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Redarc Electronics is a poster child for manufacturing in Australia.
Its four-year-old factory in the Adelaide suburb of Lonsdale churns out electronics for cars, trucks and four-wheel drives.
Over the next five years, owner and managing director Anthony Kittel wants to double sales from an anticipated $15 million this financial year.
This might turn out to be too modest a target if the “prevailing winds” – as Kittel calls the rate at which Australian dollars trade for American – turn in his favour.
So long as the exchange rate is roughly one for one, raising the percentage of sales made overseas from a single-digit to 20 per cent will be “extremely difficult”, Kittel admits.
“We are investing heavily in the French market and are about to embark on significant expenditure in the United States but it is still relatively early days to say we are an export ‘success’,” he says.
It is not too early to hail Redarc a local success story, however. An electronics engineer started the company in 1979 to service the trucking industry. After the founder passed away in the mid-1990s, the company lost its way and in 1997 it was put up for sale.
Kittel, who had risen to general manager of South Australian wheel-maker ROH after beginning his career as a mechanical engineer at mining giant BHP, seized the chance to run his own business.
With financial help from his father-in-law, a dream became reality – although it rapidly became a desperate turnaround task as Kittel discovered how close to the brink the company had come.
“It was rapidly going downhill,” he recalls. “It wasn’t reinvesting in product development and some of its customer service wasn’t what I would call satisfactory.”
Kittel spent much of the next three years “in front of customers” persuading them to forgive the company’s sins.
It was drilled into staff at every opportunity that the customer was now most definitely “king” at Redarc.
“We needed to go to extremes to let everybody in the business know it is that important,” he says.
Staff got the message and, by 2001, the company had entered the BRW Fast 100 list, where it stayed for four years.
With the company not only stabilised but growing quickly, Kittel found room in the budget to devote more than 20 per cent of revenue to research and development.
That he has kept doing so ever since is a big factor in keeping Redarc ahead of the competition and at the forefront of new markets, he says.
Kittel spun off a separate company, Redarc Technologies, in 2005, to provide a focal point for the company’s R&D activities (as well as to maximise its claim on government research subsidies). Just two years later, he took the momentous – and, with the hindsight of the global financial crisis that hit soon after, risky – step of building a new factory.
Equipped with the latest technological bells and whistles, the Redarc factory took over many steps in production – and their associated profits – which the company had previously outsourced.
Sustained investment – including a new $5 million expansion of the factory due for completion later this year – has put the company at the cutting edge of an old technology – batteries – which is being given new life by the race to power cars and trucks with electricity instead of climate-changing oil and gas.
Redarc developers have teamed up with researchers at the University of Wollongong to produce an electric battery management system suitable for Australian road conditions.
In the meantime, the company is taking advantage of baby boomer-fuelled demand for four-wheel-drives, which constitute one in three vehicles sold in Australia.
“Volumes are back to where they were pre-GFC,” Kittel says.“But we are just touching the surface of the baby boomer market.”
Redarc is living proof that making big investments in products and people is possible off a conservative balance sheet. The company has low debt and a pile of cash for the next rainy day.
“Being able to run a sound business means not being at the mercy of big economic shocks or a particular bank decision,” Kittel says.
But this otherwise upbeat poster child for local manufacturing has a warning for governments that do not follow his example and invest in R&D and education and training.
“If manufacturing is to continue in this country, government policies have to be supportive of it,” Kittel says.
“If they aren’t, then manufacturing won’t have a future.”
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