By Andrew Patterson
When Sir Ken Stevens purchased a small engineering business in West Auckland in 1972 he had modest ambitions.
In New Zealand’s tightly regulated economy at the time where even taking more than $100 in cash out of the country required Reserve Bank approval, it was a sure bet that engineering services were always going to be in high demand. Or so he thought.
Timing is everything, as they say, and just 12 months later New Zealand faced an economic tsunami few could have predicted at the time. A doubling of the oil price coupled with Britain’s decision to join what was then the EEC (European Economic Community) devastated NZ’s agricultural export markets and the local economy promptly suffered a serious downturn.
Interest costs for the business quickly doubled from 8 to 16 percent and it quickly became apparent that a new strategy would be required if the fledgling business was going to survive into the future.
After a short stint building a range of marine vessels, Stevens spotted an opportunity.
A new opportunity emerges
Realising the growing popularity in air travel as it moved from an elite form of transport to one that was increasingly being made affordable to a wider range of consumers, so it became necessary for airports to handle the growing volume of baggage that accompanied that growth.
And so Glidepath was born and has since gone on to become one of the world’s leading producers of baggage handling systems, supplying airports around the globe, including the recent installation of a new facility in Costa Rica as well as a new $120 million installation in Perth.
While technology has revolutionised many aspects of engineering, mechanically, Steven’s says baggage handling systems today are not that dissimilar from those early systems back in the 70’s
“The speeds and feeds of course are a whole lot greater these days than they were then and the costs have come right down. In fact, we were just doing a few sums the other day and we worked out that we could probably build the Brisbane system that we built for $17 million in 1976 for about the same price today.”
Taking inflation into account and the fact that baggage handling systems can have a lifespan of between 7-10 years this isn’t exactly a product that flies off the shelves.
Instead, no two systems are the same and each installation is built to an exacting set of specifications.
Expect the unexpected
Perversely it was the dramatic events of 9/11 that offered both an opportunity and a threat for Glidepath. A significant upgrading in baggage handling systems globally that would henceforth require all passenger luggage to be more efficiently screened was offset by the initial fears that globally, air transport was potentially facing its most significant crisis since the dawn of commercial aviation itself.
“On the morning of 9/11, about four of us were in an international conference in Montreal. We had just secured the order to build the baggage system for terminal 3 at Toronto International Airport. The events of 9/11 certainly left us gasping. It took us six days to get out through LAX and back to New Zealand. We didn't really even know if the industry was going to be able to survive. However, when we did come to and looked at it, the currency had gone against us big time and we were over half a million dollars in the hole before we had even started building the installation.”
“So with great Kiwi initiative, we opted for the “do-nothing” strategy, and lo and behold the forex rate came right down and we grabbed it and locked it in at that point. We got lucky, no question.”
Lean, mean and productive
While manufacturing operations these day are run “lean and mean” Stevens says Glidepath has become significantly more productive since those early days.
“Our staff in our Glen Eden workshop have been with us a long time; 20-25 years in a lot of cases. They output more than twice as much as we used to 30 or 40 years ago because we’ve obviously become a lot more efficient at all aspects of the manufacturing process. We do outsource a fair bit these days to people around our neighbourhood as well as overseas, depending on where the job is. Shipping is such a big component of our jobs these days that we'll source all the trunking and the bog-standard conveyor equipment from local sources if we can.”
Glidepath competes against a range of global conglomerates including Siemens which recently announced it planned to sell off its baggage handling division.
“It's hard to say what impact that will have because it's a difficult business right now to come into and run and be able to make a profit. I'd hate to be someone coming in cold and trying to make it nowadays. The margins and the lead times have tightened right up, to the extent that we really have to pull out all stops to get from A to B with a profit."
Glidepath is selective about the work it takes on, given its size, leaving the mega systems for the likes of Dubai or Beijing to larger competitors.
“We try and limit any one contract to about US$20-25 million, so effectively we handle what you would term as the intermediate contracts. The huge international contracts for places like Abu Dhabi, Dubai or Singapore, they run into the hundreds of millions of dollars, and we simply don't play in that space.”
Still, that leaves plenty of regional and smaller international airports globally to be serviced.
“In the US markets their systems are a little smaller because they fragment them and split them up between different terminals and different carriers. There's very few brand new terminals being built in the US, or have been built for some time."
Those who have visited Auckland’s popular visitor attraction Kelly Tarltons will have travelled on its moving walkway. It was Glidepath that designed and built the innovative moving walkway that is able to turn corners; technology that the business has successful exported around the world.
“We've built around 40 of them globally and one of them came up for a bit of maintenance and spare parts just the other day. I hadn't heard anything from the company since we supplied it to when we completed it in 1997. It was actually opened by the Queen in Blackpool so it must have run pretty well because we don't have a lot of calls for spare parts for that system.”
The company continues to innovate new handling systems and is in the final stages of developing a world class bag drop product that can be used anywhere and integrated with existing systems.
The big challenge for NZ exporters
As a leading advocate for more export growth in NZ, Stephens has mixed feelings about the country’s export score card to date.
“I'm not totally satisfied that we're doing enough to create new export businesses that will provide the sort of opportunity for the kids coming through. When I say that, I mean the likes of the Asian diaspora who have plenty of brilliant kids in their thousands, who are particularly good at engineering and technology. I’ve seen the ones that go through our Kiwibots robotics courses. These kids are so talented, they've won the world championships five times consecutively. My trepidation is that we won't have sufficient jobs for them in times to come, and we've got to work really hard on that in the future.”
So would Stephen’s be starting a business like Glidepath today if he was in his mid-twenties?
“That's a hard one to answer. If I was starting out today I suspect it would probably be headquartered overseas. We're far from the market here, time and distance is a huge factor for us, but we're used to travelling, we've got that on our side I suppose. But for all that this is really an interesting business. It covers electrical, mechanical and increasingly software as well as involving design and construction. So it's got a bit of everything. Plus we've certainly trained a lot of people over the years.”
“But these sorts of businesses are as much in decline here as they are in the USA. Simultaneous with Siemens dropping out of the industry late last year, another company, G&T Conveyor, dropped out and that was the last indigenous US baggage handling systems contractor. So the potential suppliers to the U.S. market are now all foreigners. I think that's ironic that a great country like the U.S. doesn't have its own people doing that sort of work any longer.”
“For most businesses, it’s actually very difficult planning to far ahead. Everything tends to work on very short planning lead times these days. But there's nothing better than feet in the market for sensing what is needed when it comes to inquiring, selling and marketing. Just time in the market is the greatest thing for us. Bring back the opportunities for instance, to work with the New Zealand companies that have an export aspiration, to really provide world class materials and products.”
“There's an awful lot of opportunity still in the world out there for us but we need top products and most importantly we also need top people on the ground and in the markets selling them.”
The next decade
Recognised for his efforts last year by the trustees of the High Tech Awards, Stephens was inducted into the equivalent of its hall of fame with the awarding of a ‘Flying Kiwi’ for his innovation, success and perseverance.
However, after 40 years at the help of Glidepath the prospect of taking life a bit easier is starting to have a certain appeal for its founder and Executive Chairman as he contemplates his next move.
“Well, I've got lots of little boats up at my beach house that need remedial work, and a bit of a lick and a promise, so in three years' time I think I'll be hanging up my hat a little bit more so than now.”
“We've recently added some young management to our team and they're fantastic. They're already hitting their straps, they're in the market, and they're just doing things at a quicker pace, with more energy and enthusiasm than we've seen here for a long time. So I'm heartened by that.”
Perhaps those boats might not have too much longer to wait for their ‘lick and a promise’ after all.
|Annual growth rate:||3-4% over past 3 years|
|Fastest growing market:||Middle East|
|International offices:||Dallas, USA plus sales offices in Sydney & Adelaide, Toronto, Mumbai, Durban, Lima|
|Domestic : export sales split||principally 100% export|
|Ownership:||Private (Stevens family and associated interests)|