Material guy.

Whether justifying the expansive business strategy of multiple acquisitions or negotiating compensation with his non-union work force of nearly 6,000 employees, Bob Cardy, chairman, president, and CEO of Carpenter Technology Corp., is not likely to be the guy who blinks first. His tenacity even applies to dealing with customers many times larger: "I refuse to subsidize the profitability of Boeing, and I'm not afraid to ask a customer if they're willing to risk losing us as a supplier over price."

It's not all bluster. In the six years since Cardy assumed the chief executive title, Carpenter has grown globally, acquired 11 other businesses, and made significant additions to its manufacturing capacity. Back in 1992, annual revenues amounted to $570 million; for fiscal 1998, the company did $1.1 billion - a 25 percent hike from '97 - and Cardy has set a revenue goal of $1.7 billion for 2001. As the true picture of Carpenter develops, the image that emerges is less related to obsolete blast furnaces and traditional steelmaking than to the producer and distributor of a diverse portfolio of specialty materials.

To some degree the company has always been a specialty enterprise, built on techniques first developed by James H. Carpenter, the engineer who founded Carpenter in Reading, PA, in 1889. Carpenter's initial order was for tool steel, and his expertise in creating these ultra-hard metals later brought a call for the armor-piercing rounds that proved critical in the Spanish-American War. Carpenter Technology's command of metallurgy still wins business in the highly specialized defense sector, such as the patented AerMet 100 alloy used for the tailhooks that absorb the full force of arresting an F18 fighter jet when it makes an aircraft carrier landing.

Known as Carpenter Steel Co. until 1968, the Carpenter Technology Corp. of today spreads its operation over three business units. Specialty Alloys Operations is the company's core enterprise, producing stainless steel, as well as special-application metals and alloys in some 400 grades. The Engineered Products Group (EPG) takes Carpenter's experience to the next step, delivering products that require not just a specialty material, but also an advanced manufacturing process. EPG competencies include ceramics and carbides. Dynamet, a recent acquisition, produces titanium in wire and bar form for aerospace, medical, and sports applications.

Aerospace - a Carpenter profit center that began with some Ohio brothers named Wright - accounts for 25 percent of revenue, while automotive pitches in 20 percent. Traditionally, growth in the specialty metals industry runs 1.5 percent to 2 percent annually, but currently it's double that, and according to Cardy, only about half of the growth is driven by aerospace.

In an era of refocusing on core strengths and shifting to outsourced services, it's jarring to learn that Carpenter controls its distribution to 14,000 customers with a network of widely dispersed warehouses. Cardy, who joined Carpenter in 1962 and came up through the sales ranks, offers some insight on this unlikely business model: "When a company makes so many custom products, it's the only possible way to stay close to the customer. We fit into their production process by delivering the right alloys in finished form, inspected and ready for use. If a customer is using three-foot lengths, we can cut waste and drive down costs by delivering 12-foot stock rather than 10."

Can't the competition do that too? Well, yes, but none have the delivery logistics and tech support Carpenter offers. Cardy is emphatic on this differentiator, insisting that "Customers measure us on the soft issues, and we deliver competency."

Cardy's tenure has seen the continued overhaul of most aspects of the Carpenter operation, expanding from a specialty metals producer into a broad-based supplier of engineered materials. Even the company's logo is new in the past year. Its fundamental business strategy has been expanded to include becoming a resource - not simply a supplier - for specialty materials, with extensive R&D capability and increased ability to deliver leading-edge technologies such as powdered metal sinterforging and metal injection molding. Growing the revenue stream from outside the U.S. (domestic customers now account for nearly 90 percent of Carpenter's intake) is also a key element of forward planning.

Still, the most visible policy of Cardy's growth plan is acquisition of incremental manufacturing capacity. By his own measure, the smartest buy has been Talley Industries, consummated in February of '98. A '60s-style conglomerate of units that Cardy terms "non-synergistic," the purchase brought Carpenter much-needed production capacity in the form of a stainless steel mini-mill that happens to be one of the newest in the U.S. A number of Talley's non-steelmaking assets will be sold off to pay down debt.

Though a quick look at Cardy's string of acquisitions might seem to indicate a chief executive on a mad shopping spree, Cardy is anything but reckless, approving the acquisition or merger when it meets his tests for complementing abilities. The highest risk is overcapacity - the cancer of the steel industry, he calls it - so the first step is always to look for open capacity at another producer.

"The worry that comes with growth, of course, is that as we get bigger, we might get slower," he says. "There used to be a field of about a dozen major domestic competitors. Now we compete with many small, hightech operations in Italy, Sweden, France, Germany, and Japan. We're not worried about another Carpenter out there, because in this business, lions don't kill lions. The end comes when they get slow and the hyenas bring them down."

While Cardy has set - and achieved - ambitious growth goals, he has not over-looked the basics of the manufacturing world. In the course of considering one potential acquisition that would bring increased machining capacity, he looked into existing capacity usage. He discovered that materials were being worked on during only about 15 percent of the manufacturing process; the rest of the time was being eaten up by shipping, transfer delays, and waiting for finishing steps. "Since speed of machining wasn't the issue, we avoided a capital-intensive move and directed our efforts to plant throughput," he recounts. "Our manufacturing resource planning system now reschedules workflow every night to squeeze efficiency."

Ask Bob Cardy to name Carpenter's greatest strength and without hesitation he'll cite its employees. The company has not had a layoff in more than a decade, is wary of using temporary workers, and has a reputation for paying more than its competitors. Cardy sees his own role as setting the direction. "As big as we are, there's just one ship called Carpenter. My role in leading our employees is to determine how those 6,000 sails are set."

Cardy didn't get to that position by caving in to every labor demand, but instead by his readiness to get onto the shop floor and take on the tough issues in a business that has long been at the mercy of business cycles. "We run this operation with the realization that it is cyclical," he asserts. "Everyone here learns that they have to be ready to do more than one job." Turning his comments to a more industry-wide view, his resolve as a negotiator becomes apparent: "The unions better catch on that they can't interfere with flexibility."

It's not casual comment, because for all his willingness to dig in his heels at the bargaining table, Cardy is prepared to tack when a course change is necessary. His lemons-to-lemonade resiliency is demonstrated when pressed for an answer about the potential effects of Chrysler Corp.'s research into producing a molded, plastic-bodied car for some markets. "Great," says Carpenter's CEO. "We'll sell them the material to make the dies."

PROFILE

ROBERT W. CARDY Chairman, President, and CEO CARPENTER TECHNOLOGY

Age: 62

Birthplace: Saginaw, MI

Family: Married; Children: David, 33, and Susan, 30.

Education: B.S., Business Administration, University of Cincinnati.

Words to Live By: "It's not the lions you have to worry about eating you - it's the hyenas."

Favorite Film: Midway, for its portrayal of the loneliness of decision making.

On Business Books: "You can learn as much about strategy from a Tom Clancy novel."