Consolidations reshaping foundry equipment business.

A special executive roundtable looks beneath the surface into the activities that are altering the face of the equipment supply side of the industry.

A brief glance at the 1978 AFS CastExpo exhibitors' floor plan tells the story well. Among those having the largest presence at the show 20 years ago were suppliers by the name of Carborundum, Asea, Brown Boveri, CE-Cast, Shalco Systems, Herman Corp., Rexnord and IMC-Redford. Some withered away, some still exist as a shadow of their former self under someone else's letterhead and some bloodlines have been kept alive through mergers and joint ventures.

The activities and forces of consolidation are still alive among the equipment suppliers and keeping pace with the trend of foundry consolidations. While few have been on the order of the Georg Fischer DISA joint venture announcement of three years ago, supplier consolidations and alliances have continued. Since January of this year, there have been 25 reported acquisitions on the vendor side of the industry alone.

In order to gain insight on what is happening on the casting equipment front as foundries continue to seek advantages to compete in the world market, modern casting polled a segment not often featured in the magazine's editorial pages - executives of equipment supply companies. Four executives participated in a first-ever equipment supplier roundtable discussion at the May AFS Casting Congress in Atlanta. They included Norman Patterson, president-international marketing and sales, Georg Fischer Disa Group, Schaffhausen, Switzerland; Paul Cervellero, president, Inductotherm Corp., Rancocas, New Jersey; Bruce Dienst, president, Simpson Technologies Corp., Aurora, Illinois; and Dave Foster, vice president-finance, U.S. Filter/Surface Preparation Area, Newnan, Georgia.

While not exclusive to the acquisition trend, these executives answered questions about the forces behind their changing companies and what such activity among the equipment supply base means for metalcasters.

Changes in the Supply Base

Commenting on the changing face of equipment suppliers over the last 10-20 years, Patterson said it was driven by simple economics. "It is necessary, I think, for companies to utilize their resources in as broad a market as they possibly can, and growth by absorbing many pieces is a way of getting more economy of scale," he said.

According to Dienst, the influences driving Daimler and Benz and the airlines are the same for foundry equipment suppliers. "We saw that we needed to develop new and better technology all the time for our long-term survival," he said. "In order to maintain that level of activity in R&D to bring on new products, you must have a relatively significant sales base and a certain level of profits. As big as the U.S. foundry market is, there are not enough foundries here to generate enough revenue to maintain a very aggressive R&D effort in developing new products."

The blastcleaning equipment base, said Foster, has remained fragmented. "Up until now, no one had created the mass that would enable significant investment in product line improvement. With the critical mass, you can broaden your product offerings to the industry."

Inductotherm has grown both organically and by acquisition since its founding, but has discovered that the acquisition route is generally the better path. "Sometimes success breeds the thought that you can be successful doing anything you choose to do," Cervellero said, noting that the firm occasionally found steep learning curves when it internally propelled itself into new areas. Today, the firm looks more toward acquiring than internal expansion. Some of the firm's acquisitions, he mentioned, were dictated by customers. For instance, the purchase of Venetta Corp. in 1985 was initiated by customers who wanted to source complete melt systems - not just the furnace and power supply.

Dienst added that another driver of acquisitions is people. "You can't just put an ad in the Chicago Tribune and find a good skilled foundry equipment engineer with 10 years experience - it's not there. When you acquire another firm, you have the opportunity to acquire a large pool of talented and experienced people. Sometimes, it's the only way to get the right people."

Foundry Consolidations

As is well known, foundries are in a state of fairly rapid consolidation. In the last six months alone, nearly 30 foundry acquisitions or partnerships have been reported.

When asked how suppliers are affected, Dienst said that the domestic acquisitions haven't greatly impacted Simpson, other than that the groups with central engineering departments have made things easier. "But as all these firms grow, they are demanding better technology, service and support," he said, "and you have to be prepared to supply it."

The real impact his firm sees is the U.S. foundries consolidating overseas and/or establishing offshore facilities, he said, naming Grede's acquisition of DuPont Harper and Auburn Foundry's presence in the U.K., Germany and Mexico. "We're expected to support those foundries as they expand in other nations," Dienst said. In doing so, he said, equipment suppliers can often see something occurring or see some technology in another nation far before the trend is seen here.

As an example, the firm's presence in Europe provided a strong market for its sand cooling system decades before the technology became a focus of American foundries. Working closely with overseas foundries embracing the technology, however, the firm had continually refined and enhanced the system to a fourth generation, when sand cooling became a more prominent concern in the U.S.

Inductotherm and U.S. Filter see the biggest impact in product requirements. Said Cervellero: "Our product today is more powerful and larger in output to accommodate these foundries that are coming together, for instance, to accommodate 9 ton/hr melt demand rather than 2 ton/hr." Likewise, Foster added that consolidation has prompted larger blastcleaning systems, heavier output, more automation and less material handling, all of which are being employed to increase throughput and reduce costs as foundries increase their economies of scale.

Dienst added that as foundries increase in size, they differ from their smaller counterparts in that they "shop the world" for the best technology. "If you're going to be a supplier to any of those consolidating businesses, you have to see that your technology is world competitive because they'll go out and look for alternatives everywhere they can," he said. "It puts a lot of pressure on suppliers to be very aggressive in product development."

Incidentally, Patterson noted that the growth of foundry groups is a phenomenon unique to North America. "We don't see European foundry groups or companies extending out into other parts of the world, like Auburn, Internet and others have done," he said, noting that the industry structure in Europe is essentially the same as 10 years ago, except for the specialized foundries like those casting automotive parts. "The plant that has become a permanent part of the European foundry scene is very much the latest technology-type foundry. They try to be the absolute latest and advanced in what they're doing," he said, mentioning the VAW foundry and Georg Fischer's foundry in Mettmann, Germany, as examples.

"This is something being done to a greater extent in Europe than what we've seen here in North America. The Japanese transplants and other organizations coming to the U.S. are interesting, and they will drive the technology of foundries here once again."

End of Nationalistic Sourcing

Just 20 years ago, only the slightest hint of international technology could be found at CastExpo shows, and foreign suppliers faced significant resistance. Times have definitely changed.

Patterson recalled how years ago, a foundryman couldn't be greeted at GIFA stands unless he spoke German. Parochial influences are largely gone today, he said. "foundries are looking for the best molding, core and melting techniques that they can find on a worldwide basis."

Certain products, like low-end shotblasting equipment, he said, will remain on a local level. "Higher technology seems to be more of a global situation."

Foster said U.S. Filter does consider shotblasting to be a world market. Its Eurovein and Schlick groups have provided the firm with a global database of engineering designs to draw from, making European shotblasting technology available to foundries worldwide. Now offering wheel-, air- and nontraditional-blast technologies, the right fit for any application can be sourced through his group.

While Dienst said that all foundries "will search for the best technology they can afford - period," he said service remains a big factor. "Even if you have high-tech equipment and you're a well-known company, but you don't have local service in Indonesia, for instance, the foundry will factor that in as you're evaluated against a somewhat lower-tech supplier." That, he said, is an important driver behind geographic service center expansions.

'Where is My Choice?'

When a customer hears that two of your suppliers are joining together or that a key supplier has been purchased by a larger firm whose main interests aren't necessarily in the foundry industry, questions about service, support and pricing are natural responses. Each of the roundtable participants said that the consolidation of equipment suppliers should not cause concern about dwindling choices due to market forces.

Dienst's firm, which now has virtually all of the domestic muller sales under its umbrella, anticipated comments and questions about its Beardsley & Piper acquisition this year. But as the news unfolded, he sensed that customers realized that his firm had the potential to reverse the downward slide of B&P.

"When we brought B&P and integrated it into our operation, we quadrupled the number of field service engineers available to B&P products, and integrated spare parts and logistics support. We also acquired a new warehouse, which we will use as a logistic base for spare parts." The recent acquisition, he said, should improve the support of both product lines' spare parts, and he feels that an improvement in quality and support of the B&P product line should be evident within a few months.

Patterson said that actual numbers of vendors aren't as meaningful as one might think. "The security of your customer wanting to come back to you is the important thing to a supplier. That's the foundry's big whip. A bad reference is terrible - it can be a disaster," he said.

"The foundries that we are dealing with now have clout. They might not have the choice of suppliers that they had in years gone by, but nevertheless, they have a choice in most cases. And the time will come when they will be able to implement their choice, so we must be cautious with regard to retaining a reference."

While U.S. Filter is fast becoming a "colonizer" of the blastcleaning machinery community, Foster said that he'd put customers' minds at ease simply by noting the benefits to a strong organization. "We've grown field sales and service by 200 people in North America alone," he said. "In the 1980s, many foundries couldn't maintain employee skill levels, particularly in cleaning room maintenance. So with our focus of surrounding foundries with product engineering, aftermarket service support and consumables, we can step in and provide support and service for their operations." Overall, he said, blastcleaning remains a very competitive sector.

Cervellero and Dienst both agreed that foundrymen shouldn't fret over the number of players in any one area. "Competitors can make you accountable," Cervellero said, "but if you give people the service they want, they won't be concerned with whether they have two choices, four choices or whatever. If you don't provide a fair price, they'll do some price shopping, and if you don't you service them well, people will complain. When that starts, I guarantee you there'll be another competitor." Dienst added: "If we don't act responsibly and give our customers what they expect and want in product quality, support, service and so on, the market will punish you quickly."

In addition, Patterson said there are always more choices than vendors anyway. For instance, in regard to his firm's unique Disamatic product line, he said, "There are people who do rebuilds, who pirate parts and the used equipment market - these are serious competitors. The customer does have a choice - a significant choice."

Forces Driving Product Development

Much talk these days revolves around the goals of achieving near net shape castings and high overall efficiency of equipment. The term zero maintenance is being heard with greater frequency, and it appears that room for improvement exists when it comes to achieving higher equipment uptime.

In 1993 and again in 1996, the AFS Benchmarking Committee conducted surveys aimed at measuring quality and productivity levels, as well as inventory and labor practices. One of the productivity questions dealt with shop uptime in the melting, molding and coremaking areas of casting operations. The results of the 1993 survey showed that foundries achieved 91.8% uptime in melting, 89.4% uptime in molding and 91.4% uptime in their coremaking operations. In the 1996 study, uptimes in each of the areas actually slipped a little. Melting came in at 91.1%, molding 89% and coremaking 88.5%.

While a variety of factors can be attributed to a 10% or more level of downtime, including poor foundry maintenance and increasing production levels, it is becoming increasingly clear that foundries will be placing a greater onus on their equipment manufacturers to help improve overall uptime.

Commenting on the future push in terms of product development, Patterson said that the drive toward near-net shape castings is a must, and that the reliance on the cleaning room must cease. "The drive for near-net shape castings involves not only molding, but also sand, pattern equipment, melting equipment, pouring technology and finishing," he said.

Dienst expects that as foundries gain productivity, they'll look to increase shifts and run continuously to try to get as much productivity out of their given investments and assets as possible. "Whether it's realistic or not, I think we'll see them pressure us for zero maintenance equipment and zero downtime and so on."

The other driving factor, he said, is in the human resource area, because it's extremely difficult to recruit maintenance people as well as skilled operators to work in foundries. "The other driver is to make equipment that doesn't require a skilled operator. What foundries are looking for more and more is equipment that is self-diagnostic, self-optimizing and self-maintaining. Even if you're lucky enough to have a great sand guy in your foundry, he's not going to work all three shifts. I think you'll see customers push for machines that will think for themselves and reduce their people demand."

Cervellero drew a comparison with the TV sets of yesteryear, when owners had to go to the store once a month to buy replacement picture tubes. That was acceptable then, he said, but it's a different story today. "Expectations have changed, and we must perform to that. Today, foundries just want to plug equipment in and after ironing out a few glitches, have it perform at 100%." While the firm will continue to look to improve on the already high induction furnace efficiencies levels, the majority of Inductotherm's work over the next two years will be in increasing furnace reliability. "That's the most crucial thing right now in our sector."

Patterson agreed, noting that because zero maintenance "is not practical, one has to spend an awful lot of time with equipment for reliability improvements. The Disamatic machine design, he said, is essentially the same as in the 1970s, but has been continually refined, as seen on today's newer models. While the speed of the machine was tweaked, the primary refinements have been in machine reliability.

Environmental Role

As foundries have increasingly relied on their suppliers in recent years in a variety of ways, foundries are again looking to their suppliers to help them survive in an increasingly regulated world. Putting the challenge in perspective, Dienst shared that a new U.S. foundry today spends 25-40% of its capital dollars on environmental control alone.

Cervellero said that the trend has dictated more design and building of closed-capture hoods directly into the induction melting process, something that wasn't often specified yesterday. "But that may not be adequate in the future," he said, "so we're looking to find new and better ways of recouping what's coming off the melt deck." He said that Inductotherm will increase its involvement in complete, close-capture furnaces and ancillary equipment.

In addition to Simpson's continued involvement with sand reclamation, Dienst said that as technology such as mixing can be improved, the use of binder and other materials that may eventually create an environmental impact can be lessened. Environmental control was another driver in its recent acquisition, he said, and the firm is looking to unfold that technology across product lines.

The blastcleaning area in the foundry hasn't been subjected to the same type of environmental impact as other areas, said Foster, although U.S. Filter has placed more emphasis on dust collection as a product category as a result of the trends. He also noted that magnetic separation for dust collection is another product development that has emerged.

Incidentally, said Patterson, the environmental requirements in Europe are much higher than those in effect in North America, driven by a strong public opinion there. However, he believes that American regulations will become more stringent as the foundry groups get larger and shareholders increase their influence.

"A lot of capability is present in the foundry equipment industry, but the question is who pays for it?" As an example, he discussed how years ago everyone thought sand reclamation would be truly significant, but it never materialized to what many had expected. Environmental technology is available, he said, and is being implemented in Europe to a larger extent than in the states.

Looking Ahead

The executives believe that the "bigger will get bigger" and that the movement is far from over. "foundries will see even the largest suppliers in the market today grow larger because of associations," Patterson said.

As for the future of their firms, Foster said that U.S. Filter will follow its strategy of surface preparation ("any and everything"), in a number of different technologies and surround foundries and other industries as a one-stop shop for surface preparation. While focus will be placed on integrating newly acquired segments, he said that the firm is looking at growth opportunities in Pacific Rim nations and Latin America. "In some cases, we may get into the actual machine operation and maintenance," he said, noting the firm is involved in subcontract surface finishing today.

Patterson said that Georg Fischer Disa will follow with the expansion of its 4-5 core products, both by organic growth and by acquisition. "It's unlikely that we would step outside of that over the next 5-10 years," he said.

Cervellero said: "We may expand into other markets that are related to induction, and look at high-level applications of our technology." Composites is one area, he said, that is fitting nicely into Inductotherm's mix.

Being a small company, Simpson must be very focused due to its internally generated funds, said Dienst. He said that it will continue to grow organically, through acquisition or through joint ventures, as it has done in its Simpson/Gerosa sand testing equipment partnership. He also said that establishing further geographic offices will be a focus as well. "Growth for growth's sake is not our objective; we need to do what we do very well. You won't see us try to do too much too quickly."

Norman Patterson President - International Marketing & Sales Georg Fischer Disa Group Schaffhausen, Switzerland

One of the industry's most talked-about events took place in late 1995 when a 50/50 joint-venture was announced between Switzerland's Georg Fischer (flask molding, core machines, pouring furnaces, blast equipment, sand lab equipment and gas generators) and Denmark's Dansk Industri Syndikat A/S, or DISA (high production vertically parted molding systems and high production coremaking). Today, the 18-site company employs 1500 and offers molding lines, core shooters, shotblast equipment, sand testing, casting cleaning and complete turnkey systems. Prior to the joint-venture, George Fischer Foundry Systems acquired Harth & Seiffert (Germany) air blast machines in 1993 and GOFF Ltd. shotblast machines in 1991, as well as the major Sutter Products and Harry Dietert Co. decades ago. DISA acquired Germany's BMD (horizontal molding, sand plants and shotblast machines) in 1986 and FORMA (flaskless molding) in 1984.

Paul Cervellero President Inductotherm Corp. Rancocas, New Jersey

Since Hank Rowan built the first induction furnace in his garage in 1953, Inductotherm has grown to 100 companies, with 5300 total employees, 1200 of which are in the furnace group. In addition to opening subsidiaries all over the globe, the induction furnace and power supply vendor has grown substantially through acquisitions over the years. In addition to the Linemelt subsidiary formed in 1959, other casting industry-related acquisitions included Consarc (vacuum melting) in 1962, Inductoheat (induction heating) in 1969, Venetta Co. (charging/drying/preheating systems) in 1985, and Shamrock Engineering (automatic ladling) in 1986.

Bruce Dienst President Simpson Technologies Corp. Aurora, Illinois

Founded in 1912, the 75-employee Simpson Technologies has offices in Aurora, Illinois and Zug, Switzerland. Earlier this year, the sand preparation, conditioning, reclamation and handling and control equipment supplier acquired Beardsley & Piper, and established it as a division. The acquisition provided the firm with 150 different machines and 25 subcategories of molding, coremaking, pollution control and service parts. Three years earlier, the firm acquired the Dietert Automation Product Group, which helped the firm in providing on-line controls as an integrated part of its mulling systems.

Dave Foster Vice President-Finance U.S. Filter/Surface Preparation Group Newnan, Georgia

Since the 85-year-old Wheelabrator was acquired by water treatment giant U.S. Filter ($4.5 billion today in sales) in December 1996, the foundry industry has seen many further acquisitions in the blastcleaning machinery area. Talk of a spin-off quieted when a new strategic plan was put together for the group. In 1997, U.S. Filter acquired Europe's Eurovein (which included Spencer Halstead, Pangborn Europe, Gutmann and OT Munich), VacuBlast International, EBE and Schlick, as well as North American firms such as Nelco, BCP, Southwest Abrasives, Surface Finishing, Schmidt Manufacturing, Vanguard, Abrasive Products and VL Rampe. At the first 1998, it acquired Castalloy, an iron and steel foundry in Waukesha, Wisconsin, that offered a blastcleaning parts line among other casting markets. Today, the 2000-employee surface preparation group consists of 30 U.S. sales, service and distribution centers and 26 manufacturing facilities in North America, Europe and Asia.