Fasttrack

fastrack/lsp/28″/mike1st/jc2nd By LISA STEEN PROCTOR Contributing Reporter Chet Huffman brings the same determination to running his family’s business as he does to racing off-road cars in Baja California. “It’s no different than business. I don’t like to lose at either,” he says. The 36-year-old thrillseeker has been shifting Northridge-based Dukes Inc. into ever-higher gears lately. But Huffman who, along with his father, Lloyd, owns Dukes is not pursuing that growth with reckless abandon. In fact, he’s downright conservative when it comes to running the family’s aerospace components business. The elder Huffman taught his son the two seemingly conflicting traits of leisure-time abandon and workplace conservatism by exposing his son to racecars, motorcycles and boats, but also teaching him that the way to grow a company is through internal cash flow, not debt. This practice was begun at Dukes when Lloyd purchased the then-ailing company 25 years ago and has been continued by Chet Huffman, who bought out his father’s partner seven years ago and has kept the company virtually debt-free ever since. This is not an insignificant feat given that Duke’s product is extremely R & D-intensive; and that the company has been dramatically expanding in recent years. Dukes is in the business of designing and manufacturing valves and systems used to control the air temperature and pressure inside airplane cabins. Its main product line consists of valves used to direct heated air from a plane’s engines into the cabin and to various other parts of the plane. Some of the air is produced by the engines themselves, and some is scooped from the outside atmosphere. The air is heated as it passes through the engine and is then funneled through the valves to be used for such things as de-icing the plane and even for air-conditioning the cabin, after being cooled down somewhat. (Air from directly outside the plane at cruising altitudes is too cold to inject directly into the cabin, so it is engine-heated first to warm it up a bit). Dukes had manufactured these valves solely for single-engine piston aircraft until seven years ago when Huffman took over the reins of the company after his father suffered serious injuries during an off-road car race. Since that time, Lloyd Huffman has focused on the engineering aspects of the company and left the actual running of the company to his son. When Chet Huffman came on board, he recognized that the market for single-engine aircraft was beginning to dry up because of product liability issues. “Liability got so bad that the (airplane) manufacturers quit building (the small aircraft),” said Huffman. “We had to reinvent the company because we were so dependent on that segment of the market.” That’s when Dukes began designing the same types of valves for the larger, more-complex business jets. When the company became successful in that area, it took the same technology and applied it to systems on regional aircraft (commercial aircraft that carry up to 70 passengers and fly routes of about 350 to 500 miles). While the basic valve technology is the same as those used on small aircraft, additional items are required on the valves of commercvial planes. So Dukes can sell those valves for a higher price, and a greater profit. But Huffman has not stopped there. In the last 18 months, he has taken Dukes into the wide-body business, working with large commercial airlines, such as United Airlines Inc., in replacing worn-out valves on their jets. A United Airlines publication distributed in the airline industry stated that the Dukes valve is considered 10 times more reliable than the original valves in its DC-10s and that the valve replacements will save the company more than $2 million in maintenance and replacement costs over the next five years. Huffman estimates the life of Dukes’ valves to be 10,000 to 12,000 flying hours, compared with the industry standard of 3,500 hours. Dukes also recently won a government contract to replace valves on military fighter planes as the original valves fail (Huffman would not disclose the type of plane). This contract is worth at least $20 million and could potentially be worth as much as $70 million over the next 15 years, said Huffman, depending on how quickly the original valves wear out. Huffman has also added a new product to Dukes’ offerings, a digital cabin-pressurization system, which is generating an estimated $5 million more in business a year. Eighteen months ago, the company hired 14 new employees to work on the system, which automatically maintains the cabin’s air pressure at a desired level. The system is a notable advancement from the less-precise system that requires pilots to manually control the cabin’s pressure. Since the hirings, the group (most of which works in Manchester, N.H. because that is where the workers familiar with this technology were located) has won four contracts with large companies such as Boeing Co. and Raytheon Aircraft Co. The contracts have a combined value of at least $8.5 million over 10 years. All this activity has resulted in a near doubling of the company’s revenues in just two years, climbing from $6.7 million in fiscal 1995 to $12.5 million in fiscal year 1997 (which ended in June 30). Based on the current backlog of orders, Huffman predicts revenues for fiscal 1998 will be at least $14 million to $15 million. Customers say one of the company’s biggest assets is its willingness to listen to their needs. “Rather than force something down us that we really don’t want, they listen to us and they still stay competitively priced,” said Steve Walker, senior procurement specialist for Raytheon, which recently inked a $7.5 million contract with Dukes for valves and cabin-pressurization systems to be installed in Raytheon’s fleet of business jets. Walker also praised Huffman’s efforts over the last seven years. “He was green when he started seven years ago, but he has learned the business and grown the business,” said Walker. Huffman’s attitude towards growth will not likely change soon. Despite its growth, Dukes’ size still pales in comparison to most of its competitors which include AlliedSignal Aerospace, Parker Hannifin Corp. and United Technologies’ Hamilton Standard division. “We compete against very large businesses,” said Huffman. “And we’re looking smaller because of all the mergers that are occurring in the industry.” But Huffman views this development with optimism and says Dukes’ competitors are actually becoming some of its best customers. “The larger companies are concentrating less on the individual components and more on the overall system,” said Huffman. So those companies are buying their valves from Dukes and other smaller outfits, rather than manufacturing the valves themselves. Huffman says he doesn’t intend to be swallowed up by the big guys. Instead, he prefers to keep the company in the family a company where his father and brother work in engineering and his mother works in accounting. (A second brother heads up a family-owned aircraft parts distribution business in Golden, Colo.). “We’re approached routinely (with buyout offers) and we’re not at all interested,” said Huffman. “We enjoy what we’re doing and we like the flexibility of what a small business allows us.”