Navistar's foundries are taking quality personally.

Recognizing that people are the key to quality products and services, Navistar has charted a course for long-term growth.

When International Harvester (IH) was forced to reorganize and sell off some of its operations in the early and mid-1980s, the remaining parts of the organization involved with the manufacture of medium and heavy duty trucks were renamed Navistar.

This reorganization went beyond simply changing its corporate name. Survival of the corporation and its remaining subsidiaries and manufacturing plants could no longer be taken for granted. The newly streamlined organization and its operating units would have to make it on their own, no longer shielded from the real business world by a large, benevolent parent company.

When the change occurred, Navistar was left with two casting facilities: a large iron foundry in Indianapolis and a significant but smaller iron casting facility in Waukesha, Wisconsin. Like the other operating units of the newly formed Navistar International Transportation Corp., the two foundries faced the challenge of not only existing to meet the component needs of its parent company, but, for the first time in their history to actually contribute to the bottom line health of the organization.

Armed with the knowledge that few traditionally captive foundries have made the leap from captive to jobbing, Navistar's foundry management team realized early that survival would require dramatic change. First and foremost, a new corporate culture was needed to change the attitudes that historically ruled captive operations. They needed to rediscover what the terms "customer" and "quality" really meant. Survival and growth, which ultimately meant profitability and jobs, would depend on a personal commitment--from the top manager down to the laborer--to quality products and service.

Indianapolis Casting

If it were possible to clearly define "state of the art" when it comes to iron casting operations, Navistar's Indianapolis foundry could be considered one of the most technically advanced gray iron foundries in the world. But because of its technical and process connotations, terms like state of the art and cutting edge are too confining to describe what's happened at the Indianapolis Casting Corp. during the past seven years. While the foundry is indeed on the cutting edge of gray iron casting technology, its people programs allowed it to fully utilize the potential offered by advanced processes and applications.

At the outset of initiating its Focus Foundry Plan in 1987, the organization recognized the need to balance its capital investment plans with a strong commitment to improving employee participation along with upgrading people skills if its goal of achieving best in class status was to become a reality. The foundry set out four guiding principles as the focus of its strategic plan:

* maintain product superiority in cylinder head and block manufacturing;

* remain committed to constant improvement while reducing cost through state-of-the-art equipment, continuous employee education and improved processes, workstation enhancement for employee satisfaction and increased job security;

* increase volume through OEM work;

* anticipate, meet and exceed customer expectations.

Capital Investment

With the blessing and support of Navistar's board of directors, the Indianapolis foundry invested more than $50 million to upgrade its casting operations from 1987-92. No longer considered a "captive" operation, the investment was required to allow the foundry to capture new OEM work as well as retain the traditional block and cylinder head work of its parent company.

Much of the capital equipment outlay was aimed at reducing handling and improving employee comfort and safety while upgrading product and process quality. Core operations, for example, were reengineered into "flow through processing," which eliminates much of the handling associated with coremaking. Where handling is necessary, powered lift tables, load balancers and other handling apparatus have been installed to reduce worker fatigue and improve ergonomics.

The two green sand cope and drag lines were completely redesigned to allow concentration on block and head work, and linked directly with the coreroom to further enhance the "flow through" concept. Sand preparation and delivery were automated to allow for on-time delivery of prepared sand to the molding lines as needed. A fluidized bed sand cooler with automatic moisture addition was added to control sand temperatures.

To complement its induction melting and pouring capabilities, the foundry added two automatic conveyorized charge preheat systems, and an automatic pouring system with a 20-ton radiant rod holding furnace that precisely meters the amount of molten iron poured into the mold. This is coupled with an automatic inoculation system that allows for the accurate and timely delivery of inoculants to the mold just prior to pouring.

Shakeout also received significant attention during the Indianapolis restructuring. Mold shakeout was reengineered to allow for longer and more flexible cooling times to accommodate the concentration on the head and block castings. This controlled delivery system was also enclosed to eliminate the heat, dust and noise associated with traditional foundry shakeout systems. In addition, four cab-operated casting manipulators were added to eliminate much of the brute force required in manual shakeout and degating operations. From there the castings continue through automated shotblasting and grinding operations and are not handled until final chipping and grinding operations are needed.

In addition to these improvements, the Indianapolis facility was equipped with new sand and metallurgical testing laboratories, and a CAD system that links design with patternmaking. And, last year, Navistar installed an infrared sand reclamation system, which at full capacity will eliminate up to 70,000 tons of spent sand per year.

The Human Equation

The Focus Foundry Plan, a joint effort between Navistar management and the local United Auto Workers, was initiated in 1987 and set the stage to match the company's capital investment plans with a vigorous program of employee involvement and participation in problem solving and decision making.

Gary Mitchell, president of Navistar's Indianapolis Casting Corp. and general manager of the company's two foundries, said the management team recognized up front that "investing in plant and equipment alone would not make us fully successful in our goal to become best in class. We knew that with our product line, we would be confronting global competition head-on. The key to being competitive internationally was through improved technology and processes, employee participation and unsurpassed product quality."

With UAW support and cooperation, the foundry formed a variety of teams to tackle wide-ranging projects and problems. People from operations, technical support and manufacturing management comprise these teams to provide a multidisciplinary approach to vexing issues, including product improvement, problem solving and product development.

For example, the product improvement teams are assigned to every major casting category and focus solely on individual quality issues. The goal of the product development teams is to develop and improve manufacturing processes especially as new product lines are introduced.

At the same time, various education and training programs were initiated to provide management and labor with the skills to make the team-approach effective. Courses like statistical thinking and application, and team-oriented problem solving were offered to enhance the new corporate culture Navistar was determined to develop. In addition, specific technical training was provided in-house and off-site to bring the skills of foundry workers into line with the new technology and processes that were introduced at the plant.

The combination of new equipment and systems, and employee training and participation yielded the results Navistar sought. Dramatic improvements in quality and productivity levels along with reduced absenteeism have been documented since the Focus Foundry Plan was implemented. And even local union officials agree that employee attitude toward management and their jobs has improved measurably.

What may have been the most important factor in labor's change of attitude toward management at Indianapolis was the active participation by labor and union officials in directly working with Navistar's customers. Whereas, previously, it may have been easy to ignore management's pleas for improved quality and productivity, customer visits by line workers and union officials provided them with a dimension of their jobs and business they had not experienced before.

Says one union official: "Sitting down with a customer and hearing for myself their concerns about quality in general, or about a specific problem with a specific part, gave me a whole new outlook on Navistar's challenges. I took these concerns back to the rank and file, and, I guess, coming from me they took it to heart much more than we did when it came from management.

"As more and more of the line workers became directly involved with our customers, the clearer it became that we were going to have to do better. We've gotten the message what it means to do business globally. We're doing everything we can to help keep the company competitive."

More to Do

Despite its accomplishments, Indianapolis Casting readily admits it still has much to do to assure long-term survival in an increasingly tough marketplace. "Many times we feel we've taken just about as much cost out of our castings as we can," said Mitchell. "But the ever-increasing competitiveness of our industry drives us to continue to search for opportunities that improve our cost. We are constantly benchmarking ourselves against the best and lowest cost head and block casting foundries in the world, and know that we're competitive given an even playing field."

This is the issue as far as the Indianapolis facility is concerned, according to Dan Ustian, group vice president and general manager of Navistar's Engine and Foundry Div. "With everything we've accomplished during the past five years, we must continue to pursue ways to reduce our costs. While we are price and cost competitive to the North American and European block and head foundries, some of the Brazilian foundries are delivering castings into the U.S. at quite low prices. With their labor rates and some government assisted programs, Brazilian foundries are clearly the lowest priced foundries in the world.

"Because of this, Indianapolis Casting must continue to improve our cost structure. Also, we must be considered more than just a commodity manufacturer. We must offer unmatched customer service and value beyond the casting itself."

He added: "We have the skills available to design parts functionally. Instead of separate castings for a water pump and block, we've helped design an integral casting that includes both. While we are capable of optimizing the part design, we are also able to keep the casting process compatible with our available equipment."

Ustian said as the foundry continues to improve its process capability, it will be able to provide more consistent products that will avail better machining capability and better dimensional control, resulting in reduced weights. "We believe we have an edge on all competition in this area," Ustian said. "As we take cost out of the engine for the customer, we also assure that we can produce the casting dependably and with more flexibility than in the past.

"What we' re doing at Indianapolis today is very exciting. We still must be a low-cost producer, but service and value will set us apart from the rest of our competition."

Waukesha Foundry

Evolving at the same time as its parent company, Waukesha Manufacturing Facility, Waukesha, Wisconsin, also set its course for continuous improvement. Concentrating highly engineered ductile iron and austempered ductile iron castings, the 400-employee foundry casts components from 2-175 lb, and specializes in steering assemblies; suspension brackets; axle assemblies; engine parts; agricultural machinery; material handling equipment; automotive after markets; and pumps and valves.

Located in residential Waukesha, IH bought the foundry in 1946 from a private owner. Under IH, it was a malleable iron foundry for many years before becoming ductile iron intensive. Today, 50% of its orders are from Navistar, while it competes in the OEM market for the other half.

Time to Change

In the mid-1980s, output at the Waukesha plant fell from 34,000 tons a year to 21,000 tons. Seeing their foundry shrink by nearly one-third, Navistar officials realized they had to make changes to survive in the increasingly competitive market, which was no longer hindered by oceans or trade barriers.

After 40 years as a captive shop, they were entering a highly competitive marketplace they hadn't been in before--fighting neck to neck with other foundries for work.

"We realized," said Dan Schrader, manager of foundry operations, "we had to get to the basics to get the bottom line profitability."

In the mid-80s, the foundry had 40-50 customers and more than 400 active patterns, with 300 more in storage. "Foundries, including us, tried to be everything to everybody," said Greg Etter, manager of sales and marketing. Officials focused on product rationalization, and decided to only go after the trucks, engines and agricultural markets.

Realizing that the old style of management--"the dictator," as Etter put it--was being exiled from manufacturing, foundry officials tossed aside their old chain of command.

"We got away from the supervisor and foreman concepts where there is a supervisor for the coreroom, molding and melt, with hierarchies within," Etter said. "We installed an area manager concept where one person is in charge of an area. For two molding units, we now have one supervisor, and in the machining shop, we have one supervisor for 50 people. It's the only way to compete."

Without cooperation from workers, the best continuous improvement plan will never get off the ground. Said Etter: "We needed the union (United Steel Workers) to understand our situation, and we had to break down the barriers between us."

The USW began to realize the big picture--doing what was needed to keep their jobs. After hearing the company's plan, the union agreed to a five-year contract. It understood the situation, and responded well to the change of culture.

"Morale is good," said Sam Gaylord, vice president of the local USW. "Our negotiations were up front here. We said 'bring the work in and we'll do it.'"

Machining Services

To provide unique services and further penetrate the OEM market, the foundry set up its own on-site machining facility in 1985. Today, it has a 60,000-sq-ft machining division. It is equipped with machine cells, milling machines, presses for assemblies, multitype drills, radial drills, lathes, grinders and broaches.

The value-added of machining lets Waukesha sell itself as a one-source stop for customers. Today, 25% of its revenue is a result of machining. Although this decreased its foundry base, the company put itself in a profitable position because of market penetration, officials said.

While machining added another service to its customers, it also saved jobs. The improvement plan called for downsizing indirect foundry labor. Machining, however, presented an area to shift capable employees.

With the shift to machining, employment stayed about the same. The shift to machining revealed some definite shortcomings in the skills of the foundry's laborer, who averaged 39 years old. CNC machining required additional technical skills, and demonstrated the need to upgrade skills.

"We recognized the lack of skills very quickly," said Dean Orley, manager of human resources. "It just surfaced. When some workers haven't had any math since high school, what do you do to overcome it?"

"New technology requires people to be trained and retrained," Etter said. "We're no longer the slug-it-out operation of 30 years ago. Workers have to be more astute today. Even our attendance and time clocks are barcoded. We had to raise the educational level in the workplace, especially with computers. With maintenance workers in particular, we definitely had to raise their skills with automation equipment and now machine tools they never had to work with before.

"We didn't hire machinists. We opened the bid to foundry personnel."

Investment in Learning

During contract negotiations, Etter said much discussion focused around education. Faced with workers lagging behind in technical skills, the USW prompted the development of an education center. Located on-site behind the foundry, the workplace literacy center opened in August 1988.

With the first such facility in Wisconsin, Navistar wanted to provide workers with skills they need for new technology. Operated by a full-time educator from a local technical college, it offers self-paced learning, with an open-entry, open-exit policy. Spouses also are encouraged to take advantage of the program.

"The Steelworkers definitely have taken advantage of the center," Gaylord said. "They realize they needed to operate high-tech machinery. Even people with 20-30 years knew they needed better skills to protect their jobs."

Dick Veach, former Waukesha manager of human resources who has since rejoined the company in Indianapolis, said, "Why wait until workers are displaced and deal with displaced workers? Why not educate them on the job?"

Management set a change in mentality, and the workers accepted the challenge. Today, due to the training of foundry workers, more than 100 employees work in the machine shop--jobs that could've been lost.

Waukesha's continuous improvement program is centered around its employee teams. Eight teams consisting of foundry workers are taking responsibility for solving problems.

Hourly employees work out scrap, quality and other problems by visiting other plants. "It used to be that our high-powered salary guys would try to do that," Etter said. "We still have our in-house" experts on every team, but now the entire teams make most of the decisions."

Foundry officials found that exposure to the OEM makes workers own up to their work real quick. "They know who the customer is--within the work force," Veach said. "For the coreroom, molding is the customer. It's not always someone you don't see."

Place for the Future

The foundry is producing better quality castings with better control of its costs. For the first time, the foundry turned a profit in 1993.

Waukesha plans to continue with capital investment and product rationalization. "We need to grow our business to meet customer needs," Etter said. "That might mean adding assembly to our machining and foundry. Or we may have to get involved in partnering with other businesses and industries."

Etter said the quest for continuous improvement is a constant pursuit. "You can't go through it one day and not the next," he said. "If you do, everything is stopped and you're back at ground zero.

"Also, you have to stay modern, put capital into things and increase worker education. These things all pay rewards, but they're really what you have to do to stay in business. If you don't commit to these things, you won't stay in business long anyhow."

Challenges Ahead

"All of our people have been through some tough times," Ustian said. "Many have had their pay frozen for as long as five years. Yet, our people are committed to making Navistar foundries the best in the world and we have made significant inroads to breaking down the barriers traditionally existing between management and labor. We don't intend to stop now.

"As management and labor have grown together, the trust is increasing. When everything is said and done, we truly have common interests. In being successful together, we serve each other's objectives."

Both Indianapolis and Waukesha facilities are proof that wise capital investment and employee participation work. Today, less than 40% of their casting costs are in wage and benefits. Indianapolis is averaging 90% up-time, while Waukesha's up-time has surpassed 80%.

The main goal of Navistar's foundry operations is to remain globally competitive and best in class when it comes to their product line. With fierce foreign competition and rapidly changing economic climate, management and labor recognize that it is a daunting challenge. Mitchell and Ustian agree the key is to continue to reduce costs while maintaining superior levels of quality and service. And the only way to do it is with people.

Said Ustian: "We have a saying in our business that goes, 'If you can see the road ahead of you, clearly you aren't looking far enough.' We establish our goals as a vision. As we progress, it is our people that help us achieve those one-time seemingly impossible tasks."