Executives scrutinize expanding markets.

To expand casting markets, foundry executives will need to broaden their horizons to better understand the impact of the global marketplace.

"We must learn to survive and grow without using each other as bait," said AFS President George Boyd in opening the 1997 AFS Foundry Executive Management Conference held in Colorado Springs, Colorado, September 14-17. That statement set the stage for the rest of the conference as nearly 200 foundry executives took a hard look at strategies for "Expanding the Foundry Pie."

Reiterating Boyd's sentiments, Don Huizenga, Kurdziel Industries, added, "Today, the challenge we face in expanding our industry and the strategies we employ, will depend not on individual leaders, but the collective leadership of our industry. Global expansion may be just the frontier we are looking for to increase the foundry pie, rather than dividing the pie into smaller and smaller pieces."

Huizenga, who delivered this year's Rentschler Lecture, said that most industries, including foundries, have yet to grasp the enormity of the changing global marketplace. "American industry has been fond of telling all who would listen that we are in a global market. We boast how we lost a job to Mexico, China or some other exotic country, but in reality for 90% of the foundries, the global impact has not drawn blood."

At the same time, he warned that entering the global market should not be taken lightly. "Doing business globally is not a simplistic journey that should be entered into without a thorough analysis of all facets of the project including, but not limited to the culture, political stability, the legal system, work force, ability to generate and collect profits, and the long-range objectives of your company."

For foundries, the changes that are taking place will prove to be a dilemma for many foundries as more and more foundry capacity is being consolidated and casting buyers look overseas for product.

According to Huizenga, "All of a sudden the boundaries have been blurred and casting buyers have begun to not only buy globally, but to invest in plants globally or to demand that we invest or create joint ventures to supply their plants in foreign countries. We are uncertain as to how the global casting market will be configured. With boundaries being less defined and capacities being concentrated, are we going to see foundries establishing ventures, alliances, partnerships or outright ownership of casting facilities in foreign countries? Or do we see our traditional customer base taking the initiative in establishing foundry relations in foreign countries?"

There are clear signs that casting buyers are willing and ready to purchase castings wherever they can get them cheaper, said Huizenga. Citing personal experience, he added, "It appears that casting buyers have made a strategic decision to begin the process of investing in cheap, off-shore castings and tolerating a learning curve from those foundries. In addition, there is a willingness on the part of our customers to share proprietary information with off-shore foundries to help them duplicate our level of experience."

Looking toward the future, Huizenga explained, "Our opportunities are in the expectations we have in the marketplace of tomorrow and our success will be determined by our ability to understand that our role will be one of a dynamic innovator and creator rather than that of an order taker. If we are going to grow the foundry pie, then we need to realize that history has redrawn the map of the future."

What's Ahead?

The U.S. foundry industry has enjoyed nearly five years of growth in its major casting markets, though, for some metals, the future looks to be a mixed bag of opportunity.

Ken Kirgin, Stratecasts, Inc., provided a global analysis of casting markets and like Huizenga, agrees that significant changes are ahead. "With our superior productivity, stable exchange rates and healthy economy, U.S. casting shipments will continue to grow through the next decade. But we will see continuing pressure from off-shore castings particularly from countries like China, India, Thailand, Malaysia, Taiwan and Korea."

In terms of individual metals, Kirgin offered that while the overall market for domestically produced castings will continue to grow, metals like gray iron and malleable iron will see declining markets. At the same time, ductile iron and aluminum will see significant growth well into the next century.

While overall gray iron shipments are expected to slip somewhat during the next decade, some of its major end-use markets will experience slow growth. Chief among these are internal combustion engines, medium and heavy trucks, and refrigeration and air conditioning.

During this same time period, ductile iron use is projected to grow at a slow steady pace. Shipments of ductile iron to the medium to heavy truck market are expected to rise by nearly 5% and internal combustion engines by more than 4%. Other growth areas for ductile iron castings are valves and fittings, construction machinery, pumps and compressors as well as car and light truck.

Overall, shipments of steel castings are expected to show slow, steady growth through 2007. The only major steel casting market that will show significant decline appears to be trucks as some components are being converted to ductile iron. Corrosion-resistant steel is projected to experience a solid growth rate of 3.5% during the next 10 years, while heat-resistant and manganese steels will see growth rates in the 2% range and shipments of carbon steels will be stable at best.

From all indications, aluminum casting shipments will continue its rapid growth well into the 21st century. Its rise will be fueled by the continuing move toward increased use of aluminum in cars, but other markets are expected to show solid increases as well. These include refrigeration and air conditioning, internal combustion engines, household appliances, lawn and garden equipment, and power hand tools.

Competitive Advantage

"Competive advantage is what you do for your customer that your competition cannot or will not do," said Thomas Faranda, Faranda & Assoc. In his presentation, "Creating a Growth and Profit Culture," Faranda said, "Creating a growth and profit culture is a fundamental shift in how we view and do business. This new culture is a mindset, backed by management actions, to focus the organization on core competencies, infrastructure, benchmarking, speed, outsourcing and other advanced leadership and management tools.

"Creating this new culture means reassembling your strongest competencies into a more viable alignment. It means developing strategic alliances to increase 'control' without increasing cost of resources. It means using outsourcing to remove marginal operations. It means internal realignment to maximize the potential of your core competencies and external realignment to create a knowledge symbiosis that makes your network thrive."

Also addressing the topic of competitive advantage was Howard Hyden, The Center for Customer Focus. The only real source of competitive advantage today, he said, is differentiation. "A quality product today is not a competitive advantage. Quality today is a commodity."

One of the real advantages that companies have are its employees, he explained, citing data on why firms lose customers. Of the people surveyed, only 4% said that they quit doing business with a supplier because the company moved or closed. Only 5% said that they switched their business because they made new business friends and gave their work to them. Price was the reason for switching suppliers for 9% of the respondents, while 14% reported that they switched because they were dissatisfied with the product.

The major reason that customers drop a supplier is because of indifference by someone at the supplier, according to 68% of those who participated in the survey. With that, Hyden asked, "Is it possible that your employees could be a competitive disadvantage?

"Customers today are more sophisticated, have more access to information, have more choices and higher expectations. Your employees must bring more value to the party because your customers have raised the bar."

RELATED ARTICLE: AFS Honors Williams and Warren

AFS continued its tradition of honoring top metalcasting executives during its Foundry Executive Management Conference by presenting the Keating Founders' Freedom Award and William J. Grede Award. The Keating Award this year went to J. Michael Williams (1), manufacturing manager-components operations for the GM Powertrain Group for his leadership in both technological developments and government affair activities. R. Conner Warren (r), executive vice president, Citation Corp., was presented with the 1997 Grede Award for his contributions in the areas of management and marketing that have resulted in the expanded use of castings. Making the presentations was Chairman of the AFS Board of Awards Ray Witt, CMI International.