Gear Motions Sees Opportunities with Employee Ownership

Samuel Haines, CEO and chairman of the manufacturing company, Gear Motions, Inc. has recently completed its transition to 100% employee ownership.

Sam Haines with Gears

SOLVAY — A local manufacturer recently completed its transition to 100 percent employee ownership.

Gear Motions, Inc., which has divisions in Solvay and Buffalo, began the process of becoming an employee-owned firm in 2005 and completed it late last year. The company, based in Solvay, has been entirely owned by the Haines family since the 1970s.

The move to an employee stock-ownership plan was the ideal exit strategy, CEO and Chairman Samuel Haines says. Although Haines and his family no longer own the company, he has signed an employment agreement to remain with the firm for at least the next five years.

Gear Motions has been approached about acquisitions a number of times over the years and Haines says he’s been in “semi-serious discussions” a handful of times.

But selling to an investor or competitor didn’t appeal to him. Neither option offered especially strong prospects of continuing the company in its current form.

Employee ownership means Gear Motions will keep jobs and business in New York, Haines says. It also offers the potential for more growth.

“It provides the company an opportunity to grow through acquisition,” Haines says. “It’s another opportunity for a small company to make acquisitions and to have a little more competitive plan in place.”

Haines also notes that companies owned 100 percent by their employees enjoy some significant tax advantages. A lower tax bill means more cash on hand — always a good thing for small manufacturers, he says.

Haines was convinced early on in his research that employee ownership was his best exit option, despite some additional administrative burdens.

“I wasn’t afraid of the administrative side,” he says. “But it’s not something to be taken lightly.

It’s not without its requirements. It’s a whole other level of fiduciary responsibility.”

First Niagara Bank of Buffalo provided financing for Gear Motions’ transition to employee ownership.

As part of the change, the company established its first external board of directors. The board includes Haines, Dean Burrows, president of Gear Motions’ Nixon Gear division; Louis Ertel, president and CEO of Overton-Chicago Gear in Illinois; Edward Plavko, vice president and CFO of Cincinnati–based Xtek, Inc.; and Wannis Parris, president of Niles, Mich.–based Delta Machining.

Gear Motions employs 75 people total at its Nixon Gear division in Solvay and Oliver Gear in Buffalo. That includes about 50 employees at its 45,000-square-foot Solvay facility.

The company produces gearing for clients that make heating and cooling equipment, motorcycles, medical devices, water pumps used in firefighting, automotive components including transmissions and turbochargers, and more.

Gear Motions exports about 20 percent of its products to places like South Korea, India, China, and Argentina, Burrows says. Improving business in the wake of the economic downturn and some new programs have allowed the company to increase its work force by 10 percent so far this year, he adds.

Gear Motions generated $13 million in sales in 2010.

The company’s Buffalo division actually began life as a machine shop in the late 1800s. It incorporated as a gear company in 1907. Haines and his family acquired the company in 1973 and added Nixon Gear, which dates back to the 1930s, in 1978.

by Kevin Tampone

Original article published in CNY Business Journal

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