Four years ago, Jiffy-tite was in big trouble.
Sales at the Lancaster auto parts manufacturer, which had reached about $32 million in 2007, were cut almost in half over the next two years, bottoming out at $18 million in 2009, as two of its biggest customers – General Motors and Daimler Chrysler – fell into bankruptcy.
That led to sweeping cutbacks at Jiffy-tite. The company eliminated its second shift and slashed its workforce by a third, going from 150 employees in 2007 to 98 in 2009. Among the layoffs was the son of company owner Steve Zillig.
But the auto industry has bounced back, and so has Jiffy-tite. Under company President Michael Rayhill, Jiffy-tite also is adding new products, from oil thermostats to quick-connecting couplings for the liquid propane and compressed natural gas markets, that are offshoots of its core automotive coupling products.
Sales are expected to reach $45 million this year, and its workforce is back to its pre-recession levels, with plans in the works for a $10 million expansion and 80 new jobs over the next three to five years, although the company isn’t ready to commit to doing the project at its Lancaster or Batavia plants, holding out the possibility that the expansion could take place elsewhere.
Rayhill spoke about the company’s plans last week.
Q: Why was the recession so hard on Jiffy-tite?
A: Like everyone else in the auto business, during the recession, we really started to tank. If you drill down, we had three major customers going into the recession – General Motors, Chrysler and Daimler-Benz. Two of them went bankrupt. We also had the vast majority of our sales in this product line, our Quick Connect. So one main product, and our two main customers went bankrupt. It almost killed us.
We went from 150 people in December 2007 and $34 million in sales to 98 people and $18 million in sales. They took many draconian measures to cut costs and stay cash positive, including the elimination of the entire second shift. We’ve hired a lot of those people back and we’ve hired a lot of new people.
Q: What did you learn from that?
A: The lesson learned here was that we needed to diversify the company. Since I’ve come on [in 2010], there’s three areas of diversification that we’re focused on. We’re focused, number one, on product diversity. We started to reinvent the product lines. We said we can’t just rely on one product line.
Our oil thermostat got the award in 2009 got the award for the Popular Mechanics editor’s choice innovation of the year. It’s a thermostat that saves a lot of fuel. On a full-sized truck in the winter, it will save about 8 percent on gas. It also happens to have four Quick Connects on it. It’s still got our core product on it, but it’s an extension of our core product.
We developed a product for the aftermarket, a little tiny in-line filter for transmissions. Our original equipment customers said, hey, we need something to filter oil in turbochargers. They said, hey, that filter’s perfect, so we started selling products to the turbocharger markets.
I was just in Korea and every taxi you get in, you go to put your bag in the trunk and it won’t fit because they have this big liquid propane tank in it. A lot of the buses run on compressed natural gas. We developed a connector for that market.
Q: Sounds like you’re broadening your customer base, too.
A: The second lesson was obvious: We have to diversify our customer base. We can’t rely on two, two-and-a-half customers for our income. That’s really exploded for us. It amounted to just getting people out to these other, new customers and solving problems for them. Sitting down with them and asking “What are you trying to connect and how can we help you solve your problems?”
Q: You and company owner Steve Zillig just got back from a nine-country trip. What were you trying to accomplish?
A: We want regional diversity, so if Europe catches cold, you’re still doing great things in North America and Asia. Six months from now, we expect some of the issues in Europe will ease. They’re going to restructure some of their debt and things will pick up there, and we’re preparing for a mild recession in North America in six months. As one region starts doing well, if another starts doing poorly, on average we’re doing OK. We’re not killed by it. That’s the third leg of the stool – regional diversity – that we’re working on now.
Q: What’s behind the expansion plan?
A: In 2012, we’re going to finish the year with around $45 million in sales, which is about two years ahead of schedule in our business plan. Our biggest problem right now is equipment, people and skills like engineers and skilled trades people. Stuff that’s hard to fill, just to accommodate this growth.
Q: What would the $10 million go for?
A: The largest portion of the investment is really in new tools and equipment. The vast majority of that investment is not for bricks and mortar. We’re not throwing up another building the size of this one.
Q: Is it definite that the expansion will happen at your plants in Lancaster and Batavia?
A: We’ve got to decide where we’re going to do it. Are we going to continue doing it, not only in this county, but in this state? We’ve been serenaded by economic development boards. In just the last four months, I’ve had four states call me up. They’re coming out of the woodwork.
We actually have some customers overseas that would like to be licensed to build our product. We don’t think we need to do that yet. But there’s a lot of opportunity to expand and we’ve got to decide where best to do it, which is why I’ve told these [state] folks that New York State is one of the hardest states in the United States to manufacture in. We’ve done 100 percent of our manufacturing here, and to the extent they can make it easier on us, that will help with our decision.
Q: Could you replicate the skills that you have here someplace else?
A: Let’s just say I have some firsthand experience doing that. I’ve lived on three continents in the auto business. There’s a right way to do it and a wrong way to do it, and it’s very difficult to do. Very difficult to do. But if we continue to make our manufacturing assembly equipment and we continue to engineer our product here, it would be less difficult.