New Technology Meets the Press

Originally appeared in NJBIZ on 3/26/2007

Klaiss looks for the introduction of new high-speed presses to boost the company’s profit margin.
CGI North America expands its capabilities to stay competitive

Shankar P.

Real Estate/Economic Development

JERSEY CITY - The fortunes of many printing companies have declined in recent years as the Internet, desktop publishing and regulatory changes affecting Wall Street have taken their toll. Now these companies, including some in New Jersey, are revamping their businesses and delivering high-end premium services.

One such makeover is occurring at CGI North America, a major producer of financial reports, whose U.S. headquarters are in Jersey City. The company is a unit of the CGI Group, which is based in London.

CGI North America last week began running its new Komori Lithrone S40, an advanced eight-color, eight-unit printing press that the company says is the first in the state. Next month, CGI North America will launch its second new operating line—and another New Jersey first, according to the company—a Komori web press that can produce 55,000 sheets an hour compared with 30,000-40,000 runs in conventional presses.

David Klaiss, president of CGI North America says the $14 million investment in the two Japanese-made Komoris will help his company improve its profit margins, even if revenue stays flat at around $90 million this year. The investment was financed in part by an $8.25 million loan from the New Jersey Economic Development Authority (NJEDA).

CGI North America was the state’s largest commercial printer last year, with 500 employees. But the company has been shrinking. Its work force now stands at 440, down from 1,200 in 2001 when its revenue was $130 million. The company was then known as Automatic Data Processing Graphic Communications. ADP last year sold the business to its current owners.

Back in 2001, the bulk of CGI’s customers were Wall Street investment banks that contracted out printing services for their research reports. That market shrank four years ago when regulatory scrutiny of the links between the brokerage and research wings of investment banks led many to scale back their research output. “We used to produce $100 million worth of investment research in 1999-2000; this year we will do $9 million,” says Klaiss.

Meanwhile, more companies have been diverting their print media dollars into alternatives like direct mail and desktop publishing, and e-mailing newsletters and other communications in PDF (portable document format) versions. “There has been a shift from printed material to electronic-delivery material,” says Robert Sternau, CGI North America’s director of marketing. “And part of our business shifted with that.”

“The Internet has made us an instant society,” says Klaiss. “Years ago, you used to go and get things printed for distribution and it used to take weeks. Everything now is rush, rush, rush.” Klaiss says one way to beat that trend is to offer improved service through faster turnaround and higher productivity. “That is why I am buying new presses: I cannot be competitive without them.”

CGI now has electronic tools and work-flow systems to help clients file regulatory documents and create content on the Web, in addition to offering print-on-demand services. Klaiss says his business mix has changed dramatically as the printing of investment research us replaced with commercial print jobs like catalogs and directories, documents filed with securities regulators and annual reports.

Another company that has changed with the times is Vanguard Direct, a Brooklyn, N.Y.-based printing and allied-services firm that plans to relocate some operations later this year to New Jersey. “About 15 years ago, we recognized the changes and we took action,” says Robert O’Connell, Vanguard’s president. “We re-engineered our company to provide marketing communications services as opposed to just printing services.”

Vanguard’s foresight has paid off over the past five years. Revenue has grown to about $40 million from $27 million in 2001, and the company has about 150 employees. O’Connell says Vanguard plans to relocate to Irvington in October, bringing 50 jobs and an investment of $8.15 million. For Vanguard’s planned investment and jobs, he says, the NJEDA last November approved a Business Employment Incentive Program (BEIP) grant of about $284,000.

Klaiss says the chief advantage of a Garden State location is its proximity to clients on Wall Street and in the pharmaceutical industry. “We were in an urban enterprise zone (UEZ), but Gov. [Jon] Corzine took away that sales tax advantage,” says Klaiss. “That hurts us because we have to charge our clients 7 percent more.” (A bill before the state Assembly would restore the sales tax exemption for companies operating solely in one of the state’s 32 UEZs.)

“My labor force is expensive here, and there are no economic benefits, excluding the NJEDA loan, which is slightly cheaper than the commercial interest rate,” Klaiss adds.

Sternau says printing establishments have steadily moved from New York City’s Hudson Street and Varick Street to New Jersey over the past few decades. “Hudson Street and Varick Street used to be the printing capital of the world for more than 100 years,” says Sternau, a 30-year industry veteran.

In the mid-1980s, he recalls, Trinity Church in Lower Manhattan, which owned many printing-district buildings, began converting them to office use and raising rents. “The price of real estate in downtown Manhattan became too great and many of those printing companies found it difficult to operate there,” he says.

Sternau says 60 to 70 percent of the print shops have moved to New Jersey, with others going to Long Island City. “These days at night you can see the lights on the presses that didn’t relocate,” he says. “Only a handful of companies are left there now.”