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December 1, 2006

3 Min Read
Robert F. Cervenka, Phillips

Robert F. Cervenka in Phillips, WI

Robert F. Cervenka founded Phillips Plastics Corp. 42 years ago in an old creamery building in a small town in Wisconsin and built it into a $240 million-a-year company.

Phillips focuses on precision tool building and injection molding of engineering plastics and metals for medical, consumer, and automotive OEMs as well as other customers.

“There were revolutionary changes taking place in plastics in the 1960s,” says Cervenka. He and his partner Louis Vokurka bought one of the first new reciprocating screw machines from Reed-Prentice, giving Phillips a competitive edge over other molders still using plunger-type machines, which couldn’t plasticize the newly emerging engineering plastics. “We learned the value of always being at the leading edge and made a commitment to always use the best technologies as a competitive advantage.”

Phillips built a corporate Technology Center in Prescott, WI, a slightly unusual strategy for what was then a midsized molder in a business notorious for business swings and marginal profitability. One project was construction, at Phillips’ expense, of a machine that assembled huge quantities of knobs for a white goods manufacturer. In a 12-year period, the machine produced more than 80 million knobs at a savings of $.10 per knob. A second new facility, the Origen Center, has been used as an incubation site for projects not ready for full-scale manufacturing.

Another lesson learned was the importance of leadership, and the difficulty in making high-risk investments that could sink the company in the face of significant internal opposition. In the early 1980s when vendors were pitching systems for computer-assisted design and manufacturing (CAD/CAM). The book value of the company at that time was a little above $3 million. The CAD/CAM investment would be about $1 million—during a famous recession when interest rates were sky-high. “We made the investment, and a nervous, quiet time followed. Not many people came to talk to me, and I can truly attest to the loneliness,” says Cervenka. The use of automated engineering tools became a significant competitive advantage for Phillips, which still has a large design engineering staff.

A final lesson was community support. The town and people of Phillips, WI gave financial and other support to Cervenka’s new enterprise when he and his partner had only $52,000 in startup capital. He has created several focus factories in Wisconsin that now employ more than 1500. He also created the AnnMarie foundation that provides annual financial support for high school scholarships, volunteer fire departments, nursing homes, youth sports teams, and other local projects that need help. Ann was his mother’s first name and Marie was Vokurka’s mother’s first name.

What’s ahead for Phillips Plastics? One of the biggest challenges is finding customers who understand value versus price. Phillips’ own employees must understand the difference between selling a service (contract engineering and manufacturing) as opposed to selling just parts. Phillips also tries to find customers who understand the importance of creating a design-to-delivery model at the beginning of product development to ensure that the best possible product can be manufactured at a competitive price in a fast-to-market environment. One area where the model works well is medical, which now represents more than 40% of Phillips’ business.

Another piece of the puzzle is new technology development, even far afield from the company’s normal plastic business. Phillips’ scientists developed a new porous ceramic material that is being investigated by a Minnesota company as a scaffold for building new tissue from stem cells.

An internal financial study shows that Phillips over time has grown better than 20% a year. Its return on equity averages close to 20%. “There have been bumps, of course,” says Cervenka; Phillips sold its interest in a medical device business after the economic downturn following Sept. 11, 2001. All of the technologies did not pan out. But the privately owned company remains strongly competitive.

Doug Smock • [email protected]

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