Media Spotlight: Textron Relying on Fastener Division for Savings

John Wolz

Editor�s Note: Articles in Media Spotlight are excerpts from publications or broadcasts which show the industry what the public is reading or hearing about fasteners and fastener companies.
�You can boost earnings with acquisitions, or you can do it by looking at the nuts and bolts of factory management,� reporter Brett Nelson wrote in Forbes magazine. �It�s nuts-and-bolts time at Textron.�
The June 11, 2001, Forbes article, headlined �The Soul of a New Machine: Textron Gets Down to Business,� describes the corporate change from growth by acquisition to improving plant productivity.
�Running the LDR fastener factory�one of seven Textron sites in Rockford, Ill.�has just gotten a lot tougher for plant manager Andrew Moschea. Each day 23 machines called �cold-headers� pound out up to 1.5 million custom metal adapters to piece together everything from truck engines to computer hard drives. Soon Moschea will have to do all that in barely half the 100,000-square-foot space.�
Moschea retired 20% of the headers � some dating back to the 1920s � and will reshuffle 140 other machine tools to make room for equipment from a nearby larger plant.
CEO Lewis Campbell announced a $200 million companywide restructuring last fall to increase efficiency.
Nelson wrote that the �conglomerate is suffering from self-inflicted indigestion. Fueled by 59 acquisitions, sales climbed 47% from 1997, to $13 billion last year. Profits before interest, taxes and special charges rose 54%, to $1.4 billion. But as its global roster ballooned to 71,000, Textron�s asset and cost controls waned.�
�Wall Street scoffed at a 12% return on capital, while peers like Tyco, United Technologies, ITT, Honeywell and Dover averaged 15%.� The stock rose as high as $97 in 1999, but has been in the 50s recently.
Fasteners account for 16% of Providence, RI-based Textron�s sales.
Textron also has an aircraft division, which manufactures Cessna jets and Bell helicopters; industrial products ranging from golf carts to telescoping booms; automotive components; and finance divisions.
Campbell, a former manager of GMC Truck, is �counting on fasteners�a mini-Textron in its own right, with 86 plants and 13,500 employees in 19 countries�to set the pace� of improvements. �They have to solve problems within their own segment,� Campbell told Forbes. �If they can prove it, we can learn from them.�
Textron entered the fastener business in 1955 with the acquisition of Rockford-based CamCar, which made patented screws with specially formed heads that meshed easily with automated assembly tools at the Big 3 and Harley-Davidson.
In the mid-1990s then-industrial products chief Herbert Henkel started buying up fastener companies. Sales jumped to $2.1 billion.
But sales growth slowed to GDP rates, and return on capital fell to 6.8%.
Henkel took a hands-off approach to newly acquired companies, arranging them into 12 divisions, each with its own profit-and-loss statement. Each division had its own sales staff, R&D, purchasing and IT systems.
�Textron might call on the same customer with two different salesmen�even compete for the same job,� Nelson wrote. �Worse, many of the units still acted like competitors. If one got an order but had no capacity to spare, it would buy a new machine rather than boost its partner�s sales and profits.�
Joachim Hirsch, appointed fastener division president last fall, told Forbes that �the old system screwed both of them.�
Hirsch and his team spent three months �cataloging every piece of equipment to see which plants were best suited to supply certain customers.�
Hirsch has slashed the 12 divisions into three and brought in executives from Eaton, OEA and Key Plastics. He has closed four plants and cut the workforce by 1,470 employees. Another 20 plants will be closed by the end of 2002.
In addition to meeting financial targets for their bonuses, managers now are penalized for increasing profits at the expense of return on capital. Managers must meet specific transformation goals, such as working with other plants to reduce operating costs.
Textron has been spending $400 million on steel, and Hirsch is cutting costs by buying in bulk for the entire corporation from a dozen suppliers instead of 30.
� Ali Fadel, a vice president of global operations, standardized tracking of everything from materials waste to asset usage. A traveling team enforces standards. At LDR, Moschea gives progress reports to foremen during a conference call every Tuesday. Monthly figures are posted so operators can track�and tweak�performances.
� New machines are in Textron�s plans. Nelson cited the example of a $4.5 million cold-header, which makes adapters to fasten drill-bit holders to giant mine drills. �It delivers two 500-ton horizontal blows at each of its six stations, spitting out 80 finished pieces a minute. That eliminated four extra operations and lowered LDR�s costs enough to swipe the job from Sandvik�s German supplier.�
LDR�s productivity is up 47% in the past year. �Those gains in efficiency allowed the plant in the last year to post an 8% increase in return on capital, even though sales were down 12%,� Nelson reported.
� Hirsch�s next step is selling value-added services. Forbes reported Textron is close to a North American logistics contract with a U.S.-based semiconductor equipment manufacturer. �Textron already sells the firm $1.5 million in fasteners, but that�s a rounding error compared with the $70 million that may come from managing inventory, a less capital-intensive business,� Nelson explained. �Once inside the supply chain, Textron hopes to cut costs for the customer by specifying designs using fewer kinds of fasteners�which, naturally, Textron would make.�\
� 2001 FastenerNews.com