Future of Foundries Is Being Molded at Bigger Firms
Robert Foster proudly hefts a stainless steel cone, part of a Lockheed Martin missile. It’s heavy--about 30 pounds. And 18 years ago, when Foster began working at this Port Hueneme foundry, the facility wouldn’t have produced it.
PAC Foundries, which pours hot aluminum and steel into the shape of intricate parts for aerospace and other industries, was purchased two years ago by Consolidated Foundries, a Paramount-based company that has been buying up small foundries throughout the West since it was founded in 1991.
The result, said Foster, a plant manager at PAC, is the ability to manufacture bigger, heavier parts such as the one that goes in the Lockheed missile.
The Port Hueneme facility is a prime example of an industry trend. Bigger is better, said executives at the company--a contrast to the mantra of many small foundry owners, some of whom said they are being squeezed out of the industry.
Consolidated Foundries, a private company, has purchased nine small foundries, and it recently secured $7 million in funding from a Seattle investment firm for further expansion--which could include the purchase of four other foundries and machine shops in Ventura County, said Consolidated’s president and chief executive, Stephan Clodfelter.
Last year, Consolidated reaped nearly $40 million in revenues. By 2005, Clodfelter hopes that figure will reach $150 million.
For years, many foundries--which produce engine components, airplane parts and thousands of other widgets--were mom-and-pop outfits, small companies that chiseled a niche in the industry and guarded their turf like a junkyard Rottweiler.
But those days are over, said executives at Consolidated Foundries.
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Many of the small foundries that have permeated the industry are either closing their doors or selling out to larger companies, Clodfelter said.
“Over the last five years, the number of foundries in the U.S. has been cut almost in half,” he said. He isn’t sure if the massive die-out is the result of more foundries being snatched up by large companies, the way his has done, or if they simply can’t compete anymore and are calling it quits.
The benefits of consolidation are many, executives said.
Larger companies can absorb industry downturns because they have more resources. A treacherous industry nose-dive in the early 1990s sparked by lack of demand for airplane parts prompted PAC Foundries to lay off nearly 150 workers, said Mehrzad Shaghaghi, PAC’s vice president of operations. By the time the Port Hueneme foundry was purchased by Consolidated nearly a decade later, the facility employed 250--the same number it employs today, he said.
Foundries with more capital can take on larger jobs, producing larger parts such as the Lockheed missile component, executives said. They can also take on new projects.
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While aerospace companies such as Boeing, Bell Helicopter and Honeywell--all of which PAC serves--have traditionally bought parts from foundries, had them refined at machine shops and then installed them in airplanes, Consolidated Foundries executives hope to eventually handle many of those jobs in-house. The company wants to buy machine shops that will thread holes, seal gaps and shave corners on airplane parts, saving aerospace companies the hassle.
“We see that as an incredible opportunity,” said Paul Sassoon, director of sales and marketing for Consolidated Foundries. “Our cost of running business is much lower than [that of smaller foundries]. We can produce a part, add value to that part . . . and have it ready to put on their final plane without any of the headache.”
But not everybody sees the trend of larger companies buying up smaller foundries as a blessing. Some small foundry operators said they simply can’t keep up with the big guns in the industry and are frustrated.
“They’re being squeezed out is what’s happening,” said Lee Stevenson, manager of El Monte Alloys. “They’re being forced to sell. . . . You’re constantly trying to compete and you feel the expense because you have a smaller inflow of capital.”
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Stevenson’s company, which sand-casts everything from metal motorcycle parts to table legs, is not a direct competitor with PAC Foundries. While he would not say if his company was in danger of shutting down, he said he knows of several small foundries that are worried they’ll have to close.
Wayne Haddox, general manager of Image Casting, an Oxnard foundry that pours some aerospace parts as well as Harley Davidson kickstands, fine art sculpture and other products, said small foundries find themselves bludgeoned by industry regulations. It costs more than $50,000 to be certified for some international standards, he estimated, a price that small foundries such as his can’t afford.
Executives at Consolidated Foundries, meanwhile, look forward to more automation at their plants, a European sales force, and larger, more complex projects. They said they’ve never laid off a single worker at a plant they’ve acquired. And they speculate that their niche of the industry will grow substantially during at least the next three years.
“We as foundries are looking at growing globally,” Sassoon said. “That’s where the acquisitions come into place. Business has changed.”
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