In business, as in love, relationships forged can sometimes foster a dependency that has decidedly negative consequences for a least one party. Take the case of Peninsular Cylinder Company, a mature business founded in 1948 that for more than 40 years faithfully and effectively serviced the automotive industry (specifically, one customer: General Motors Corporation).
Well, the auto industry can be capricious. Some periods it’s up, and all seems well; other times it can take a downturn that can be as precipitous as the first descent on a mammoth roller coaster ride. In the early 1990s, when the industry endured one of its cyclical slowdowns, GM was forced to cut orders and cancel contracts. As a result, Peninsular nearly went bankrupt. Fortunately, Peninsular proved as durable as the long-lasting hydraulic and pneumatic cylinders that it produces. More to the point, Peninsular survived, in large part, because of the resilience and determination of company President Brent Paterson. After what went down with GM, Paterson decided to seek out other clients in different industrial sectors.
In other words, he picked up the pieces then went out to play the field.
Skipping ahead several chapters to today, Peninsular, an ISO 9001:2000 registered company headquartered in Roseville, Mich., is thriving in its new relationships. It provides a range of industrial customers, both American and international, a full line of world-class air and hydraulic cylinders that power factory production equipment and are designed to endure in the most destructive manufacturing applications. The company now serves clients in the foundry, lumber, food processing, oil and gas, mining, manufacturing and paper industries, among others. It even still stays in touch with the automotive industry.
“Right now, we’re at about 78 percent non-automotive and 22 percent automotive customers,” says Paterson. “Had we not broken our dependency on the American automotive industry, we most likely would have gone out of business.”
Key Word: Diversification
Obviously, Peninsular had learned the hard lesson about the perils placing nearly all of one’s eggs into a single basket. By the time the automotive industry experienced that critical slowdown in the early 1990s, 95 percent of Peninsular’s business was restricted to General Motors. Taking an assessment of the cylinder market, Paterson realized he’d have to diversify if he wanted the company to survive.
Paterson’s strategy involved initiating a multi-year campaign that expanded the company’s horizons beyond both the automotive industry and the Michigan region. “I saw that the market for what we made was a $1 billion-a-year market, consisting of about $400 million in commercially interchangeable cylinders and $600 million in special cylinders,” he recalls. “After I learned that, it then became a game of convincing the public to buy our cylinders.”
“He spent three years promoting our products to non-automotive companies,” says Steve Vasilovski, Peninsular’s director of marketing. “Part of this involved using some of the engineering and technology that we made for GM and reworking it so that it would be useful in other industries.”
As part of the strategy, Paterson contacted fluid power distributors from around the country, seeing if they would represent his product. He also launched an aggressive advertising campaign in magazines and trade journals. Eventually, he convinced so many distributors about the value of Peninsular products that he needed to hire six regional sales managers to manage the influx of new business. Soon, he had a viable network of distributors and sales managers that handled multi-state territories.
The turnaround has been both substantial and steady. Before the auto industry slowdown, Peninsular was raking in revenues of $2 1/2 million a year. After the fall, desperate times required desperate measures: Paterson sometimes had to take change from the company’s vending machines to help cover the payroll. But he persevered and carried Peninsular from the red and back into the black: by 2001, the company was again recording a profit. By 2004, it posted annual revenues of $5.65 million. Sales keep climbing. “Our non-automotive revenues have been increasing at a rate of 20 percent a year,” says Vasilovski.
In 2005, Peninsular recorded revenues of $6.3 million. The figure increased to $7.5 million the following year. “We’re anticipating as much as between $8 million and $9 million in 2007,” Vasilovski adds.
Of course, no public relations campaign, no matter how well developed, will succeed unless a company can back up its boasts, and Peninsular’s high-quality products proved to be a principal plot driver in the company’s redemptive story.
The company produces its cylinders at its manufacturing plant in Roseville, Mich. Under the roof of the 20,000-square-foot facility with state-of-the-art CNC manufacturing equipment, the Peninsular manufacturing team brings more than 400 years of combined experience into the design and production of hydraulic and pneumatic cylinders, which are engineered to endure in the most destructive manufacturing applications imaginable. In 2004, Peninsular invested its new prosperity into a significant site upgrade, spending well over $1 million in crane systems and CNC machines and computer software & hardware.
Paterson calls cylinders the “invisible workhorse” of manufacturing. “Our customers incorporate our cylinders into their tooling systems, and they choose us because our products have a longer mean time before failure. That is, they have a longer life expectancy,” he explains.
“In industry tests, Peninsular cylinders have consistently outperformed other cylinders,” reports Vasilovski. “That’s because the seals and engineering features inside our cylinders are designed to last longer. Therefore, instead of having to purchase cylinders on a frequent basis, our customers will save a considerable sum of money because of the extended life of our cylinders and our quick response to their emergency situations, thus, increasing their manufacturing uptime.
All Peninsular cylinders, pneumatic thrusters (slides and die lifters) and cylinder accessories can be manufactured to either NFPA or metric dimensional standards. In addition, Peninsular can make a cylinder with an inside diameter of up to 24 inches and a stroke up to 20 feet. Moreover, because Peninsular’s clients have special manufacturing needs, the company can customize its cylinders for non-standard, specific applications.
Innovations in its cylinders include motion control feed back systems and cylinder head proximity switch sensing. This involves an in-port cylinder head-mounted RF output proximity switch sensor without spacers underneath the switch. It includes same switch probe length at each cylinder end, and it provides a constant air gap between the switch probe and sensing target (piston cushion) to create reliable and repeatable stroke-to-go.
The company’s complete product line includes hydraulic cylinders (high and low pressure), air cylinders (heavy, medium and light duty), air/oil tanks and hydraulic reserve tanks, tandem cylinders, corrosion resistant cylinders, and GM, Ford and Chrysler standard cylinders, as well as air-powered slides, lifters and radial motion clamps.
Rapid and Courteous Response
Another key to Peninsular success is that it combines its high-quality product offerings with optimal customer service. “We ship our products out in timely fashion, typically within three to five days,” says Paterson. “In that area, we usually outperform what the rest of the cylinder industry is doing. Usually, it takes other companies about two weeks to ship out their products.”
Also, if a customer emergency arises, Peninsular can even repair a cylinder or make a new one within 24 hours.
Peninsular also makes it very easy
for customers to order its products. “Buying a cylinder can be a complicated process,” explains Paterson. “There are, literally, hundreds of thousands of variations available, and trying to come up with a part number for each of those variables is rather complex. But we have found a way to make it all much simpler with something that we call a cylinder configurator. This makes it easier for a customer to explain what they need in a cylinder, and the configurator will create a part number and provide a solid model picture that can be instantly down loaded into a CAD drawing based on how they described their needs.”
Further, all business is conducted with the utmost courtesy. “We treat our vendors, customers and employees with the respect that they deserve,” says Paterson. “In that way, people want to become associated with our company. As a result, we have very loyal customer and vendor bases, and we also have a very low employee turnover rate. Business all comes down to how you treat people, and we have a good reputation in that regards. We’ve developed some very strong relationships as a result of that philosophy.”
Indeed, Peninsular Cylinder Company has come a long way since the dark days of the 1990s. It managed to translate the expertise it developed in the automobile industry into other industries. In the process, it expanded its reach well beyond Michigan borders, as it now ships product to Mexico, Japan, China and Europe.