Growth across the board despite a slow market

With more than 30 operating units and 10,000 employees, ASSA ABLOY North America is by far the largest of the Group’s regional organizations. In 2002, despite continuing recession in the USA and a sustained decline in new construction, the North American organization achieved a modest rate of growth, and all its operating groups, without exception, showed considerable improvements in profitability and operational efficiency.

“To achieve growth in a year like this is pretty amazing,” says Clas Thelin, Group Vice President responsible for North America. “We have seen six successive quarters of declining new construction, which is one of the drivers of our business. Commercial construction has fallen, but fortunately institutional construction, which is particularly important for us, was stable. And aftermarket sales provide an important stabilizing factor in the lock industry, buffering the effects of changes in the construction market.

“The shock of 11 September resulted in a number of short-term measures that had only limited impact on equipment or hardware. The longer-term consequences that we foresee as we move forward are systems and hardware upgrades that will have a positive influence on the growth of our business.”

Success of US restructuring
The restructuring of the US organization in July 2001 has proved a highly successful first step in exploiting Group strengths. Five product-related manufacturing groups were formed, supported by two main sales and marketing organizations. Within each manufacturing group there are councils devoted to cross-learning of best practices and to joint development of products using common technology. Cross-sourcing of components and complete products to optimize manufacturing investment is increasing within the groups, within North America and across the whole ASSA ABLOY Group.

In the Door Group, for example, there has been heavy consolidation. One factory making custom frames has closed, with investment concentrated on a fully automated production plant in Mason City, Iowa. The two biggest companies, Ceco and Curries, will continue to compete on the market, but have rationalized their development of niche products. Thus Ceco will carry forward the development and certification of certain categories of doors such as for hurricane requirements, while Curries will develop a decorative, textured steel door that looks like wood, sourcing it for both companies. The labor-intensive manufacture of steel-stiffened doors has moved to Mexico, where labor is cheaper.

The cross-learning and benchmarking process has probably made most progress in the Architectural Hardware Group, the largest of the manufacturing groups. During the year, units with only limited previous exposure to lean manufacturing processes and a profit center structure have taken major steps to get closer to best practices used in other companies in the group. Product and purchasing councils have also been formed, with a very positive result, to ensure that the group optimizes its efforts and capitalizes on the potential inherent in its size.

 
“In a casino, security must blend with the surroundings but provide maximum protection so that our customers and employees feel secure,” says Marshal Szalay, Head Locksmith of the Mohegan Sun gambling resort in Uncasville, Connecticut, USA. “At the same time, strength and durability are vital. People come and go round the clock. Some doors cycle thousands of times a day, and this requires door hardware that can absorb tremendous abuse. For our recent expansion we looked for a security solution to fit our world-class image. Sargent and Timelox helped us achieve this with products that combine old-fashioned strength with industry-leading technology.”

Promoting higher security
Compared with other advanced markets, the USA has always been more focused on safe evacuation of buildings than on security protection. “Although our High Security Group has a strong market position, the market for mechanical high security is smaller than in Europe,” says Clas Thelin. “The challenge is more to educate the market to appreciate the benefits than to sell specific products. People in the us don’t realize how easily ordinary keys can be copied – or that a high-security key system will cost only usd 20–40 a door more than a standard system.”

As a result of initiatives directed at residential and institutional customers, virtually every company, not only in the High Security Group, is now showing faster sales growth in highsecurity products than total growth. The traditional companies of the Architectural Hardware Group are moving from just supplying products to more of a security consultancy role. In the Building Security Initiative, essex has teamed with outside companies to offer integrated high-security solutions backed by training and consultancy. Medeco has launched a nationwide program focused on safer workplaces in conjunction with the National Crime Prevention Council (NCPC). ASSA ABLOY is also helping to drive the development of a new ansi Standard for high-security locks, currently being written by the Builders’ Hardware Manufacturers Association.

On the electromechanical side, new products have created opening solutions that are secure as well as safe. The Electromechanical Group has shown one of the highest growth rates, especially in non-residential applications. Again, educating the market is vital. “If you change a standard exit device to an electromechanical device, you can for example introduce a 15- second time delay and alarm, which adds significant security without jeopardizing fire safety,” says Clas Thelin. ASSA ABLOY is also supporting and acting as consultant to another NCPC initiative focusing on school safety. The Safe and Sound program is being piloted at 30 schools in Pennsylvania and Kentucky, with the aim of making children feel safe and secure. Physical security is one major component, with procedures as important as products. If an incident occurs it must be possible to move children quickly around the school or outside while keeping other areas securely locked.

Good design raises margins
The Residential Group has also shown high growth, founded on greater attention to esthetics. “If you can differentiate yourself through design, margins are far higher than on basic products,” Clas Thelin comments. “People are willing to pay for the right designs.” Emtek has continued to be highly successful in selling a wide range of upmarket designer door handles. Now Medeco’s new series of residential high-security locks combines their own cylinder and deadbolt functions, and strong brand name, with Emtek input on the design side. The trend is likely to spread to non-residential applications such as hotels and prestige offices.

Quinnipiac University in Hamden, Connecticut, USA was seeking a user-friendly security solution that would keep its 3,000 residential undergraduate students safe and its campus buildings secure at an affordable cost. “The combination of VingCard Persona and SARGENT products gave us more,” says Jonathon Terry, Assistant Coordinator of Communications. “We got durable, 100 percent dependable locks, operated conveniently by the students’ ID cards rather than keys. This simplifies our student check-in process, allows only authorized personnel to enter, controls access to student accommodation during holiday breaks, and allows us to audit door activities. And it’s backed by great customer support.”

Innovation vital to growth
Ongoing product development is a vital driver of growth, and the North American organization continues to launch innovative products across the whole spectrum of security. Sargent has introduced a silver-based antibacterial coating, SARGuard, which can be applied to door handles and keys in hospitals, laboratories, schools and care homes to provide permanent resistance to microbial growth. For use with rim-mounted exit devices, HES has developed a completely new surfacemounted electric strike that requires no cutting of the door frame.

In the industrial field Medeco has developed new lock systems for parking meters and vending machines, designed to eliminate fraud by money collectors. The first parking application was developed in close collaboration with the City of San Francisco. The locks for all associated meters use the same high-security mechanical key code but have different electronic key codes. A hand-held computer records the result of every visit.

In the detention market, Trussbilt has added security ceiling and wall systems to its steel doors and frames. The space-saving modules – steel partitions which are then filled with concrete – can build complete prison cells. The first unit has been installed and it is estimated that one whole storey could be saved when building an eightstorey prison. The system is being sold by Trussbilt itself and also branded for a large distributor partner.

High-security expansion in Canada
ASSA ABLOY’S market position in Canada remained stronger than in the USA, especially in locks and hardware. Between them, the Group’s four Canadian sales companies represent virtually all the us manufacturing companies.

Over the last couple of years electromechanical products, primarily from Securitron, HES and effeff, have made major inroads in Canada. In the same period McKinney’s hinge business in Canada has grown from almost nothing to seven-digit sales.

Canada has traditionally had a well-developed high-security market, proportionally larger than in the USA, and the Group has a solid presence through Medeco, Abloy, Mul-T-Lock and Assa. Previously most high-security sales were on the aftermarket, but Yale- Corbin Canada and Sargent both have specifying power in the new-construction market, and as a matter of policy now include a high-security mechanical key system as the preferred option for every job. This policy is significantly increasing penetration into new projects.

Integration and outsourcing in Mexico
With 100 million people and a strong infrastructure, Mexico is now the world’s twelfth-largest economy. After the change in regime in 2001 the economy showed limited growth that year, with very much a ‘wait and see’ attitude. In 2002, however, growth increased considerably, which must be seen as a sign that the new President, Vincente Fox, a former international businessman, has been well received as the country’s leader.

ASSA ABLOY’S three Mexican companies, Phillips, TESA and Yale, shared one of the best growth rates in the North American organization. Integration progressed well, with crosslearning, cross-sourcing of products and coordination of purchasing. The three companies are jointly involved in promoting higher security and in developing a national security Standard. Mexico also enhanced its position as a low-cost and conveniently located manufacturing base for the us companies. TESA manufactures most of the builders’ range sold by Yale Residential in the USA. The products are trucked straight from the factory to us customers with no warehousing in the USA, giving significant economies. Yale Security Mexico continues to supply a substantial portion of Arrow’s product range.

A future based on organic growth
“The highest priority for the North American organization now is organic growth,” Clas Thelin concludes. “Each individual company and each group has a 3-year plan. Growth areas for the next year are very clearly defined, and every project has a designated owner. Some projects are product-related, others directed at specific customer segments or promotional activities. Every project is followed up on a monthly basis to make sure it’s on track.

“The two sales and marketing organizations, essex and YSG, are heavily involved here too. They compete with each other for sales growth. We strongly believe in giving customers more than one option, and this also ensures that the salesmen retain their ‘brand passion’.

“The USA is a unique market in having big regional variations in economic sentiment. Some regions are currently showing 20 percent growth while others are in decline. It is important to have strong regional managers who know the conditions and are close to our distributors. We have therefore expanded our division of the country from four regions to eight and appointed a manager for each region with overall coordinating responsibility for both sales organizations.

“The integration of the whole North American organization received a major boost from the visit of the Volvo Ocean Race with two long us stopovers. Externally we got far more media coverage than we expected. We could also offer our customers a oncein- a-lifetime experience. Sailing is a minority sport in the USA, so they found it unusual and exciting to be invited on board a racing yacht. Internally the Race generated Group enthusiasm and solidarity among employees generally, and especially those who manned the marquees at the stopovers. The example of the crew in supporting one another through crises and illness inspired everyone, and stimulated the organization to offer a series of awards, which will now continue.”