Profile: General Pencil survives low-cost competition by adapting and changing focus

June 30, 2005 from Morning Edition

RENEE MONTAGNE, host: Time now for business news.

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MONTAGNE: There is a great deal of fear about the future of American manufacturing because of lower cost competitors from abroad, which brings up the question: What kind of American manufacturer is doing well these days? NPR's Adam Davidson found one company that's found a way to compete.

ADAM DAVIDSON reporting:

At first glance, it makes no sense at all that General Pencil is still in business. They make pencils, a cheap commodity, just the sort of thing the Chinese companies can make for a lot less money. In fact, most US pencil-makers have gone out of business. But General Pencil is doing fine. That's what Jim Weissenborn, the company's owner, says as he shows off some old photos at the entrance to his factory in Jersey City, New Jersey.

Mr. JIM WEISSENBORN (Owner, General Pencil): We are looking at the great-great grandfather and started the first lead pencil company in Jersey City Heights back in 1864.

DAVIDSON: They're still making pencils much the same way they did a hundred years ago, in the basement of the factory.

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Mr. WEISSENBORN: Hang on, we're going down.

DAVIDSON: The basement is just amazing. It's like stepping into the 19th century. This is where they make what most people think is lead, the black graphite sticks in the center of a pencil. It starts with several massive, black, greasy machines. Weissenborn's grandfather bought them in 1910. Each is about the size of a minivan and they spin around.

Mr. WEISSENBORN: These are called ball mills. There's stones in there off the Belgian coast. We put graphite and clay and pulverize them for 24 hours. This is what makes the produce much better. It's not mass-produced.

DAVIDSON: The workers down here use old Weissenborn family recipes, different ratios of clay and graphite for different kinds of pencils. After being pulverized, water is added and the mixture is kneaded like dough in something that looks like an old wine press. The wet graphite paste then goes into a sort of an industrial pasta-maker, which extrudes long, thin pencil leads. They're cut to size, then baked hard in a kiln. The leads are then taken upstairs where they go into wood which is shaped, painted and turned into what what we'd recognize as a pencil.

Almost all of the machinery is nearly a hundred years old and the whole process is fascinating, but it also seems a bit crazy to still make pencils this way. It's so inefficient. In China, or in other US companies, new machines make pencils much faster and much cheaper.

By the mid-1990s, the Weissenborns knew they had a problem. Katie Vanoncini is Jim Weissenborn's daughter. She's expected to take over the company.

Ms. KATIE VANONCINI (General Pencil): At that point, it was very scary. It would just come up: You know, what kind of future does General Pencil have?

DAVIDSON: General's main business was those yellow #2 pencils. They sold them by the tens of thousands to schools and stationery stores. But 10 years ago they started losing market share quickly. A finished Chinese pencil cost less than the Weissenborn's raw materials. Vanoncini was confident their products were better but nobody seemed to care.

Ms. VANONCINI: A lot of the yellow pencils were just a throwaway item, and so it didn't really matter how well they worked. As long as they made some marks for a couple hours for a meeting or something, people would just throw away their yellow pencils.

DAVIDSON: General couldn't keep up. Weissenborn had to fire more than half the staff. There was little hope that the business could survive. Nobody remembers who came up with the idea, but by 1997, the Weissenborns decided to drop their biggest line. They almost completely stopped making those yellow #2 pencils.

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DAVIDSON: They realized their century-old techniques produced higher-quality pencils. They just needed to market their products to people who actually cared about quality. They started focusing the business on producing pencils for artists and art students. Now their pencils sell for a dollar each rather than a dollar a dozen. They invested in a machine known as a shaker which sorts pencils to create sets that fit almost any market. A little over a week ago, one customer, an art supply store, told General they were having a hard time selling large pencil sets.

Mr. WEISSENBORN: They wanted a smaller set of the same thing. They wanted some of the graphics changed. They wanted added value put to it. So we put the added value, we changed the packaging, presented it to them, all within a couple of days. And they said, `Great,' and now it's a finished product. We're packing them right now. We'll take you out on the floor and you'll see this product being finished today.

DAVIDSON: General went from vague idea to finished and shipped product in a week. Weissenborn says that at any one time, he has 30 new products in development.

The General Pencil story is a familiar one to US manufacturers faced with stiff competition from abroad. Many American companies facing a crisis find they can survive by transforming a cheap commodity into a custom-made, higher-end good. Some make expensive, fancier soda bottles. Some make a better pencil. They typically ship fewer goods but make a lot more money on the ones they do sell.

Adam Davidson, NPR News.