Rtron Inc. expects to move in August into a larger facility on a street whose name bespeaks prosperity-Cash Road.
The new address will give the four-year-old Stafford, Texas, EMS provider a permanent home. The $9 million site lies on 14 acres in the same Houston suburb where Rtron is currently headquartered in a leased, 72,000-sq.-ft. facility.
The project represents a dream realized for Rtron principals Randy Corporron, his twin brother Rodney, and Cathy O'Leary, contract manufacturing veterans and partners in the privately held enterprise. Randy and Rodney are Rtron's chief executive and chief operating officer, respectively, and O'Leary is the company's president.
"We were three [senior] officers at K*Tec Electronics" [a Sugar Land, Texas, EMS provider], O'Leary said. "We peeled away to do contract manufacturing with a different approach."
Like K*Tec, Rtron started out in January 1998 making cable assemblies. Now the fledgling company, while still doing cable work, sees mechanical assembly for energy, industrial, and medical and test equipment as its future, and plans to acquire the assets of smaller contract manufacturers. The executives believe the new 150,000-sq.-ft. plant will help make those deals possible.
"[Larger EMS providers] like Solectron and Flextronics buy large manufacturing facilities," O'Leary said. "There are thousands and thousands of companies out there that would love to sell off some of their manufacturing assets, including equipment, but they either aren't big enough or the industry they're in isn't glamorous enough for the Flextronics' of this world."
Rtron's executives, on the other hand, find the assets of smaller manufacturers attractive. These potential purchases are much cheaper and easier to close than full-scale acquisitions, they said.
"We're not interested in buying a company," O'Leary said. "We're looking at companies with really good engineering and design [capabilities] to buy their assets and test equipment."
So far, seven manufacturers targeted by Rtron are interested in the company's proposition, which could include outsourcing work as well as the purchase of assets.
"Two of the seven companies we're talking with are bringing out more products," O'Leary said. "Either they build more buildings, hire more employees, or outsource some of the things they're doing. We'll take on their mature products and they can have their workforce focus on the new designs coming out."
The additional assets and outsourcing opportunities could help push Rtron eventually into Mexico.
"Given some of the programs we offer from a design and logistics standpoint, we can compete on prices with Mexican assembly, depending on the project," O'Leary said.
However, the company hopes to expand its reach south of the border. But the timing of that venture depends on the EMS provider's customers, she said.
"The energy and medical sectors don't want to go offshore, especially if you need government approval," O'Leary said. But that hasn't stopped Rtron's executives from looking at Mexican manufacturing hubs such as Guadalajara.
"Our first foray into the international market will definitely be Mexico," O'Leary said. "We'll probably have to make a decision within the next 120 to 180 days."
The company, which has 275 employees, has also explored facility-sharing options with Mexico-based manufacturers that are looking to expand into Texas and could offer Rtron room in their Mexico plants.
A revenue leap
The potential partnerships could put Rtron in line with its 2002 revenue goal of $100 million. In 1999, the small EMS company had a modest revenue of $10 million. O'Leary declined to reveal the company's 2000 revenue and expectations for this year.
"We have so many programs that we're working on," she said. "We don't know how many we'll be able to bring on line this year."
But O'Leary insists that 2002 will be a banner year for the company since the new facility will be operational and new programs will be in place. And as market conditions improve, she anticipates additional work from existing customers to surface.
"We're going to use Rtron for another project next year," said Joe Muenster, an electronics supervisor with GE Power Systems in nearby Channelview, Texas. Currently, Rtron makes turbine control panels for GE Power Systems, a division of conglomerate General Electric Co.
"I was impressed with the neatness of Rtron's shop area," Muenster said. "After seeing how they work, I thought they would be a good candidate to bid on more work."
Aside from its Texas customer base, Rtron claims to have clients all over the country.
"People are building cable in New England, but I can build cable cheaper in Texas," O'Leary said. "An EMS company can't be in every state. It's not cost-effective. But if you have warehousing hubs and logistics programs-and as long as you can get parts on the day that the customers need them, at a good price and the quality is there-you can work around location issues."
With a number of West Coast OEMs setting up shop in Dallas and the Austin technology corridor, O'Leary believes that Rtron's Stafford location will serve the company well.
"Austin is a two-and-a-half-hour drive from us, and we have a truck that goes up there every day to deliver product," she said.
Rtron's new facility is located a mile from Interstate 69, which leads from Canada to Mexico, O'Leary noted. And it looks like Cash Road could lead Rtron to an operation in Mexico within a year or so.