PERSPECTIVE: CEO Thompson: Starting the Next 100 Years at SPS

John Wolz

Editor�s Note: The following FIN interview with CEO John Thompson took place prior to the announcement of the Precision Castparts acquisition of SPS Technologies.
What to expect from SPS Technologies Inc. as the fastener corporation starts its second hundred years: Reduced costs, more production in lower labor cost locations, more robots and a continued role in acquisitions and in aerospace production.
SPS is marking its 100th Anniversary during 2003 with a series of events, from ringing the opening bell at the New York Stock Exchange in January to a party at the Paris Air Show and opening a museum at its Jenkintown, PA, plant.
In its 99th year, SPS named a new CEO � John Thompson � to lead it into its second century. He is only the fifth CEO the company has had.
Thompson, who holds an MBA from Harvard, joined SPS in 1999 as president and COO. He had been with BTR PLC � originally known as the British Tire & Rubber Company � for 24 years. BTR is now a diversified engineered products company traded on the London Stock Exchange. Thompson was chief executive of BTR�s U.S. holding company.
North Americans concerned about the exodus of manufacturing jobs to other continents will see more of the same, Thompson predicted.
�I don�t think there is any doubt that more of the industry is going to end up in lower labor cost areas,� Thompson said. You can hire seven people in China for the price of health insurance for one person here.
�It�s kind of sad in a way, but there is a certain inevitability to it,� Thompson reflected.
OEMs such as General Electric will want suppliers in China, Thompson pointed out. GE has sent engineers there and when it begins manufacturing airplane engines in China, locally sourced parts will be necessary.
There are stumbling blocks to fasteners and other industries moving to China. �There isn�t a well-developed law yet on intellectual property in China,� Thompson explained.
The aerospace industry has yielded higher margins in the past, but lowering costs is going to be an increasing issue, Thompson observed.
Though the aerospace industry has been on a down cycle and there will be price pressure, Thompson isn�t worried about its future. �A lot of people are flying from Point A to Point B,� he explained. �They are going to keep flying.�
� SPS won�t just rely on Asia. The corporation has been in South America for 50 years. �Brazil has excellent, low-cost labor, a good environment for fasteners, an existing market and the ability to export.�
Not all production will move to low labor cost countries. Certain parts will remain in the U.S. and U.K. In Jenkintown, SPS is already reducing labor costs with robots. Only one human is responsible for an operation that used to require many workers.
� The cost of producing a fastener is not the only factor in fastener costs, Thompson emphasized. The real issue is �bringing down the installed cost.�
Such products as AVK�s new blind threaded insert for attaching luggage racks to SUVs can make the end cost of a fastener less without moving production elsewhere. If a product saves installation costs, there is growth for the producer.
Good management also is a factor in locating production facilities, Thompson added.
Quality is not a problem. In China every foreman may soon have a college education. Some graduated in the U.S. and there is �very capable engineering talent.�
� SPS can grow through new markets. Aerospace has been focused more on the OEM and through distributors as a means to the aftermarket. New sales channels are opening to the aftermarket. Thompson described the situation as �more transparent.�
There is potential in working with customers on design and creating fastening systems rather than just designing a fastener.
� Expect more fastener acquisitions, Thompson forecast. Though acquisitions have slowed with the economy in the past few years, Thompson predicts the fastener industry will �continue to consolidate. You are seeing it all the time.� He cited well-known names acquired in recent years: Fairchild, Huck/Alcoa, GFI of France and Hi-Shear.
�We�re always looking,� Thompson said this spring about potential acquisitions.
� In the next century SPS will continue to develop in non-fastener areas, Thompson predicted. He noted the company�s growth in magnetics and manufacturer specialty materials.
Wherever the growth potential is � consolidations, lower cost labor or working with customers to develop lower installed costs, �We�re going to be involved,� Thompson said of SPS� future. \ �2003 FastenerNews.com