This firm is quick on the trigger.

Special Devices shifts from military work to air bag igniters for automobiles

Up in Canyon Country, on the north slope of the San Gabriel Mountains where hawks fly free and rattlesnakes roam wild, sits Special Devices Inc.

It's a small company that has successfully made the switch from military- to commercial-sector business but still keeps its hand in the Department of Defense pot by making triggering mechanisms for Patriot, Cruise and AMRAAM missiles.

But Special Devices' primary business these days is producing firing mechanisms for automobile air bags, a booming business that is likely to get even bigger.

"I don't know. I guess you can say we're gleeful about our future," said Thomas Treinen, president of Special Devices.

What Treinen and other company executives are so gleeful about is that all 1995 car models built or sold in the United States must have driver-side air bags and all 1997 models will require passenger-side bags as well. What's going to happen in the overseas car market remains to be seen, but Treinen expects foreign sales to some day represent a substantial portion of industrywide air bag sales.

Because of the explosion in the air bag business, Special Devices' sales have blossomed.

In fiscal 1990, the company's first full year in making air bag triggering mechanisms, sales were just under $14 million. In fiscal year 1991, companywide sales went up to $24.1 million, then to $30.1 million in 1992 and $37.4 million in 1993.

For the company's fiscal 1994 ending Oct. 31, Special Devices' officials are projecting revenue in excess of $60 million.

The bottom line, however, has not been quite so impressive.

In fiscal year 1990, the company lost $294 million, followed by a profit of $1.3 million in 1991, $1.4 million in 1992 and $1.3 million for the 12-months period that ended last Oct. 31.

For the nine-month period ended July 31, the company reported net income of just over $2 million, compared with $670,000 for the like 1993 period.

Wall Street analysts who cover the company (Special Devices' stock trades on NASDAQ) said they expect its net income for fiscal 1994 to exceed $3 million.

Special Devices' stock price has surged recently because of some favorable reports by analysts. The stock has lately been trading in the $14-to-$15 a share range, up from $9.25 at the end of May.

One of the more unusual aspects of the company is its location at 16830 W. Placerita Canyon Road in Newhall. To reach Special Devices' secluded hideaway, one must drive to the northern reaches of Los Angeles County, exiting the Antelope Valley (14) Freeway at Placerita Canyon and winding down that lonely road. All of a sudden, in what appears to be the middle of nowhere, stands the headquarters of Special Devices, located on a 300-acre piece of property embedded in the San Gabriel Mountains.

"Oh, we have plenty of rattlesnakes around here, and hawks, and coyotes and deer. Just the other day there was a rattler out by the guard gate. We got 'em," said Treinen, 57, who has worked at Special Devices for almost 30 years.

Special Devices was started in the late 1950s in Pacoima as Special Effects Inc., a company that made pyrotechnics for the motion picture industry. In 1960, the company moved to its current location because it needed an open area to test its explosives.

When it moved, the company changed its name to Special Devices and started looking for military work using its expertise in explosive triggering devices. The move into military work was initially unsuccessful, said Treinen, and the company was forced into Chapter 11 bankruptcy.

In 1965 a group of San Francisco investors bought the company and brought it out of bankruptcy. Three years later the company was bought by Allied Research Associates Inc.

In 1976, Treinen, who at the time was a vice president of the company, and Jack Watson, another vice president, joined with outside investor Walter Neubauer to buy Special Devices from Allied Research for $250,000.

At the time, the company had about 30 employees and annual sales as a military subcontractor of about $750,000.

Through the 1980s, the company experienced fairly steady but unspectacular growth as a Pentagon subcontractor making firing mechanisms for weapons.

As the Cold War ended and the Pentagon's budget started its long decline, Special Devices turned to the commercial field.

"We knew we had expertise in initiators (triggering devices), and so we bid on a contract with TRW to make them for air bags," said Treinen.

In 1989, Special Devices won the contract from TRW to make the triggering mechanisms that cost air bag makers between $5 and $6 apiece.

The mechanisms are the small devices that trigger air-bag deployment in automobiles.

Sales of the devices have grown so fast that the company's commercial business now far outpaces its military work, which used to account for all the firm's business. For the first nine months of fiscal 1994, the company's military sales revenues were $9.2 million and its commercial sales revenues were $35.4 million.

The move into the commercial field has been difficult, said Treinen, because the demands of the private sector are tougher than those of government subcontracting.

"The quality control is tougher, and there are more pressures for deliveries and pricing," he said.

For instance, in terms of timing for the triggering devices, or the period from impact to deployment, the government measures it in one-thousandths of a second while in the commercial world, automobile manufacturers deal in one-millionth of a second, said Treinen.

Though Special Devices' sales have boomed and its number of employees has reached 850 with the addition of a second production facility in Mesa, Ariz., company officials said they are not satisfied to just rely on air bag business.

"There's no doubt it's a good business to be in now, but we're thinking about new products and markets. It's just that I can't really tell you about them," said Treinen.