Johnson Components

September 1, 2000 Daniel Vance

Photo by Kris Kathmann

Ernie Glass, 62, president of Johnson Components and survivor of five buyouts over the past thirteen years, leans across his desk to explain why his Waseca office has few furnishings. “My tradition of a bare office dates to my General Electric days,” says Glass, a hint of a smile breaking across his lips. “I moved every two years then so I never really bothered to fill my office up with things that would need to be packed and eventually unpacked. Then I came to this company where I’ve had six different office suites at three different plant sites since 1987. I carried on the tradition.”

A review of the histories of both Glass and Johnson Components explains why these two corporate wanderers have been perfect soulmates for each other.

First, Johnson Components: The E.F. Johnson Company began manufacturing radio components in 1923, becoming well-known 20 years later for its radios installed inside WWII military vehicles. In 1959, the E.F. Johnson family took the company public. In 1984, Western Union bought all the shares and held them for a year before selling E.F. Johnson to Diversified Energies (who also owned Minnegasco and a basketful of other successful companies.) Then in 1990, Diversified Energies sold E.F. Johnson to Arkla.

Hold on, it gets more complicated.

Arkla sold E.F. Johnson in 1992 to a New York investor group, Weksel Davies, and in 1996 Weksel Davies sold the Johnson Components division of E.F. Johnson to Jordan Industries, a $3 billion owner of smaller companies. Most recently, Jordan Industries sold Johnson Components in January 2000 to Emerson Electric, the $15 billion electronics giant out of St. Louis – the same company that owns North Mankato’s Kato Engineering.

Now its “legally registered” name is Emerson Electronic Connector and Components Co. and sales are approaching $50 million with 350 employees. It has four divisions: Johnson Components, the $20 million components manufacturer based in Waseca with about 250 employees; Cambridge Products, whose new manufacturing facility opened July 2000 in Guadalajara, Mexico, with design/engineering functions located in Waseca; Vitelec, a telecommunications parts distributor based in England; and AIM, a Florida distributor of mostly Far East telecommunications parts. Ernie Glass runs all four companies from the naked room with white walls.

To most people outside the telecommunications industry, a good portion of the spelling of their RF coaxial connector line (which is manufactured in both Waseca and Mexico) might look like Alphabits floating in a bowl of milk: MMCX, MCX, SMA, SMB, and SMC. They also manufacture test jacks, cable terminations, calibration kits, between series adapters, banana plugs and jacks, tip plugs and jacks, tube sockets, capacitors and spacers.

To expand his horizons beyond his boring polar-bear-in-a-snowstorm walls, Glass now tries to spend half his time in Florida and a small portion of it in England. Kent Schultz, the company’s director of manufacturing and engineering, handles the upstart plant in Mexico.

“Emerson Electric is our fifth owner in the thirteen years I’ve been here,” Glass says deadpan, adding, “and it has been an interesting thirteen years indeed.” He says he stayed through the ownership changes because most of the deals “went down smoothly” and were “transparent,” and, with several of them, he was able to move up the corporate ladder.

Now for Glass: In 1962, General Electric hired him out of college, and he worked with them until Uncle Sam tapped him for military duty. After two years of military service he became a nomad of sorts with GE, feeling his way from one plant to another over the next two decades, not even bothering to unpack family photos from previous moves. He punched his corporate ticket in Cleveland, Erie, Schenectady, Pittsfield, Lynn, Philadelphia – and even Europe and South America – handling financial functions in plants that made everything from motors, locomotives, and circuit breakers to generators.

Then in early 1987, a former GE associate of his, the then-CEO at E.F. Johnson, persuaded Glass to accept a CFO position at E.F. Johnson and move near its Eden Prairie office. From there he began to climb the ladder slowly. In 1990, with Arkla, he was asked to oversee the components division and soon thereafter, in 1991, they added the custom products division to his responsibilities. After the next buyout, Weksel Davies made him VP of Operations.

“After Jordan Industries bought out Weksel Davies in 1996,” Glass says, sighing, “it was a different ownership scheme completely. Jordan invested in the business. They allowed me to have complete autonomy, which was completely fantastic. Emerson Electric, which bought us in 2000, was a much larger company yet, with even more resources. I really had no reason at all to leave through the ownership changes. I was enjoying myself – and I still am or I wouldn’t be here.”

In 1996, he was part of Weksel Davies’ “selling” team, helping to make the presentations and proposals that would spin off Johnson Components to one of eight potential suitors – the eventual winner being Jordan Industries, of course. Midway through the first meeting with the first prospective buyer Glass was surprised to learn that he would be one of the “assets” sold. (All along he had thought he’d be staying with the mother company, E.F. Johnson.)

Businesses are sold in two steps, he says. First, the seller must hire an investment banker to fashion a package that will lead to the company being advertised for sale. Once enough interest is generated and buyers are lined up, the prospective buyers then sit down with the selling company’s management team to perform their due diligence. Their eight suitors were judged according to: 1) their financial wherewithal 2) stability 3) their passion to grow the business and 4) their attitude towards dismantling the management team.

Jordan Industries’ decision to sell Johnson Components to Emerson Electric was taken in late 1999, Glass figures, because that was when he began seeing various suitors touring his facility. “The sale to Emerson Electric didn’t surprise me,” he says, “because basically I’m too old to be surprised.”

Today he lives in Lakeville not far from E.F. Johnson’s former corporate offices. The hour-long drive to Waseca every morning, often beginning at 4:00 a.m., acts to cleanse his mind. During the drive he “has the radio turned on for background noise, but I don’t listen to it. I’m thinking about what we can do better as a company.” And he certainly has a lot to think about these days.

Back Home In Waseca

The workers at Johnson Components in Waseca have created their niche in the RF connector industry by trying to outfox the industry Goliath, Pennsylvania-based Tyco, by “developing relationships, being responsive, selling quality product, offering ontime delivery and being competitively priced,” Glass says. New machines costing over $250,000 that require less manpower help productivity, too.

Like with any manufacturer, product quality is a primary concern. But unlike others, Glass isn’t sold on ISO. “It’s a nice buzzword,” he says, “but it doesn’t improve quality at all, particularly if you have poorly written procedures.” A company can still be ISO-approved with poorly written procedures that don’t enhance product quality.

“We’ve been told that if our customers aren’t asking for it, then don’t do it because it’s costly,” he says. “Instead, we’ve found that Motorola’s philosophy of going for Six Sigma is a lot more effective for our industry.” “Six Sigma” is a quality rating that measures defects per part. To receive a “six” a company must have virtually no defects. Johnson Components signs up for Six Sigma every three years mainly due to Motorola, their second largest customer. Currently, Johnson Components’ “Sigma” rating is between “4” and ‘4.5,” which is about where General Electric stands.

“The real question with ISO is how to get from Point A to B,” he says, moving his hands across thin air over his desk. “In essence, we’ve encompassed the thought process behind ISO by making sure procedures really enhance quality. Not having ISO hasn’t hurt sales. Potential customers say that even though we aren’t ISO-approved, we still maintain its thought processes.”

Since RF connectors are a commodity, what if one of their larger customers claims they can buy the exact same product for 20% less elsewhere? “They do it all the time,” Glass smiles. “Sometimes it’s real and other times they’re bluffing. Sometimes they can buy it cheaper elsewhere but the delivery period is significantly longer than ours. Yes, 65% of what we make is a commodity, but the rest is specialty work for specific customers, either a modification of an existing standard or a completely new design.”

The need for Johnson Components’ products linger. Tube sockets originally built in the ’20s are still on their price list, however it’s becoming more and more difficult to make that product because of scarce ceramics. Its connector price list still includes the first ones manufactured in 1985. Today, the industry is manfacturing smaller and smaller connectors, and the smaller they become, the more costly they will be to manufacture and design.

Just-in-time delivery has been a challenge. A few larger Original Equipment Manufacturers (OEM) customers, such as Motorola, provide them with accurate product forecasting schedules, thus giving them enough lead time to make delivery problems rare. Smaller OEMs usually don’t forecast accurately. To help with just-in-time, in the last two years, many OEMs have asked Johnson Components to sell product to them through a distributor so the distributor can manage the OEM’s inventory.

Way Down In Mexico

Unfortunately, the way we dealt with the labor shortage in Minnesota is that we had to open a new facility in Mexico,” Glass admits. “There is simply a lack of qualified employees in Waseca.” Had more qualified workers been available in Waseca he claims they “probably” would have expanded there rather than Mexico, although he hedges a bit about that because of the tremendous amount of overtime the Waseca employees have been working since January. He says, “You just can’t keep driving good people like that for very long.” Desperate for employees, he even inquired through backdoor channels about the possibility of hiring inmates at the new state prison in Waseca.

The Cambridge Products facility in Mexico is really redirected business from an old plant in Connecticut that closed in 1998. If business in Waseca continues to double like it did in 1996-2000, more and more manufacturing will have to be moved to Mexico. According to businesses already up and running there, Mexico’s labor force has good qualities. “Still they can’t beat the work ethic in southern Minnesota,” he says. “In fact, the work ethic here is far above that of any other area of the world where I’ve worked. We have very dedicated employees who do an exceptional job. I can’t say enough about them. There just aren’t enough of them.”

Because of such rapid growth in the telecommunications industry, particularly in Mexico, even if it had more laborers at its Johnson Components plant in Waseca, the company still couldn’t meet all the demand. Cambridge Products’ – and also Johnson Components’ – largest customer is now Telefono de Mexico, the Mexican telephone company whose business they earned by designing a new two-piece product from scratch. Most of the parts Cambridge Products makes goes into infrastructure equipment that is the backbone for cellular phone and mobile radio systems or landline or wireless switching equipment.

Besides Telefono de Mexico, other large customers of either Johnson Components or Cambridge Products are Motorola, Hewlett-Packard, and MiniCircuits. (Johnson Components protects its distributors: If you want to buy direct, odds are they will send you to a distributor.) Their master distributor businesses in Florida and England sell to distributors who then resell the product, but their major customers’ names aren’t so easily recognizable.

The tender nature of the new Mexican operation, particularly, seems to be keeping the 62-year-old Glass on the job. “If it were just Johnson Components I could leave now because the team we’ve put together wouldn’t miss a beat. Hopefully in another year I can say the same about our Mexico, Florida and England operations.”