Baldor Targets Drive Market

It has already set industry standards with its motors, and now Baldor Electric Co. is aiming for an equal share of the drive market.

The company has converted

an old furniture factory – a mammoth-sized building of some 557,000 SF that stood vacant for a dozen years – into a spotless new electronics center.

Chairman Roland.S. Boreham Jr. and the rest of the Baldor team hope to become the nation’s largest maker of motor drives, devices that allow for adjustable speed, acceleration and torque.

A huge potential market for such products exists. In the United States alone, Boreham says, somewhere between 58 percent and 63 percent of all electricity generated is used to run motors. Relatively few of those motors are equipped with electronic control drives.

Baldor hopes to capitalize on the existing market by selling drives for existing motors while continuing to also profit in the new-motor business. By making drives as well as motors, Baldor, in effect, doubles its potential market.

History

Baldor Electric, headquartered in Fort Smith, reported net sales of more than $589 million in 1998, but that’s small change by industry standards. Its competitors include General Electric Co. (annual sales from its industrial division alone were more than $4.8 billion in 1998) and Emerson Electric Co. (annual sales of $13.4 billion in 1998).

Yet Baldor has consistently impressed the industry with its products as well as with its processes. The company proudly cites customer preference polls in which 82 percent of those polled said they would choose Baldor brand products if they could have just one motor.

In the 1970s, when it seemed domestic manufacturing was no longer economically feasible, many other motor-makers began looking overseas for its manufacturing operations. Baldor, however, stayed stateside and concentrated on improving quality and diversifying its product line. It ended up with an improved financial picture and with overseas markets – other countries were importing Baldor motors.

That was one Baldor accomplishment noted by Fortune magazine, which, over the years, has written several complimentary articles on the company. It’s a mutual admiration society. Boreham speaks highly of Fortune, which, he says, “does their homework.”

Forbes, on the other hand, “prints anything,” Boreham confides.

Because of that close relationship with Fortune, top management learned Baldor’s inclusion on the magazine’s list of the 100 Best Companies to Work For was endangered. In 1997, Baldor ranked 50th, a more-than-respectable showing.

But in 1998, it seemed there was considerable employee unrest. A Fortune researcher called Boreham.

“‘Rollie, we didn’t find any disgruntled employees the first time, but this year we’re finding some and I thought I’d better talk to you about that,'” Boreham recalls the researcher telling him.

“I said, ‘Where?’ and he said, ‘They all seem to be in Seattle.'”

The complaints turned out to be from former employees, laid off when Baldor closed its Seattle operation to consolidate the drive manufacturing operation in Fort Smith. Although Boreham says he would have been distressed to learn 80 of Baldor’s 4,000 current employees were unhappy, he’s not terribly sympathetic with the former Seattle crew.

The plant was closed because it never achieved acceptable productivity levels, he says. As for offers of other employment, Boreham notes that unemployment is practically nonexistent in Seattle.

By all accounts, the consolidated operation in Fort Smith, open since late last year, is on the right track. It brought together under one roof operations from Seattle as well as a small drive operation and the company’s die-casting plant, both already in Fort Smith.

Consolidating the three plants has resulted in a savings of about $1 million annually. About 100 people currently work in the drives operation, which is a few steps away from Baldor’s headquarters. The Ward Furniture Co. had been vacant for years, but its various owners had always refused offers to sell or lease a portion of the huge building, Boreham says.

Finally, Baldor agreed to buy the entire structure. In less than 60 days, it converted 80,000 SF into a drive-manufacturing factory and another 60,000 SF into storage space for materials. Another 200,000 SF on the opposite end of the building is leased out, still leaving Baldor with considerable space for possible expansion as needed.

“I never thought I’d buy a 577,000-square-foot building,” Boreham muses. “You know, at 577,000 square-feet, you don’t have a lot of buyers.”

Lucy Connection

Educated as a meteorologist and an engineer, Boreham easily explains a motor-drive’s function in layman’s terms.

He does it by citing what may be one of the best-known episodes of the old “I Love Lucy” show, in which Lucille Ball works in a candy factory. She’s supposed to wrap the candy as it goes by on the conveyor belt, but, naturally, the comedienne falls behind as the line moves along faster and faster. In desperation, the red-haired actress starts eating the extras, but soon, the unwrapped candies are more than she can handle even with that method of disposal.

“She got a lot of laughs out of that, but a lot of industry was actually working that way,” Boreham says, explaining that Lucy’s dilemma arose because there was no control for the conveyor belt.

Like Lucy, many workers on assembly lines found themselves either struggling to keep pace or standing idly while a too-slow line crept by. The controls available at the time the show was made weren’t as efficient as the models Baldor is making today, Boreham says.

“Her boss probably wouldn’t have bought her a control,” he chuckles.

A majority of industrial motors in operation today still lack controls, Boreham says. They can be either on or off, making them less energy efficient than a motor that can be adjusted for the proper speed. Today’s motor drives are so sophisticated, they can even be programmed to perform various functions at designated speeds and specified time periods.

Flex-flow Speeds Lines

Baldor uses its copyright “Flex-flow” manufacturing process in both its drive and motor operations. Unlike traditional assembly lines in which workers assemble the same products over and over, Flex-flow lets workers build a variety of models. A look at one of the Fort Smith lines of completed motors shows a variety of models coming off the assembly line.

The same is true of the motor-drive plant, where, during a recent visit, drives were being manufactured for such diverse customers as Sandia Labs in New Mexico and a Vietnamese sugar refinery.

Boreham notes that a Baldor competitor, General Electric, was a pioneer in the synchronous-flow method of manufacturing. In that system, once an order is entered, it can’t be changed.

But customers have a way of changing their minds, even if the order’s entered in the manufacturing system, so Baldor set about to develop its own system that allowed for flexibility. The result was Flex-flow.

It’s been so successful, Baldor has been able to cut its manufacturing time on custom orders, which make up about half of the company’s motor business, to three weeks. That, the company boasts, is the shortest in the industry.

Despite Baldor’s success with its products, its stock hasn’t fared well in recent months. It traded as high as $27 a share in 1998, but more recently has been in the $18 range.

Boreham doesn’t seem worried. He notes that the company’s stock is out of favor in two sectors: It’s an industrial business and it’s a small-cap company.

“That’ll change,” Boreham says.

The company stumbled at the end of fiscal 1998, breaking a 27-quarter string of record sales and earnings. That didn’t keep Baldor from recording a record year – the previously noted net sales of $589 million as well as net earnings of $44.6 million. Total assets rose, too, to $411.9 million.

But that string of record-breaking quarters was a matter of pride, and Baldor employees have vowed to accomplish an even longer string in the future.

Midwest Manufacturing

Baldor has plants in 11 cities, including Munich, Germany, and Bristol, England. In Arkansas, there are plants in Clarksville and Ozark as well as Fort Smith, and nearby there’s a plant in Westville, Okla.

The company was founded nearly eight decades ago in St. Louis, and Baldor still has operations there. He says there are are good people working there, but Boreham, a native Californian, seems partial to the workers in his adopted state.

“The middle part of the United States is the best place in the world to manufacture a technical product.”

He theorizes that it’s due in part to the fact Southerners aren’t braving the elements through long winters, as well as their desire to top the Yanks. But he’s not sure.

“You know, some things in life just are,” Boreham says.