When one refers to manufacturing in the Hudson Valley, it’s usually in the past tense. The wealth of Kingston, Poughkeepsie, Newburgh and other cities and towns in the region was built on industry that peaked early in the last century, precipitously waned in the 1970s and, with the closing and downsizing of IBM’s plants, crashed in the 1990s. Yet manufacturing is by no means dead. Take the case of the Schatz Bearing Corporation, a name associated with industry in Poughkeepsie for more than a century. With 115 employees and 50,000 square feet of production space, the company is flourishing, having built its success on a process of reinvention that started more than 30 years ago.
Like the Schatz Federal Bearing Company, its predecessor, which supplied the automotive industry from 1910 through the 1970s, Schatz Bearing Corporation manufactures bearings – but not the high-volume kind that could more cheaply be produced in China. Schatz Bearing makes small quantities of precision parts forged of high-quality metals for the aerospace, medical equipment and semiconductor industries: highly regulated sectors in which safety and precision are paramount.
“Being a manufacturer in the US is challenging and has been for decades,” said Schatz president Stephen Pomeroy. “You have to be selective about the industries you target…you can’t be a US manufacturer for bearings in ceiling fans or filing cabinets, because the labor rates are low and safety is not an issue.”
Pomeroy said that his company, which operates out of a complex of long, low-slung red-brick buildings on Fairview Avenue, a stone’s throw from the Dutchess County Rail Trail, is growing in employment and sales. “We’re constantly getting better and better,” he said. “We invest in new technologies that enable us to switch from part to part very quickly.” That nimbleness recently enabled Schatz to gain new customers in the space industry.
Founded in New Haven in 1896 by the father-and-son team of Adolf and Herman Schatz as a metal specialties shop, the original company moved to Poughkeepsie in 1910 and focused on producing ball bearings for the automotive industry. It rapidly expanded, adding new buildings in 1916, 1920 and 1936 (the hulking brick factories, located near the current company’s facilities, have long been abandoned) and reached a peak of 1,200 employees during World War II.
Up through the 1960s, Schatz Federal was one of Dutchess County’s “highest-wage manufacturers apart from IBM,” according to Main Street to Mainframes: Landscape and Social Change in Poughkeepsie by Harvey Flad and Clyde Griffen. But, like so many other manufacturers in Northeastern and Midwestern cities, it could not hold its own against cheaper competition, both foreign and domestic. In 1980, after the loss of its two big-volume customers, Ford Motor Company and NAPA, and a punishing 15-month-long strike, the company filed for bankruptcy. It was auctioned off to a Canadian company for $7.3 million, which in turn struggled to make a profit. Stephen’s father, Walter Pomeroy, was a partner in one of the Canadian company’s suppliers. Walter wanted out of the partnership, which was located in Connecticut, “so in 1985 my dad used the proceeds from his half of the company to buy the Canadian guy out” and moved to Poughkeepsie.
Stephen was about to enter graduate school, and went on to earn a PhD in Electrical Engineering. (In retrospect, “the ideal thing would have been to study mechanical engineering,” he noted ruefully.) “My father was late in his career and knew I had entrepreneurial interests, so he asked if I wanted to join the company.” Stephen agreed, with the intention that “I would do it for a year, and then do something else.”
Instead, he got hooked, becoming president in 1992 (his dad retired in 1994). He studied the art of manufacturing and was specifically influenced by the Toyota Production System, whose “just in time” philosophy and focus on eliminating waste was a precursor of Lean Manufacturing. Change – adopting new ways of doing things – was essential to the company’s eventual success, though initially he faced resistance.
He considers hiring the right people absolutely key to running a prosperous company. New employees at Schatz undertake a 90-day introductory period to see if the job is a good fit; more than half the time, it’s not. But “once somebody is hired, they stay,” Pomeroy said. Employees undergo extensive training, provided through the Continuing Education program at Dutchess Community College and through the Council of Industry, the Hudson Valley association of manufacturing, of which Pomeroy is a member. Last year Schatz received a state grant to fund a training program through the college. According to Pomeroy, “Manufacturing offers a lot of positions.” At Schatz, they include assemblers, on the lower end of the salary scale, and higher-paid production grinders, along with material handling, quality assurance, finance, engineering, purchasing and customer service.
“We pay well, offer good benefits and we have challenging things for people to work on,” he said. The company holds a meeting each month at which “we go over what we sold and our new products. We have a whole sea of eyeballs and experience, and we want people to speak up, whether it involves a safety issue, quality or productivity. We have a really great crew.”
The company has reduced its carbon footprint by upgrading to LED lighting, switching from oil to natural gas to fuel its compressed air system and disposing of all its waste, including batteries and fluorescent lights, responsibly.
Two challenges stand out. One is the rising cost of health insurance, which has been increasing at the rate of ten percent a year. “When I think about the things we’ve done as an industry to drive costs down, it seems to me the healthcare industry can go in that direction” – toward a hospital system that is more efficient and specialized – he said.
The other big challenge is a reduction in prices for bearings sold to Boeing, a major customer and driver of the aviation industry, which is under competitive pressure from Airbus. Over the past five or ten years, Boeing has pushed suppliers to lower prices. Pomeroy said that the grounding and subsequent halt in production of the 737 Max plane, Boeing’s best-selling aircraft, also is negatively impacting his business.
Despite these challenges, Schatz is beefing up production and expanding into a second shift. “We’re constantly looking for other opportunities in little corners of the market,” said Pomeroy. For example, the company recently developed and produced specialized bearings for a satellite company in nine months, developing a capability it didn’t have a decade ago.
Being “the small guy” among a handful of precision bearing companies supplying the world has its advantages: Schatz has the ability to make bearings of all sizes, from an inside diameter of four millimeters to over a foot, and fulfill special orders: a necessary condition in aerospace. “Our strategy is to be flexible, versatile and responsive,” Pomeroy said – principles that have brought the company enduring success.
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