It’s been another busy year on the news front in the electrical industry. To sort out the companies, people and trends that made news this year, here’s a sneak preview of Electrical Wholesaling’s upcoming cover story on the 10 biggest news stories of 2003.
Is Bigger Really Better? Uncertain futures face the corporate parents of two of the better-known acquirers in the electrical wholesaling industry, Rexel Inc., Dallas; and Hagemeyer USA, Atlanta.
Hagemeyer owns Cameron and Barkley, Charleston, S.C., and Tristate Electrical and Electronics Inc., Hagerstown, Md., two blue-chip regional players in the industrial and construction markets; as well as Vallen Safety Supply Co., Houston, a large safety products distributor. But Hagemeyer’s parent company in Naarden, Netherlands, is spending much of its energy these days renegotiating terms on its loans. According to reports in the European business press, it’s not a pretty financial picture.
Rexel Inc., Dallas, is owned by the largest electrical distributor in the world, Rexel SA, an international giant with 1,700 sales outlets in 29 countries, 22,000 employees and 2002 sales of approximately $9 billion. Since the 1980s, the company has acquired a roster of well-regarded family owned distributorships. However, it’s debatable how much longer Rexel’s corporate parent, Pinault-Printemps-Redoute (PPR) wants to dabble in electrical distribution.
PPR is an international conglomerate with over $28 billion in 2002 sales, but the company is now more interested in Gucci handbags and several other luxury retail brands than electrical supplies. According to PPR’s October letter to shareholders, the company is focusing on building its luxury goods business, and has begun to spin off unrelated businesses, including its financial services units and several entities in its business-to-business division. In fact, Rexel is the only property remaining in that group. Add in a published report by AFX European Focus that PPR would like to exit the electrical business by the end of 2004, and it makes you wonder about the future ownership of Rexel’s North American business operations.
Texas Tango. Late last year, Summit Electric Supply, Albuquerque, N.M., the 31st largest electrical distributor with $140.3 million in 2002 sales, acquired 12 of Warren Electric’s domestic locations and one location in South America. Summit Electric is using the acquisition to extend its presence throughout Texas and parts of the Gulf Coast.
Dallas’ Reynolds Co. now has the Allen-Bradley/Rockwell Automation area of primary responsibility (APR) for the eight locations it bought from Warren Electric in July 2002. Sonepar acquired Warren del Caribe, San Juan, Puerto Rico.
The China Syndrome. It seems like 2003 was the year when the trend of manufacturers moving factories to China entered the public consciousness in the electrical industry. Malcolm O’Hagan, president, National Electrical Manufacturers Association (NEMA) Rosslyn, Va., said China “is the single biggest factor influencing NEMA members’ business these days.”
Indeed, two-thirds of the respondents to a NEMA survey on China said they are already sourcing from China, and half of the rest said they soon plan to be. NEMA plans to open a China office.
The issue of moving jobs to China was on the agenda at the Keystone Conference co-sponsored by the National Electrical Manufacturers Representatives Association, (NEMRA), Tarrytown, N.Y., and several other rep associations. The Chicago-based Electronics Reps Association has set up trade missions to China for its members interested in starting up business ventures in China, and the Manufacturers Agents National Association (MANA), Laguna Hills, Calif., also led a contingent of its members to China on a similar mission.
The Mice that Roared. With so much industry chatter focusing on the bigger electrical distributors, it’s sometimes easy to forget about the hundreds of smaller distributors that collectively control nearly half the sales of electrical products.
The potential collective clout of this “silent majority” took center stage in May 2003 with the merger of two buying/marketing groups that serve smaller distributors, Equity Electrical Associates, East Walpole, Mass., and EDN, Concord, Ohio. EDN and Equity operate as separate divisions of the new combined entity, with their own names, personnel, boards of directors, earnings schedules and payment procedures. Together they serve about 1,000 electrical distributors with 1,150 locations.
When the deal was announced, 80 percent of the sales volume of the two groups was derived from common vendors. Along with several hundred members, EDN brings it focus on doing business via EDI; Equity brings veteran management talent and a lively stable of electrical distributors dedicated to the benefits of their group.
The State of E-Business. While no one is satisfied with the slow adoption of proven e-business tools, overall there’s been progress in 2003. The Industry Data Exchange Association (IDEA), Rosslyn, Va., developed a new tool to help electrical distributors and manufacturers clean up their data — the Data Audit and Certification (DAC) program. Founded by NEMA and NAED, IDEA estimates data errors cost the electrical industry $1.2 billion annually, and that if electrical businesses synchronized their data properly through the IDW, it could add 1 percent and 0.75 percent to the bottom lines of manufacturers and distributors, respectively.
What’s in a Name? It was a brief press release battling for the light of day against dozens of other releases from electrical companies. It simply stated that Eaton Corp., Cleveland, has renamed its Industrial and Commercial Controls business “Eaton Electrical,” and that the Eaton organizational unit, formerly known as the Cutler-Hammer Group, also will be named Eaton Electrical.
While Randy Carson, Eaton senior vice president and group executive for Eaton Electrical, said in that announcement that Cutler-Hammer and several other smaller brands “will be able to grow under the Eaton Electrical group umbrella,” and that the company was aware of the strong awareness of these brands and would continue using them in products, marketing and sales efforts.”
The announcement marked the end of an era for one of the better-known brand names in the electrical market. A ton of brand equity had built up in the Cutler-Hammer name since it was founded in 1911, and the name will live on at distributor counters and in brand preference studies over the years.
Another manufacturer played the name game differently. With lamp sales up over 22 percent since it first inked a three-year licensing agreement to use the Westinghouse name, Westinghouse Lighting Corp., formerly Angelo Brothers Co., has found that a well-known but once- dormant brand name with ties to the earliest days of the electrical industry still carries considerable clout. The 57-year-old Angelo Brothers, Philadelphia, officially changed its name to Westinghouse Lighting Corp. in January and now markets over 5,000 lamps, ceiling fans, lighting fixtures and decorative lighting hardware under that name.
Westinghouse has also licensed its name and famous “Circle W” logo to Salton, Lake Forest, Ill., a manufacturer of small kitchen appliances and vacuum cleaners; and Linear, Carlsbad, Calif., a maker of garage door openers and intercom systems; and several other manufacturers.
Westinghouse had been one of the three largest manufacturers of lamps until 1983, when its sold its lamp operations to North American Philips, now Philips Lighting Co., Somerset, N.J.
The Quest for Hassle-Free Special Pricing Authorizations (SPAs). Savvy electrical distributors always look for ways to cut waste from their operating processes. That’s why there’s been so much talk this past year about the need to streamline the process for special pricing authorizations. The good news is that distributors and manufacturers want to work through NAED to develop a standardize format for SPAs. Mike Rioux, IDEA’s president says by using existing EDI transaction sets, distributors and manufacturers can already standardize the process. IDEA hopes to have completed review and approval of a new request for credit “flat-file” standard by early 2004, which should help alleviate the use of priority formats.
Once, Twice...Sold On Ebay? Ebay’s move this year into the MRO/industrial supplies arena provides distributors with a relatively inexpensive option for setting up an online storefront. In 2003, the San Jose, Calif.-based online giant added 110 new subcategories to its MRO/Industrial Supply category at www.ebaybusiness.com, including categories for electrical distribution equipment, industrial automation and control, electrical tools and supplies, motors and lighting products.
Sellers can create online Ebay stores and have items listed under specific product headings for as little as $9.95 per month. For $499.95 per month, sellers can have an “anchor store,” with premium placement opportunities. The company estimates that last year business buyers shopping at www.ebaybusiness.com purchased over $1 billion in products in its MRO/Industrial Supply categories.
Industry Execs Move to New Posts. Some well-known industry veterans moved to senior executive positions at a number of companies. Following are some of the most intriguing leadership moves in 2003.
Ed Staple was named president at GB/Gardner Bender, Milwaukee, Wis. Sue Smith is now vice president of marketing for Pass and Seymour, Syracuse, N.Y. Ned Camuti was promoted to vice president of wire terminations, Ideal Industries, Sycamore, Ill. Joel Bateman took on more global responsibilities as chairman, global supply solutions committee, Hagemeyer NV. Joe Huffman left Leviton to become vice president of supplier relations, Consolidated Electrical Distributors (CED), Westlake Village, Calif. Jack Justillian retired from the COO post at Maurice Electrical Supply, Washington, D.C. Kirk Hachigian replaced Ralph Jackson as COO of Cooper Industries, Houston. Bob Sullivan retired as vice president of sales and marketing for the Electrical division of Southwire Co., Carrollton, Ga. Jeff Schaper was named president of GE Supply, Shelton, Conn., when Bill Meddaugh retired after 37 years with GE. Mike Gambino president and CEO, Pass and Seymour, Syracuse, N.Y., took on the additional role of president at Wiremold, West Hartford, Conn. Also at Wiremold, John Hoffman is the new vice president of sales; Tom Hudak joined the company as vice president of marketing; and Wes Kelley became director of specification strategy. Barry Boyer succeeded Jim Schmitt as president and CEO of Van Meter Industrial, Cedar Rapids, Iowa. Tom Cloud, now serving as chairman of NAED, became chairman and CEO of United Electric Supply, Co., New Castle, Del., and Gene Bruni became United Electric’s president. Richard Kurtz succeeded Tony Wang as president of W.A.C. Lighting, Garden City, N.Y. Industry veteran John Peterson became vice president of sales for the Gulf Coast region of EGS Electrical Group. Lighting veteran Phil Alexander joined American Fluorescent, Waukegan, Ill., as director of light commercial sales. At Drake USA, Franklin, Mass., Andy Hemingway moved from AIW to a post as corporate vice president of sales and marketing for the datacom, utility, transit, irrigation, telecommunications and industrial/automation markets. Dominic Pileggi will succeed Kevin Dunnigan as CEO at Thomas & Betts Corp. In another move at T&B, former A-D executive Chris Hartmann was hired to lead the company’s electrical products business. Curt Andersson became president of Cooper Industries’ Crouse Hinds division, succeeding Steven Sisney, now heading Cooper’s tool unit as group president.
The Economy May Finally Turn in 2004. Although the industry continues to suffer through one of the worst downturns in recent memory, of particular concern are high vacancy rates in the office market and low capacity of utilization in industrial facilities. These are of particular concern to electrical manufacturers, electrical distributors and independent manufacturers’ reps because so much of their business depends on office construction and retrofits, new factory construction and supplying the MRO needs of existing facilities.
However, many electrical industry executives see slow growth for next year. Many reps, distributors and manufacturers surveyed for the upcoming 2004 ElectroForecast in Electrical Wholesaling, to be published in the magazine’s next month’s issue, see single-digit growth in 2004 for their companies.