THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, November 13, 1995 TAG: 9511110450
SECTION: BUSINESS WEEKLY PAGE: 16 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY LON WAGNER, BUSINESS WEEKLY
LENGTH: Long : 119 lines
At Stihl Inc. in Virginia Beach, expansions are becoming ordinary. The chain-saw and power-lawn-equipment manufacturer has expanded an average of once every three years since it set up shop in 1974.
Its latest expansion, in the form of a 50,000-square-foot warehouse, comes as the company launches its first-ever under-$200 chain saw and prepares to manufacture a new family of grass trimmers and a new series of chain saws.
But Stihl's rapid growth in Virginia Beach - the privately held German company's United States headquarters and its only plant in the country - isn't entirely the result of new products, or the lean, highly automated factory, or even a growing demand for chain saws.
Stihl - pronounced ``steel'' - had several reasons to set up in Virginia Beach 21 years ago: the value of the dollar, the cost of labor in Germany and the vast consumer market in the United States. Since then, those factors have become more significant and the plant has become even more important to Stihl's worldwide efforts.
Stihl's 1994 annual report, the most recent available, paints an optimistic picture for the future of the Virginia Beach operation:
``As the United States was also the biggest market for small chain saws, Stihl corporate management decided to build all small saws for the world market in Virginia Beach,'' the report says.
``. . . the importance of the U.S. production facility in the group has also grown in the past 10 years. The constant upward revaluation of the deutsche mark against the U.S. dollar has in itself given the U.S. plant a considerable competitive advantage in the Stihl-internal manufacturing network.''
In 1994, labor costs at the Virginia Beach plant were 38 percent below those at the company's plant in Waiblingen, Germany. The average employee in Virginia Beach worked 1,758 hours during the year, while a similar Stihl employee in Germany worked 487 hours less due to more liberal vacation, holiday and sick-leave benefits.
Benefits add about 40 percent per worker to hourly wages in Virginia Beach, but they add 100 percent to hourly wages in Germany, President Fred J. Whyte said.
Stihl, as a result, has doubled its production volume in four years at Virginia Beach, where the plant will produce more than $300 million worth of goods this year, Whyte said.
For the first time last year, Stihl made more machines at its Virginia Beach plant than in Germany.
The Virginia Beach operation - in its role as U.S. headquarters for Stihl - is effectively becoming its North American headquarters following the passage of the North American Free Trade Act, Whyte said. It is also lending support to a new facility in China.
Stihl now employs more than 600 workers, and makes 16 products - chain saws, trimmers, leaf blowers, edgers - and 120 variations of those products for different countries. The company will hire about 60 new workers in February, Whyte said.
So it's no surprise that Stihl's new chain saw - the 017 - is being manufactured in Virginia Beach, but the company still had some hurdles to overcome to keep the retail price under $200. The 017 retails for $199.95, a necessity for Stihl to compete with the chain saws its competitors sell at Wal-Mart and Kmart. Stihl sells only through its dealer network.
``Although we had always been perceived as a premium, high-quality manufacturer, we simply could not ignore 50 percent of the market,'' Whyte said.
After deciding to get into the low-cost chain saw market, Stihl had little choice but to manufacture the chain saws in Virginia Beach. But even as changes in the international market boosted the Virginia Beach plant toward its pivotal role within the company, the plant's workers and managers have helped elevate the plant further.
Last year, for instance, the Virginia Beach plant made a clean sweep of Stihl's internal quality contest in the electrical products, chain saw and power tool manufacturing operations. Each worker at the plant received a $150 bonus.
``We talk about quality a lot,'' Whyte said. ``But when it happens, you have to reward it - you can't just talk about it.''
Executive Vice President Peter K. Mueller came to Stihl from Germany when the plant opened in 1974. An engineer and manufacturing guru, Mueller seems familiar with every detail of the assembly lines.
For the new chain saw to be built at its projected cost, the Virginia Beach plant had to cut the 30 minutes it normally takes to make a chain saw by 25 percent.
``If you give a work station two seconds, that's money,'' Mueller said. ``Ten seconds here, 30 seconds there, it adds up to 25 percent less time.''
Functions performed at the plant are set up to interlock with one another. The production schedule is programmed into driverless vehicles that cruise to the warehouse to pick up parts and cart them back to the assembly line. Computers on the vehicles communicate with each other, so the closest vehicle can make the pickup.
Each supervisor at the plant has online access to quality measurements, which are updated every 30 seconds. The company's manufacturing standards permit only a two micron - or 2/1000 of a millimeter - variation from perfection.
The company doesn't subscribe to any one theory on quality control, Whyte said, since they ``tend to be faddish.''
``Whereas you read now that anybody on the American assembly line can stop the line if there is a defect in quality,'' Whyte said, ``we're thinking, `Big deal, what else would they do?' ''
But with all the growth at Stihl, aren't there any problems?
``You have to be careful,'' Whyte said. ``We have a very dedicated work crew, and it's a fine line between dedication and wearing people out.'' ILLUSTRATION: [Cover]
STIHL SAWS
[Color Photos]
RICHARD L. DUNSTON
The Virginian-Pilot
Peter Mueller
Fred J. Whyte
Peter K. Mueller
Illustrations of chainsaws, trimmers, hand-held blowers, backpack
blowers, and hedge trimmers
by CNB