In a preemptive strike, Breed announced he would slash prices by 30%. "What I really wanted was to take my competitors out," he says. "I wanted the whole market. In business I don't believe in sharing."
Manufacturing would move across the Rio Grande.
It took guts and Breed's impossibly positive thinking to pull it off. The $30 million needed to build a plant wasn't exactly sitting in the bank. A workforce, however cost-effective, would be tough to assemble from a motel room in Brownsville, Tex. And in those pre-NAFTA days, nothing guaranteed that a shipment, even if it made it off a loading dock, would cross the border in decent time.
With the help of $5 million from Cordell Breed and another $20 million from an equity deal she cut with Kobe Steel, Breed's Japanese licensee, "we went from green field to closed-in plant in six months," reports Breed. The first plant, built in Matamoros, Mexico, with eight lines and a one-million-sensor capacity, was operating before 1990 was out. Competitors were taking twice as long to get new plants up to speed. By 1991 the inventive managers at Breed had doubled the plant's capacity and had produced 2 million sensors in Mexico. Breed broke ground on a second plant 30 miles away in Valle Hermoso. It made 5 million sensors the following year.
Allen Breed's penchant for making instead of purchasing parts was paying off: it allowed him to slash costs and drop prices, yet maintain margins. "By making parts ourselves, we could control the cost, control the supply, control the quality." He was flouting conventional wisdom again and building a vertically integrated company. But he was producing more sensors, with fewer defects, for a third less. And doing business with Breed was becoming a hard habit for automakers to break.
"By the early '90s we had 90% of GM's business," reports Breed. "In 1992 Ford shut down TRW and gave us all the business."
Wall Street applauded, snatching up 4.3 million shares in a $67-million initial public offering in November 1992. "We told them we were giant-slayers," says Cordell Breed.
* * *
For three years now Breed has monopolized the electromechanical-sensor business, capturing an estimated 80% share of the $300-million market and making money hand over fist. A decorated veteran of the air-bag wars, this unlikely victor managed to take nearly all the spoils. Now he's fighting to keep them.
The giants are back. The growth has tapered. And the product -- electromechanical sensors -- may be nearing the end of its life. The sensors so proudly mounted on the wall of Breed's engineering lab are growing cobwebs now. And in Detroit, car companies are buzzing about electronic sensors, the next generation, which TRW and Allied Signal and the car companies' own internal divisions are expected to dominate.
The bears on Wall Street, having battered the stock, circle. "Breed's sensor business has begun to decline," says Chad Brown of IPO Research Inc. "Electronic sensors are the future. But Breed has no major contracts to produce those next-generation products. And it's too late. The business has been sewn up by bigger players."
Breed admits he's a little behind the curve. Even though customers were telling him back in 1990 that they wanted electronic rather than electromechanical sensors, he wasn't in the practice of listening all that closely. The engineer in him considered it inferior technology.
So now the company must reinvent itself as an electronics manufacturer. "Yeah, we can do that," can be heard around the place, an echo of the old days when nobody thought Breed stood a chance of becoming the world-class, global manufacturer it is today. Once more, Allen Breed's engineers are hearkening to his familiar cry: "Don't worry, we'll swing 'em." The personal anthem plays on.
In the meantime he's scrambling to diversify the product line, to sell more inflators and modules (entire air-bag systems) to offset an anticipated dip in sensor sales. The competition in those categories is also heavyweight. And the customers aren't any friendlier, demanding price rollbacks from suppliers. Breed works feverishly to "get every fraction of a cent out" of the cost of goods. "A never-ending exercise," says Breed. "The minute you stop cutting costs, you get run over by the competition."
Still flush with cash, he's expanding overseas, where the market is young, pouring as much as $100 million into ever more capacity and positioning the company to supply the suppliers of next-generation sensors. He's quickly snapping up companies that can pry open the door to the electronic-sensor market. He purchased one company, Finland-based Vaisala, when it was in the throes of bidding on GM's electronic-sensor business. "We came to the table as the new owners, and GM said, 'Oh, you again," says Breed with a chuckle.
As always, he's searching for that break in the clouds. In his gadget-filled study at home on "Breed's Island," he points to his chronometer, a backlit panel displaying a map of the world with a bell curve of light moving across the Americas. It tells him it's dawn in Alaska, dusk in Greenland. It tells Breed where in the world he'll find daylight -- he's not looking at the shadows.
"I never met a rich pessimist," he says.
RESUME
ALLEN BREED
Breed Technologies Inc., Lakeland, Fla.; founded in 1961
$401 million in 1995 revenues; $110 million in pretax profits
Born: Chicago, 1927
Parents: Father, oncologist who pioneered radiation therapy for cancer patients; mother, homemaker
Education: B.S., Northwestern University, 1950. Completed degree in two and a quarter years by doubling course load (rigged tape recorder in one classroom while attending lectures in another).
First Job: Manufacturing-design engineer for RCA
