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| Vertex Secures
Its Place In R.I. |
by DOUGLAS HADDEN
PAWTUCKET TIMES
MAY 29, 2004
PAWTUCKET -- Vertex Fasteners has long made a wide variety of
products noted for their ability to keep one thing securely
fastened, with utmost reliability, to another. One of the oldest
continuous manufacturers of fasteners in the country, it makes
nuts, bolts and screws to exacting standards.
That's literally the nuts and bolts of the business, but doesn't
begin to describe how widespread are the applications or the
tough task of staying competitive in a global economy.
During World War II, the company was a subcontractor relied
on during the top-secret Manhattan Project that created the
atom bomb and, during the first Gulf War, the Patriot missile.
Today its products still find military uses in projects for
Raytheon. But they're also in everything from electronics to
municipal waste treatment plants, and as components in Carrier
air conditioners, Toro lawnmowers, Freightliner trucks and EMC
disk drives. Vertex fasteners also go into equipment that makes
potato chips and soft drinks, and vats and tanks that process
wine – and they're the bolts that hold together the playground
at Central Falls' Capt. Hunt School.
But perhaps the most singular aspect of the Vertex story today
is the ability of the company, founded in 1882 as Pawtucket
Fasteners, to hold onto its share – and even grow in a
tough international market while still being based in Pawtucket.
Vertex's corporate headquarters remain at 327 Pine St., once
a short wagon ride to the train stop that then sat on the east
side of Barton Street, where the Amtrak rails still run. Vertex
also has distribution branches in California, Illinois, Ohio,
North Carolina, Georgia, Florida and two in Texas, plus its
Specialty Fasteners division in East Freetown, Mass., with 200
employees nationwide, including 65 in Pawtucket and 100 in New
England. Los Angeles, Chicago and Pawtucket, occupying 180,000
square feet in the original brick mill, are the biggest hubs.
But as with many of the region's traditional manufacturers,
Vertex has had to cross the ocean to stay competitive at home,
said CEO David Hirsch. “In the 1970s, 95 percent of what
we sold, we produced. Today, 95 percent of what we sell is imported.
Frankly, that's how we've been able to survive,” said Hirsch,
who bought the company with a few partners in 1972 from third-generation
owners. “We source the world for our products.” That
includes Germany, Italy, Taiwan, Korea, Vietnam and mainland
China, with India and Malaysia seen as playing larger roles
in the future.
The business strategy also includes acquiring companies that
are a good fit. In February, Vertex concluded integration of
California-based West-Spec, a 34-year-old company that distributes
corrosion-resistant fasteners. Growth takes capital, and for
Vertex that required a new partner. "We needed to recapitalize
the company and recognized we needed more capital, so we looked
for a partner," said Hirsch. Vertex teamed up with Main
Street Resources of Westport, Conn., a new firm profiled in
the May 22 issue of Fortune Small Business as “Mavericks
on Main Street.”
Main Street Resources's partners, split half between entrepreneurs and executives,
raised $22 million and the U.S. Small Business Administration
added $44 million to launch the investment firm. According to
the FSB article, Main Street Resources takes ownership stakes of $2 million to
$10 million, seeking 35 percent annual compound returns when
the companies are eventually sold. It buys “established
concerns with good track records,” and through its network
of executives offers expertise as well as financing.
“They're a good partner with us,” said Hirsch.
Hirsch did not disclose sales figures for the privately held
Vertex, in which he is partners with Mark Alperin, Mark Klosek,
Tim King and David Kujanek. But he put the sales number at “mid-eight
figures,” and “top 10 in size in our industry.”
Alperin, executive vice president, said Vertex wants to excel
in getting “product to our customers and the end user.”
New logistics systems, including bar coding on fasteners, will
focus on purchasing and forecasting while reducing paperwork.
Radio frequency scanning is being developed for wireless inventory
search and updates.
“We switched from product to process,” Alperin summarized.
Some customized product is still made in Pawtucket; however,
in part because labor is a much smaller part of the final cost.
Such finished bolts can cost up to $3 each even when bought
in large bulk.
With 12,000 items – not including custom orders –
that's a lot of stainless steel, corrosion resistant and increasingly
metric (including products for Europe and NATO allies) fasteners
each in need of its own SKU. “Coming from 15 countries
and scores of vendors, it's obviously a major, monumental task,”
Alperin said.
Hirsch, who has an electrical engineering degree from Rensselaer
Polytechnic Institute and a graduate degree from Harvard Business
School, said the company's goal is delivering “the right
product in the right place at the right time for our customers
when they need it.”
Stainless steel, brass and silicon bronze remain the essential
elements, and corrosion resistance – “heat, environmental,
liquid, chemical, any kind of corrosion,” explained Hirsch
– a crucial task. “We have very tight industry specs,”
Hirsch noted. “We have a lab here for dimensional testing.
All our products,” which can range from .072 inches to
7 inches, “are traceable by chemical and mechanical composition.”
It's a long way from the earliest days of the company, founded
by such landmark local names as Jenks, Webb and Carter, and
still evidenced by the old grates through which hay was pushed
for the wagon horses.
As for where the company will be heading the next five years,
Hirsch sees continued development of “complementary products”
for customers, tighter logistics to “squeeze costs from
the supply chain, the whole handling and moving of the product,”
and investing in Web technology to improve ordering while cutting
costs. And more acquisitions? “If the right opportunity
falls into place and it fits with our strategic plans, absolutely,”
said Hirsch, in which Main Street Resources would have to play
a role because “we can't do it alone,” he said.
Hirsch also thinks government could work to reverse a policy
on tariffs he said has hurt manufacturers and cost the nation
thousands of jobs. “I can buy screws for almost the cost
of raw materials. So you tell me why I should manufacture this
when I can import (much more cheaply). You should pay higher
duty on (imported) unfinished products to encourage people to
make things (domestically),” Hirsch said.
“They're protecting one (steel-making) job for the cost
of seven jobs. It's accelerated the exodus of manufacturers.”
Where there were once 150 fastener makers like Vertex, “now
there's 25 to 30 of any substance left. It's a 20-year-old problem,”
Hirsch said. But not easily undone. “Those skills are gone,”
Alperin noted. “The plants are shut down. The machinery's
been shut off,” and the regulatory climate not likely to
be reversed, he said.
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