An in-depth conversation with Harvey Fuson

BY MORRIS R. BESCHLOSS
PVF and economic analyst

Newmans, since its incorporation in 1946, has been in all facets of the valve industry. From having large machine shops to refurbish surplus valves in the early years to the importing and inventorying of valves in the 60s and early 70s to the present-day manufacturing of Newco, oic and Cooper, the Newmans name has been one of the most respected in the PVF circles.

Founded in the mid 1930s by Jay and Betty Newman as West Tulsa Pipe and Supply, the primary business focus was in wholesale plumbing and field salvage. As the country began rebuilding itself and its resources after World War II, Newmans turned its full attention to the PVF industry. In 1952, Irv Frank, after attaining his mba from New York University, joined the company and in 1954, Newmans opened its first branch in Houston with an ambitious Albert Stein becoming the first out-of-Oklahoma employee and future president. In 1956, Don Newman graduated college and entered the business. With Jay directing and the driving team of Irv, Don and Albert, company locations expanded from Tulsa and Houston to New Jersey and Oregon in the U.S. and Ontario and Alberta Provinces in Canada.

In 1973, oil went from $5 to 15 per barrel. As a result, shortage of product (valves) and inflation changed the face of the PVF industry. Inventory build-up was in such great demand that industry looked outside the U.S. for product and resources. Newmans was one of the first to recognize this and adapted their strategy accordingly. At the time, Italy had a rich history of manufacturing approved industrial valves at reasonable prices. Newmans began acquiring large product inventories that would accommodate the growing need for the U.S. energy sector. The acceptance of this material took years, but when the users saw the need and quality of this product it opened doors to looking for material in other countries such as Japan, Korea and Taiwan. Newmans, again, was at the forefront of this movement. Huge inventories supported distribution, which in turn sold to the e&c and User Communities.

Irv Frank saw the need for factories in foreign countries to maintain their identities. He also saw that bringing in product from different manufacturers would cause confusion with marketing and gaining industry approvals. With this in mind, in 1976, the brand name Newco was born. Understanding the business, Irv knew that it was nearly impossible to assert rigid quality control over an independent foundry and process center. Newmans made it a policy to only deal with reputable, mid-sized family owned companies.

These select manufacturers were required to be self integrated and control the process of the product from the scrap purchased for the steel to the finished merchandise. This was overseen by the Newmans’ engineering department. The breadth of the Newco line was manufactured to the same quality standards in cast steel, low alloy steel,forged steel, low alloy forged steel, cast and forged stainless steel and cast iron.

In 1989, Newmans was sold to a venture capitalist that merged the company into a group called Newflo Industries. In 1995, Newflo sold the businesses to a public company, pcc, that took over daily operations. In December 2003, Irv Frank and Don Newman, along with Steve Mines and Harvey Fuson, bought the company. Once again, Newmans became privately held.

Business had changed drastically since Newmans’ inception. The company went back to its successful past values, but with a modern approach. Instead of relying on independent factories as in the past, Newmans made direct investments in lost wax and sand casting foundries and processing centers. In 2005, Newmans acquired Cooper Valves from Dresser Industries, a specialty alloy manufacturer in the U.S.

To date, Newmans manufactures a complete line of bolted bonnet and pressure seal gates, globes and checks, angles, tilt disc checks, standard globe and angle boiler non return valves, and floating, trunnion, and QuadroSphere ball valves to serve the Refining, Petro-Chemical, Chemical, Power, Pulp & Paper, Marine & Mining industries. Now, Newmans has six strategically positioned distribution centers throughout North America and the Far East, warehousing more than $40 million in ready-to-ship inventory to conveniently supply product to the industrialized world.

Newmans’ locations are now in the following areas: Houston, Texas; Carson, Calif.; East Brunswick, N.J.; Edmonton, Alberta; Barrie, Ont.; and Shanghai, China, with plans for further expansion. Newmans’ employees enjoy the challenges of innovative thinking and planning, and are proud of their accomplishments and milestones. As a result, Newmans’ is proud to call itself “The Reliable Source.”

It’s our privilege to interview Harvey Fuson, who along with Steve Mines, comprise Newmans’ ownership and senior management.

Beschloss: Congratulations to you and your partners, Harvey. The saga of Newmans from entrepreneurial success to sellout, going public and then back to private enterprise reads like a novel. What motivated you and your cohorts to take Newmans back?

Fuson: Irv and Don as the original founders still felt responsible for the company even though they had sold it 15 years before. They wanted to see the company returned to its former status.

Beschloss: As you indicated, the PVF business has changed dramatically since Newmans first incorporated in the post-war years. Since you’ve experienced the ups and downs of much of the PVF sector in the last 30 years, what is your level of optimism about the future?

Fuson: We are encouraged about the future. With an equal blend of thinking outside the box and history, the valve industry will flourish.

Beschloss: Since Newmans is unique in experiencing both the manufacturing and distribution end of the business, where will your major thrust be in the months and years ahead?

Fuson: Our focus is on-time, quality manufacturing and being the reliable source to our distribution customers.

Beschloss: Since you acquired Cooper Valves from Dresser Industries last year, how has this acquisition panned out?

Fuson: Very well! There were a few processes we had to change to improve our deliveries, but now that those are in place and we have shortened out basic lead times to 12 weeks. We are also able to put out emergency shipments in as little as four weeks. Also by opening up our distribution network from a single master distributor to general distribution has really increased sales volume.

Beschloss: Other than your enormous size and broad geographical reach, how would you differentiate Newmans from the breadth of master distribution now spreading throughout the North American PVF sector?

Fuson: Newmans and its six stocking locations help bring direct factory goods to the local regions to better support distribution on their daily business. Our focus is to stock large-diameter valves and specials that distributors do not have a consistent market for or cannot afford to stock. Our China warehouse allows our North American distributors a platform to service overseas projects more effectively.

Beschloss: Knowing and respecting the key partners comprising Newmans today, how have you allocated the responsibility for each of you, considering you were top executives in your previous incarnation?

Fuson: The strengths of each partner were discussed amongst us openly and then divided so as to best utilize each persons strongest attribute.

Beschloss: With your gigantic inventory investment and your key geographical locations in the U.S. and Canada, your analyses of the industry’s growth potential becomes of paramount importance. How do you view the PVF potential for the rest of the decade?

Fuson: Certainly as everyone has seen upstream has been very strong over the last three years. In our opinion, the downstream market and projects are just beginning. Since downstream is the segment of our market, Newco, oic and Cooper products are best suited for we are looking to be a very strong market through 2010, possibly 2012.

Beschloss: Please indicate what end use sub-sectors provide the best opportunities for growth in the PVF industry in the foreseeable future?

Fuson: The best opportunities for growth in the PVF industry is still through Refining, Chemical, Petro Chemical and Power.

Beschloss: What technological evolution do you foresee the valve industry pursuing in the next few years. Do you believe industry’s accelerating automation will play a role in valve industry changes?

Fuson: We see more going to quarter turn as new designs and higher temperature seats are coming out. The Quadrosphere, which is Newmans innovation, is an example of the new areas for quarter turn in various hard to service applications.

Beschloss: Will the anticipated need for more specialized short-run valve products slow down the foreign outsourcing of valve production?

Fuson: If nothing else, it leaves a hole for those who can fill this segment. That is why we purchased Cooper and continue to manufacture all the special alloys in the U.S.

 

Beschloss: Since your massive inventory indicates a huge bet on future growth of the PVF sector and master distribution, you’re obviously putting your money on this sector’s future growth. Are there any forthcoming obstacles that might deter such optimism?

 

Fuson: There will be dips in the market as always, but the general trend is strongly upward. It is hard to imagine it will come to a sudden halt. We, of course, will keep our eye on various indicators to watch the future, but right now we are betting things will continue positively over the next few years.

Beschloss: Other than your projected domestic industry growth, do you foresee export activities to be an increasing factor in your revenue growth?

Fuson: Yes, we have received a number of nice projects over the last few months from overseas. In the Pacific Rim, the sales staff in our Shanghai office is seeing good activity. The new warehouse in China, which will be completed in March 2007, is designed to accommodate this business.                   

 

Morris R. Beschloss, a 50-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst for The Wholesaler.