Forging Ahead

Soligen Technologies Inc. has developed what one outside observer calls “a wonderful technology” that could mean huge savings of time and money for manufacturers producing cast metal parts such as automobile manifolds.

Yet, Soligen has yet to make a big impression on either tech stock investors or on the industry it hopes to revolutionize.

Despite rapid revenue growth (nearly 3,500% in five years) that vaulted the company to No. 69 on Deloitte & Touche’s recent national “Technology Fast 500” list, Soligen has lost money for the last five quarters and its stock closed Monday at 26 cents.

The company, with about 55 employees at its Northridge headquarters and 45 at its foundry in Santa Ana, reported a net loss of $416,000 for the first quarter ended June 30, compared with a net loss of $120,000 for the first quarter of fiscal 1999, with revenue remaining about even at $1.6 million.

Soligen’s new technology is a proprietary system that creates a ceramic mold directly from a computer-aided design (CAD) file. The ceramic mold is then used to cast a fully functional metal part. Soligen has already used the system to produce automobile manifolds for professional race car drivers, including Jeff Gordon, and to produce a number of other auto, aircraft and industrial parts. Soligen says that by going directly from the CAD file to a mold, its system can cut weeks or months both from the time required to create prototype parts and to gear up for mass-production manufacturing runs.

If Soligen can deliver on its promise, its system could save manufacturers millions of dollars, according to Rohit Shukla, president and chief executive of the Los Angeles Regional Technology Alliance.

“This kind of savings in time and money is equivalent to the Holy Grail of manufacturing,” Shukla said.

But both Shukla and Soligen’s president and chief executive, company founder Yehoram Uziel, concede that a number of hurdles stand between the Northridge firm and that sort of success.

The big auto manufacturers and parts companies that might benefit from the company’s technology are “very conservative” and reluctant to change, said Uziel, who founded the company in 1992 in his garage.

“They have systems they have been using for years that work reliably for them. Their attitude is, if it isn’t broken, don’t fix it,” he said.

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Shukla describes Soligen’s process as “a wonderful technology” and says Uziel is “a visionary,” but adds, “Whether they can make it [the new technology] succeed in the marketplace is an entirely different question.”

“Big Midwest manufacturers for years have been trying to cut down the time required for their manufacturing cycles, but they are very reluctant to make wholesale changes in the way they do things,” Shukla said. “How do you get a behemoth like General Motors, with all of its various plants and sub-assemblers and suppliers, to adopt a new technology like this?”

Shukla said the realization that big manufacturers are slow to adopt revolutionary new systems could be one reason that investors haven’t flocked to Soligen’s stock.

“It could also be that investors believe some larger companies are going to develop their own versions of technology that does the same thing,” Shukla added.

Another obstacle to Soligen’s financial success is that the company has not yet licensed its system to other companies, said CAD expert Terry Wohlers, president of Fort Collins, Colo.-based Wohlers Associates Inc., an independent consulting firm that publishes the annual Wohlers Report on Rapid Prototyping and Tooling.

“Yehoram has been saying, ever since he founded the company, that he’s going to license the technology. But he hasn’t done it,” Wohlers said. “The technology has a lot of merit, but if you want access to it, the only place on the planet that you can get it right now is at Soligen.”

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Licensing the process to other companies, Wohlers said, would spread the use of Soligen technology and would generate more revenue for the firm. As Uziel sees it, Soligen’s challenge is “to persuade people that what we do on a small scale” can be done in mass production.”

Soligen already produces parts in runs of 100 or more for NASCAR drivers like Gordon and other customers at the company’s foundry in Santa Ana, Uziel said.

If Soligen’s system can cut the time for producing parts as dramatically as the company says, “it would be a distinct advantage,” said Karl Conroy, an engineer with the General Motors Design Center in Torrance.

Conroy said he was unfamiliar with the Soligen process, but he said any system that substantially reduces design or production times could produce tremendous savings and improve the overall process.

“If you can produce a prototype part in four weeks rather than 14, it means you can make changes a lot faster as you refine your design,” Conroy said. Parts are typically refined and improved a number of times before mass production, Conroy explained, so any reduction in the time required to produce a new prototype results in significant cost savings.

Once a design has been finalized for a cast metal part, Conroy said, another six months is typically required to produce the tools and dies used in making many cast metal parts. If Soligen’s technology can reduce time at that stage of the process, it could result in further savings, he said.

Uziel acknowledges that his company now faces many such “ifs,” but he’s confident that it can prove itself if given a chance. He declined to comment on when the company might show a profit, but he said he didn’t expect to make money immediately.

“We knew from the beginning that it would take some time, but, quite frankly, I didn’t think it would take this long because we always tend to be optimistic,” he said. “Despite the many hurdles, we’re making progress.”

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Despite its losses, Uziel said Soligen runs “a very lean and tight operation” that has a relatively slow “burn rate” of capital.

“We’re trying to do the most that we can with the money we have. We have raised money in private placements and, if needed, will continue to do it that way,” he said.

Uziel said Soligen expects to make money not by mass-producing parts itself but by refining its technology and licensing its processes to manufacturers.

“Our business model is to develop technology and franchise it,” he said.

“We are also trying to develop awareness and acceptance of the concept that things could be done in a different way.”