Share this article

print logo

HIGH-GROWTH BUSINESS SAVES OLD-LINE FIRM FROM EXTINCTION

This summer, factory equipment maker McKenica Inc. hit a crisis that grew out of its own success.

The Buffalo company is the dominant supplier -- with 90 percent of the market, company officials estimate -- of machines that transform sheets of metal into tubes for auto radiators.

"For years we had people beating down our doors," general manager John B. Nemcek said. "But our problem is, the mills (machines) we build last forever . . . this has been a disaster year."

In March, the company laid off 30 of its approximately 100 workers after orders from Asia evaporated.

But now McKenica, a unit of Insilco Corp., instead of quietly dying, has turned to new products and markets. McKenica's story is about how a company with roots in a mature market saved itself from extinction by turning its skills to emerging, higher-growth industries.

The company now makes machines for the fiber optics and coaxial cable industries to rejuvenate sales of its tube-making machines, recalling workers and averting what could have been the death of an old-line Buffalo manufacturer.

The company shipped a machine tailored to the oil industry last week and is working on another machine for Rockbestos, a fiber optic cable manufacturer with operations in Massachusetts and Connecticut.

Employment at the company now stands at 85 people, still down from last year's level.

"They claim they're going to hire more people, but we haven't seen it yet," said Daniel Tyczka, chief steward for Machinists Local 630 at McKenica. "The problem is they need skilled people and there's not many available."

By tweaking its designs and adopting a new marketing strategy, McKenica captured orders from makers of fiber optic cable, a $10 billion industry projected to grow to $26.8 billion by 2002. McKenica's mills can make tubes that sheath cable and protect it from the elements and electrical interference.

"We know the margins will be lower than what we've traditionally been getting in the auto market," Nemcek said. "But we can make some good money in this business -- it pays the bills."

Machines selling to auto component makers typically cost $1.5 million to $2 million, vs. about $850,000 for machines for the cable markets, he said.

It was in 1966 that McKenica introduced its thin-tube mills, which furl and weld together the aluminum, copper or steel without overlapping the edges. The technique produced a lightweight tube that swept the automobile radiator market. Delphi Harrison Thermal Systems in Lockport is among the company's customers, together with other radiator makers around the globe.

Nemcek, a turnaround specialist recruited by Insilco to save McKenica in 1997, said the company is entering the cable market at a good time. Makers of fiber optic and coaxial cables are moving toward higher-tolerance metal sheathing as their industries mature.

McKenica started advertising in cable industry trade journals and attending trade shows, breaking the ice with its credentials as an auto industry supplier.

Under the gun from quality-obsessed automakers, McKenica's mills use electronic inspection techniques to catch and eliminate weak welds without slowing production. The scrap part of the tube is marked and automatically cut from the section.

"We feel we're in the driver's seat, being in the auto market for all these years," he said.

McKenica expects to build five to eight of its tube welding machines a year for the fiber optic and coaxial cable industries, making the new market 60 percent of its business within five years.

Success of the strategy should pay off for the company's hourly workers, who signed a one-year contract last year and went without a general wage increase, Tyczka said.

"We signed the deal due to the fact that there wasn't any work in the shop," he said.

Despite the new marketing strategy, the company's not out of the woods yet. "We're the new guys on the block so we've got to prove ourselves."

There are no comments - be the first to comment