Can American Standard design an uncloggable toilet?

In one room, 12 toilets are flushing as if under ghostly control; an electronic machine is pulling the virtual levers--and manipulating water temperature and pressure as well. In smaller rooms nearby, one man is alternately flushing cylinders of miso paste, wadded-up paper, and as many as 24 golf balls at a time, while another is inspecting different glazes on ceramic tiles.

Men and machines are testing and retesting the Champion, a low-to-medium priced but technically advanced toilet. American Standard, the world's largest maker of bathroom and kitchen products, has promised consumers that the Champion will never clog.

"A branded toilet that they can differentiate with technology? That could be a whole new category and source of profits," said Deane M. Dray, an analyst at Goldman Sachs who has a buy recommendation on the company.

To Fred Poses, the Champion represents more than that. In his five years as American Standard's chief executive, he has added discipline to design, manufacturing and almost every other aspect of the company's internal operations.

Many consumers still think of American Standard as a mundane manufacturer of mundane products, but investors no longer do: The stock closed yesterday at $43.85, up 43 cents.

The Champion resulted from research showing that customers would buy a toilet that they never had to use a plunger on. That the company even did such research, Poses maintained, shows that it is finally out of its traditional "if we build it, they will buy it" mentality. "For us," he said, "the Champion is a milestone."

Bathroom and kitchen fixtures represented about a quarter of American Standard's $9.5 billion in sales last year. Its Trane air conditioners are its biggest sellers, and its Wabco vehicle braking systems are its most profitable products. But when consumers free-associate to the American Standard name, cheap, utilitarian bathrooms are what come to mind.

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Analysts say the Champion, which uses a complicated flushing "tower" instead of the familiar flapper and chain, may yet make the company's name synonymous with more upscale products.

"If the Champion is viewed as truly innovative, then American Standard will be viewed as an innovative company," said David R. Giroux, an investment analyst at T. Rowe Price Associates, a long-time holder of American Standard shares.

The company is already recovering from its once-towering $2.6 billion debt, now down to a manageable $1.5 billion, or 1.61 times shareholders' equity. Its sales were up 11 percent in the fourth quarter, to $2.35 billion. Earnings, excluding a $188 million charge to cover asbestos liabilities, hit $100.9 million. Both numbers exceeded analyst's expectations.

But prices for metals, which represent about a third of American Standard's costs, keep rising. Toto of Japan, which makes luxury

bathroom products, may compete more heavily with American Standard here and in China as housing starts fall in Japan. If the American real estate market cools down, as many analysts predict, bathroom and air-conditioning sales will fall. Other challenges await American Standard as well. Earlier this year, the government stepped up efficiency standards for new residential air-conditioners. David R. Pannier, who runs the residential air-conditioning business, said that about 20 percent of Trane's products met the new rules but that only 10 percent of all air conditioners sold in the United States did. Analysts warn that companies that had specialized in cheap, low-efficiency products will push into Trane's higher-end markets.

"There's a lot more downside risk than upside opportunity,"' said Don Schreiber Jr., chief executive of Wealth Builders Inc., an investment firm.

But some analysts are still confident about the company's ability to outperform its peers.

"They've got good plans to grow each of their businesses," said Edward Wheeler, an analyst with the Buckingham Research Group.

Others applaud American Standard's unacquisitive corporate demeanor. "They're focusing on grabbing market share with existing assets, and that's yielded a better-performing stock," said Timothy M. Ghriskey, chief investment officer of Solaris Asset Management, who does not own American Standard stock.

Poses has certainly revved up the company. Each of American Standard's three businesses has adopted a customer-focused quality control method. Each has centralized purchasing and wrung costs from manufacturing.

And each of the businesses is forcing its geographically dispersed designers to act like helpful siblings rather than estranged cousins. For example, Gary Uhl, director of design for Bath and Kitchen-Americas, mentioned a seat design project to his British counterparts, only to discover they had been working on something similar for two years. "They gave me everything they had--including the list of things they tried that didn't work," Uhl said.

And all the businesses are stepping up customer research. Bath and Kitchen now offers coordinated suites of bathroom fixtures and furniture "because we finally realized that people want to buy matched sets," Uhl said.

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Wabco, which sells primarily to truck manufacturers, is asking truckers themselves what products they might want to buy. Trane's consumer research has led to a high-gloss finish on components--even those hidden in basements--and to quieter air conditioners. It will soon introduce air filtration systems, too.

"We thought of ourselves as big players in the $8 billion market to provide hot and cold air," Pannier said. "Now we think we compete in the $16 billion market for creating comfortable home environments."

That is the kind of comment that makes Poses grin. "I didn't want continuous improvement," Poses said. "I wanted radical change."

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