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American Made
Who produces anything here anymore? Tampa's Bison Investments Inc. does.
Ignoring the offshore outsourcing juggernaut, CEO Birge Sigety is on the lookout
for manufacturers that can make it in the good ol' US of A.
By Francis X. Gilpin
Associate Editor
Five years ago, Charles Birge Sigety came face to face with what many fear is the unavoidable future of American manufacturing.
His Tampa-based Bison Investments Inc. bought a North Carolina plastic-molding manufacturer out of bankruptcy. Among other products, Bison's acquisition made blenders for Cuisinart, the kitchen-appliance distributor. Sigety prides himself on finding new methods to improve old manufacturing processes. So when the Cuisinart contract was up, Sigety was ready to show his acquisition's biggest customer a cheaper way to make blenders.
It was too little, too late.
Cuisinart executives had already decided their blenders were going to be made in China. The Bison acquisition, what became PolyTen LLC, offered Cuisinart lower production costs. But nothing like the 60 cents on each and every $23 blender that Cuisinart would save by moving production to a lower-wage country. It was nothing personal. Production of all of Cuisinart's appliance lines was going overseas.
"We had lost an important customer to foreign competition," says Sigety.
After that experience, who would invest in domestic manufacturing again? Birge Sigety does. And the 51-year-old Bison chief executive officer continues to put his money where conventional wisdom says it is most at risk.
"With the increase in technology that's available out there, I think it is possible for American companies to compete very well if they use that technology," Sigety says of U.S. manufacturers. "I've done capital goods, disposables, paper converting, textiles. I've seen personally how technology can be used in those different industries."
He appears to be personally doing quite well by it, too.
Although Bison Investments is private, Sigety is willing to say his share of its $5 million initial capitalization came from the sale of one of his former companies. Sigety and his management team took what became Professional Medical Products Inc. off Warner-Lambert's hands in the early 1980s and retooled it into a leading maker of adult-incontinent, wound-care and plastic medical devices. PMP had $165 million in sales and 1,500 employees by 1996 when Sigety's group sold it to a pre-scandal Tyco International Ltd.
The exact price wasn't disclosed. But Tyco did report paying a combined $206 million for PMP and another company acquired in the same quarter.
HGTV
When Sigety isn't on the road, he works a few hundred feet from Bayshore Boulevard in South Tampa. His office is on the second floor of a small building at the rear of his oak-shaded yard. From the street, the home office is obscured by more than 5,000 square feet of Mediterranean-style mansion. Sigety shares the million-dollar space with Beth, his wife of 27 years, and their three children. The property was featured on the Home and Garden Television cable channel in 2001.
Sigety, whose grandfather emigrated from Hungary, was born first among five children in Manhattan. His Republican father served in the administrations of President Dwight Eisenhower and New York Gov. Nelson Rockefeller. His mother gave up a promising career in early TV at 1950s NBC after the third child was born. When Sigety was 15, his family moved to rural Pennsylvania, midway between New York and Washington.
It was in that small community that Sigety met his future wife in the ninth grade. Elizabeth Pennington went on to study computer science at Worcester Polytechnic Institute and earn an MBA at Emory University. Her background isn't wasted. "She's a whiz at telecommunications and computers," says her husband, who leaves Bison's more nettlesome technology problems for Beth Sigety to troubleshoot.
As for Sigety, he went to Bates. The Maine liberal arts college made a lasting impression. "It's a great school because it makes you learn to think, or it challenges you to want to learn to think," says Sigety, an English major who was exposed to business theory only in a few economics classes.
Birge and Beth later endowed the Sigety Family Fund for Computer Science to help nudge Bates into the Information Age. It wouldn't be the last time the Sigetys introduced high-tech into a traditional setting. But it might be the most gratifying. "Now it's one of the most wired schools in the country," Sigety says proudly of his alma mater.
Hands-on investing
Bison is the third phase of Birge Sigety's business career. After his 1975 Bates commencement, he started in family-owned nursing homes. Sigety became a manufacturer himself in 1981 by leading a leveraged buyout of the Warner-Lambert medical division that turned into PMP. After selling PMP in South Carolina seven years ago, Sigety relocated to Tampa and founded Bison to invest in American manufacturing.
A PMP textile subsidiary had given Sigety a strong taste of what globalization is doing to the American worker. "I watched hundreds, if not thousands, of people in the state of South Carolina in manufacturing lose their positions," he says. "It was not a big stretch for a liberal arts major to say, 'Well, gosh, if this can happen in the textile industry, this can happen in any industry.'"
A small business owner is more conscious of what is happening than the multinational corporate executive who is closing factories here and reopening them on foreign shores, according to Sigety. That executive has forgotten the example of one of the 20th Century's greatest industrialists. Henry Ford, too, believed in keeping costs low, says Sigety. But Ford did so primarily because his employees, who often worked their entire adult lives on his assembly lines, would be able to afford his automobiles.
"What we're now facing - and I think this last recession is an excellent example of that - is: Can the American people, absent the jobs that are going overseas, afford to buy the products that the multinationals and the other companies want to export back into this country? 'Cause they've got to work."
Sigety settled his family in Florida with those concerns fresh in his mind. "I decided the best thing that I could do was combine my manufacturing skills with an ability really to buy smaller manufacturing companies in defensible niches, where we could grow them here, create jobs and try to do what little part we could to - I can't say reverse the tide but - stem the tide, maybe, of the exodus of those kinds of things from our country."
He adds: "And make above average returns along the way."
His formula worked at PolyTen. Despite losing the blender contract, Bison regrouped. Sigety and his investors shelled out $1.8 million for the assets of another plastic-molding company, Coeur Laboratories Inc. Merging the two, Bison was able to improve Coeur's medical products by using the excess modernized capacity at the PolyTen plant where the Cuisinart blenders were to have been made.
Sigety prefers Bison's hands-on approach to investing. "It's a lot more fun to do that than it is to spend your time going to quarterly board meetings and deciding whether the guy can make the investment pay off for you," he says. "We try to get involved and make sure the investment pays off."
What Bison takes a run at
Bison will invest up to $3 million at a time for a majority stake in a Southeast manufacturer. The company favors basic manufacturing, especially medical items. Americans like to buy medical devices that were made here, Sigety thinks, so those producers are better positioned to ward off overseas rivals.
Helping small, under-performing manufacturers reach their potential is Bison's specialty. "Now nobody, including the largest Fortune 500 companies, have unlimited abilities to get capital," says Sigety. "But you have to steadfastly hew to reinvesting and advancing - keeping up-to-date, if you will - your manufacturing infrastructure."
American industry listens to Wall Street and seldom modernizes. Consequently, Sigety says, manufacturers are forced to globalize their own myopia to survive. "They have chosen to reduce their costs by taking, in many cases, machinery that is not the most efficient machinery available offshore and, if you will, supplementing that lack of efficiency by saving costs on the wages," says Sigety. "And that really is how the system has worked."
With a longer-term outlook, Bison resists the easy fix. "What we try to do, in the process of buying a firm, is get into the facility as quickly as possible," says Sigety. "Take a look at the systems, get a sense really of the ambiance in the plant. It's hard to explain 'cause it's not something you can see in documents. But it's something you can feel when you walk in."
At most of the small manufacturers that Bison covets, top executives also own the company and depart with their money upon signing on the dotted line. So Bison spends more time down the chain of command.
"In my experience in manufacturing, things go round because of the front-line employees and also the middle management," he says. "They're just the heart and the soul of the business."
Sigety looks for middle managers who would thrive in a more advanced plant. "If they're not capable and I guess I would use the words, 'open-minded,' about seeing things from a different viewpoint, that really gives us pause in a transaction," he says.
Another concern is workers who aren't allowed to make independent decisions about how they do their jobs. "Are there work cells? Are there team leaders? Or is it really kind of a centralized, command-and-control structure, which is always a red flag for us."
While Sigety detests outmoded plants with inflexible top-down hierarchies, that is exactly what he hopes to see at competitors of a targeted company. "Can we bring to that company something that changes that dynamic and makes the company we're buying a better competitor, a more successful competitor in the market?"
Bison doesn't pull the trigger on a deal until it has lined up an executive team. Along with a 5-year business plan for the acquisition, Sigety draws up measurable performance-based pay schemes for top managers.
One such compensation plan rewarded PolyTen executives in April when Bison sold the company, now known as Coeur Inc., for an undisclosed sum to Hammond, Kennedy, Whitney & Co. Coeur executives, including President Jay Cude, stayed on as significant equity partners under terms of the Bison sale.
There's no shortage of financial buyers for established companies. "There needs to be more angel investors like Birge," says Cude.
Uncle Sam, too?
Perhaps Bison's selectivity as a strategic buyer is why the PolyTen sale left Sigety's investment company with only one manufacturing holding.
Aerial Machine and Tool Corp. has concentrated on making life-safety apparel for military missions since World War II. Vesta, Va.-based Aerial Machine has had just three owners in 75 years. Bison bought it in 1998. In spite of installing the latest computerized sewing equipment, Bison has increased employment about fivefold at Aerial Machine.
Workers are still needed in an automated defense plant to make sure machinery is set to the proper tolerances so a uniformly high-quality product is turned out. "You can make a bad product consistently, too, which you have to guard against," says Sigety.
Aerial Machine received $5.4 million in prime contracts during fiscal 2001 from the Army, the Navy, the Defense Logistics Agency and U.S. Special Operations Command, according to a Gulf Coast Business Review analysis of non-classified federal procurement data. Three years earlier, Aerial Machine had won just $969,000 in prime contracts.
John Marcaccio, Aerial president, is grateful to Sigety for backing increased efficiency. "He's been very keen to let us reinvest in the plant every year," says Marcaccio, even though new computerized sewing machines run $30,000 each.
But being a defense contractor doesn't automatically bless an American manufacturer with a "defensible niche" anymore.
Sigety sees the Pentagon using more foreign contractors and he doesn't like it. "It would be very unfortunate if, in this country, we decided to rely on foreign countries to supply a disproportionate share of our defense needs, not knowing tomorrow if those will be our allies or our enemies," he says.
U.S. Rep. Duncan Hunter has attempted to insert "buy American" requirements in recent defense appropriation bills. Sigety wholeheartedly supports the congressman. But Hunter, who chairs the House Armed Services Committee, has run into stiff opposition.
That was noted in July when Hunter appeared on CNN. "The flak that you are getting from the White House, from the Pentagon, from our trading partners, from the aerospace industry, in particular, pretty severe heat," CNN host Lou Dobbs asked Hunter. "Are you going to be able to withstand it?"
"Well, Lou, that's what we're here for," replied the California Republican. "It's time for these boys to climb out of their BMWs and realize the good old American taxpayer out there carrying a lunch bucket is paying for everything we do here, and we're going to have to give them a little bit of the action."
Sigety worries about Aerial Machine employees, many ex-textile workers who probably couldn't be retrained again, if Pentagon brass decides to import aviator restraints or search-and-rescue vests from Taiwan.
This doesn't make him a protectionist, Sigety insists. He just prefers fair trade to free trade.
James "Al" Merritt, a Miami exporter of medical equipment who advises Bison, offers Brazil as an example of a nation that doesn't walk the walk when it comes to free trade. Merritt says small American medical-device makers like Coeur are effectively shut out of the Brazilian market due to product registration rules and other barriers.
Merritt says he has the utmost respect for Sigety's fair-trade crusade. "He's a really, really genuine American," Merritt says of Sigety.
Sigety believes time is running out. "We seem to think that it's OK to placate other countries in the world by giving them the ability to pollute or to have much later adoption of some of the rules and things that we use in our workforces here, and at the same time open our markets to them," says Sigety. "I think there is something wrong with that. And that is speeding this exodus of manufacturing infrastructure from our country."
Bison roams Florida for plants
Bison Investments Inc. has yet to invest in a Florida manufacturer. Birge Sigety looked over 20 companies since 1996. He came close to purchasing two.
One Florida deal didn't go through because the owner came down with what Sigety good-naturedly calls "seller's remorse" before all the papers were signed.
Sigety says there are three reasons why Bison hasn't closed a deal hereabouts:
×Product wasn't good enough to be competitive. (That was the case about six months ago with a medical instrument maker that Sigety passed up.)
×Competition was too strong. (Sometimes revealed when customers of a prospective acquisition tell Bison during due diligence that there are plenty of other suppliers.)
×The Sunshine State simply doesn't have a whole lot of traditional manufacturing.
Sigety hasn't given up on finding the right manufacturer in his adopted state: "I'd like to do that because it would certainly mean I wouldn't have to travel through (Tampa International Airport) like I do."
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