Kwikset Is Locked Into Anaheim : Manufacturing: The 46-year-old company plans to increase its work force of 2,000 by about 200.

ANAHEIM —  In countless American homes from the flat sprawl of the San Fernando Valley to the urban core of Baltimore, the key that fits the front door features a familiar stylized cutout forming the eleventh letter of the alphabet.

That “K” is for Kwikset, the 46-year-old Anaheim company that created the inexpensive three-piece tubular door lock to meet the demands of the post world War II residential housing boom.

The company has been successful since its beginning, faltering only briefly early last year when the sluggish economy cut into sales and forced Kwikset into its first major layoff--10% of its 2,000-person work force in Anaheim, Texas and Oklahoma.

But it has since refilled all the positions it eliminated and is preparing to increase its payroll by an additional 200 employees in coming months.

Improved manufacturing techniques and a plethora of new products combined with a marketing strategy designed to sacrifice short-term profit for long-term market share mean that Kwikset today is poised for continued growth, company officials say.

The residential door lock, or lock set, market in the United States generated about $550 million in sales last year and Kwikset says it garnered about 36% of the total, or $200 million.

At Kwikset, the aim is to maintain the company’s dominance of the low-cost market, where it now captures about 55% of annual sales, while boosting its share of the fast-growing mid-range market where it has about half the 40% market share commanded by San Francisco-based Schlage Lock Co.

Kwikset also wants to secure a position in the upper price range, now dominated by Baldwin Co. in Redding, Penn., Schlage and a handful of European firms. But Steven Price, marketing vice president, said Kwikset doesn’t foresee itself as a major player in the high-end market.

“That is really an artisan’s market, and we are a mass producer and that’s what we will stay,” he said.

Industry analyst David S. Leibowitz of American Securities Corp., New York, said Kwikset, “is a company that should not be overlooked. It has a consumer franchise, an important brand name and a line with some depth.”

The residential lock market is “very hotly contested” and Kwikset has taken several steps to differentiate itself from the competition, Leibowitz said, including its recent move to package some of its locks with instructional videos and installation tools.

The company, a highly profitable subsidiary of the $5-billion Black and Decker Corp. consumer goods empire since 1989, has countered the decline of new home construction in the last three years with a renewed emphasis on the remodeling and home repair market, which accounts for about 70% of all U.S. residential lock sales.

The marketing shift, which brought Kwikset products into such unfamiliar arenas as Sears and Target stores, so far has worked well and sales have picked up, said Price.

Kwikset is soon to expand its parts factory in Dennison, Texas, and its assembly plant in Bristow, Okla., to increase total production capacity by 35%, Price said.

The expansion is taking place outside of California because Kwikset has run out of room at its Anaheim campus--not because the company has lost faith in the state’s economy or feels hampered by state business and environmental rules.

“Benefits, workers compensation coverage, wages, all those things are a lot more expensive in Anaheim than in Texas or Oklahoma,” Price said, “and we have a lot of environmental concerns and costs--we have to make our plating and coating processes here more friendly.”

But the trade-off is the skilled work force in Orange County.

“There is still a lot of hand work involved in making our products and our people really are our most important resource. It would be absolutely prohibitive to close down and move this plant to another state and try to replace the workers.”

Price said that turnover in Kwikset’s non-union Anaheim labor force is less than 5% a year.

A major competitor in the middle price ranges, Weiser Lock Co., looked at the same set of problems several years ago and came to the opposite conclusion.

Weiser, a subsidiary of Masco Corp. of Taylor, Mich., phased out its Huntington Beach factory during 1988 and 1989, laying off about 1,000 workers with a combined annual payroll of nearly $28 million.

Weiser moved its corporate offices to Seal Beach and built a new, automated factory in Tuscon, Ariz., where it hired mostly local labor at significantly lower wages than it had been paying in Orange County. Weiser officials could not be reached for comment on the move, but said at the time that the move would shave almost $4 million a year from operating costs--mainly in labor savings.

But Kwikset’s administrative and sales headquarters and West Coast assembly plant complex will stay in Anaheim, where about half the company’s employees work.

An increased demand for Kwikset products is driven, in part, by the company’s new operational philosophy--more typical of a Japanese conglomerate than a U.S. manufacturer--that places increasing market share ahead of immediate profits in the panoply of corporate goals.

To achieve that end, Kwikset has stuck to its old pricing while introducing upgraded products that often are costlier to manufacture than their predecessor models. One example is Kwikset’s introduction this year of a line of solid cast brass decorator handle sets to replace brass-plated stamped zinc models that were much less expensive to produce. Kwikset decided to keep market share, however, by slashing its profit margin and selling the brass sets at the prices as the old zinc sets--beginning at $139 for the set.

While the company made its name--literally and figuratively--supplying easily installed, low-cost locks to home builders, it recognizes today that the bulk of its sales are made in the growing home improvement and repair arena, where consumers are looking for more upscale products, Price said.

One chore is to capture the hearts and minds of the unhandy--a generation of new homeowners with little or no exposure to maintenance skills because they grew up in career-dominated families where mom and dad jobbed out such tasks to a handyman.

The answer, as Kwikset sees it, is to use that most familiar of household appliance teams--the television and video cassette player--to instruct customers.

Thus was born the “project pack,” a series of matched lock sets and deadlocks. All are packaged with an instructional video on installing locks; several come with a Black & Decker cordless screwdriver and one includes a complete set of the proper drill bits and hole saws to install the locks in a new door.

Although the company has benefited from its marriage with Black & Decker, Kwikset’s continued success in the face of foreign competition and recession goes back to decisions made in the late 1970s, said Price, a Black & Decker marketing executive who joined Kwikset after its 1989 acquisition.

When the imports from Korea and Taiwan began hitting the U.S. market in the late ‘70s, Kwikset decided to compete directly on price, Price said. “The company bellied up to the bar and almost overnight dropped its prices 25% to be more competitive.”

Other U.S. lock makers didn’t drop their prices and saw their share of the residential lock market decrease while those of Kwikset and its foreign competitors grew. At Weiser, for example, the company’s market share dropped from 30% in the late 1970s to 22% in 1988, fueling its decision to move to Arizona.

“We are the only U.S. company still (manufacturing domestically) in the opening price point segment,” said Price.

Other U.S lock companies, including Schlage, Weiser, National, Harlock and Master compete largely in the mid range market.

The residential door lock market is divided into three price ranges and each includes three types of products: lock sets, which utilize doorknobs; lever sets, with horizontal levers instead of knobs; and handle sets, which combine a deadbolt with a thumb-latch and vertically mounted ornamental pull-handle.

Low-cost deadbolts, lock sets and lever sets retail at prices ranging from from $7 to $25 and low-cost handle sets range from $50 to $60. In the mid range, deadbolts, lock sets and lever sets run from $18 to $40 while handle sets run from $80 to $150. In the top end of the market, prices can easily exceed $500.

Kwikset’s decision to slash prices cut deeply into profits for a few years, Price said, “but the company started right away to change its manufacturing, to modernize and use more automation,” to cut production costs as demand increases.

It also changed the way it marketed its products to retailers, Price said. Kwikset began charging retailers for advertising and for point-of-sale displays that it had paid for in the past. Kwikset also speeded up is delivery of orders.

“We had been a company that drove our segment of the market and we changed to a company that simply competed in that market with other players,” Price said.

Under Black and Decker’s ownership, he said, the focus at Kwikset “is to increase our investment in our employees and to become more market driven. We will spend more than $1 million this year alone on employee training programs--more than was spent in the entire prior history of the company.”

With completion of its Texas plant in 1989, Kwikset’s average delivery time to builders and large retailers plummeted from 26 weeks to four weeks.

“It used to be a case of ‘this is our football so we’ll play by our rules,’ and all of our competitors did the same,” Price said.

“But no more. With mega-dealers out there like Home Depot you just don’t tell them it’ll be 26 weeks if you want to keep them as a customer.”

At a Glance: Kwikset Corp.

Corporate Headquarters: Anaheim

Founders: Adolph Schoepe and Karl Rhinehart.

Founded: South Gate, 1946; moved to Anaheim in 1948.

Original Name: Gateway Manufacturing; changed to Kwikset Corp. in 1947.

Original Product: Nation’s first tubular lock. Replaced old-fashioned mortise lock in residential use because of easier, less expensive installation.

Ownership History:

1946-1952, Schoepe and Rhinehart.

1952-1957, Schoepe.

1957-1964, American Hardware Corp., New Britain, Conn.

1964-1989, Emhart Corp., Hartford, Conn.

1989-present, Black & Decker Corp., Towson, Md.

Products: Residential lock sets, deadbolts, interior knob sets, lock set hardware. Also is exclusive U.S. distributor for Valli & Colombo, an Italian manufacturer of designer door hardware.

1991 Sales: $200 million.

Facilities:

Parts manufacturing plant in Dennison, Texas.

Assembly, plating and polishing plants in Bristow, Okla., and Anaheim.

Employees: 2,000.

Footnote: Adolph Schoepe opened a new factory in Anaheim in 1957, the same year he sold Kwikset. That company, Fluidmaster Inc., has become the nation’s leading producer of replacement valves for toilets. Schoepe and his employees annually commemorate the death--Jan. 17--of Sir Thomas Crapper, 19th-Century British inventor of the flushing mechanism that made the modern toilet possible.

Source: Kwikset Corp.

Researched by JOHN O’DELL / Los Angeles Times