Mendoza School of Business

How one U.S. manufacturing company has prospered during the recession

Published: September 30, 2011 / Author: Ed Cohen



Manufacturer.

American.

Supplier to the construction industry, especially housing.

If any company was likely to have been crippled by the Great Recession, it was NIBCO Inc.

The 107-year-old maker of plumbing values and fittings for housing and commercial construction manufactures almost exclusively in the United States. And it’s headquartered in Elkhart, Indiana, which, as the capital of the RV industry, has been ground zero for many economic downturns.

Yet NIBCO – originally known as Northern Indiana Brass Company – has actually increased in value since the recession began in 2007, said Alice Martin, vice chair and “chief people officer” (human resources). In a talk to business students on Sept. 30 at the University of Notre Dame, she explained how.

Martin spoke as part of the fall Boardroom Insights course and lecture series of Notre Dame’s Mendoza College of Business. The program brings corporate leaders and senior executives to discuss current business issues.

NIBCO is a fourth-generation family–owned company that started out making valves for the brass musical instrument, the cornet. Martin’s husband, Rex Martin, serves as board chair and CEO. Their daughter, Ashley Martin, a 2007 Notre Dame business graduate, is expected to join the firm as the eventual fifth-generation leader next year after she completes an MBA.

The Martin family controls NIBCO, but since 1922, its employees, called “associates,” have been issued and allowed to purchase stock. They’re given opportunities to buy or redeem shares during two periods each year. The company pays an outside company to calculate share value, she said.

Alice Martin said NIBCO has suffered with the downturn in construction. Housing starts, which numbered about 2 million a year in the United States before the recession, have fallen to about 500,000 a year now, she said. Yet company earnings more than doubled, from $2.65 per share in 2007, when the recession began, to $5.66 per share in 2010, she said.

The value of the company’s stock has averaged an 8.1 percent gain per year for the last 10 years and is up 22.8 percent in the most recent year, she said.

“Despite this terrible economy, NIBCO continued to perform really well,” she said.

The human resources director credited the success to the company’s people. As she explained, though, NIBCO also invested in research and development of new products and technologies. And a strong preference exists in the construction industry to “buy American,” she said.

Management also acted quickly to cut costs as business evaporated. NIBCO closed two factories, in upstate New York and South Carolina, along with three distribution centers. The moves cut the payroll from 3,000 to 2,300 as manufacturing and distribution were consolidated at other company locations, she said.

Alice Martin said she volunteered to deliver the bad news to employees at the closing facilities herself.

Each was given the choice of either a generous severance package, or, if they were willing to relocate to another facility, a $10,000 bonus, up to $10,000 in moving expenses and a $10,000 donation to the charity of their choice.

“Not many people moved,” she said. Most felt too rooted in their local communities. “But I was willing to put my money where my mouth was. And if every person … had said, ‘I’ll take that $30,000 deal … (I) would have done it, would have done it in a heartbeat.”

She said that because of the way the company handled the closings, there were no angry emails or letters to local newspapers.

She described other ways the family owned company has demonstrated its commitment to employees, including a wellness program. The Elkhart headquarters has a gym and free personal trainer. Vending machines offer only healthful options, and there are smoking-cessation classes. Health-care costs have fallen from $10.2 million in 2006 to a projected $7.4 million in 2011, she reported.

There’s also career coaching for women associates (the manufacturing industry is notoriously male dominated, she said) and an employee awards program for ideas that save money or boost revenue. She said employee turnover has fallen from 35 percent companywide in 2006 (“not good”) to a projected 11½ percent this year (“much more manageable.”)

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