4/10/2014

THEN AND NOW: Daniel Hertz, Seals Eastern Inc.

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By Bruce Meyer Follow Author

Daniel Hertz, Seals Eastern Inc.

RED BANK, N.J.—Daniel Hertz Jr. has been in the O-ring business since 1953, and he's still convinced there's room for a company that has top-notch technology and builds quality parts.

He is 84 and still going strong as CEO of Red Bank-based Seals Eastern Inc.—his son Daniel Hertz III is now president—and his company makes precision parts for use in such rugged applications as oil and gas, locomotives and transportation.

“People know that we have the products that are going to survive,” the elder Hertz said. “We're upgrading our equipment on a regular basis and adding new equipment.”

He told a story of how warranty issues have led to some sales gains for Seals Eastern. He said some locomotive makers found a high percentage of warranty costs were caused by faulty O-rings made by other suppliers, even though the seals represented just 1 to 1.5 percent of the product cost. Hertz said he often wondered why the management of the firms didn't ask right away about correcting the performance of the O-rings and seals, rather than continuing to chase the lowest cost.

So after GE Transportation, which still has thousands of locomotives in active service, had trouble with several global vendors, the firm brought in someone to solve the problem. After several people referred to Seals Eastern and the work it did—including some projects for Navistar—Hertz' company ended up with a multimillion dollar account.

One obstacle to doing business, though, is customers that will take your technology and shop the business around the world, he said, again searching for the lower cost. One valve manufacturer did that, gave away half of the business Seals Eastern had with the firm, and then later came back and asked Seals Eastern to take on other orders when vendors either couldn't or wouldn't supply the parts, Hertz said.

“If you have the technology and the quality, and the labor is not overly substantial, you should be able to hold onto the business because there is an increasing tendency of buying American again.”

Hertz said that manufacturing remains strong in the U.S. despite what the current administration in Washington is doing. He said Seals Eastern always has paid fair wages and had first-class medical plans, though the costs of the latter continue to climb. “We're a small company, paying out over $1 million a year in health insurance on a business that's producing only about $14 million a year in sales.”

What helps protect Seals Eastern from offshore competition is the proprietary technology that comes with the equipment it purchases from French Oil Mill Machinery Co., according to Hertz. The specially built compression presses allows the molder to not compromise its rubber formulations as it would have to if injection molding were used, he said. “What I have in there are the ingredients that are going to give me long life under severe service.”

Employment at Seals Eastern currently is 130, down from 151 in 2008 but up from 108 during the recession. Hertz said the annual productivity per employee, though, has jumped from about $80,000 in sales a year per worker to about $125,000.