Volume 4, Issue 1

matters
volume 4, issue 1
®
Insights for business & life
A long
history
how ferriot
continues to live
up to its legacy
Craig Ferriot,
President,
Ferriot Inc.
plus:
business apple Pay makes purchases more secure
strategy Swaps create predictable casH flow
TM
Get the expert attention and
advice you need to keep your
business moving forward.
FirstMerit Merchant Services
As Olivia’s business continues to grow, so does her need for advice from the local merchant
service experts at FirstMerit Bank. By knowing and understanding Olivia’s needs, their team
can better assist her with fraud and chargeback mitigation, as well as help her business stay
PCI compliant. And with access to a 24-hour support desk and online credit card transaction
information, Olivia’s business can enjoy many more years of forward momentum.
TO L E A R N MOR E, C O N T A C T :
Nick Browning, President and CEO, FirstMerit Akron Region,
at 330- 384-7807 or [email protected].
Follow the latest market trends
@firstmerit_mkt
firstmerit.com
Member FDIC
4767_FM15
>>>
firsT word
Providing perspective
w
hen it comes to managing
a business, the view from
the bridge continuously
changes. while keeping an eye on the
big picture, you need to pay attention
to many smaller details that can have a
huge effect on your success. This issue
of MeritMatters provides a number of
valuable perspectives on issues large
i’M pleased To reporT
ThaT MONEY Magazine
recenTly recognized
firsTMeriT as one
of The besT banks in
aMerica.
and small.
The federal reserve in december
credit cards, relying on an embedded
raised interest rates by .25 percent, the
electronic chip rather than the traditional
first time it increased rates since 2006.
magnetic stripe. our feature on page 11
with variable interest rates on loans
guides you through what’s changing.
tied to libor rates, it may make sense
providing a wider perspective, our
to look at interest rate swaps for loans
firstMerit private bank chief investment
of $1 million or more. These derivative
officer dan crawford looks at the
contracts can lock you into a fixed rate,
slowdown in global economic growth
eliminating the uncertainty of rising
and what it means for u.s. investments.
interest rates and allowing you to fix your
see page 20 for more.
interest expense for a defined period
of time. The article on page 13 provides
more information.
Things are changing rapidly on
bringing this back to the local level,
i’m pleased to report that Money
magazine recently recognized firstMerit
as one of the best banks in america,
the electronic payment and credit/
naming it the best regional bank in the
debit card fronts. firstMerit recently
Midwest. The information we offer in this
introduced apple pay to our online
latest issue of MeritMatters is a sampling
consumer and business banking
of the expertise we can bring to you and
customers. apple pay provides a
your business. Thanks for reading.
PAUL
grEig
secure way to make a payment without
phoTo by Jesse kraMer
reaching for your wallet; see page 10
for more exciting details. on the card
side of things, october 2015 marked
the implementation date for new rules
around card liability that encourage the
adoption of eMv chip cards. eMv cards
are the next generation of debit and
paul greig
chairman, president and
chief executive officer
firstMerit corp.
MeritMatters® • 3
first word
>>>
matters
®
n ic k
b r o w ning
volume 4, issue 1
Publisher
Michael Marzec
Managing Editor
Todd Shryock
Contributing Editor
Erik Cassano, sue ostrowski,
david searls
Art Director
Stacy Vickroy
Akron success stories
W
elcome to the latest issue of
MeritMatters. As we head into a
new year, Akron-area businesses
are thriving, and we are excited to share
with you the stories of the organizations
that are driving our region’s growth.
We speak with Craig Ferriot, the
third-generation president of Ferriot
Inc., about a company whose ancestral
line stretches back to the time of Queen
Victoria. Over the decades, the family has
evolved from engraving and machining
to become a multifaceted manufacturing
solutions company that employs 115 people, including members of the fourth and
fifth generations.
We also speak with Dave Lewis,
president of Akron Porcelain & Plastics
Co., about what has changed — and
what has stayed the same — in the
company’s 125-year history. Now in its fifth
generation, the company manufactures
products that founder E.H. Merrill never
would have imagined.
And we talk with John Graves, CFO of
Girl Scouts of North East Ohio, about how
4 • MeritMatters®
the organization is shaping the leaders of
tomorrow.
In addition, this issue offers advice
from FirstMerit bankers on how interest
rate swaps can create a predictable cash
flow for large commercial loans, and how
FirstMerit’s Apple Pay offers improved
security and convenience. We also look
at what the shift to EMV cards — credit
and debit cards with embedded chips —
means for retailers and their liability for
counterfeit transactions.
As you read this issue of MeritMatters,
we hope you take away something you
can use in your own business to keep your
organization moving ahead.
Nick Browning
President and CEO
Akron Region
FirstMerit Bank
Project Manager
KAte Castrovince
Cover photo: COdy York
If you would like to receive future
issues of MeritMatters®, email us at
[email protected].
MeritMatters® is published by
SBN Interactive, 835 Sharon Drive,
Suite 200, Westlake, OH 44145,
(440) 250-7000.
MeritMatters® is solely intended for general
information purposes. It is not intended to
provide – nor should it be used in lieu of –
financial, accounting, legal or other professional advice. It does not constitute a
recommendation to buy or sell any security or
adopt any investment strategy. The publisher
assumes no liability for readers’ use of the
information contained herein. The information was obtained from sources believed
to be reliable, but such information is not
guaranteed as to its accuracy. Readers should
seek professional assistance with regard to
specific matters. All opinions expressed in
MeritMatters® are those of the authors or
sources and do not necessarily reflect the
views of FirstMerit Bank or FirstMerit Corp.
Securities and Insurance products are:
Not FDIC insured. May lose value. No bank
guarantee. Not a deposit. Not insured by any
federal or state government agency.
matters
®
volume 4, issue 1
table of contents
14
Cover
How Ferriot lives up to its
longstanding legacy
6
12
Personal Finance
Business Matters
Akron Porcelain & Plastics is thriving in
its fifth generation of ownership
Briefs .................................................................. 9
Events, highlights and attractions
Ask the Expert . ................................................10
Have you recently reviewed your
life insurance?
Ask the Expert . ................................................13
How a swap can create stability and
a predictable cash flow
Embrace Apple Pay to make your purchases
more secure
Investments ......................................................20
Ask the Expert . ................................................11
Community . .....................................................22
New EMV standards shift liability
The slowdown in global economic growth
Girl Scouts of North East Ohio molds
tomorrow’s women
MeritMatters® • 5
business matters >>>
A ceramic legacy
Akron Porcelain & Plastics Co. is thriving in its fifth
generation of ownership By David Searls
A
kron Porcelain & Plastics Co. is that rare
business that has not only survived 125 years
but is thriving under the leadership of the fifth
generation, the founder’s great-great-grandson.
There are no investors or shareholders outside of the
bloodline, and the company has spent its entire history in or
near the city of its beginnings.
“It’s been a real legacy and a huge opportunity,” says
Dave Lewis, the company’s president. “We’re honored to be
able to carry things forward for this long.”
A lot has changed over the years, including the company’s
name (several times), locations within the Akron area and
especially its product line. But Akron Porcelain & Plastics
hasn’t completely left the past behind. In addition to maintaining its genetic code, the company still works in ceramics,
but today, the clay is mostly imported from Kentucky and
Georgia rather than being dug from the Akron area. And the
product line produced in the 110,000-square-foot space now
includes small, molded parts for industries such as aerospace
and modern appliances that company founder E.H. Merrill
would perhaps never have been able to envision.
Benjamin Harrison was president and Teddy Roosevelt
was a decade away from the vice presidency when the company first known as Akron Smoking Pipe Co. put down roots in
a plant in downtown Akron and incorporated in 1890.
“At one point, the company made something like 89
percent of the clay pipes in America,” says Lewis. “Picture
an Indian peace pipe, miniaturized.”
The company’s smoking pipes consisted of ceramic
bowls, some of them highly glazed and quite ornate, with
hollowed-out bamboo stems. Its customers were match
companies that threw in a pipe with the sale.
Unfortunately for the company, however, the state
started using prison labor to make the popular product, and
Akron Smoking Pipe Co. was no longer able to compete.
It was time to seek out a new line of work, and while it was
the first time, it certainly wouldn’t be the last time that the
family had to retool for the company to survive.
Electrification
Electrification, the lighting up of cities, was the digital
technology equivalent of its day, the innovation that swept
the nation and changed American lives forever. In 1919,
6 • MeritMatters®
“A lot of the high-volume
work has gone offshore.
We’re becoming more of
a low-volume shop, with
short runs of sometimes
just hundreds of pieces.”
– dave lewis, president, akron
porcelain & plastics Co.
the family company, which had earlier changed its name
to Mogadore Insulator Co., moved to nearby Mogadore to
make insulators and other parts to go on electrical poles.
“We made literally millions of insulators,” says Mike
Lewis, father of the company’s president and the company’s
chairman of the board. “We made all kinds of knobs, tubes
and cleats to electrify houses.”
In the process, the company had to reach beyond local
pits to find more highly refined clays from other states.
As it continued to grow, in 1929, the company moved
to the Kenmore area in Akron — where it remains today
— and changed its name again, to Akron Porcelain Co. By
the 1930s, area business was thriving to the extent that the
predecessor of FirstMerit Bank opened a retail location
in the Kenmore area specifically to serve the needs of the
family company and other manufacturing plants in the area,
according to Mike Lewis.
“They built a branch there partially for the purpose of
handling our payroll and cashing the checks of our employees,” he says.
The final name change came when the company
branched into heat-resistant plastics in 1984 and became
Akron Porcelain & Plastics Co.
In the early 1990s, it designed and manufactured ashtrays for most America-based automakers.
“They’d tell us the size of the hole in the car and how
continued on page 8
photos by Jesse Kramer
Mike Lewis, left,
Chairman, Dave Lewis,
President, Akron
Porcelain & Plastics Co.
MeritMatters® • 7
continued from page 6
they wanted the ashtray to open and whether there’d be a
lighter or not, and we designed ashtrays to fit,” says Dave
Lewis.
That was a good source of business for much of the
20th century, until the culture shifted.
“Eventually, they just stopped putting ashtrays in cars,”
says Lewis.
Modern challenges
and opportunities
Lewis is a strong believer in manufacturing.
“Manufacturing gets in your blood and you have a love
for it,” he says.
And while that’s his viewpoint most of the time, it
doesn’t mean that every moment is equally as pleasurable,
as challenges have mounted for U.S. manufacturers in the
form of global competition and the constant need to cut
costs and innovate.
Akron Porcelain & Plastics has survived and thrived
because of its ability to innovate. After a number of iterations, today it is a custom molder of small parts designed
and owned by a roster of customers in industries such as
oil and gas, iron and steel, aerospace, appliance manufacturing, electrical and lighting. For instance, for appliance
maker Emerson, the company manufactures plastic
housing for thermostatic switches that go into refrigerator
icemakers shipped all over the world.
That’s an example of the company’s preferred type of
job, high-volume work that entails making the mold just
once and automating a process to make, say, a million
parts of a single SKU. But the ideal is not always the
reality.
“A lot of the high-volume work has gone offshore,”
says Lewis. “We’re becoming more of a low-volume shop,
with short runs of sometimes just hundreds of pieces.”
Short-run orders are more difficult to automate, so
costs are higher.
8 • MeritMatters®
“We maintain a positive relationship between management and our labor union and keep the relationship vibrant,
but there’s a whole raft of challenges that has to be addressed in order to remain competitive,” says Lewis.
The company also has to stay attuned to tax and health
care issues that can quickly impact profitability.
The Lewis family has responded to its challenges with
technological and operational changes that have kept it
ahead of cultural shifts and competitive pressures to become
a company today that has about 100 employees and a second manufacturing plant in Barberton.
A legacy partner
FirstMerit Bank has been a part of the Lewis family legacy
since at least that moment in the 1930s when it built a retail
location near the plant so workers could cash their paychecks.
“They have always provided our payroll and checking
account services, and we have a line of credit with them,”
says Mike Lewis.
FirstMerit has also been there when the company needed to make capital investments.
“They provided us with a loan to make the major investment in a kiln and a plastic press that were large enough
to take on aerospace business we wouldn’t have otherwise
won,” says Lewis. “We’re thankful for our relationship with
FirstMerit and for the opportunities they’ve helped us take
advantage of.”
After all of the changes the business has undergone
— from manufacturing smoking pipes to car ashtrays to
aerospace parts and from high-volume to short runs — one
lesson stands out in Lewis’ mind.
“The business cycle is very quick,” he says. “If you just
sit back and figure you’ll supply the same market forever,
you won’t be in business for long. Not today.” u
Contact Akron Porcelain & Plastics Co. at (330) 745-2159 or
www.akronporcelain.com.
>>>
briefs
akron events, highlights
and attractions
Vivaldi and Bach: Inspired Connection
– Akron Symphony Orchestra
Buddy – The Buddy Holly Story
Jan. 12 and 13, 2016 / 7 p.m.
$30 to $60 per ticket
EJ Thomas Hall, The University of Akron,
198 Hill St., Akron / (330) 972-7570
http://uaevents.com/site/page php?id=179&eventid=2109
Buddy – The Buddy Holly Story charts the meteoric climb and
legendary adventures of a star who set the music world on fire
and forever changed the face and sound of rock ’n’ roll.
Buddy Holly Photo by Peter Cox, Buddy Worldwide Ltd.
Run for Regis 50K, Marathon and
Half Marathon Fun Run
Jan. 23, 2016 / 7:30 a.m.
$75 per runner, no awards
Ledges Shelter within the Cuyahoga Valley National Park,
Peninsula
https://www.facebook.com/RunforRegis/info/?tab=page_info
The Fun Run benefits Regis Shivers Scholarship, which is
awarded to a graduating high school runner as a college
scholarship in honor of Regis Shivers, and Zachary and
Elizabeth Fisher House, a network of comfort homes where
military and veterans’ families can stay at no cost while a
loved one is receiving treatment.
Jan. 16, 2016 / 8 p.m.
$17.50 to $55 per ticket
EJ Thomas Hall, The University of Akron, 198 Hill St., Akron
(330) 972-7570
http://uaevents.com/site/page.php?id=179&eventid=2028
Enjoy music by the two most popular composers of the
Baroque era performed by the electric concertmaster of
Apollo’s Fire.
Arc of Stark Grape
Possibilities –
Wine Tasting and
Silent Auction
Jan. 21, 2016 / 5 p.m.
$43 to $58 per ticket
Canton Memorial Civic Center –
McKinley Room,
1101 Market Ave. N.
(330) 489-3090
http://www.cantonciviccenter.
com/detail.php?id=2354
Grape Possibilities is an elegant
wine tasting event that features
wines from Northeast Ohio
wineries and distributors with
hors d’oeuvres in a romantic
atmosphere.
MeritMatters® • 9
ask The experT >>>
apple pay™
Embrace this technology to make your purchases more secure
JAY
D o bk o wSki
senior vice
president, director
of e-commerce
JASon
g EnD i cS
senior vice
president, director of
card services and
payment innovations
N
o retailer is 100 percent immune to a data breach,
but as a consumer, you can reduce the risk of your
data being compromised by using your Apple
device to make purchases.
With Apple Pay, you can link your iPhone 6, iPhone 6
Plus, iPad Air® 2, iPad mini™ 3 or Apple Watch to your
FirstMerit debit or credit card and use your device to pay,
removing the need to share your card number with retailers,
which store that information.
“We’re focusing on what the customer is looking for —
self-service, ease of use and mobile,” says Jay Dobkowski,
senior vice president, director of e-commerce at FirstMerit
Bank. “As mobile transactions continue to grow, this gives
people a tool to use to make easier and safer purchases.”
Once set up, you can authorize a payment using Apple
Pay on an iPhone by simply placing your finger on the
Touch ID, which is built into the phone’s home button. On
the Apple Watch, double-click the side button to make your
payment. Your fingerprint identifies you as the unique user
and allows Apple Pay to automatically charge your linked
bank account, says Jason Gendics, senior vice president,
director of card services and payment innovations at FirstMerit Bank.
An understandable concern of consumers making card
payments is data security. Apple Pay helps prevent point-ofsale fraud by blocking retailers from storing the user’s card
information.
“The transaction is tokenized, meaning you are getting
approval for that one and only transaction,” Gendics says.
“The store does not hold onto your card information, the
card number or the expiration date. So if there is a data
10 • MeritMatters®
breach, your information is not with the store to be taken.”
If you lose your phone, you can also feel secure knowing
that your linked credit or debit card number is safe.
“FirstMerit has that number. MasterCard has that number. But the information that passes to Apple is encrypted
in the translation back and forth, so Apple never has the
number,” Dobkowski says.
While not all merchants accept Apple Pay yet, major
retailers such as McDonald’s, Best Buy and Panera are
using the system, and Dobkowski and Gendics expect more
retailers to get on board as consumers rapidly adopt the
technology. The first day FirstMerit Bank made Apple Pay
available, more than 500 customers registered for it.
“Customers have become accustomed to using their
phones for everyday life,” Gendics says. “Instead of pulling
out a piece of plastic, they can use their phones — and a lot
of people are really enjoying the opportunity to choose the
channel by which they make a payment.”
FirstMerit is currently working toward the introduction
of Samsung Pay and Android Pay in the coming months. u
for more information, contact Jay dobkowski at
[email protected] or (330) 849-8863, or Jason
gendics at [email protected] or (330) 384-7032
Apple, the Apple logo, iPhone, and iPad are trademarks of Apple Inc.,
registered in the U.S. and other countries. Apple Pay, Touch ID, and
Apple Watch are trademarks of Apple Inc.
>>>
ask The experT
new eMv sTandards
shifT liabiliTy
T
hree letters (EMV*) represent a significant change as
it relates to the security of payments. As of Oct. 1,
a new set of standards for payment processing was
implemented in the United States. As a result, the counterfeit fraud liability, which has traditionally been assumed by
the card issuers, will now be the responsibility of the party
(merchant/acquirer) that does not enable EMV during
a fraudulent transaction. In other words, merchants not
accepting the new chip technology will become liable for
any losses resulting from use of a counterfeit payment card
at the point of sale.
“Businesses that accept card payments should speak with
their merchant service provider regarding the shift in liability
and what it means to their company,” says Michael Bodnar,
Senior Merchant Compliance Administrator, Merchant
Bankcard. When considering whether to adopt the EMV standards, a business should consider:
• The cost associated with the technology upgrade required
to become EMV compliant
• The potential risk and financial impact associated with not
implementing the required upgrade
“When making this decision, a business should keep in
mind the fact that many card issuers have been proactive by
issuing EMV cards. They want to protect their cardholders,
and they also have a vested interest in reducing their liability
for counterfeit transactions,” Bodnar says.
Making The swiTch
It’s clear that the migration to EMV is highly advantageous for merchants and the U.S. payments infrastructure
as a whole, though the adoption to accept these transactions is not mandatory. The expense of upgrading the
required technology in order for a company to become
EMV compliant should be thought of as a cost of doing
business. It’s a way to better protect against fraudulent and
counterfeit transactions, which, as previously mentioned,
can be more costly than the price of the new technology.
“Bear in mind, in many cases, the process can be as simple as purchasing EMV-capable terminals and a company is
good to go. Others may be working with a third-party vendor and could face the challenge of needing their program
upgraded or certified. A company then becomes reliant on
the vendor to accomplish that task,” says Bodnar.
Either way, change is never easy, but in the wake of
increasing counterfeit card fraud and numerous significant
data breaches, this new technology will better protect each
“card issuers wanT To proTecT
Their cardholders and They
also have a vesTed inTeresT in
reducing Their liabiliTy for
counTerfeiT TransacTions.”
– MICHael Bodnar, senIor MerCHant CoMPlIanCe
adMInIstrator, MerCHant BankCard
of us as consumers and reduce the costs associated with
counterfeit activity.
why eMv is More secure
Unfortunately, cards with a magnetic stripe on the back are
susceptible to counterfeit fraud. EMV cards, also known as
“smart cards,” are equipped with a chip that provides more
sophisticated authentication than the magnetic stripe. This
new chip technology will reduce the use of stolen credit card
data. If data is compromised, a counterfeit card would be
unusable without the presence of the EMV card’s unique
elements. Think of it as if the card has a full operating computer system embedded in it. And with the chip being nearly
tamper-proof, the information contained and generated by the
chip is virtually impossible to duplicate.
“This shift in liability is intended to encourage card issuers
and merchants to adopt a more secure environment by
improving security at the point of sale by including technology which makes them resistant to counterfeiting,” says Tim
Romick, vice president, Merchant Bankcard Risk Operations
Manager at FirstMerit Bank. u
for more information, contact Michael bodnar at
[email protected]
*EMV stands for Europay, Mastercard and Visa – a global standard for cards equipped
with computer chips and the technology used to authenticate chip-card transactions.
MeritMatters® • 11
personal finance
>>>
who is driving?
Have you recently reviewed your life insurance?
W
e have all heard
recently about
advancements
in computer technology
that make a driverless car a
potential reality. While most
of us can imagine this is possible, it raises images about
the potential risks created by
a lack of human control and
intervention in the face of an
impending crash. While the
future of the driverless car is
yet to be determined, we all
understand our innate need
greg a.
to control the circumstances
Mcdermott,
of our daily lives, whether it
exclusive advisor
is the safety of our families,
to firstMerit
the preservation of our assets
insurance group
or the fulfillment of our
financial futures.
When I meet with business owners and successful individuals, I often ask the following questions. If you experienced a long-term trend of declining interest rates and
investment market volatility, would you:
• Review your current lending arrangements for possible
refinancing opportunities?
• Review your retirement plan assumptions?
• Review your investment portfolios for proper risk tolerance and asset allocation?
• Review the performance of your life insurance programs?
The answers are invariably the same. Everyone absolutely says yes to the first three questions and then pauses and
admits they have not reviewed their life insurance programs.
They typically do not understand that life insurance policies
are impacted by changes in interest and dividend rates,
market returns and credit quality, just like their retirement
and investment portfolios. Yet all too often, the agents who
initially designed and sold their insurance programs do
not regularly review and communicate the impact of these
changes on policy performance over time.
Is your insurance program driverless?
Most life insurance policies are designed based upon a
set of assumptions, including the death benefit amount, interest, dividend or investment rate of return, and premium
payment period, to name a few. In addition, the insurance
company controls the internal expenses of the contracts,
such as monthly mortality costs, which can change over
12 • MeritMatters®
time. These design assumptions, and others, are then used
to create an illustration of future performance, as if those
performance metrics will remain constant over the insured’s
lifetime, even beyond age 100.
Policy owners generally think that if they pay the illustrated premium, the policy benefits are on track. We know
that over the last 30 years, interest and dividend crediting
rates on permanent insurance policies have declined by 4
to 5 percent. We are often engaged by a prospective client’s
counsel or tax advisers to review policies that we subsequently find are at risk of lapsing without value, well before
the insured’s life expectancy. Even more recent guaranteed
death benefit products can be materially impacted by the
timeliness of premium payments.
Whether your insurance coverage was acquired by the
company for buy/sell or key man purposes, or it was acquired individually for family protection and estate planning
needs, it needs to be reviewed on a regular basis to ensure
that it meets its designed purpose. The complexity of life
insurance products has increased materially over time, and
it is unreasonable to assume that any policy owner can effectively monitor program performance without the assistance
of a professional insurance adviser.
Someone needs to be driving. u
Greg A. McDermott is a registered representative of ValMark Securities, Inc.
and not an employee of FirstMerit Bank, N.A. or any of its affiliates. Securities
and insurance products are offered through ValMark Securities, Inc., member
FINRA, SIPC 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431, phone
(800) 765-2501. Securities and insurance products are not insured by the
FDIC, are not deposits or obligations of FirstMerit Bank, N.A., or any of its
affiliates, are not guaranteed by FirstMerit Bank, N.A. or any of its affiliates,
and are subject to investment risk, including possible loss of principal invested.
ValMark Securities, Inc. is not affiliated with FirstMerit Bank, N.A.
>>>
ask The experT
proTecTing your raTe
How a swap can create stability and a predictable cash flow
LAUrA
rEDi n g Er
senior vice
president
DoLF
rÖELL
executive director
of b&f capital
Markets inc.
I
f you’re a commercial entity borrowing a variable rate
loan, it may be a good idea to consider an interest rate
swap, a contract that allows you to fix your interest rate
in a market where future rates are unpredictable.
“Many commercial loans are booked at a variable
interest rate,” says Laura Redinger, senior vice president at
FirstMerit Bank. “When you borrow money at a variable
rate, that rate will adjust as the market changes. A derivative contract allows you to turn the variable rate into a
fixed rate, which helps control your expenses when interest
rates rise. Especially in today’s environment, where we
suspect rates will be rising, it is a valuable tool for highly
rate-sensitive borrowers.”
A swap helps protect not only the borrower but the
lending institution, says Dolf Röell, executive director of
B&F Capital Markets Inc., which partners with FirstMerit
on swaps.
Offering only floating (variable) rate loans allows the
bank to more efficiently manage its balance sheet.
how iT works
When a swap contract is entered into, the borrower agrees
to pay the lending institution a certain rate each month;
for example, the Libor rate plus a spread of 2.75 percent,
creating a fixed rate of 4.58 for five years and protecting the
borrower from rising interest rates. Röell says this protects
against a wide swing in rates that could affect the borrower’s
earnings and provides stability and a predictable cash flow.
“Most economic cycles are seven to 11 years, and if
clients recognize that we’re nearing that point where we’re
going to see interest rates rise, failing to hedge now if the
loan is going out five years or more could negatively impact
cash flow,” he says. “In five to 10 years, the odds of seeing
fixed rates at the rate they are today are close to zero.”
Redinger says that, especially for businesses with limited
monthly cash flow, a rate change can be devastating if it
suddenly has to use more of its monthly income to pay
interest expense.
“A derivative contract locks in the rate so that doesn’t
happen,” she says. “The interest rate derivative is usually
closed at the same time you close the loan. It’s basically an
insurance contract. Even though you pay a little more today,
it ensures you don’t have to pay even greater rates in the
future. Some clients may be hesitant to pull the trigger because rates continue to stay so low. But the Federal Reserve
in December raised rates .25 percent, and further increases
are expected to follow.” u
for more information, contact laura redinger at
[email protected]
MeritMatters® • 13
Craig Ferriot,
President,
Ferriot Inc.
14 • MeritMatters®
manufacturing
mystery
How Ferriot Inc. continues to live up
to a longstanding legacy
photo by cody york
C
By Erik Cassano
an you name the Akron company that can trace its lineage back
to the court of Queen Victoria?
Ferriot Inc. has been providing custom mold manufacturing,
injection molding and a host of other manufacturing solutions
for its customers since 1929, when the three Ferriot brothers
started a machining business out of a garage on Storer Avenue. But the company traces its heritage to nearly a century before that and an ocean away.
When Queen Victoria ascended to the British throne in 1837, she sought
master engravers to create her official royal seal and other royal emblems. Her
search took her beyond Britain’s borders to continental Europe, where her
agents found a family of master engravers in France.
MeritMatters® • 15
In 1850, second-generation members of
that family immigrated to the United States to
work for Tiffany & Co. in New York. Ten years
later, one of them, Frederick E. Herrington, left
New York to start his own die sinking company
in Chicago. After building that company into
a success, Benjamin Goodrich hired him to
produce dies to create tire-wall designs for the
B.F. Goodrich Co. in Akron.
While working for B.F. Goodrich, Herrington once again established his own company, the Art Die and Sinking Machine Co.,
on Bartges Street in Akron, along with his son,
Ernst, and his son-in-law, Victor Ferriot. Following their father’s death, Victor’s sons Gene
and Glenn became apprentices at a prominent
mold and machine company in Akron.
All of which brings us to 1929, when
Gene — a master engraver — and Glenn — a
master machinist — started their own business
out of Gene’s garage on Storer Avenue. A
third brother, Albert, also joined, bringing
his master lens-grinding skills to the business.
Later, after Albert’s departure to Hollywood
to make camera lenses for the movie industry,
a fourth brother, Joe — a gifted artisan —
joined the company.
That brings the company through the first
92 years. What’s happened in the 86 years
since – and what’s going to happen in the
coming years – is the rest of the story.
16 • MeritMatters®
Constant evolution
So how does a family business evolve from
engraving and machining to become a multifaceted manufacturing solutions company? It
happened step by step, in increments, over the
span of decades. But the groundwork was laid
in 1934, when the Ferriot brothers patented
a process using beryllium copper to manufacture molds for the toy industry.
“That opened up an important chapter
for our company,” says Craig Ferriot, the
third-generation president of Ferriot Inc. “It
paved the way for us to develop an impressive
client base, including toy giants such as Kenner and Mattel.”
But think of toy manufacturing, and you
probably think of one material in particular:
molded plastic. Whether it’s action figures,
dolls, toy cars or planes, molded plastic
represents the axis around which the industry
rotates.
As World War II came to a close, the Ferriot brothers recognized how the developing
plastics technology would shape their customers’ businesses in the coming decades.
“By the mid-1940s, we were already taking
steps to develop an injection molding division
to service our toy customers,” Ferriot says.
“In doing so, we became one of the pioneers
in injected thermoplastics. In some cases, we
made the molds that were then shipped to an-
As World War II
came to a close,
the Ferriot brothers
recognized how
the developing
plastics technology
would shape
their customers’
businesses in the
coming decades.
other company for production, and in others,
we made the mold and the product ourselves.
In both cases, it built up our business even
further, and it allowed us to look past our one
or two areas of specialization to how we could
really become a multiservice company.”
As the injection molding division grew, the
Ferriot family began discovering natural areas
in which to offer add-on services. Customers
often needed more than just a mold or a part;
they needed a company that could paint and
finish the part. Ferriot Inc. was well positioned
to service its customers as a one-stop shop
that could produce the mold and the part, and
finish it, all under one roof.
“In the ’50s, some of our customers came
to us and asked us if we could start decorating
the parts we were producing,” Ferriot says.
“That’s how we started getting into plastic
painting and staining, and began developing a
customer base in the furniture industry.”
Ferriot Inc.’s specialists began using the
beryllium copper process the company first
utilized in the 1930s to replicate wood-grain
patterns on plastic paneling used in cabinetry
Cooper Cancer Center
MeritMatters® • 17
and chair manufacturing.
“The big advantage of the beryllium copper process is that it captures fine detail,” Ferriot says. “It captures a lot of the detail in the
casting process. It made plastic an even more
popular material for producing furniture,
because you could now get that realistic woodgrain look. At that time, you couldn’t machine
something like that into a metal surface.”
Through the 1970s, large electronics were
often positioned as dominant pieces of furniture in a living room or family room, while
radios and TVs were housed in cabinets made
of wood, or a material that mimicked wood.
For Ferriot Inc., that meant a natural jump to
the electronics industry — and with it, one of
the first home computer consoles.
In 1978, Ferriot Inc. produced plastic
molds for a series of IBM personal computers,
one of the first personal computers on the
market.
“We started painting those parts, and it
created yet another opening for us into the
computer and business machine markets,”
Ferriot says. “We became one of the leading
suppliers of molded parts for the computer
industry through the mid-2000s.”
18 • MeritMatters®
But as Ferriot Inc. grew, the company diversified and moved from consumer
goods into new emerging markets. In 1994,
it entered the three-dimensional modeling
space with a rapid-prototyping division — the
forerunner to modern 3-D printing.
In 2007, Ferriot Inc. founded American
Original Building Products LLC, a spinoff
company that allowed it to move into the
construction materials space.
“American Original Building Products
LLC makes private-label products for different
customers,” Ferriot says. “Specifically, it’s a
type of injection-molded polypropylene siding
that is used as external cladding on residential
and commercial buildings. What makes it
unique is that it’s a synthetic material that can
accurately mimic the look and texture of cedar shake shingles. That’s become the newest
growth area of our business.”
American Original Building Products
continues to run as a separate operating entity
focused on building and construction products, while Ferriot Inc. continues to evolve.
Ferriot today
Recent changes at Ferriot include the addi-
tion of a service component to its array of
offerings, providing customers with specialized
engineering assistance. Ferriot provides design
assistance at any stage of product development or production to aid clients in producing
superior products. This value-added service,
combined with Ferriot’s injection molding and
product finishing businesses, has repositioned
the company as a contract manufacturer, finding a niche where OEMs are focusing on core
competencies and outsourcing some or all of
their production.
The company meets the needs of its clients
by providing end-to-end services, including
streamlining the total manufacturing process,
from supply-line development and management to process qualification, product testing,
final assembly and drop shipping to the customer. With mobile, adaptable manufacturing
modules, Ferriot can tailor processes to meet
needs including short runs on assemblies with
multiple parts.
With these added capabilities, it has found
opportunities in major markets including
medical devices, business machines, industrial
equipment and electronic devices.
As medical technology continues to grow
at a rapid pace, Ferriot has found success with
medical devices, delivering technical expertise
regarding materials and processes used to
produce parts that meet the demanding needs
of the market. It also continues to build business machines for the banking industry and
works in the industrial arena manufacturing
products for the oil and gas industry, as well as
components for industrial control valves and
energy conservation. Ferriot focuses on growing in these areas and will continue to develop
new opportunities as technologies evolve.
Building on
the legacy
With such a long history, Ferriot and his team
of 120 employees have a massive — but exciting – challenge as they continue building upon
the company’s legacy.
Ferriot says the company — which now
employs fourth- and fifth-generation family
members — is up to the task because of the
way in which its people and processes are
aligned. Ferriot Inc. is designed to be nimble
and adaptable to the changing needs of its
customers and the changing conditions of the
markets it serves.
“We’re very vertically integrated as a
manufacturer,” Ferriot says. “We’re positioned
to move quickly when a customer comes to us
with a product design. We can help them manufacture the mold, and then help them manufacture the product itself. Then we have the
capacity to do any post-production work that’s
necessary. The fact that we can put all of those
wheels in motion, and do it quickly, makes us a
valuable partner for our customers.”
Ferriot Inc.’s recipe for adaptability is to
stay small but make big investments in products, technology and development of human
resources. The company has made large
investments in assembly-line improvements,
including robotic technology, to help increase
the efficiency and capacity of its manufacturing operations.
“It’s all about ensuring that it’s easy to do
business with us,” Ferriot says. “That’s what
sets us apart from the competition. We take
“They want to
develop, test
and ship their
products but
might not want
to manufacture
them. That’s where
we come in.”
– Craig Ferriot,
President, Ferriot Inc.
part of the burden away from our customers.
They want to develop, test and ship their
products but might not want to manufacture
them. That’s where we come in, and that’s
why it’s so important that we are able to
respond quickly. A customer might decide
relatively late in the development process that
they want to farm out the manufacturing portion, and we have to be able to react to that.”
Knowledge is another critical element in
positioning the company for future growth.
To that end, Ferriot’s team frequently attends
trade shows and seminars relevant both to
its own industry and to the industries of its
customers and suppliers.
“We have many partners around the globe,
so we’re very aware of how important it is
to stay current regarding what’s going to be
affecting our customers in the coming months
and years,” Ferriot says.
And the need to attain knowledge extends
to all corners of the company, including the
team members on the shop floor.
“Maintaining a skilled and up-to-date work
force is probably the biggest challenge we’re
facing today,” Ferriot says. “We’re constantly
putting in new training modules and programs
to help take our employees to the next level. It
obviously is going to benefit our customers in
the end, but it’s also to benefit our people. If
we’re helping them advance in their careers
by attaining new skills, they’re even more
valuable to the company, and they’re going to
want to stick around here because they know
the company is investing in them. It’s a big
reason why our employees have been here
more than 15 years, on average.”
Working with
FirstMerit
No business goes it alone, and for more than
50 years, Ferriot Inc.’s banking partner has
been FirstMerit Bank. As a pair of longstanding Akron-based companies, Ferriot Inc. and
FirstMerit share many of the same values, a
big reason that their relationship has endured
for so long.
Ferriot utilizes an entire suite of financial
tools from FirstMerit, including a line of
credit, employee 401(k) management, direct
deposit services, company bank accounts and
treasury management services.
“There’s a reason why we’ve been with
them for so long,” Ferriot says. “They’ve been
top-notch in responding to our needs as a
company. They work very hard to understand
what our needs are, and they are excellent at
delivering what they promise.”
For those who manage FirstMerit’s relationship with Ferriot, the feelings of trust and
alignment are mutual.
“We’ve been with them for just about
every step of their growth, and they’ve been
a great client for us,” says Jim Eckleberry, the
Ferriot Inc. relationship manager for FirstMerit. “They have always come to us when
they need help with their financial services.
They’ve grown along with us, and as important as anything, they get involved when we ask
them to get involved. If we need information
from them, they get it to us. They help us help
them, and you can’t ask for much more than
that as a banking partner.” u
For more information, visit
www.ferriot.com.
MeritMatters® • 19
invesTMenTs >>>
The slowdown in global
econoMic growTh
“boTh econoMisTs and
invesTors are concerned
ThaT china’s growTh is
deceleraTing rapidly.”
– dan CrawFord, CHIeF InvestMent oFFICer
FIrstMerIt PrIvateBank
We have been hearing recently a lot more about the
slowdown in global economic growth. What does
this mean?
It does appear as though global economic growth is slowing.
We are witnessing a significant decline in emerging markets’
economic growth. In our opinion, this slowdown should not
result in a global recession any time soon. However, it does
mean slower, yet more sustainable global economic growth
going forward than we have experienced in the past.
Can you put this in perspective for us? Emerging
markets are developing countries with high economic
growth but whose economies are still considered underdeveloped from a regulatory point of view. From 2000 to
2010, emerging markets were the primary driver of global
GDP growth. According to Cornerstone Macro, emerging
markets’ nominal GDP growth averaged 8 percent from
2000 to 2007 versus developed markets’ nominal GDP
growth of 4 percent, i.e., double the pace. During the
global financial crisis from 2007 to 2009, emerging markets’
nominal GDP growth slowed to 4 percent, while developed
markets’ nominal GDP growth declined 3 percent, which
20 • MeritMatters®
Why? What has changed? Emerging markets are in the
process of unwinding their excesses, e.g., credit and investment. Too much debt accumulation is weighing on both
demand and inflation, thus limiting the stimulative powers
of the ultra-easy monetary policies of the major central
banks. Emerging markets’ private debt growth both during
and after the financial crisis grew rapidly in an effort to help
boost growth. As a result, emerging market private debt as a
percentage of GDP increased significantly.
In addition, emerging market corporate and household
debt levels have increased, with corporate debt growing at
a faster pace and now representing 83 percent of nominal
GDP, an all-time high. High levels of corporate debt can
be a major economic headwind, given that companies drive
economic activity through hiring and spending.
How does China fit into this scenario? China is
considered an emerging market and is currently a bit of an
enigma. For years, China experienced annual GDP growth
in excess of 10 percent. Now, both economists and investors
are concerned that China’s growth is decelerating rapidly.
The difficulty is deciphering the speed and magnitude of
phoTo by Jesse kraMer
dan crawford,
chief investment officer,
firstMerit privatebank
helped prevent an even larger global recession.
In real terms, after adjusting for inflation, emerging markets posted an impressive 6 percent average annual GDP
growth rate versus 2 percent for the developed markets, thus
contributing the lion’s share to global real GDP growth,
which averaged 4.5 percent annually over that time period.
Unfortunately, it will be difficult to match those averages
over the next several years.
>>>
invesTMenTs
the decline of the world’s second-largest economy. Accurate
and reliable Chinese economic data are not easily obtained.
Economists must rely on government-provided economic
data, which must be accepted with a grain of salt.
The Chinese government states that its economy is growing at 7 percent. However, most agree that the economy is
growing at a slower rate. Is it much slower, say, at a rate of 2
percent, which would qualify as a hard landing (a significant drop in GDP growth)? Or is it more likely 5 percent,
which would be considered a soft landing, and therefore,
less disruptive? The jury is still out, and the situation merits
monitoring. Clearly, a soft landing is preferable to a hard
landing, as it would have a less negative impact on global
economic growth.
What caused Chinese economic growth to slow?
During the financial crisis, the Chinese government injected
a tremendous amount of liquidity into the economy. The
majority of the stimulus was invested in real estate and
infrastructure (highways, airports, factories and shopping
complexes). This resulted in a real estate bubble and excess
capacity throughout the manufacturing sector. China now
finds itself trying to transition from an investment-driven
economy (currently 46 percent of GDP) to a consumer- and
services-driven economy (currently 38 percent of GDP). As
a point of reference, consumer spending and investment
represent approximately 70 percent and 17 percent of U.S.
GDP, respectively. The transition, which has a long way to
go, thus far has been slow and minimally successful.
China faces several severe headwinds, including excess
inventories and capacity, labor unrest, pollution, corruption,
net capital outflows and currency devaluation. But as China
transitions from a closed and controlled economy to a more
open one, there will be successes and challenges throughout
the process.
What are the global ramifications of the Chinese
slowdown? Other than exporting deflation to the rest of
the world, the real risk is that China experiences a hard
landing and spreads its weakness throughout the Pacific
Rim, the Eurozone and potentially the U.S., leading to a
global recession. The Pacific Rim economies have already
been negatively impacted by the slowdown in China.
However, we believe the odds of a global recession are
relatively small.
What does all this mean? It means that the global
economy will likely experience subpar growth for the next
several years, with neither a boom nor a bust occurring.
Many economists and central banks now estimate that the
4.5 percent annual global growth enjoyed from 2000 to
2010 will be replaced with 3 to 3.5 percent growth until the
excesses accumulated over the past five years are unwound
and the structural problems are addressed.
Easy money has boosted excess supply by allowing weak
companies to stay in business. The oil and gas industry in
the U.S. is a great example. Artificially low interest rates and
ample liquidity allowed many exploration and production
companies to borrow money on favorable terms and continue to produce natural gas and oil at a time when demand
and prices dropped. Without easy money, these companies
would have been forced to close their doors in this uneconomical environment. Eventually, this imbalance will work
its way out, but not before more pain and bankruptcies
unfold in this industry.
Slower global growth has a negative connotation and
sounds bearish for U.S. stocks. However, because we believe
that slower global growth is sustainable without a boom or
bust cycle, the likelihood of the secular bull market in stocks
increases. We know that bear markets are caused by recessions. Recessions occur under the following conditions:
• An inverted yield curve
• Declining corporate profitability
• A surge in commodity prices or inflation
None of these conditions currently exists. Therefore, a
bear market in U.S. equities should not come to fruition.
However, due to the fluid nature and connectedness of
global economies, we continue to closely monitor global
growth. u
MeritMatters® • 21
community >>>
Girl Scouts molds
tomorrow’s women
About those cookies
Even the activity for which Girl Scouts are perhaps best
known has been updated. In addition to selling cookies
in person and at cookie booths, a national team added a
channel called Digital Cookies that enhances the way girls
market their products and sell cookies.
“Each girl now has a marketing plan and her own small
website for asking potential customers to purchase Girl
Scout cookies,” says Graves, who is a member of the
GSUSA Digital Cookie Design Team.
It was that hassle of processing sales the old-fashioned
way that first brought together Girl Scouts of North East
Ohio and FirstMerit Bank.
“In 2008, when I first got here, we were hauling suitcases full of certified checks to the bank to deposit cookie
sales,” Graves says. “Girls sell more than 2.7 million boxes
of cookies in Northeast Ohio every year at $4 a box, so
we needed to streamline our process for collecting this
22 • MeritMatters®
$10 million-plus to reduce the burden on volunteers and
become more efficient.”
He worked with FirstMerit to design a system whereby
troop leaders could simply deposit their collected funds
into their troop business accounts at their local banks.
From there, the funds were electronically transferred to the
council’s account at FirstMerit.
“We then used the same database of routing numbers
and account numbers to pay troops,” he says. “Because
we send payments to our 2,600 troops on a regular basis,
this resulted in additional substantial savings.”
Today, this seems like a simple process, but seven years
ago, electronic banking wasn’t such an integral part of
commerce.
“We talked to several banks, but FirstMerit was the
only one that could set a system for collecting funds from
thousands of accounts at different banks,” says Graves.
“It’s worked like a charm and changed the way we bank.
We save a fortune in paper, postage and time.”
The world is, indeed, changing — in everything from
technology to the advantages and expectations of the
women leaders of tomorrow. The Girl Scout organization
and Girl Scouts of North East Ohio have proven they can
keep up with the changes as they continue to positively
impact the futures of their young members. u
For more information: www.gsneo.org
photos by girl scouts of North East ohio
T
raditional activities such as camping, cooking,
stargazing, first aid and the business of babysitting
are still part of Girl Scout programming. But to those
skills add information technology, digital photography
and even the operation of individual cookie-sale websites.
That’s today’s Girl Scouts.
“Our mission is to build girls of courage, confidence
and character who make the world a better place,” says
John Graves, CFO of Girl Scouts of North East Ohio.
This regional council consists of 2,600 troops in 18
counties and some 28,000 girls in levels from kindergarten
through high school. The council also has 84 paid staff
members and 5,500 trained adult volunteers who have
undergone background checks.
To gauge the impact the program has on a girl’s future,
Girl Scouts of the USA recently commissioned research of
alumnae.
“It showed that those who were Girl Scouts for three
years or more were likelier than their peers to graduate from high school, go to college, graduate, become
involved in their communities and earn higher incomes,”
says Graves. “Girl Scouts exists so that girls thrive, and
thrive they do.”
Partnership
Melissa
*
I have a mission. Every day I come to work focused on serving
members of my community. My Client Advisor from FirstMerit’s
Charitable Advisory Group understands this—imparting financial
expertise and partnering with me so that I can continue to focus on
my mission. Because when the business side of our organization
is well cared for, I can better care for those in need.
TO L E A R N MOR E A B O U T
F I R S T M E R I T P R I VA T E B A N K ,
C O N T A C T : Leigh Gerstenberger, Senior Vice President,
at 330-384-7104 or [email protected].
Follow the latest market trends
@firstmerit_mkt
*Melissa reflects a composite of clients with whom we’ve worked; she does not represent any one person.
Non-deposit trust products are not insured by the FDIC; are not deposits or obligations of FirstMerit Bank, N.A, or any of its affiliates; are not
guaranteed by FirstMerit Bank, N.A or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.
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Align your personal and
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FirstMerit PrivateBank and Commercial Banking
For Jeff, managing personal and business finances on his own was challenging. But with the support of his FirstMerit
Bank team of advisors, he was able to use their Treasury Management services to optimize his cash flow, Retirement
Planning services* to benefit his employees, and Succession Planning services to ensure his company’s future.
So now, Jeff has the support he needs to reach his maximum potential — both personally and professionally.
TO L E A R N MOR E, C O N T A C T :
Nick Browning, President and CEO,
FirstMerit Akron Region, Commercial Banking,
at 330-384-7807 or [email protected].
Leigh Gerstenberger, Senior Vice President, PrivateBank,
at 330-384-7104 or [email protected].
Member FDIC
Deposit and loan products are offered through FirstMerit Bank, N.A. Loans are subject to credit approval.
*Non-deposit trust products are not insured by the FDIC, are not deposits or other obligations of FirstMerit Bank, N.A. or any of its affiliates,
are not guaranteed by FirstMerit Bank or any of its affiliates, and are subject to investment risks, including possible loss of the principal invested.
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