Here are three axioms in the rubber world: Regulations are bad; you need high volume to succeed; niche businesses often are too small to be worth the effort.
Several companies that make conveyor belting are turning those beliefs upside down.
For mining conveyor belt makers Veyance Technologies, Fenner Dunlop and Price Rubber, a stringent regulation on flame retardancy in conveyor belts is anything but bad. The Mine Safety and Health Administration has mandated tougher standards that go into effect Dec. 31, and these rubber companies welcome it.
A fire in a mine can be a major disaster, and the MSHA has spent two decades trying to beef up regulations to prevent that from happening. The agency has done some fudging with the new rule, primarily to avoid placing a major financial burden on mine operators during an economic downturn. But ultimately companies that have been able to develop flame-retardant belting will have a big edge, here and presumably overseas someday.
Then there's WCCO Belting Inc., a conveyor belt maker that is the exact opposite of giants like Veyance and Fenner Dunlop. WCCO is a small, niche-player, and doing quite well at that. While much of the industry struggles with production cuts and layoffs, WCCO has been hiring, taking its pick of the best of a wide pool of unemployed. The company's forte is light-duty agricultural belting.
Big concerns would have no interest in the labor-intensive, small market business, but WCCO is able to thrive in that environment.
It all goes back to what a former president of Price Rubber pointed out years ago, when B.F. Goodrich was a big player in conveyor belting, with sales in excess of $100 million. Price Rubber was nowhere near that level in sales but, as the executive pointed out, BFG was losing millions, and his company was turning a profit.
High volume is needed for a firm to compete in some rubber industry segments, but in the end it's all about what profits a company—big or small—achieves.