Jim Loree wants to turn a 175-year-old man­u­fac­turer into a com­pany as in­no­va­tive as any in Sil­i­con Val­ley.

Jim loree wants to turn a 175-year-old man­u­fac­turer into a com­pany as in­no­va­tive as any in sil­i­con Val­ley.

Forbes - - CONTENTS - By aMy feldMan

In 2014 Stan­ley Black & Decker set up en­gi­neers in a Tow­son, Mary­land, strip-mall of­fice with in­struc­tions to come up with some­thing new in cord­less power tools. Three months later, James Loree, the com­pany’s chief op­er­at­ing of­fi­cer and chief-exec-in-wait­ing, had a look.

The Tow­son en­gi­neers demon­strated a clever way to ar­range cells in a bat­tery to make the volt­age ad­justable. Loree asked what they would need to get the bat­tery out the door in a year. They said $30 mil­lion. “I looked at the CFO and said, ‘Are we good for that?’ and he said, ‘You bet,’ and off they went with their $30 mil­lion,” Loree says.

Stan­ley is an an­cient firm, still mak­ing tape mea­sures in the rust­belt city of New Bri­tain, Con­necti­cut, where Fred­er­ick Stan­ley opened a hinge-and-bolt shop in 1843. How does a com­pany sur­vive for 175 years? By throw­ing money at long shots like that bat­tery. “His­tory is littered with sto­ries about legacy com­pa­nies that were com­pla­cent, in­wardly fo­cused, ar­ro­gant,” Loree says.

Stan­ley’s vari­able-volt­age bat­tery didn’t reach stores un­til June 2016, but it looks like a win­ner. Lithium-ion bat­ter­ies are get­ting big enough these days to run not just hand­held drills but also stand­ing equip­ment like ta­ble saws. The big tools, though, need a much higher volt­age to operate ef­fi­ciently. The de­sign­ers in Mary­land fig­ured out how to make bat­ter­ies in­ter­change­able by hav­ing the tool tell the bat­tery what kind of juice it wants.

With this trick Stan­ley gets car­pen­ters ad­dicted not just to its tools but also to its bat­ter­ies, which re­tail for up to $199 apiece. They’ll pay ex­tra to be able to build a house with­out wor­ry­ing about lug­ging a noisy gen­er­a­tor to the job site and tripping over power cords. Stan­ley is haul­ing in $300 mil­lion a year on its FlexVolt bat­ter­ies and wants to see a lot more break­throughs, mean­ing in­no­va­tions that will each add $100 mil­lion or more to rev­enue.

Loree, 59, who has been run­ning the com­pany for two years, is a fi­nance guy, not an en­gi­neer. He joined Gen­eral Elec­tric in 1980 as an au­di­tor and spent 19 years there, mostly at GE Cap­i­tal. In 1999 John Trani, the GE alum then run­ning Stan­ley Works, brought Loree in as chief fi­nan­cial of­fi­cer.

Trani was try­ing to turn around a trou­bled com­pany whose $2.75 bil­lion of rev­enue came mostly from hand tools like tape mea­sures and builders’ hard­ware like hinges. “It couldn’t ship ef­fec­tively. It had a weak sup­ply chain,” Loree re­calls. “Al­most all the things you could think of that could go wrong for the com­pany were go­ing wrong.”

Slowly, Stan­ley did turn it­self around, and in

2002 it be­gan an ac­qui­si­tion binge. Loree’s fi­nan­cial skills paid off. In 2009 chief ex­ec­u­tive John Lund­gren, urged on by Loree, en­gi­neered the ac­qui­si­tion of Black & Decker, a cen­tury-old maker of power tools. De­spite the fact that Black & Decker was larger (in em­ployee count), Stan­ley was the top dog in the merger.

Loree has worked on more than 100 ac­qui­si­tions at Stan­ley, and since tak­ing over as CEO he has spent $3 bil­lion buy­ing busi­nesses. Re­cent deals gave him Ir­win drill bits and Lenox saw blades, bought from Newell, and Crafts­man, a ven­er­a­ble but tired brand bought from Sears.

Sears never made tools, but it knew where to have them made. In olden times Crafts­man was a revered prod­uct line, with loyal do-it-your­selfer fans who would talk about how they were still us­ing the Crafts­man drill or san­der that Grand­dad had bought. Un­der the Eddie Lam­pert regime at Sears the line de­cayed, col­laps­ing from $2 bil­lion in whole­sale rev­enue to less than $1 bil­lion. Loree paid around $900 mil­lion last year to get the name, a few em­ploy­ees and about $100 mil­lion in sales to Ace Hard­ware. No assem­bly lines went with the trans­ac­tion.

“We were star­ing at this brand po­ten­tially be­ing re­leased into our world, which would be a huge threat from a vol­ume point of view if a re­tailer got it or if one of our arch com­peti­tors got it,” Loree says.

Sears had long ago out­sourced its power-tool man­u­fac­tur­ing to Asian sup­pli­ers. Loree is go­ing to bring most of the work home to Stan­ley Black & Decker’s 30 U.S. fac­to­ries. This may be a fi­nan­cially chal­leng­ing goal, given that com­pen­sa­tion for Stan­ley’s roughly 8,000 fac­tory-floor and dis­tri­bu­tion-cen­ter work­ers in the U.S. is mostly be- tween $10 and $25 an hour. But it will al­low the com­pany to cut down on ship­ping costs and re­duce the risk from Trump’s tar­iffs.

Stan­ley’s arch­en­emy on the hard­ware store shelf is Techtronic In­dus­tries, a Hong Kong-listed firm that has done a skill­ful job of mar­ry­ing Amer­i­can brands like Mil­wau­kee and Homelite to Chi­nese pro­duc­tion lines. A con­trac­tor look­ing at the Mil­wau­kee dis­play in Home De­pot may think his drill comes from Wis­con­sin. It likely was made in Guang­dong.

Loree aims to get some mileage out of the Amer­i­can fla­vor of his re­vival plan for Crafts­man. Crafts­man tape mea­sures will be added to the pro­duc­tion lines at the 12-acre New Bri­tain fac­tory that al­ready makes 5.5 mil­lion Stan­ley FatMax tape mea­sures a year. “We have a sense of his­tory in this com­pany,” Loree says. “Bring­ing the prod­ucts up to a new stan­dard with a real em­pha­sis on ‘Made in Amer­ica’ is a huge deal with many of our end users.”

Crafts­man power tools, hand tools and tool chests will be sold via Lowe’s, Ace Hard­ware and Ama­zon. Susque­hanna Fi­nan­cial Group an­a­lyst Robert Barry es­ti­mates that the line will hit the $1 bil­lion mark in 2023.

Ad­di­tional growth will come from emerg­ing mar­kets, which Loree wants to push up from 14% of Stan­ley’s $13 bil­lion in an­nual rev­enue to 20%, in part by cre­at­ing prod­ucts specif­i­cally geared to­ward those coun­tries’ needs, such as tools for met­al­work­ing in Mex­ico. He sees op­por­tu­ni­ties to fill gaps in Stan­ley’s prod­uct lineup, such as in abra­sives, tools in Ja­pan, and lawn and gar­den prod­ucts. Stan­ley al­ready gets rev­enue from such di­ver­si­fi­ca­tions as mo­tion-ac­ti­vated doors and in­dus­trial-fas­tener sys­tems. Loree’s goal is to crank up rev­enue to $22 bil­lion by 2022.

Stan­ley’s ad­vanced man­u­fac­tur­ing cen­ter, slated to open in Au­gust in Con­necti­cut’s sickly cap­i­tal city of Hart­ford, will test new tech­nolo­gies, in­clud­ing a 3-D metal print­ing process that might some­day al­low a tool com­pany to print out prod­ucts in re­tail out­lets. If there’s any fu­ture in Amer­i­can man­u­fac­tur­ing, Stan­ley is go­ing to be part of it.

Handy man: CEO Jim Loree holds a clas­sic Crafts­man com­bi­na­tion wrench at Stan­ley Black & Decker’s demon­stra­tion cen­ter near Bal­ti­more. He ex­pects some can­ni­bal­iza­tion of other brands, but “some­times you have to dis­rupt your­self.”

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