James Pearson: guiding Aurora in the global marketplace. (Industry Faces).

For Aurora Metals Div., L.L.C. (Hiler Industries), a copper-based foundry located in Montgomery, Illinois, Jim Pearson is not only the leader of the day-to-day activities of the plant, but the future direction of the company as well. As president, Pearson understands that his firm cannot simply live in the present, but must continually find new growth opportunities.

"Most of my effort goes into strategic planning and where we are going in the future," said Pearson. "We have to figure out what is the right place for this foundry in the ever-changing global market."

In the past 20 years with Pearson at its helm, Aurora has examined and sought out means to expand its reach, This includes its current interest in the possibility of manufacturing in China or Mexico.

"If we are in China for the low cost labor market, we could be very competitive, not only for customers in the U.S., but also the Asian marketplace," said Pearson. "It could be a win-win scenario."

This article takes a look at Pearson's growth at Aurora and how expansion in productoin and markets is key to the firm's future success.

Rising Through the Ranks

After graduating from Drake Univ. in 1962 with a B.S. in Business Administration, Pearson spent 13 years working in various management positions for a variety of manufacturing companies, In 1975, he joined what was then Aurora Industries, Inc., a copper-based foundry and resin-coated sand supplier, as vice president of administration, At that time, the foundry was focused on the pump impeller market and was in the midst of developing its proprietary vacuum permanent mold casting process.

Pearson was promoted to executive vice president in 1978 and was part of a group that purchased the company in 1981. That year, he also was named president and CEO.

In 1987, Aurora was sold to Derland Industries, When Derland ran into financial difficulties, it sold Aurora to Hiler Industries in 1995 on the recommendation of Pearson. "Hiler is in the foundry industry, and we had worked together before. It was a good fit," said Pearson. "We generally don't compete with each other because they are in the shell molding business and we are in the permanent mold business."

Hiler Industries is located in LaPorte Indiana, affording Pearson both the luxury of management independence and a partner who understood the foundry business. "I have been able to operate as a private owner," said Pearson, "They saw the value of having someone with that level of commitment to the company, because they are too far away to manage the day-today business."

While Pearson may enjoy the distance between Aurora and LaPorte, a much larger distance--an ocean away--causes him greater concern.

Chinese Competition

Offshore competition is on the minds of most foundry management today. Although Pearson had seen foreign competition take jobs from his foundry brethren, Aurora had not experienced any problems firsthand,., until two years ago.

"One of our major long-term customers took 75% of its business to China within 24 months," said Pearson. "We offered price reductions, but it was not enough. We still have some of its business, but those are the mare complex, lower volume jobs."

Overall, Pearson estimates that Aurora has lost 5-7% of its business to Chinese competitors in the last two years. These loses have confronted Pearson and Aurora head-on with the question: how does a medium-sized foundry compete with foreign firms that can undercut prices up to 50%?

"Our management team took a trip to China to examine the opportunities over there," said Pearson. "It comes down to how much money we are willing to risk in a country thousands of miles away whose laws are not as defined as those in the U.S. If we don't go over there, however, it seems to me that we are saying we are willing to accept the risk of doing nothing. The implications of that decision could entail more risk then going overseas."

As the metalcasting industry continues to globalize, Pearson says that to stay in business, foundries must look at manufacturing alternatives. "As the world becomes more global in terms of competition and smaller in terms of information and transportation, medium-sized foundries are going to have to develop positions outside the U.S.," he said. "You cannot rely on the closure of other foundries as a long-term survival strategy."

With large and small foundries maintaining their markets, Pearson sees the medium-sized foundries being squeezed out by foreign competition "There is going to be a segment of business that stresses low volume and quick delivery. No one is going to go to China for one casting that is needed immediately," said Pearson. "The high-volume foundries will be fine as well because labor is not as much of a factor."

Pearson sees China as more than just an opportunity for lower costs. "We're trying to evaluate the potential of the Chinese marketplace," said Pearson. "I don't just want to go to China for cost reduction. I want to go because it offers an opportunity for revenue growth by supplying the Chinese Market. Our main market (pump impellers) is critical in the development of a country's infrastructure. The opportunities to supply China are endless."

Over the next 12-18 months, Aurora will research foreign alternatives and decide if it will be a global manufacturer. If the answer is yes, the firm also must decide whether to create a joint venture with an existing company or build a subsidiary overseas.

"We are trying to understand both philosophies," said Pearson. "We have heard the negative aspects to joint-venturing. You have to find a partner that you can trust, and that may be difficult. If we start our own business, we have a problem with staffing it. How many of our people want to leave the U.S. and live in China? I don't see many volunteers."

For Pearson and Aurora, the battle against foreign competition is up to each individual foundry to fight--not the government. "Government protection is a two-way sword," said Pearson. "We don't want the government involved in our businesses, yet the minute we get in trouble we are asking for protection. Ultimately, each foundry is going to have to make a gut decision on its future: risk going out of business or expand globally."

Expansion Outside of China

For Aurora, China isn't its first look at market expansion. The firm looked into Mexico as an alternative in the early 1990s, and still considers it a viable option.

"In Mexico, the cost is low, but it seems like it takes two people to do the job of one," said Pearson, citing the country's lack of technical advancement, "I think that we can overcome that, and it could serve as an excellent alternative, However, you can't penetrate the Chinese market from Mexico. In Mexico, all we could do is make castings for the U.S. at a lower cost and supply the Mexican market, which is slowly growing."

Aurora Metals also is looking to expand the marketplace for its copper-based castings. The company recently started developing boat propellers using its vacuum casting process. The propellers were previously manufactured in a foundry process that did not employ the characteristics of near net shape.

"The boat propeller market allows us to use our technology in a more cost-effective way," said Pearson. "We have eliminated a lot of the hand work that went into the propellers in the past. The old manufacturing method could not produce the quality of shapes and thin sections as well as our process can."

According to Pearson, Aurora works to make sure its current and potential customers think of copper-based alloys when designing castings. "Copper is perfect for areas where a customer is looking for corrosion resistance and high strength. From a cost standpoint though, the raw material is a little higher priced, but our sales staff can position copper-based cast components as engineered alternatives."

As it studies foreign and domestic market opportunities, Aurora must continue to strive for success with the formula that it knows best. Since medium-sized foundries can not match the cost of foreign competition, said Pearson, they must play to their strengths. "What domestic plants need to sell is that they are consistent, proven, on-time, customer-oriented and are continually working on cost-reduction programs."

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James D. Pearson

President

Aurora Metals Div., L.L.C. Montgomery, Illinois

Age: 64.

Immediate Family: Wife-Marlene, Son-Robert, Daughter-Ann Marie.

Education: Drake Univ., B.S. in Business Administration.

Industry Affiliations: AFS, Illinois Cast Metals Assn. and Illinois Manufacturer's Assn.

Company Information

Metals Cast: Copper, stainless steel and gray iron

Casting Processes: Gravity and vacuum permanent mold and nobake.

Key Markets: Pump, electrical and boat propellers.

Total Employees: 140