Federal Reserve looks for 'secret sauce' behind a successful Wisconsin toolmaker

toggle caption Scott Horsley/NPR

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KENOSHA, Wis. — People are holding on to their vehicles longer these days, so spending on car repairs is on the rise.

That's good news for Snap-on. The company has been making high-end tools for auto mechanics for over a century.

"Vehicle repair is one of the great businesses," says CEO Nick Pinchuk. "Everybody's got to get their vehicles repaired. The garages are humming."

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By catering to those mechanics, Snap-on has enjoyed steady growth and profitability, despite the challenges facing U.S. manufacturers. This week, the president of the Chicago Federal Reserve Bank, Austan Goolsbee, dropped by Snap-on headquarters in Kenosha, Wis., to get a taste of the company's secret sauce.

"It's interesting to see," Goolsbee says. "Customization is why they get paid a premium and how they still manufacture in America."

The company makes 85,000 different tools, each one tailored to a specific need of someone fixing cars or airplanes or even rocket ships.

"Our philosophy is to be at the point of work, observing it, and figuring out what are the most sticky tasks," Pinchuk says. "And then using those insights to create a tool which will make it easier. People will pay for this."

Snap-on tools are not cheap. But they pay off if they help mechanics save time and complete more repairs.

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To diagnose those sticky tasks and peddle its tools, Snap-on relies on thousands of franchisees, who make weekly visits to nearly a million neighborhood mechanics in custom company vans.

Snap-on makes 80% of the tools it sells in the U.S. domestically, so it's relatively insulated from tariffs. To crank out such a wide variety of tools, its 15 U.S. factories have to be enormously flexible, changing models multiple times each day. Other companies do a much bigger volume of business with a much narrower product line. But Pinchuk says specialization is what makes Snap-on so profitable.

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The company has deliberately avoided marketing its tools to the general public.

"If there's a rule in Snap-on that's irrevocable, it's that Thou Shalt Not Sell to Do-It-Yourself people," Pinchuk says. "Because it undermines the cachet of the brand. People use Snap-on tools to declare to the world they're doing something special."

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That approach has instilled cradle-to-grave brand loyalty in generations of mechanics. They're often introduced to Snap-on tools while in technical school or during apprenticeships. Some even have their ashes stored in miniature Snap-on toolboxes.

For Goolsbee, whose Fed district in the Upper Midwest has the nation's highest concentration of manufacturing, the visit to Snap-on offered an encouraging lesson in how — even in an uncertain environment — domestic manufacturers can specialize and prosper.

"They scratch a very, very specific itch," Goolsbee says. "It's fun to see. This is where productivity growth comes from."