A Close Fit

With the auto and aerospace industries still facing slow demand, more Connecticut manufacturers are looking to diversify into new business lines, with a keen eye on the medical device market.

While industry officials stopped short of calling it a widespread trend in the state, there is clearly more interest from companies aiming to tap the medical device industry, which traditionally hasn’t faced the kind of dramatic cyclical downturns that hit the aerospace or auto industries.

“More companies are looking to diversify in general because they don’t want to be tied to a certain economic cycle,” said Bonnie Del Conte, president and CEO of CONNSTEP, the state’s nonprofit business consultant for manufacturing companies. “They are looking to balance product lines so they don’t have the peaks and valleys of aerospace cycles.”

Del Conte said some Connecticut manufacturers are gaining market intelligence on the industry, while others are taking their first baby steps into production. The diversification is made possible for Connecticut manufacturers in particular, because many of them are already involved in precision manufacturing, especially those tied to the production of aerospace components.

The fact that health care is a hot market segment that is likely to see increased demand is making the move all the more attractive, Del Conte said.

But the transition isn’t easy, largely because of the time and resource commitment it requires.

Connecticut’s medical device manufacturing industry produced $2.8 billion in sales, $460 million in state payroll, and employed 7,638 people in 2008, according to the Advanced Medical Technology Association.

East Hartford-based Horst Engineering has depended on aerospace production for as much as 90 percent of its business over the past 20 years. But in late 2008 and early 2009, the 64-year old company began to diversify, mainly by acquiring Crystal Precision, a small Massachusetts-based manufacturer with a medical device business line.

Horst consolidated Crystal’s operations in East Hartford and established a separate division within the company known as Horst Medical. The company invested hundreds of thousands of dollars in the new division, which has its own marketing and research development team. Horst Medical produces surgical instruments and orthopedic implants.

Scott Livingston, president and CEO of Horst Engineering, said he is a firm believer that there is going to be a large aerospace industry in the state going forward, but he said it’s important to enter an industry likely to see future growth.

“We used the acquisition to develop a foothold in the medical business,” Livingston said. “Every time aerospace goes through a down cycle, you see a migration, or at least a lot of companies knocking on the door trying to penetrate another market. We are used to the fact that every once and while you are going to have to reinvent yourself.”

Before aerospace production, Horst Engineering’s big line of business was manufacturing typewriters in the 1950s and 1960s.

Livingston said medical device manufacturing and aerospace production require similar precision turning and Swiss-type screw machines, which is making the transition possible.

Kristin Muschett, CEO of Glastonbury-based HABCO Inc., has been looking into medical device manufacturing for a few years, but the company is still in the exploration stage.

HABCO was founded by a former Pratt & Whitney aircraft engineer in 1970. It designs and manufacturers ground support and testing equipment for military and commercial aerospace markets.

Muschett said HABCO got its feet wet in the medical device arena by developing catheter testers for Boston Scientific. Now the company is in talks with the University of Hartford to manufacture a rehabilitation training harness partly developed by students at the school.

HABCO is moving into a new 50,000-square-foot building in June that could boost its entry into the medical device industry. But the attempt to become a major player in the medical device arena isn’t easy, industry officials agree. There are a host of challenges, including finding financing.

Muschett said getting sales and marketing dollars to get off the ground has been a challenge.

“We are still trying to decide where we fit in that business line,” Muschett said. “We enjoy a sterling reputation in the aerospace field, but when you move over to medical devices, that reputation doesn’t transfer easily. It’s tough to break into a new market.”

Livingston noted that aesthetics are also important for medical device equipment, and the engineering on those products changes rapidly, unlike aerospace components, which traditionally stay in circulation for longer periods of time.

Medical devices are also a higher volume business line that faces intense global competition. Both factors can put pressure on profit margins.