Company Profile: Raycar Gear & Machine Co.

Paying attention to details and growing in a methodical manner has allowed Dan Schwartz to break from the pack and emerge as an American success story.

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Fifteen years ago Dan Schwartz found himself in a bit of a professional quandary, caught somewhere between the shop floor and a glass ceiling. "I'd spent about eight years working my way up from running machines to middle management at a company called Patterson Gear," he says. "That's when I realized I wasn't satisfied with either position and there was nowhere left for me to go."

Nowhere within that company, at least. The solution? "I started looking around, and I found this little business called Raycar Tool & Machine," he says. "I met with the guy who owned it, and he was interested in selling, so I talked with a buddy of mine at Patterson who agreed to come on as a silent partner, and we ended up buying the company for $50,000."

What that bought them was a machine shop that had once been owned by two brothers–Ray and Oscar, thus the name "Raycar"–and was in a fairly advanced state of decline. "The building was just 2,500 square feet with a couple of antiquated machines sitting around, and the company didn't have any customers to speak of," says Schwartz, "so we really started at ground zero."

It wasn't long before he realized that a change needed to be made in order for the business to have a chance of succeeding. Located near Chicago, in Rockford, Illinois, there were hundreds of machine shops vying for every scrap of business. "With all these guys lowballing each other on every job, there just wasn't any money to be made, and going broke really wasn't what I'd had in mind when I got into this whole thing," Schwartz says with a laugh.

He soon came up with a plan: He would present his partner with a choice, asking him to decide between throwing in the towel and liquidating the company's assets, or coming onboard full time and getting into the gear manufacturing business. "We had both worked our way up at Patterson, and we both knew a lot about gears," says Schwartz. "So he quit his job, joined the company as a full partner, and we started buying gear equipment."

Curiously enough, one of their first customers was their former employer, who sent some business their way since both men had left the company on good terms. Also, Schwartz's sister met a man who was looking for someone to do some machining for him. "She got his card, and I was on the phone with him the next day," he says. "So that's how we got through those first few months, with orders we'd pick up here and there, and we just sort of slowly started building up a name and a reputation for doing good work.

"Besides, that's the only way I know how to go about doing things," Schwartz says. "I've always believed that if I did a good job and satisfied my customers, then the work would come to us and we would grow. And that's exactly what's happened."

Growth came quickly in the early years, in fact. In order to attract new business, the partners needed more equipment, and it wasn't long before they'd completely run out of space. "I was out driving around one Saturday, and I saw what looked like the perfect building," Schwartz recalls. "So I contacted the owner, and by Monday morning we had the banker and a lawyer out there and we bought the building. It doubled our space to 5,000 square feet, and it just seemed endless when we moved in. We didn't think we would ever run out of space again."

As it turned out, by the end of that year it was time to double the company's size once again by purchasing the building next door for a total of 10,000 square feet of manufacturing space. But a lot had happened during that time. The first involved renaming the company as Raycar Gear & Machine in order to reflect its new direction, and the second saw Schwartz buying out his partner to become sole owner of the business. "It wasn't a falling out or anything, we were just headed in different directions," he says. "We're still friends and have tremendous respect for each other to this day." Since then Raycar has continued its trend of careful, qualified growth, making sure that its current customers' needs have been met before taking on new work. This approach has proven successful, Schwartz says, with little need for outside representation.

"My wife, Joy, has taken on responsibility for sales in the past few months, and we now make sales calls together, which is working out very well," he says.

So much so that the company is doing business with industry giants such as Hamilton Sundstrand, which has a manufacturing facility nearby. "It was the same situation as always," he says. "A guy who was pleased with our work said to one of their engineers 'If you need something done right, give Raycar a call,' and before we knew it we had 10 or 15 people from Hamilton Sundstrand calling us to manufacture their parts."

Schwartz says that the company has gradually developed into a supplier of OEM replacement parts for industries including printing, agriculture, and mining. Most gears are made complete from bar stock, with all operations performed in-house, and with an emphasis on low-volume, high-quality parts. This has been central to Raycar's success, he adds.

Still, between the outsourcing of jobs and a stalled economy, recent years have been hard on American manufacturing, and Raycar has taken its lumps along with everyone else. Convinced there would be brighter days ahead, however, Schwartz decided to take advantage of the downtime to mount an investment initiative. "Three years ago I started a program of purchasing new equipment for the company," he says. "I traded in two old CNC lathes for two new ones, and I bought a new gear grinder and a CNC OD grinder, along with some other pieces of equipment. So I've ended up reinvesting about a million dollars back into the company."

That investment is now showing a return. Since the first of the year, Schwartz says that business has taken off, to the extent that he is operating at full capacity and already in need of new equipment and more space–both of which are on the drawing board. "I wanted to be ready when business picked up, so I'm glad I made that decision," he says. "Our sales have increased tremendously in recent months, and all indications are that we've finally turned the corner."

With 18 employees currently on the payroll, more will soon be needed, but they will be chosen carefully–in the same way that everything is done at Raycar. "It's important that we choose the right people because we retain who we hire. We cross-train everybody so that they will be more valuable to the company, and we assign new hires to an employee mentor who can help them and answer their questions immediately," Schwartz says. "We have no middle management here. We have Joy handling sales and Carl Wedig, who is my right-hand man and oversees operations, and me. Employees either work problems out on their own, or they come straight to us."

Schwartz says he has spent time in middle management, after all, "and I know how ineffective that can be." For more information:
Call Joy or Dan Schwartz at (815) 874-3948 or send e-mail to sales@raycargear.com. Visit the company's Web site at [www.raycargear.com].