Look to the Future, Not Over Your Shoulder.

The global metalcasting industry. As Y2K approaches, this phrase continues to become more of a reality. The imaginary boundaries formed by countries, continents and oceans have almost disappeared as end-users (U.S. and otherwise) now can pick and choose their casting suppliers from across the globe. As many of your foundries have experienced, if a customer can save a penny by moving a pattern to another country, it will.

On the flip side, this new reality also has paved the road for U.S. firms to expand their manufacturing realm beyond the 50 states. By establishing partnerships with foreign companies or building greenfield plants on foreign soil, some U.S. foundries have appeased their customers and held onto their business.

But for most foundries in the U.S., expansion--whether it is across the street, to another state or halfway across the globe--isn't an option due to a lack of capital and, in many cases, desire. Therefore, when a customer begins shopping your patterns around for a lower price on the global market, your foundry is left with only two options--either enter into a price bidding war or forget about it and focus on what it can control.

The answer, more than likely, should be to forget about it.

As we all know, the manufacturer-supplier relationship evolved in the '80s and early '90s as cost-cutting became the phrase of choice in the purchasing community. The OEMs that still understand the value of a manufacturer-supplier marriage appear to be becoming fewer and farther between. In the past, when a customer decided to shop a pattern for a lower cost, it may have been to the foundry next door or in the next state. As a result, you knew that if your firm properly costs its castings and efficiently produces them, the foundry that undercut your price would eventually have to relinquish that casting (probably back to you) because it wasn't profitable.

The problem with this philosophy today is that the playing field has changed. A U.S. foundry could win a price war against its neighbors as long as its cost structure is in line. On the global playing field, a U.S. foundry, more often than not, won't win a war waged on price alone with plants in China, Korea or Mexico regardless of its cost structure because these developing countries have the benefit of lower labor and regulation compliance costs, government subsidies, etc.

"We can't compete with Chinese, Korean and Mexican foundries on price alone," said one U.S. foundry CEO who regularly does business south of the border and overseas. "They do not have the same worries about environmental regulations, worker welfare or short-term pressure to continually improve ROE, ROI or whatever profit yardstick that may be used. They want market share and will sacrifice profits to get it."

But how do you forget about a job that your firm spent time and money designing and producing? The answer is to look to the future and focus on what you can control.

"As the high-growth but low-cost areas of Mexico, Turkey and Eastern Europe become stronger, our metalcasting focus must evolve from less of the high-labor, high-volume commodities to more engineered components," said Paul Mikkola, Hitchiner Manufacturing.

Within the last year I have had the opportunity to visit foundries in Mexico and Italy as well as discuss the industries of Brazil, China, Korea, Russia, etc. with foundrymen from those countries. Although each of these countries' foundry industry is at a different stage of development, they all have something in common--they still take their cues from the U.S. in terms of metalcasting technology and the application of it.

The U.S. foundry combination of both casting design and manufacturing capabilities is unsurpassed by any other metalcasting nation. As a result, U.S. foundries can offer their customers engineered cast components that can't be manufactured by foundry industries whose primary selling proposition is price. This is what U.S. foundries must capitalize on and market to their customers.

This isn't a cry to end all commodity production of castings because this has been the meat and potatoes of your business over the years, and there are U.S. foundries that excel in this market. But our industry must understand where its strengths are and continue to raise the bar by offering the customers engineered products--on both million and one-piece orders--that are difficult to source anywhere else. If you provide OEMs with an engineered product that is a consolidation of parts, a reduction in overall weight and, ultimately, a reduction in cost, you will be remembered the next time they are developing that challenging metal component.

Selling on price may result in nothing but lost profit margins and setting the stage to lose that casting to the next lowest bidder. Selling your customers on casting engineering and reliable production of an engineered component may rekindle that lost marriage, providing casting orders for Y2K and beyond.

Alfred T. Spada

Managing Editor

On a personal note, I'd like to introduce myself to those of you I haven't yet had the opportunity to meet. Since joining modern casting in '97, I have spent my time with you, the foundryman, in your shops and on the phone, becoming a part of your industry. Although I don't have molten metal running through my veins yet, my wife and baby girl often wonder why I sometimes come home with sand under my nails and in my pockets.