Award-winning business publication gives in-depth attention to the development of Hydra-Electric’s sensor expansion.
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MANUFACTURER SWITCHED TO SENSORS
AEROSPACE: Hydra-Electric says customers guided new direction.
By CAROL LAWRENCE
Monday, September 7, 2015
About 10 years ago, Allen V.C. Davis realized that his company’s specialty of making mechanical switches for aircraft was going to be left behind in the aerospace technology race.
The industrial engineer, who founded Burbank switch maker Hydra-Electric Co. in 1948, decided to move into sensors, the new technology for switches, because customers asked him to make the move.
He steered the company into developing its own sensor technology and invested millions of dollars into building the business segment. Davis’ foresight is now paying off as sensors drive fast-paced growth for Hydra. The company sells its devices to both commercial and military aircraft manufacturers or to their suppliers.
Bob Guziak, director of the sensor engineering group, and Tim Burmood, director of sales, said while sensors still make up only about one-third of the company’s annual revenue, their sales have grown 200 percent every year, and they expect that to keep going.
“This is the largest focused product line for the company because of its potential,” Burmood said. 
Sales have been enough to justify the investment, he added. “We’ve met that threshold, and now it’s a matter of meeting the on-going demand.”
The company’s sensors perform basically the same functions as its switches, but sensors are electronic, not mechanical, and they monitor and adjust to readings continually and precisely. For example, a switch that monitors hydraulic pressure might be triggered when a critical level is reached, giving a pilot little time to react. But a sensor can monitor the level continuously, giving the pilot more time to respond to changes.
Sensors also are more lucrative than switches, as Hydra charges more for them and customers buy more of them per project.
Their use will continue to grow in the aerospace market due to several advantages they have over switches, said Rajender Thusu, an industry analyst who tracks the market for Mountain View market research firm Frost & Sullivan.
They can easily integrate into computer systems that monitor aircraft operations, and can quickly adjust and correct amounts when levels approach danger points, Thusu said. Also, safe levels are more easily programmed into a sensor than a switch.
What is particularly important for aircraft – the majority of Hydra’s business – is that sensors are much more precise in their monitoring than switches, Thusu said.
“It’s difficult to conform switches to those kinds of standards,” he said. “The standards always have been very strict. The issue is how do you improve compliance. With sensors, you have a higher level of compliance.”
Pressure cooker
Hydra’s customers include suppliers of aircraft systems to the makers of airframes such as Moog Inc. in Elma, N.Y., and Irvine-based Parker Aerospace, a division of Parker Hannifin Corp. in Cleveland. The company also sells directly to aircraft manufacturers such as Bombardier Inc. in Montreal.
These were some of the customers who 10 years ago pushed Davis’ younger brother Frank, who worked in sales at Hydra-Electric, to consider making sensors.
One of Allen Davis’ first steps was hiring Guziak, a veteran in the sensor field, to lead research and development. Guziak and Burmood met with dozens of existing customers to learn what problems they were having with existing sensors and what they needed.
“We heard it was difficult for anyone else to make a sensor that would survive based on their (vehicles’) rugged environments and high vibrations,” Guziak said. “They wanted higher-accuracy devices and ones that could withstand higher temperatures. Our customers said to us, ‘You make such great switches, why don’t you make sensors for the same environment?’”
Davis the innovator and Guziak the sensor veteran developed proprietary and confidential sensor technology. Then, Hydra added production capacity by buying a 50,000-square-foot building – larger than its existing 35,000-square-foot building – across the street for $6.8 million in 2011. The company filled it with new computer numeric-controlled machines and testing equipment such as giant ovens to make sure sensors could withstand heat and pressure. Hydra also increased its workforce by 25 percent with new assemblers, technicians and engineers, and hired Lisa Leight as marketing director to promote the new business segment.
Guziak said the investment was substantial but wouldn’t give an amount. 
The company funded it without any outside capital, he and Burmood said.
One driver behind the move to sensors is that aircraft buyers want to continually monitor elements, which they can do with sensors, rather than just getting alerted when elements such as air pressure are about to reach the danger level, which is what switches do. A lot has to do with maintenance, Guziak said.
“They want to monitor everything on the aircraft,” Guziak said. “They want to detect when a filter is reaching the stage when it needs to be changed to reduce the amount of maintenance. This is bringing a new level of economics into the maintenance of aircraft, and our sensors are able to go into new aircraft, and that’s what’s driving part of the demand.”
Hydra-Electric’s leadership also went through changes while building the new business segment. Davis, the founder and former chief executive, retired in 2014, and the company hired David Schmidt as chief executive. Schmidt, a 30-year aerospace veteran who previously worked for Hydra competitor Esterline Corp. of Bellevue, Wash., brought deep contacts in the aerospace industry and a metrics-driven management style to the company, board member Gregory Chiampou said in a statement at the time of the leadership change.
Revenue potential
For the past four years, nearly all of Hydra’s new business has come from sensors. About three out of four requests for quotes from customers are for the devices and revenue from the segment has been tripling every year.
The new business segment has enjoyed a compound annual growth rate of 15.8 percent over the past three years, Guziak said.
The investment in the segment is paying off because sensors bring a higher price than switches do, Burmood said, and customers buy many more of them.
“Sensors can be $200 to $300 more apiece than switches and you can have 10 sensors for every switch on an application,” Burmood said. “It becomes very lucrative.”
Guziak said sensors cost slightly more to make than switches. The process requires an upfront investment, but much of the new equipment is automated, so production costs are not significantly higher.
As customers spend more money on Hydra, the company gets to pitch more business with customers, Leight said.
“They spend a lot more money with Hydra than they did in the past, which gives us a lot of visibility within those companies for new projects and new aircraft programs,” she said. “Basically, you get invited to the party early.”
That’s important because becoming a supplier for a new aircraft potentially means consistent business with that customer for about 40 years, according to Burmood and Guziak. That includes 10 or so years during development and production and an additional 30 or so years of operation.
“As a company, you invest in that kind of technology that’s going to expose us to more request-for-quote opportunities and for a higher quantity and at a higher price per ship (application) than switches,” Burmood said. “That’s the pure business case for the sensors.”
Hydra-Electric is a trusted provider of reliable technology in sensors and switches in the aerospace industry. Its proven solutions include: pressure, temperature and multi-function sensors; and pressure, temperature and liquid flow switches. Hydra’s high performance sensing technologies are able to address problems which were previously thought to be unsolvable, including: pressure-spike damage, pump ripple, high-speed impulses, burst diaphragms, and broken wire bonds to name a few.
The Company has been an innovator in the aerospace industry since 1948 when it introduced the Negative Rate Disc Spring design that remains the global standard today for aerospace pressure switches. Hydra-Electric’s products are found in demanding military and commercial applications, including fixed and rotary wing aircraft, missiles, space launch platforms, ships and submarines, armored vehicles and UCAVs.