Global Fastener News

1981 FIN – Importer Fuller Buying From Armco Steel; Sells Interest to Nissho Iwai

February 11
00:00 2014

June 22, 1981 FIN – Joseph Fuller & Co. (Chicago) unveils its strategy for how a major importer can cope with the high cost of money, the hazards of being a privately held company, and the need to grow in a down market.

Fuller has:
• Bought out the local presidents’ shares of a number of local distributors its had 50 / 50 partnerships with to consolidate them into a larger Fuller distribution company
• Switched its major source of supply from imports to a domestic company: Armco Steel.
• Sold an unspecified but substantial interest in itself to the Japanese trading company, Nissho Iwai.
“The six affiliates were indeed fine businesses, “but were fragmented, separate medium-sized companies,” Joe Fuller tells FIN. “We felt that the total entity would make a more meaningful corporation. While it’s nice to have a lot of stock certificates, the one stock certificate makes more sense. We entered into a different kind of agreement on profits and so on, accomplishing about the same thing as they were achieving before. We would have had to do about the same thing if we had gone public.”

The six affiliates acquired by Fuller are:
Hardware Services Inc., Lisle, Ill., Richard Knowles, president.
Manufacturers Bolt & Nut Co., Chicago, Paul W. Bridgman, president.
Suncoast Fastener & Supply, Sarasota, Fla., (subsidiary of Manufacturers Bolt & Nut).
Manufacturers  Bolt & Nut Co., LuJax Div., Milwaukee, Wis., James Heinzel, president.
Indiana Bolt & Nut Co., Indianapolis and Evansville, Ind., James E. Butler, president.
Heart of America Bolt & Nut Co., Kansas City, Mo., Edward R. Oshman, president.

Fuller and the subsidiary presidents had talked about doing this long before the Nissho question arose. “All of us have estate problems and I suppose I have more of an estate problem since I’m not involved in those companies’ management,” Fuller explained to FIN. “My wife would have been a lovely shareholder in a bunch of private companies that didn’t make any sense to her. I presume that the first thing my lawyer would do would be to sell and put it in General Motors.
“We’re not very old. We’ve only been in business since 1973, and times have changed. The larger company in the fastener industry makes more sense. The primary intent is to compensate the presidents. The larger company can make a different form of remuneration; I don’t think there has been any change in the appreciation of their efforts.”
Nissho and Fuller have done business for years. The cost and difficulty of getting money for Fuller interested in something beyond the purely commercial arrangement he had had with Nissho.
“Frankly, it used to be that you could expand out of profits without real capitalization,” Fuller says. Being in heavier fasteners, primarily, all of his competitors are owned by conglomerates, he says, who are not too happy with the performance of the fastener industry just now. “The elements between 1973 and 1981 are as different as night and day,” Fuller told FIN. “You have to have real working capitol. What do you do? Do you draw in your fences and don’t consolidate or do you get ready for tomorrow?”
Tomorrow includes, in Fuller’s estimate, having a distribution network, and access to major wholesalers of fasteners.
“Frankly, we’d like to upgrade some of our product lines and take advantage of some of the other things there are to distribute,” Fuller says. “How better can you do it than if you are in business with somebody who trades in everything?”
“From their side, they get more than a commercial relationship; they get the ability to use their muscle. There’s a big difference between a conglomerate and a trading company. A trading company understands the fastener business, understands the cyclical nature of it and the low margins. All that conglomerates understand is bottom line. It’s easy to make money when it’s an active market. In a narrow margin business in an inactive market, competition is fierce and there are lackluster profits and that is when people are trying to sell their shares to the public start to jump out.”
On the Armco arrangement, which means that Fuller’s main supply of products wil be domestic now rather than imports, he thinks this is the way to go now.

Joe Fuller was with Lamson & Sessions before forming his import company. And bought considerable products fro L&S before it sold its fastener operations to Russell, Burdsall & Ward, so he is not unfamiliar with the domestic end of it.
Japan, Fuller says, is experiencing the same problem the U.S. went through 10-14 years ago: lower cost products are being picked up by developing nations, “not as quickly as Japan picked up our business, but definitely, Japan has a hard time competing now and all indications are that they will have a hard time competing in the future.”
In the bolt business, Fuller says, the biggest change is that the Canadians have gotten much stronger because of the dollar discounts and “that doesn’t look like it is going to go away right away.”
The Armco arrangement will solve problems both for Armco and Fuller. Armco had a marketing problem in that it could not carry large inventories as they previously had, so could not service the ten and twenty-ton orders. Fuller will now do that marketing job for them.
Fuller and Armco had talked about this arrangement since 1976 but Fuller was committed abroad too far in advance to make the shift then and economic uncertainties since kept the plan on the back burner till now.
On Fuller’s side, they had found it “very difficult dealing with offshore producers. The price spread is not what it used to be. The bloom is off that flower.”
Armco gets production efficiency because Fuller buys substantial quantities of every size so Armco can plan their work for about four month ahead. Fuller gets at least a one-month inventory turnover improvement by eliminating the time on the high seas, which represents a substantial amount of money to them. It is also able to replace its stock quickly, so it doesn’t have to plan six months in advance as it did when buying offshore.
Another plus will be the ability to provide the traceability being demanded by industry, particularly for heat-treated fasteners. “Traceability and price stability on heat treated products are very important now,” Fuller says. Customers don’t like the way import product prices change monthly with fluctuations of the dollar, he says.
Fuller’s increased interest in specials is partly an interest in getting the business away from lackluster and cyclical profits, partly a desire to take advantage of changing buying patterns by multi-national OEMs, and partly uncertainty about which fastener manufacturers will still be around in 1982.
“Large companies like General Electric and General Motors have international buying offices. They are more interested today in dealing with offshore fastener producers directly. The products are not standard, they are specials—simple specials, but specials which are being consumed here. At the same time offshore companies are coming here to manufacture and are having a difficult time procuring hardware of the right quality and getting timely shipments.
“We have a partner now, in Nissho, who deals in everything from Boeing airplanes down to steel;” Fuller tells FIN. “They will see a lot of opportunities.”
Fuller concedes that he does not yet know how he is going to take advantage of all this.
A more immediate use for the Nissho association is the financial backing. “Large organizations don’t react to money costs,” he says. “Smaller firms have to. And that’s where the boys get separated from the men.
“When I first got into this industry we were dealing in 6-7% money. You could buy a mound of stuff and sell it all out and get a return. Now, if possible, you should buy daily. Yet, you are still expected to plan ahead of your customers. Our situation turned nasty late last year.”
Fuller feels optimistic about his business now, but feels there may be an over-population of both import warehouses in certain markets and of distributors. ©1981/2014 Fastener Industry News.
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