Bodycote announced the planned opening of a new vacuum heat-treatment facility in northwest Mexico. The facility, which is scheduled to open in the third quarter of 2011, will provide outsourced specialist processing support to major aerospace and power-generation suppliers in the area. This site will maintain full aerospace accreditation and prime approvals supported by Nadcap and AS9100.
IH: Why did Bodycote decide to open a new facility in northwest Mexico?
TG: Trac Precision, whose end customers are predominantly Rolls-Royce and Siemens, was the initial customer we worked with to justify the business case to get started. Trac Precision is a big customer of ours out of the U.K., and they were moving some work to Mexico. We currently do work for them in the U.K. today, so we are transferring work from the U.K. to Mexico, which further enables Trac to continue ramping up volume for Rolls-Royce. Siemens is new business for Trac and will be new business for Bodycote. If you look at the macro reasons why, you’ve got a number of our customers in the Guaymas area (city of Empalme in the State of Sonora). Those customers are currently shipping parts from Mexico to the U.K., California or other parts of the U.S. for special processing because there’s no special-processing capability in the area. The entire area is full of customers that we do business with elsewhere in North America and Europe, so it makes perfect sense for us to be there with them.
IH: What are some of the differences between running a facility in the U.S./U.K. and running one in Mexico?
TG: Bodycote has been operating in Mexico since 2006 with an automotive-focused facility in Silao (State of Guanajuato). We certainly applied the lessons learned from that facility and leveraged that experience when planning for our new facility in the Guaymas area. Having said that, we still had to deal with basic activities such as getting the banking set up and understanding the legal system, especially regarding employment law, in Mexico. To help with this we have contracted with Offshore Group to enable us to focus on our core business of special processing. They provide our support for tax, HR, etc. Another lesson learned is that things take time. In Mexico, they take a little longer because of the systems and processes required by the government. Regarding employment, we found some very talented people. So far that hasn’t been as difficult as anticipated.
IH: Where do you see this facility in a couple of years?
TG: We’re already expanding. We’re not even operational yet, but we’ve got a second vacuum furnace on the way. Right now we’re starting at 10,000 square feet, and we’re already reviewing the potential to add another 16,000 square feet. If things work as anticipated, I expect this to be a 25,000 to 35,000-square-foot operating facility with a variety of services based on customer needs. We are already in discussions with additional customers about adding additional types of heat-treatment and surface-technology capabilities.
A recently announced 10-year renewal contract with Rolls-Royce involves direct support from Bodycote’s on-site facility located within the boundaries of Rolls-Royce Precision Casting facility in Derby. Bodycote will provide Rolls-Royce with heat treatment, hot isostatic pressing, thermal spray coatings and metal joining. The two companies signed their first agreement in the early 1980s.
IH: How important is the Rolls-Royce relationship to Bodycote?
TG: It’s huge. In our commercial aerospace business, it is probably the most long-standing and important relationship that we have. It’s certainly the deepest. We have a facility on their property that is pretty much dedicated to them. Rolls-Royce has clearly decided that we’re their partner.
IH: Is this a unique relationship to have with another company?
TG: It is, and it’s one that I get a lot of questions about from other major OEMs. I hope we soon have other examples of customers who want to operate this way. We have facilities in other market segments that are very near dedicated to a customer, but Rolls-Royce is clearly the most prevalent.
I’m finding that companies are beginning to look at their core competencies. Should special processing be an in-house or an outsourced activity? “How do we reduce our supplier list and focus on what we do well?” Rolls-Royce decided that they don’t do certain special processing in-house, which led to our partnership, and there are other companies beginning to look at those types of things as they seek to streamline their operations and focus their capital on their core competencies.
Bodycote announced the development of an advanced cooling control process that optimizes the heat treatment of high-strength titanium components used in the aviation industry. This process earned Bodycote’s Rancho Dominguez, Calif., facility BASCA (Beta Anneal Slow Cool Age) approval from The Boeing Company.
IH: What is so unique about the advanced cooling control process announced with Boeing?
TG: The process, which was developed by Boeing, is related to the specific type of titanium used for parts for the 787. We have been working hard with Boeing’s key metallurgist for the past year to get qualified to run those parts.
IH: What does it mean to have this qualification?
TG: It means a lot in that it further extends our relationship with Boeing. This just continues what is already a very long-standing relationship of working together to ensure, as a part of their supply chain, that we’re able to respond to their changing needs.
Mr. Glende also answered some general questions about the economy and the future of his business.
IH: Are you seeing improvement in the economy?
TG: As a group, we’re seeing improvement. During the crisis many markets, including automotive and oil and gas, went off a very steep cliff, but it’s generally recovered quite rapidly from a very low starting point. Conversely, commercial aerospace is a very long-cycle business. We saw contraction, but nothing like auto and oil and gas. It’s just now really starting to recover, and we anticipate accelerated growth beginning in 2012.
Additionally, the resurgence of U.S. manufacturing has caught quite a number of us by surprise. The U.S. is holding its own, and the U.K. is holding its own. For aerospace, China, India and Mexico are where we get the most requests. But when I look at the near-term need for special processing, Mexico and Poland are currently ahead of India and China in terms of demand.
IH: Are you optimistic about the future?
TG: I’m very optimistic. About half of my business is aerospace. As long as nothing out of the ordinary occurs, the backlog from the major OEMs gives us a nice forecast. If they make those airplanes to the schedules they’ve articulated, then we’ll see our business do quite well. As far as the oil and gas industry goes, we’ve taken a number of pieces of equipment out of storage and moved it into Texas and Oklahoma to meet surging demand. We anticipate continued strong results from this segment.
I would say that from a marketing perspective Bodycote has been flying under the radar with regard to the role we play in the supply chain and the size and scale of our organization (more than 170 facilities in 27 countries). We’ve really tried in the last six months to up the marketing game to get people to understand what we can deliver. Our customers are globalizing their supply chain, but at the same time they’re desperate to cut the number of suppliers they have. Bodycote is in a good position to help these companies with regard to special processing. They don’t have to add a supplier to their list if they want to have processing done in places where we can support them.
Prior to joining Bodycote in April 2009, Tracy Glende worked for Gerdau Ameristeel in Tampa, Fla., as a vice president and general manager. Prior to Gerdau, he spent 15 years working for Honeywell International in multiple locations as a vice president in both the Aerospace Division and the Automation and Control Division. Glende holds a BS in Electrical Engineering from Lamar University in Beaumont, Texas, and an MBA in International Business from the Arizona State University, W.P. Carey Business School in Tempe, Ariz. He has spent his career working in the aerospace and oil & gas industries managing businesses in the U.S., Canada, Mexico, U.K., France, Germany, Czech Republic, Finland, Australia, China, India, Singapore, Indonesia and Malaysia.