Cadet stands the heat and rebounds from near-collapse

Products: Wall, baseboard and garage heaters and associated products.

Ownership: Privately owned, founded in 1957.

Employees: 106 year-round, 30 seasonal.

Website: www.cadetheat.com

Cadet Manufacturing faced a daunting list of misfortunes in the late 1990s: A handful of lawsuits related to house fires allegedly ignited by its electric heaters; a massive, government-ordered recall; Chapter 11 bankruptcy proceedings; and the costly cleanup of toxic chemicals once used in its manufacturing process.

One might assume the heater maker is now defunct.

Instead, Cadet is a more robust business than ever. Cadet just celebrated the best November in its 57-year history, according to a spokeswoman. The company has won six awards this year, including the 2014 Manufacturer of the Year from the Association of Washington Business.

Cadet mounted its unlikely turnaround with a combination of old-fashioned and newfangled strategies. Company leaders relied on face-to-face meetings to restore the public’s trust, while adopting lean manufacturing techniques and new software to save time and money on production. These changes also helped the company weather the Great Recession. More recently, Cadet turned to another Vancouver company, AHA!, to overhaul its brand and find new growth in a market aimed directly at consumers.

Disaster strikes

Earlier this month, Cadet’s president, Hutch Johnson, sketched a crude line graph on the whiteboard in his modest office. The figure showed the company’s performance since he was hired in 1998. At first, the black marker line plunged sharply.

“The company just started going downhill, as soon as I got here,” he said.

Cadet was hit with a class-action lawsuit and several other liability suits after the company’s heaters were blamed for igniting fires, including one that killed two people.

Shortly after the company recalled 190,000 heaters for a faulty component, the federal Consumer Product Safety Council demanded that Cadet expand its recall to include 1.9 million Cadet units.

The company filed for bankruptcy.

After decades of being considered the top electric heater manufacturer, Cadet looked to be doomed.

Johnson remembers one day when all the major news stations had satellite trucks parked outside his window.

“I wanted people to hear the real story,” Johnson said.

So he and the company’s CEO and owner, Dick Anderson, traveled around the Pacific Northwest, taking contractors and distributors out to breakfast.

“Contractors, these are breakfast people,” Johnson said.

The company had redesigned its heaters to eliminate the components believed to have caused the fires. Johnson put the new Cadet products in a plastic tub and the old ones in another, and toted the tubs along on his breakfast tour.

His message was that despite all the bad publicity, Cadet heaters were now the safest on the market.

Face-to-face meetings

As the contractors munched their breakfasts, Johnson explained that the faulty components could still exist in competitors’ products, as the government tends to recall products from one company at a time.

“We’d been through all of this, and moved away from these components,” he said.

For months, Johnson and Anderson made their pitch in diners across Montana, Idaho, Oregon and Washington.

Before coming to Cadet, Johnson had spent 25 years working in his family’s electrical distribution business.

“So I knew a lot of these people,” he said.

In 2001, a year after emerging from bankruptcy court, Johnson’s black marker line started to drift upward. He brought on a new executive team. The company adopted new manufacturing techniques to increase efficiency and lower costs.

Johnson estimated the company’s sales plummeted by about 40 percent following the lawsuits, recall and bankruptcy. But the company’s image was slowly being rebuilt, and by 2005, sales had bounced back to pre-scandal levels.

Shortly after that, the recession hit. As new construction halted, so did electric heater sales. For two years, Cadet relied on a state layoff-avoidance program to help reimburse workers whose hours were cut.

In 2011, sales began to rise again. The line on Johnson’s whiteboard took a steep uphill turn. Today, the line is at the same height as it would have reached had the recession never happened.

Johnson doesn’t spend much time dwelling on the company’s past challenges.

“You’re the first person to mention it to me in three years,” he said.

Markets and consumers are shifting so quickly that Johnson said “I sometimes feel as if I live in the future. I’m already thinking about 2016.”

Getting lean

It’s “heat season” at the Cadet manufacturing plant in west Vancouver, when winter temperatures bring in thousands of orders daily.

The busy season arrived later than usual this year, thanks to a warm fall.

“But when it hits, it hits,” said Frank Twardoch, senior director of operations, standing on the production floor during a recent busy weekday. “It’ll be like this until late January.”

For decades, the dominant story of U.S. manufacturing has been one of jobs being cut here and moved to China, where labor is cheaper. But Twardoch said that as costs creep up overseas, more companies are looking to return stateside. Among its competitors, he said, Cadet has an edge because its manufacturing never left.

Twardoch was hired by Cadet in 2004, primarily for his experience with lean production. The philosophy was first developed by Toyota, and has since been adopted by manufacturers around the world. The strategy is to train employees to look for ways to do their own jobs more efficiently.

Twardoch was working for Northern Engineering and Plastics Company when he first learned about lean manufacturing. At that plant, it took eight hours to reset the hulking machines that melt and mold sheets of metal into precise shapes — a process called a die cast change. After the company went lean, die cast changes were slashed to two hours and Twardoch became a true believer.

“It was one of those ‘aha’ moments,” he said.

In 2008, Cadet went a step further and hired a full-time “lean champion” to prod the company to make even more improvements.

Don Walker, 70, started working for Cadet on Aug. 5, 1971, as a welder. A maintenance worker trained him to perform die cast changes.

He remembers when the lean champion videotaped and timed him performing a die cast change. Walker said he worked alone, so he had to walk around the machine several times.

“The die I’ve got in now, it (used to) take me about 45 minutes to change,” he said.

Today, he works with a partner — one stands in front of the machine, the other in back — and the change takes about 14 minutes.

Twardoch said the company “never” expects to achieve peak efficiency.

“The low-hanging fruit, we’ve got it. That’s done,” Twardoch said. “But we’ll still … have an idea and think, ‘Why didn’t we think of this sooner?’ ”

Four years ago, fan assembly operators spent weeks during the slow summer season redesigning their work area.

Johnson said when he was hired, in 1998, it was a big deal for that crew to assemble 300 fan units in a day.

“I remember when we had 324 one day, and we bought (the team) pizza — it was that big a deal,” he said with a laugh.

Today, the team churns out 1,000 units per day.

“And it’s the same people,” he said.

The average manufacturing worker at Cadet has been with the company for 15 years. The company works to retain its trained, experienced employees with a profit-sharing program, health insurance, paid time off and a new wellness program that reimburses employees up to $100 a year for gym memberships or exercise equipment purchases.

‘Try it’

Steel is delivered to the manufacturing facility daily, and most of it is cut, bent and screwed into a functional heater, then shipped away in one day.

The quick turnaround is matched by a new software program that allows the company to track its direct online orders in real time. That means when a shopper visits Home Depot’s website, for example, and orders a Cadet heater, the company is informed as soon as the customer enters his or her credit card information and clicks “confirm order.”

Production statistics and orders are tracked on computer monitors located throughout the plant.

Even Cadet’s office staff have been lean-trained, which means office equipment such as printers and copiers have been moved to more central locations. Flexible scheduling allows employees to work during their most productive times of the day. And filing processes have been streamlined.

“People here are empowered to make the changes themselves,” Twardoch said. “We know they’re the experts at their jobs, so we tell people, ‘If you think it’ll work, try it.’ “

The Cadet factory is one open space. Different phases of production take place not in walled-off rooms but in clusters of equipment called “work cells.” The open floor plan makes the operation more flexible.

On a recent visit, some work cells were draped with Christmas decorations, and various music was playing in different areas of the factory, depending on each team’s musical tastes.

One work cell, which assembles baseboard heaters, has gone through five different redesigns to improve quality, reduce waste and increase efficiency, Twardoch said.

At the end of the process, workers slide the finished heaters onto flattened boxes, fold the box sides around the product and staple them closed.

Previously, workers fastened the boxes using a handheld staple gun. But employees complained that hoisting a commercial grade stapler for hours each day was hard on their shoulders.

So Cadet assigned a specialist to redesign that part of the process. Now, a worker simply slides one edge of the folded-up box against a sensor, and all five staples are punched through the box simultaneously. It spares workers’ shoulders, speeds up the process and ensures a neat, straight look to the finished box.

“It’s important that the labels are straight, the (box) staples are straight,” Johnson said. “It reflects the quality of the product, because it’s what a customer sees on the shelf. These guys (in the factory) care about all that stuff.”

A new brand

A few years ago, Johnson began interviewing consultants to help the company update its brand. He chose Vancouver company AHA! over six Portland agencies.

“Brands are really the expression of who you are, what you do and why it matters,” said Betsy Henning, CEO and founder of AHA!

In some ways, rebranding was the culmination of a 15-year overhaul of the company.

Henning said she has lived in Clark County since the 1980s, and first became aware of Cadet when it dominated news headlines in the 1990s.

“My sense was that they had dealt with that crisis pretty well,” she said. “I thought of them as a good, solid Clark County company.”

In researching the company to help it find a new brand, she said she discovered Cadet was, “in some respects, still nursing the scar of that crisis … I hadn’t realized how much that had affected their psyche as a company.”

One of the most rewarding parts of helping Cadet build a new brand, she added, was “to give them a new story to tell themselves, much less the world.”

Cadet now has a modern-looking logo, a streamlined website and a new slogan — “Inviting warmth” — that Henning said appear more sophisticated than the brands of its direct competitors.

Four companies in the U.S. produce similar heating products to Cadet’s. But Henning said AHA! looked beyond those companies when trying to differentiate Cadet.

“We’re trying to elevate Cadet into a brand consideration that’s as much about aesthetics and design as it is about practicality,” she said. “If their biggest growth potential is with direct consumers, then you … want to make sure you are being relevant to them.”

That means making sure Cadet products appeal to shoppers who are also considering high-end thermostats such as the Nest, Henning said. Cadet’s new packaging clearly boasts that the products are made in the United States, and it touts the products’ sustainability features.

“The whole notion of heating a house one room at a time is such a modern way of looking at it,” Henning said. “It’s a very efficient, green approach.”

It’s yet another sign that Cadet has come a long way from where it stood 15 years ago, on the brink of collapse.