Gloucester rebuilds sales, reputation

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Gloucester Engineering Co. A Gloucester Engineering blown film line in operation

GLOUCESTER, MASS. — Gloucester Engineering Co. is beefing up its product development and hiring salespeople and engineers, as management works to restore the machinery manufacturer's luster under its third year of ownership by Blue Wolf Capital Partners LLC.
"It's a reputational rebuild around the core of blown film and cast film," CEO Mark Steele said. "But we also have a strong history around foam and sheet. So the focus has been on rebuilding that core, restoring customer confidence."
The New York private equity firm took ownership of Gloucester Engineering as the company emerged from Chapter 11 bankruptcy Jan. 3, 2011. Blue Wolf had provided debtor-in-possession financing during the case, to ensure Gloucester Engineering's continuing operation. Blue Wolf converted its secured debt to equity ownership.
But that's old news now, as Blue Wolf hired Steele for the CEO spot in early 2011. Steele is experienced both in leading manufacturing companies and working with private equity owners.
Blue Wolf is taking a long-term approach to rebuilding the 52-year company, Steele said. Gloucester Chairman Michael Ranson, a partner at Blue Wolf, visits the company several times a quarter.
"I've worked with six different private equity firms, so I have benchmarks on this, and he's absolutely the most active chairman that I've ever worked with," Steele said.
He said every employee and executive is important.
"My expression is, you have to earn the right to serve. One order at a time. One service call at a time. Take care of those things. One quote at a time," Steele said in an interview at company headquarters in Gloucester, a historic fishing town north of Boston that gets packed with tourists in the summer.
Steele said there is no magic formula.
"So it's not, 'Turn it on,' right?" he said, snapping his fingers. "You don't just say, 'Hey, go and innovate next week.' It doesn't happen that way."
After a series of layoffs in 2010, Gloucester Engineering was down to around 75 employees, 26 of them union workers in the machining and assembly plant in Gloucester. Today, after acquiring Future Design Inc. and Pearl Technologies Inc., the company has more than 150 employees. The Gloucester plant now employs 45 unionized machinists, said Joe Orlando, chief steward of the International Association of Machinists Local 15.
Blue Wolf moved quickly to bring in new management, invest in a new computer system and management software to control costs, and sign a new contract with the IAM. Negotiations on a new contract are about to begin, as the current pact expires July 31.
"I think they've treated us fairly, and in return, we've gone above and beyond the call of duty in being more flexible," Orlando said.
As the machinery company hit financial troubles in the recession, and was squeezed by a cash crunch, it was the IAM that first contacted Blue Wolf to save jobs. The new owners installed an enterprise resource planning system, or ERP, while trying to serve customers.
"It was difficult at times. I mean, we couldn't always turn a quote around as fast as we should have," Steele said. "So that first year was a tough year."
At first, customers bought mainly spare parts, but then they started to order new film lines — a major investment that can cost millions of dollars. The company issued news releases announcing sales to Sigma Plastics Group, Scientex Bhd, Grupo Reyma and Automated Packaging Systems Inc.
Steele said officials estimate Gloucester's installed base at about 1,200 blown and cast film lines worldwide.
"To put it into perspective, the company had average revenues of $84 million from 1999 to 2009. So they sold $850 million worth of equipment in that 10-year period," Steele said.
Gloucester does not give out sales numbers now, he said, but added that the business doubled revenue for two straight years, in 2011 and 2012. Backlog has steadily increased, and Steele said sales should increase about 60 percent this year.

The machinery manufacturer has more than $300 million in quotes outstanding, over the past year. A big reason: adding sales people. During the recession, Steele said, Gloucester was down to just two direct salespeople. Now the company has seven people in direct sales, plus 25 sales agents in 35 countries.
Ranson, the chairman, said Gloucester Engineering is past the "turnaround" stage, after "starting off at a standstill, with negative momentum."
"We've still got a lot of work to do, but this is no longer a company that's in retreat. This is a company that's moving very rapidly," Ranson said.
Gloucester is getting some repeat orders from customers, and ones located in different parts of the world, he added.
On the management side, Gloucester has named several new executives. The company hired Bob Fulford for the newly created position of vice president of purchasing and supply management. Laurent Cros joined as vice president of aftermarket and service operations, another new position.
The president is Gloucester veteran Carl Johnson, who joined the company in 1995.
Steele said the company currently is seeking a chief operating officer.
In 2012, Gloucester Engineering made two acquisitions: Future Design Inc., a maker of air rings and collapsing frames for blown film based in Mississauga, Ontario; and Pearl Technologies Inc. of Savannah, N.Y., which makes customized aftermarket products for film converting such as slitters, bubble cages and advanced gusset boards.
The products from Future Design and Pearl help boost output and improve quality, Steele said. "So it made sense to acquire that kind of capability and technology right out of the gate," he said. The two operations also help smooth out the cyclical nature of new-machinery sales.
Steele said Gloucester needs to digest those two acquisitions, and so will be "less aggressive on the acquisitions in the short term."
Gloucester also last year announced a working relationship with Italian winder company Dolci Extrusion srl.
One area the company won't slow down on is developing new technologies. Earlier this year, Pearl Technologies and Future Design both introduced new products.
According to Steele, Gloucester Engineering had only one patent in the past 14 years, and that one was never commercialized. "We've applied for 10 patents in the last 15 months," he said. "We're restarting the innovation engine."
But Steele said the company — just like the plastics industry as a whole — needs to attract more young engineers. Gloucester Engineering has invested in SolidWorks 3-D design software and computational fluid dynamics. Gloucester is hiring recent college graduates who have those skills, and teaming them with veteran design engineers and machinists.
Those advanced skills will allow the company to work on innovations with dies and some new heating technologies, Steele said.
In April, Gloucester Engineering announced an expansion of its die-rebuilding offerings, by allocating more resources and people, bolstering technician training, and offering new features and options for rebuilding dies.
"We are experiencing a virtual near-capacity situation in our die-rebuilding program," Cros said.
Steele said the company is back. Now officials are preparing for an exhibit at K2013 this fall in Düsseldorf, Germany.
"We had to rebuild [customer] confidence. There was some anxiety, and so we've kind of worked through the anxieties. And we're being responsible on quotes and being responsible on service, and that restores confidence," he said.