The new Pelco?

China operations, layoffs, open systems part of the course for 2010
Thursday, January 14, 2010

CLOVIS, Calif.—Covering the company for the past five years, this reporter has found Pelco isn’t like other camera manufacturers. When other companies lay off four percent of their workforce, maybe they sweep it under the rug and hope no one will notice. Because Pelco is based here in Clovis, Calif., where Pelco’s workforce represents roughly two percent of the population, “every time we do layoffs it goes to the news,” said Herve Fages, Pelco director of global marketing, “so we either tell them what we’re doing, or they build up a story around it and it goes from the blogs to the front page and everyone does what they want to do with it. We prefer to be upfront. Pelco is not doing layoffs because we’re in bad shape financially. We’re doing it to be a stronger company.”

“We finished 2009 right at our forecast and we’re making a profit,” Fages said. The roughly 100 layoffs come “not because the company’s in bad shape; it’s because it’s the right decision. We’re not ashamed of what we’re doing. We’re helping them find work, we’re doing what we can for them, but it’s the right thing to do to make the company even stronger.”

The layoffs all came essentially in manufacturing and support operations here in Clovis, partly because the acquisition by Schneider Electric also brought a commitment to lean manufacturing, which Fages said has led to a 30 percent gain in efficiency. It’s also because everyone overseas is in a sales position or technical support, “and where we see the major growth is Brazil, the Middle East, China, developing markets, and we’re not cutting there because that’s where we expect growth.”

Further, because Pelco sees China as a developing market, and doesn’t think it can be competitive paying 35 percent import duties, it will have a fully operational Chinese manufacturing plant by March. Fages is careful to emphasize that this is not “moving” jobs overseas, however. “If we have growth in 2010 and 2011 in the U.S., we’ll be hiring in the U.S. One is not incompatible with the other. We look at what the business is in the U.S., and in parallel we realize that there is growth in China, and that’s not something we can serve from the U.S.”

While Pelco generally agrees with recent IMS Research predictions of slight growth overall and as much as 15 percent growth in IP surveillance, “since the core of our business is in the U.S. and in analog, we have to be careful in planning for growth,” said Fages. “The transformation we’re going through with IP products and software-only products also forces us to realign our organization.”

“Our growth is coming from IP,” he said, “and at a number way above market average, but that’s easy to understand because we’ve been in catching up mode. And now that we have a full range of IP products, we really are playing in that market. We have today something like 120 partners compatible with our products. It’s been a dramatic shift in the Pelco business.”

Would Pelco be in the same place had Schneider never purchased it? Fages, who’s been with the company seven years, took some time to think. “Would it be the same? My answer would probably be, ‘no.’ I believe Schneider is probably better prepared to fight the downturn in the economy that we are facing today. I was in charge of Asia for the last four years. The previous ownership didn’t understand what it meant to manufacture in China. All of those changes we’ve made to get more international, Schneider has stronger experience with that. The previous ownership wouldn’t have been able to implement those changes quickly and to face the economic situation.

“If we didn’t have the economic crisis, maybe my opinion would be different, but with the economic crisis, I don’t think they had enough international experience to face such dramatic change.”