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.
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.”