Potter & Brumfield Inc.

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Potter & Brumfield Inc.

200 S. Richland Drive
Princeton, Indiana 47671
U.S.A.
(812) 386-1000
Fax: (812) 362-2289

Wholly Owned Subsidiary of Siemens AG
Incorporated: 1933
Employees: 2,681
Sales: $290 million
SICs: 3625 Relays and Industrial Controls

Potter & Brumfield Inc. (P&B) is the leading manufacturer of electronic relays—devices that control the flow of electric current—in the United States. Vital components in a wide range of products, relays are found in small appliances, automobiles, furnaces and air conditioners, and vending machines. P&B also designs and markets timers, connectors, circuit breakers, input/output modules, and other mechanisms necessary in the transmission of electric power. A subsidiary of the German conglomerate Siemens AG since 1986, P&B focused on developing new products as well as consolidating and automating its production lines in the 1990s, in order to compete more effectively with Japanese relay manufacturers.

P&B’s history may be traced to 1932, when Elbert E. Potter and Richard M. Brumfield established a small manufacturing business in their hometown of Princeton, in southwestern Indiana. At the time, the two young men were employed at the local Hansen Manufacturing Company, which produced small motors for clocks. There, Potter was a toolmaker, and Brumfield, who had studied engineering at Purdue University, worked in the design and drafting department and also operated a die cast machine. During 1932, however, both men were often out of work, as the company was forced to lay off large numbers of its employees in order to withstand the effects of the Great Depression. During these periods of unemployment, Potter and Brumfield decided to try developing a business of their own.

Potter invested $280 in the necessary tools, and together the men set up a small shop in a corner of Potter’s basement, with the goal of manufacturing timer controls for stokers, machines that fueled furnaces. During their first year of business, the two men remained on the Hansen Manufacturing payroll, working there whenever possible and using off periods to work in their own shop. The following year, however, they left Hansen to focus exclusively on Potter & Brumfield Inc., which they incorporated in 1933.

In order to support themselves financially while they perfected the timer control, Potter and Brumfield took on various repair jobs for their friends and neighbors. In April 1933, for example, the company’s ledger book listed income of 25 cents for fashioning a key, $1.70 for repairing a washing machine motor, and 65 cents for welding skates. By the fall of that year, however, the two men had sold their first timer control, to the Meier Electric and Machine Company of Indianapolis, which paid $31.75 for the device. At the end of their first full year of business, P&B reported a profit of $243.

Orders for the timer controls increased over the next few years. To meet the demand, Potter and Brumfield moved their operations into a small building in Princeton and hired their first employee. By 1936, the company’ work force numbered eight, and its product line had expanded to include timing gears and the electronic relay, a product that would eventually become P&B’s mainstay. During this time, Potter focused on product development, while Brumfield spent much of his time making sales calls and devising marketing strategies. In 1939, however, they hired Ralph Brengle to take over as chief sales representative.

As the company grew over the next several years, Brengle would oversee the expansion of the company’s sales staff into a national organization. During World War II, while Brengle and many of the company’s skilled laborers served in the U.S. armed forces, the demand for stoker timers declined dramatically but the need for electrical relays escalated, ensuring a brisk business for the company. Gradually, P&B began focusing exclusively on relay production.

When Brengle returned from overseas, he put together a deal that would forever change the nature of P&B. In 1947, he secured a contract to supply a manufacturer with $500,000 worth of relays within one year. This was by far the largest order P&B had ever received, and it led to a rift between the company co-founders. While Brumfield welcomed the increased business and looked forward to becoming a major player in the industry, Potter preferred that the company remain a modest, specialized firm. When it became apparent that they would never agree on the direction their company should take, Potter and Brumfield decided to sell the business. They first extended an offer to Brengle, and he accepted, purchasing a 100 percent interest in the company. Although the split was amicable, Potter left the company altogether, moving to south central Illinois, where he took up farming. Brumfield, on the other hand, took some time off; when he returned, he purchased a 37.5 percent interest in P&B from Brengle and remained as president of the firm.

Under Brengle and Brumfield, the company began realizing rapid growth, with production volume doubling annually over the next several years. In 1951, construction was completed on a new plant in Princeton, an 85,000-square-foot facility that housed a work force of around 200. By the mid-1950s, Potter & Brumfield was the country’s largest manufacturer of electrical relays, producing over 50 varieties of the device, most of which were designed specifically for each customer. P&B relays were in demand from manufacturers of aircraft, submarines, and missiles, as well as makers of toys and household appliances, and the company’s work force swelled to around 700.

In 1954, P&B was acquired by the American Machine and Foundry Co. (AMF), a New York-based sports and leisure manufacturer—best known for their bowling alley pinspotting machines—which was seeking to diversify its interests. Under its new parent, P&B was afforded a great deal of autonomy; Brumfield remained company president, Brengle was named vice-president and sales consultant, and both men were named to the board of directors.

In 1956, the company expanded its presence beyond Indiana, establishing a manufacturing facility in Franklin, a town in southwestern Kentucky. Later that year, however, P&B’s growth rate and sales were curbed dramatically by a four-month-long strike among its unionized employees, during which research and production came to a halt. Once the strike was settled, P&B faced a backlog of orders and wavering consumer confidence, as well as heightened competition among the nearly 150 other relay manufacturers in the United States. As sales at P&B declined slightly and its backorders were eventually filled, the company’s work force was scaled back to 300. Nevertheless, by maintaining its emphasis on engineering new relays to suit specific needs, P&B eventually regained its customer base. By the late 1950s, P&B had recovered its reputation as a leader in the industry and sales again surged. In 1958, P&B built a new plant in Ontario, Canada, and the following year, a second Kentucky manufacturing plant was opened, in the northwestern city of Marion.

During much of the 1960s and 1970s, P&B worked toward establishing a national presence. Its facilities in Princeton and Franklin were enlarged, while construction was completed on a new plant in Gainesville, Georgia, in 1966. In 1969, the company made its first acquisition, purchasing a relay manufacturer in San Juan Capistrano, California, where P&B also opened a new office from which representatives oversaw sales in the western states. A factory in Juarez, Mexico, was opened in 1971, and in 1973, the year that Richard Brumfield retired, P&B opened an eastern states sales office in Braintree, Massachusetts. Increased business prompted the company to construct a new distribution center in Princeton in 1975, and the following year a new, 111,000-square-foot, tri-level Administration and Engineering Building in Princeton became P&B headquarters.

Also during this time, P&B became known in the industry for its contributions to new relay and switching device technology. Among the company’s innovations were the first magnetic latching relay, the first snap switches for television sets, and the only all-solid-state polarized telegraph relay, which replaced its electromechanical predecessor. P&B also produced the first military and aerospace relays capable of resisting large shocks and vibrations; as a result, virtually all space vehicles through the 1980s were equipped with P&B relays.

P&B’s parent company, AMF, had also expanded during the 1960s and 1970s. However, its rapid growth rate through acquisition had engendered several problems. In the early 1980s, AMF’s debt load was high, its energy division, which included interests in petroleum drilling and exploration, was experiencing heavy losses, and its stock prices were plummeting. In order to offset the effects of its high debt-to-equity ratio, AMF, led by chairperson W. Thomas York and president William P. Sovey, engineered stock swaps and public stock offerings, paying off some of its debt with the profits. By 1984, AMF had emerged a much healthier company, reporting a profit of $15 million on revenues of $1.1 billion. However, the company still maintained a small equity base, and its stock prices remained depressed. Moreover, some critics alleged, management had been neglectful of the company and had made some poor decisions. Thus, during this time, AMF became the object of a highly publicized hostile takeover by Minneapolis-based Minstar Inc., led by corporate raider Irwin L. Jacobs.

AMF initially rejected Jacobs’ April 1985 offers to acquire a 50.5 percent interest in the company, and weeks of litigation ensued as AMF charged Jacobs with proposing “greenmail”—buying up the company’s stock in order to resell it to the company at an inflated price—while Minstar charged AMF management with setting up “poison pills”—tactics, such as increasing the company’s indebtedness, to deliberately devalue the company—in order to dissuade Jacobs. Eventually, however, AMF was forced to accept the Minstar takeover; Jacobs and his company paid a reported $563.8 million for AMF, a price just slightly over book value. As expected, Jacobs then dismantled much of AMF, and in the process Potter & Brumfield was sold to the German conglomerate Siemens AG for an undisclosed sum.

Siemens AG’s primary business was electronics. Its holdings included companies prominent among Europe’s telecommunications, automotive, and industrial markets. Moreover, Siemens was Europe’s leading relay manufacturer. The new relationship between Siemens and P&B was regarded as mutually beneficial, since P&B could take advantage of Siemens’ technological advances and financial resources, while Siemens gained better access to the U.S. market for relays. Furthermore, by joining forces the two companies stood a far better chance of competing effectively with Japanese relay manufacturers. When asked by a local news reporter to comment on the recent acquisition, Richard Brumfield remarked, “It’s a good fit. Siemens is very familiar with the electric relay business. They’re the General Electric of Europe.”

Under Siemens, P&B underwent several changes, the first of which involved the overhaul of P&B’s management. Roy H. Slavin, chief operating officer at Cerwin-Vega, Inc., an electronic equipment company, was named president, while Edward B. Prior, a former vice-president in acquisitions and mergers at Siemens, became P&B’s executive vice-president. Slavin, who had considerable experience in bringing electronics companies to profitability, looked forward to directing P&B, which was already on solid financial ground yet faced possible extinction as foreign competition intensified. Under Slavin and Prior, P&B was provided with a new growth plan, which focused on research and development, expansion into foreign markets, and the consolidation and automation of its existing manufacturing facilities.

Exploring ways to improve the company’s productivity, the new management team called for renovations to P&B’s out- dated facilities and modernization of its production lines. They also introduced new concepts such as “cell manufacturing,” under which a team of workers oversaw every step of production for a specific assigned product, rather than just one stage of the assembly. This practice was intended to give workers a broader knowledge and a greater sense of responsibility for the product.

With the financial backing of Siemens, P&B was also able to invest more heavily in new product development. The automotive and telecommunications industries were regarded as holding the greatest potential for increased relay sales. Toward that end, P&B began developing new relays for use with circuit boards, a segment of the industry then controlled by Japanese relay manufacturers. Moreover, since most automobiles typically relied on more than 30 different types of relays to activate their electronic systems, P&B also stepped up efforts to custom-design relays for the country’s major automobile manufacturers. In 1987, for example, the company designed and manufactured a relay used to trip the locking mechanism on some models of General Motors automobiles.

Automation of P&B assembly lines became an increasingly important part of management’s new plan. According to a company spokesperson at the time, computer-controlled production lines ensured quality and eventually proved cost-effective. P&B spent millions to automate each of its plants in Indiana, Kentucky, and Mexico (having closed its Georgia and California plants in 1983 and 1985, respectively). Despite the increased reliance on computers and other machinery, P&B maintained a 1987 work force of 1,000 at its Princeton facilities, 300 in Marion, Kentucky, another 300 in Franklin, Kentucky, and 1,600 in Juarez, Mexico. Retraining programs were instituted to help some employees adapt to new roles as machine operators rather than assemblers, and benefit packages were improved.

As economic recession in the early 1990s hit automakers hard, P&B experienced some disappointing sales figures. Since projected growth had fallen short of expectations, P&B had to further consolidate its operations. Some of P&B’s moves to ensure competitiveness proved upsetting to the company’s hometown of Princeton, where P&B had been the largest employer for over 50 years. Between 1990 and 1995, the Princeton work force was cut significantly. In 1990, operations at the Princeton distribution center were transferred to Marion, Kentucky. Two years later, company officials announced a major restructuring, stating that they would be forced to eliminate more than 300 jobs at the Princeton plant and to transfer nearly 100 more from Princeton to the Franklin, Kentucky, facilities. In 1994, the last of the Princeton manufacturing operations were transferred to Kentucky. Nevertheless, as of early 1995, P&B’s administrative and engineering headquarters remained in Princeton.

P&B had estimated annual sales of nearly $300 million in the mid-1990s, making it the leading supplier of relays to original equipment manufacturers in the United States. The company marketed over 100 models of electromechanical and solid state relays, and as new uses for the device emerged—particularly in computers, automobiles, and aerospace equipment—the company looked forward to continued growth as well as to securing a competitive ranking in foreign markets.