As Husky Injection Molding Systems Ltd. begins its largest-ever expansion — including a major change to make general-purpose machines — its founder, Robert Schad, is planning to take the Canadian company public.
These are heady days at Husky. Right now, the Bolton, Ontario, firm is investing more than US$200 million in Canada, the United States and Europe. You need a scorecard to keep up:
Schad, shortly after the NPE 1997 show in Chicago, confirmed he wants to take Husky public, probably within about two years.
``It's part of my succession plans,'' he said.
Schad and his family own about 65 percent of the company. Employee shareholders own about 25 percent. The remaining 10 percent is held by Komatsu Ltd. of Tokyo. Company officials have not decided which stock exchange to use, he said.
At its Bolton headquarters, Husky is building a 200,000-square-foot addition that represents a major new direction, as the company prepares to begin making its own components, such as machine bases, in-house. Husky is evolving from a specialist in PET preform and thin-wall packaging molding to a higher-volume maker of general injection presses. The move should increase production from 700 machines a year to more than 1,000. Schad said Husky is investing US$70 million in Bolton.
In August, Husky will break ground in Milton, Vt., for a campus-style manufacturing complex that, according to Schad, could employ 1,000 people in a decade. Initial investment: US$80 million. The plant will make hot-runner systems at first, but it could assemble machines in the future, he said.
The company has announced a five-year plan to invest US$185 million at its European manufacturing operations in Dudelange, Luxembourg. In the first phase this year, Husky is spending US$40 million to US$50 million. The European expansion includes a plant for building its new general-purpose machines, called the G-Series, plus additional space for its PET preform mold manufacturing and a new hot-runner factory.
Another US$10 million to US$15 million is going to build new technical centers in Brazil and England. Earlier this year, Husky opened a center in Japan.
Schad founded Husky in 1953 to make snowmobiles. In the early 1960s, the company began turning out injection molding machines in Canada.
Husky began focusing on injection presses to make PET bottle preforms in the late 1970s, dominating that market. The company also makes preform molds and robots.
Today, Husky employs about 1,800 worldwide. Sales for fiscal 1996 were US$568.2 million.
Schad has taken an independent approach. Even though the machinery maker is privately held, Husky issues a formal annual report, listing sales, earnings and a detailed analysis of each business segment.
Schad, an avid skier and outdoorsman, has gained a reputation for promoting healthy lifestyles, through employee workout facilities and low-fat food at Husky cafeterias.
The machine maker also promotes environmentalism. Schad has said Vermont's natural beauty was a major reason the company picked Milton for its new campus, on 700 square acres of land overlooking a lake. Husky donates 5 percent of its profit to charity, mostly to environmental causes.
This year, Husky discontinued the Robert Schad Environmental Award, a $150,000 cash gift given annually to a plastics company — but Schad insists the decision ``is in no way a reflection of our environmental feelings and our environmental attitude.'' Instead, he said, the gifts raised ethical questions.
``Let's say we give an award to a major company. Of course, immediately we have an in. It's like paying our way in, and we felt this was not right.'' Husky will still give the money away, folding it back into the 5 percent donation program.
As an entrepreneur, Schad makes many of the company's decisions. To announce that Husky picked Milton, he personally addressed citizens in a packed high school gymnasium. Would that personal touch remain in a publicly traded Husky? Schad, 68, said he has no intentions of retiring any time soon, and he will continue to run the company.
``The main reason for going public is because I think it's a better future for the people at Husky,'' Schad said.
Packaging analyst Tim Burns, managing director of McDonald & Co. Securities Inc. in Cleveland, called Husky ``an impressive company'' that probably controls 80-90 percent of the market for PET preform molding presses.
Burns said a publicly held Husky could mirror the success of Groupe Sidel, the Le Havre, France-based manufacturer of PET blow molding machines.
``Sidel has been one of the darlings of the French stock market,'' Burns said.
Burns said going public also would make it easier to buy other companies — but Schad traditionally has shunned that approach.
During a June 19 interview at NPE, Schad said, ``We're not planning acquisitions. We feel that we have a strong distribution network. We'd rather have one culture than different cultures. Our internal growth has been very, very substantial, much better than our competitors. But they had their growth through acquisitions. Our growth has been strictly internal.''
The expansion in Bolton, to add the 200,000-square-foot components plant, signals a new strategy for Husky. In the past, Schad has been a vocal proponent of doing final assembly in Bolton using complete subassemblies sourced from outside suppliers.
``The whole company is going through a major change right now,'' he said. ``We are entering the generic machine market, something we never really have done. We have been a niche producer for PET, thin-wall and some other things.''
Husky leaders began rethinking their method of operation in recent years, prompted by the 1995 PET resin shortage and new competition in PET preform machines, Schad said.
``We had really two choices: either to defend ourselves in the niche markets, through technologies like the Index machine, for example, or to say we now have to bring our costs down.
``And the only way we saw we could do that was entering the volume machine market, with economies of scale.''
Husky will pursue both paths. At NPE, Husky unveiled a major advance in PET preform molding, an Index press. The firm says the unit's rotating block of mold cores can slice cycle times more than 20 percent.
Meanwhile, Husky has sold more than 200 general-purpose G machines in the first year of production.
G presses are pushing into nontraditional Husky markets, including medical and technical parts.
At NPE, Husky also joined the ranks of companies making two-platen machines, introducing its E-Series.
``We will concentrate even more on niche markets, but more so on special-purpose equipment. And we have the cost advantages of the generic machines, in components such as controls and injection units, in many things which are used on all these machines,'' Schad said.
In-house production of subassemblies and components should begin in Bolton this fall. The plant also will make molds and robot components.
What type of parts will Husky build?
``First of all, we will do all our [machine] bases in a highly automated operation,'' Schad said. ``We had problems getting the quality and the prices on bases. It will be a very, very modern line to make bases, with robotic welding, with computerized cutting and with specialized machining equipment.''
Husky already runs an automated mold machining cell in Bolton.
The decision will hurt some suppliers, many in the Toronto area, that had shipped parts to Husky.
But Schad said some of them did not keep pace.
``Where the suppliers have not been sufficient, of course there will be an impact. We've asked our suppliers for years and years to buy state-of-the-art equipment and be more productive. And there will be some problems.''
More-responsive suppliers will gain as Husky's output grows, he added.
As it expands, Husky also is making itself more efficient.
``It's a different company today,'' Schad said. ``We took two levels out of our management. We've reorganized. Our management team is more than 50 percent new people.''
In Vermont, Husky has passed the last major hurdle to its Milton facility. Residents of the town of 9,000 overwhelmingly approved a 10-year tax stabilization agreement.
Husky has received a permit to build the first phase, a 200,000-square- foot building, according to Frank Cioffi, commissioner of Vermont's Department of Economic Development. Schad reviewed the design of the campus at local town meetings.
Cioffi said the tax deal means Husky will pay its current state and local property tax rate for 10 years.
``Husky was looking for a predictable and stable tax rate,'' he said.
Milton, north of Burlington, was one of Vermont's first towns to abolish the local-option tax for machinery and equipment. On June 26, Gov. Howard Dean signed a bill wiping out the tax statewide. Vermont also has eliminated its 5 percent sales tax on construction materials for new factories.
The state agreed to build a road for the plant and to provide water and sewer to the Husky site, which already has a railroad line running through it.
But Cioffi said Husky did not get many special incentives to locate in Vermont.
Schad agreed. Several states courted Husky.
``We're not going to Vermont for handouts. ... We're going to Vermont for the quality of life. We think we can attract the kind of people we would like to have work for us.''