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Supply Chain Management of Hastings Manufacturing Company
Supply Chain Management of Hastings Manufacturing Company - January 10th, 2011
Hastings Manufacturing Company makes piston rings, auto mechanic service tools, and, through a joint venture, engine additives and other automotive chemical products. The company's goods are primarily sold in the United States and Canada, though they are also distributed internationally. Hastings products include Flex-Vent Oil Rings, PowerFLEX Precision Racing Rings, and Motor Honey Oil Treatment, which is produced by the 50 percent-owned Casite Intraco LLC. Most Hastings products are sold on the aftermarket, but the company also makes original equipment piston rings for the likes of DaimlerChrysler AG. A sizable minority of Hastings' stock is owned by descendants of the firm's founder Aben Johnson, and the company is run by his grandsons Mark Johnson (CEO) and Alex Johnson (president).
Hastings Manufacturing was founded in 1915 in Hastings, Michigan by Aben Johnson. The firm was created to manufacture so-called "aftermarket" products, which car owners could buy to enhance or upgrade their vehicles. Early offerings included a luggage carrier, a tire carrier, a bumper, a steering stabilizer, a water pump, an oil engine, and a curtain light.
In 1923 Hastings introduced its first piston rings, cast-iron metal semicircles that fit around an engine's pistons to protect them as they cycled up and down to generate power. Piston rings, especially in early combustion engines, had a relatively short lifespan and needed to be replaced when worn to avoid causing damage to the engine. Buying "original equipment" replacement rings from a dealer could be somewhat costly, and substitute versions made by companies such as Hastings provided consumers with a less expensive alternative.
During the automobile's early years most carmakers used low compression engines that required minimal oil-sealing ability from piston rings. In 1932, however, the Ford Motor Co. made the V-8 engine standard on its vehicles, and the new "flathead" motor utilized a high-compression design. The popularity of the reasonably priced, higher-power vehicles soon led to problems for mechanics who had to find a new type of replacement ring that could control the greater oil compression ratios involved.
To address this issue, in 1935 Hastings introduced its "Steel-Vent" oil control piston ring, the first multiple-piece ring, which was a vast improvement over the cast iron versions heretofore used. To advertise the new product, the company created the Hastings Tough Guy, a cartoon character who touted the product in print ads. The new ring design was a huge success, and Hastings Manufacturing soon grew from a minor aftermarket parts maker into one of the world's leading manufacturers of replacement piston rings.
Expanding the Product Line in the 1940s
In 1941 the growing company formed a Canadian subsidiary, Hastings, Limited, to do business north of the border. The firm also added a line of oil filters in 1944. Hastings' "Densite" filtering media, which was composed of short cotton fibers, worked well, and demand for the company's filters grew steadily over the years.
Following World War II Hastings again expanded its product offerings, adding spark plugs and auto service tools. In 1947 the company acquired the Casite brand of automotive chemical products, which had been introduced in 1939. Casite's offerings included Motor Honey Oil Treatment, an engine additive. Advertisements for Casite from this era emphasized the product's ability to free sticky valves, retard congealing of oil, and eradicate engine sludge, and guaranteed "Better and Smoother Motor Performance or Double-Your-Money-Back." During the 1940s founder Aben Johnson's son Stephen also began working for Hastings. He would later take control of the firm from his father.
In 1950, following six years of design and testing, Hastings added a line of oil filter cartridges. The firm began manufacturing safety belts in 1956 and introduced the new Flex-Vent three-piece oil control ring the same year.
In 1957 Hastings began construction of a foundry, which became operational in October. The year 1958 saw the company purchase its first computer and also start construction of a new filter manufacturing facility, which was completed the following spring. The "state-of-the-art" plant was highly automated. In 1963 Hastings discontinued its spark plug line, which had not proven to be profitable.
In the early 1970s company head Stephen Johnson's sons Mark and Andrew began working for the firm in its marketing and financial departments. By 1980 Hastings, whose stock was now trading on the Amex exchange, was reporting annual sales of more than $47 million. Earnings for that year topped $1.4 million.
Increasing Filter Manufacturing in 1985
In 1985 Hastings enlarged its filter manufacturing operations by creating a new assembly division in Yankton, South Dakota. The unit was charged with making filters for sale through mass merchandisers, which the company was targeting to increase sales. In 1986 Hastings' Canadian subsidiary, now known as Hastings, Inc., built a new facility in Barrie, Ontario to accommodate sales growth expected in that country.
In 1987 the company opened a new distribution warehouse in Knoxville, Tennessee. The 150,000-square-foot facility gave Hastings better inventory handling capability and also improved the company's ability to ship to customers in a timely fashion, given its more central location. That year the company's sales topped $65.5 million and its net earnings totaled slightly less than $1.5 million.
In November of 1991 a former Hastings employee and an alleged accomplice were arrested and charged with stealing company plans for an oil-control ring system and offering them for sale. An undercover police officer had reportedly arranged to buy the plans from them for $300,000. The company had discovered that the documents were missing during the summer.
In the spring of 1994 Hastings president Stephen Johnson stepped down and his sons Mark and Andrew were named co-CEOs and co-presidents of the company. Stephen Johnson continued to serve as board chairman.
Hastings sold its filter-making operations in the fall of 1995 to Clarcor, Inc. of Rockford, Illinois for $13.9 million. The deal included the company's Yankton and Knoxville facilities. After the sale was finalized, Clarcor would continue to make filters under the Hastings and Casite names, joining its own Baldwin, Clair, and Airguard brands. Hastings' decision to sell had been motivated by a desire to concentrate the company's efforts on its core product line of piston rings. A total of 250 employees who were involved with the filter operation were transferred to Clarcor, leaving Hastings with a total of 624.
In December of 1996 the company restructured its operations, reducing staffing levels and phasing out piston ring manufacturing in Canada. During this time period the firm also was gaining QS-9000, ISO-9002, and ISO-9001 certification of its manufacturing procedures.
In 1997 Hastings began exporting its own products abroad, following the termination of an international distribution contract with an outside firm on December 31, 1996. The new "country-direct" method of distribution involved working with subdistributors in each country, rather than a master distributor for all foreign sales. In May of 1997 Hastings also introduced a new product line, PowerFLEX Precision Racing Rings, which were marketed to the auto racing industry. Sales for the year reached $35.7 million, with net earnings of $955,000.
In 1998 Hastings began to adopt lean manufacturing practices, for which the company's factory was reconfigured to minimize waste in materials and labor. This was done primarily to address a problem with manufacturing capacity that had caused product shortages during the latter half of the year.
Starting a Joint Casite Venture in 1999
In the fall of 1999 the company formed a joint venture with Intraco Corp. called Casite Intraco LLC, or The Casite Company, to develop, market, and sell Casite vehicle chemicals worldwide. The 50-50 jointly owned venture would be headquartered in Hastings. The Troy, Michigan-based Intraco was an international building, industrial, and automotive products distributor, which had earlier distributed Hastings piston rings abroad. Hastings would transfer all trademarks for Casite products to the new entity, but would continue to market the line in the United States for the first two years of the agreement. In conjunction with the joint venture, Hastings announced plans to increase the offerings in the Casite line from six to nearly two dozen products. In addition to established items like the Motor Honey and Tranny Honey additives, new fuel, maintenance, and aerosol products were planned. The Casite line was already distributed widely in the United States through Kmart, Meijer, and Murray's stores.
The year 1999 also saw Hastings' Canadian subsidiary begin to distribute the products of other U.S. automotive aftermarket goods makers through a new distribution, administration, and sales program in that country. The Canadian unit took on all packaging and distribution of the firm's mechanics specialty tool line, as well.
A slowdown in demand for the company's products led to new cost-cutting measures in 2000 and 2001, including suspension of stock dividend payments and the layoff of 11 percent of the company's workforce of 345 in February 2001. March of that year saw the company sign an agreement with Karl Schmidt Unisia, Inc. (KUS), to distribute its Zollner brand pistons in the United States and Mexico. KUS, an affiliate of the German-based Kolbenschmidt Pierburg AG, would make the pistons at a plant in Wisconsin. Zollner, originally located in Fort Wayne, Indiana, had been acquired in 1999 by KUS. By the summer of 2001 business had begun to rebound, and Hastings was able to offer most of its laid-off workers their jobs back and also hire ten additional employees.
Another marketing agreement was signed in November of 2001 with Norcross, Georgia-based Automotive Components Limited (ACL), a maker of engine parts including bearings, gaskets, and pistons. Hastings would distribute that company's products along with its own in the United States and Mexico. Shortly afterward, Hastings created a new Global Automotive Aftermarket unit, which would be run by two former ACL executives to help position Hastings as a single-source supplier of engine components worldwide. Creation of the new unit was part of a restructuring in which the company's Michigan operations were split into two parts, the other of which would be responsible for piston ring production and distribution. At the same time the company made changes at the top, naming Andrew Johnson president and giving Mark Johnson the titles of CEO and board chairman.
After several years of losses, Hastings reported net earnings of more than $1 million for fiscal 2001 on sales of $34.8 million. The profits were due in part to $714,000 received from the company's sale of a 120-acre fishing lodge it owned near Baldwin, Michigan.
In the spring of 2002 Hastings reached an agreement with Intraco for the latter to market Hastings piston rings and other products in Central America, South America, and the Middle East. At year's end the firm also resolved a two-year-old lawsuit that had been filed by company retirees, who charged that Hastings had improperly reduced their healthcare benefits. The settlement would cost the company approximately $4 million over a 12-year period.
More than 85 years after its founding, the Hastings Manufacturing Company continued to produce quality automotive piston rings and other aftermarket products. Recent agreements to expand distribution of goods worldwide and to distribute other manufacturers' engine components in North America, as well as a refinement of the company's manufacturing process, had returned it to profitability after a period of losses in the late 1990s.
Principal Subsidiaries: Hastings, Inc. (Canada); HMC, Inc.; Casite Intraco, LLC (50%).
Principal Competitors: Dana Corporation; Federal-Mogul Corporation; Robert Bosch GmbH; TRW Automotive, Inc.; Nippon Piston Ring Co., Ltd.
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