American Optical Changes with the Times

Article Out Of A Business Worcester Paper
Dated: 3/7-20/88
By: Christina L. Pappas

As a corporate personality, American Optical Corporation doesn’t like to talk much. At $250 million in revenues per year, the Southbridge-based optical products maker qualifies as number four on Business Worcester’s Top 25 privately-held companies list. But though AO released some information when surveyed, the company’s operating word is private.

Southbridge was always a company town, and the company was always American Optical (AO). Under its previous owners, the Wells family and Warner Lambert Pharmaceuticals Inc., a lot of information flowed back and forth about company matters. Under the ownership of the Wells family, the company was a closely-held private business, but the Wellses were an integral - and benevolent - part of the community.

Warner Lambert, which owned AO from 1966 to 1982, had less of a local personality but, as a publicly-held company, allowed for the employment of a public relations department within AO that issued a steady flow of information about corporate activities.

But now, long-time residents express amazement at the curtain of relative silence that shrouds the large brick building at 14 Mechanic Street. “I’ve never seen that degree of loyalty before, in a town that thrives on gossip,” says one observer. And a local reporter says, with a little exaggeration, that the only news out of AO is the company’s scholarship awards and its participation in the United Way campaign.

People in Southbridge are concerned about AO, because for the past five years, the town’s largest employer has steadily pruned down its Southbridge work force. Since M&R, a holding company controlled by Maurice J. Cunniffe and Rudolph S. Wood, bought AO from Warner Lambert in 1982, the company’s work force has been reduced by half (Wood later sold his interest in the company to Cunniffe). AO’s head count in Southbridge stands today at 1,200. The sprawling mill complex that used to house over 3,000 AO workers is now being partially leased to other area businesses.

Southbridge Town Manager Jack Howley, and his predecessor, Donald I. Jacobs, both characterize AO as a responsible corporate citizen. Jacobs recalls that in 1983, the new owners “went out of their way” to follow through with a 150th birthday bash for AO that featured a lavish, eight-band parade.

AO was cooperative in more elementary and less festive matters as well, Jacobs says. When it came time for the company and town officials to assess a proper sewer use fee for AO, Jacobs recalls, the process was made easier by officials’ cooperation.

Howley says AO is “a good corporate citizen, very responsive in terms of its commitment to the community.” He meets with company officials several times a year to discuss infrastructure issues such as traffic and sewage. And, he says, “They try to give us as much advance notice as possible (concerning manpower reductions).”

The impact of the latter has eased considerably since the early 1980s when unemployment in Southbridge was much higher, Howley says, and the displaced AO workers have found jobs in other sectors of the local economy, which is increasingly diverse. Southbridge is not a one-company town any more.

Of the company’s policy with the press, Jacobs feels that former AO President Gene E. Lewis’ tight grip on news about the company during 1982 was appropriate for a transition year. “From the town’s point of view, AO still represented the backbone of the community,” Jacobs says. “The last ten years have been a rough time for (AO). The town’s frustration is in its inability to have direct input.”

The town could not do much anyway. AO has had to change its product mix or be left behind in the international market. Plastic eyeglass lenses have replaced glass, and contact lenses represent over 15 percent of the ophthalmic market. For the eyeglass maker, the remedy to its problems could not be found in town.

Business Sense Abroad

AO had to diversify to survive. The company has many different specialties, and owns an array of overseas manufacturing subsidiaries. They include ophthalmic and instruments operations and a prescription laboratory in Germany, and marketing and distribution in Switzerland and Singapore.

Worldwide, AO’s total head count is 5,000 people (including Southbridge). That number has remained stable, indicating that while M&R has been selling off divisions of the once large company domestically (as it did with its contact lens business in 1985, selling to Ciba-Geigy), it has been acquiring overseas companies. The company is still active - but it does not feel as if part of its mission is to tell the world.

Indeed, it took some persistence to reach Stephen B. Lewis (no relation to Gene Lewis), administrator of facilities and real estate, and vice president of human resources for AO, who is also the company’s sole designated spokesman, to ask about what the company is doing these days. When finally reached, Lewis proves to be patient, courteous - and very, very quiet about AO’s operations both here and abroad. He was willing to confirm that a previously written report about the company was factually correct.

“Our focus is trying to effectively run our business, rather than trying to communicate with the public,” Lewis says of the company’s attitude toward public pronouncements. Asked if the company has ever felt any pressure from people in town to communicate more openly, he cites the number of ways in which he and other company officials participate in town activities. He does meet with local reporters to discuss specific issues, he says. And AO maintains its contacts with town and state officials.

“So, it’s not a case that we are not willing to keep that pipeline open, it’s just a case that many times when we have been willing to be open with the media, it appears as though they have had an ulterior motive in terms of trying to find things wrong, rather than trying to communicate positive information,” Lewis says. “You look at anything, and is the glass half full or half empty? It’s sometimes been the perspective of the press that the glass is half empty rather than half full.”

According to the company’s projected figures, the glass is half full and filling. The recession of the early 1980s behind it, AO’s 1987 revenue of $250 million plus is an 11.1 percent increase over the $225 million of 1986. Lewis declines to provide any information on the company’s profitability. But AO seems to have deep pockets when it comes to investing in foreign subsidiaries. Presently, foreign sales account for half of AO’s total activity.

The company purchased UK Optical International p.l.c., a $50 million British optical manufacturer and marketer, at the end of 1986. UK Optical’s manufacturing plants in Scotland, Ireland, Wales, France and Sweden help AO further penetrate the international market in which it must increasingly compete. The acquisition increased AO’s size by 25 percent, and made it one of the world’s largest manufacturers and distributors of ophthalmic products. UK Optical operates as a subsidiary of American Optical, adding American-made products to its European lines. Conversely, AO distributes UK Optical products in this country.

Lewis says AO’s international competition is among large ophthalmic manufacturers such as Essilor of France. That company has a European subsidiary, Silor, and a United States affiliate, Multi-Optics. Seiko is another AO competitor in the vision-care market. Lewis says he “is not privy” to how AO measures up to its European competition, and so declines comment.

The company’s international division is its strong suit. The division’s star product right now is the Omni Progressive Lens series, which provides bifocal vision without the telltale line or the visual “jump” from far to near. The introduction of the Omni product was one of the year’s high points, according to Lewis.

But the company divests as well as acquires; AO dropped a foreign plant last year, one that was more reminiscent of the old days. In August of 1987, AO announced the closing of its Nicolet, P.Q. plant in Canada, which produced safety eyeglasses and prescription eyewear. The factory had been a part of AO since 1920, and many management people had trained at Nicolet before moving to Southbridge. The closing idled 79 workers.

They were not the only ones idled during 1987; James J. O’Connor, who had been with AO for ten years and had been president since 1985, was replaced by David W. Ortlieb, who was named to the post by AO’s board of directors in September of last year. Ortlieb’s international experience may have been a key factor in his accession to the post.

Though at the time Cunniffe publicly thanked O’Connor for “turning around the contact lens and solutions business prior to its 1985 sale, and his efforts to return AO to profitability,” reports said that O’Connor had been replaced. Lewis’ office declines to comment on the change in leadership, however; it is clear that the company is going through another period of transition.

Back in the U.S.A.

AO has not abandoned its domestic business. It may be scaling back in Southbridge, but it has acquired several domestic companies in California and New Jersey to expand its United States markets. In the divisions where the company feels it can compete successfully, it has been active. AO’s research division moved last year to larger facilities in New Jersey, and two divisions remain in Southbridge: safety products and precision products.

The latter is working on a $3.9 million contract from the Department of Defense to produce 100,000 units of ballistic and laser-protective eyewear for foot soldiers. The eyewear, made of high-impact plastic, protects eyes from flying dirt fragments (Army spokesmen say that up to 10 percent of accidents resulting in downtime during the Vietnam War involved the eye). An absorptive dye shield placed over the plastic stops low-intensity laser radiation.

The contract, awarded in September of last year, is a follow-up to a previous $2.75 million contract to develop the eyewear. First delivery is scheduled for this month, and the contract will be complete in February 1989.

Army spokesmen say that to receive a government contract, a domestic company must pass a preliminary assessment of its management, its past performance, and its stability. AO has passed that assessment. And U.S. Army public affairs officer Charles F. Dasey of the Army’s medical research and development command (MRDC) affirms that the contract is in force, the work is being performed on schedule, and the government is satisfied with AO’s work.

Lewis says the company will move employees from other parts of its business to work on the contract, rather than hiring new people. The labor and housing shortages in Southbridge are key factors in AO’s economizing on labor, Lewis says; the company has some vacant hourly positions it is “continuing to attempt to fill.”

But not all the company’s domestic growth depends on government contracts. In AO’s safety products division, which makes safety goggles and respirators for the domestic market, growth has been steady. Do-it-yourselfers with an increased awareness of safety and chemical hazards have been the division’s target customers. The aerosite plano safety goggle and the 5-Star and 7-Star respirator series, as well as growth in the safety prescription business, have contributed to a bright picture on the domestic side; Lewis considers the division’s performance to be one of AO’s 1987 high points.

In the research devices unit in New Jersey, AO is working on two products with applications in the semiconductor industry. The Model 5010-Micro Pattern Printer, which is used for fault analysis of semiconductor chips, and the Model M-8 Bump Aligner which aligns chips and circuitry one over another with microscopic precision, are well received by the semiconductor industry both domestically and abroad. Another research division brainchild, the infrared microscope, has been well accepted in the marketplace as well, Lewis says.

AO has some less esoteric domestic spinoffs, as well. The company’s automotive group has begun production against contracts with two of the three big domestic automakers on decorative trim products for 1988 and 1989 automobiles.

There are no current plans for the company to go public. And a rumor that the company is quietly looking for a buyer is discounted by Lewis. “If that’s the case, we’re not aware of it, and I don’t believe that’s the case,” he says.

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