APPLIED PROCESS’S POSTHAVEN

Fifty years ago this month, Bob Keough, a 45-year old engineer, banked on his previous 20 years of thermal processing equipment and heat treating experience and took an entrepreneurial risk.  With a couple of his brothers and some partners, in a former food warehouse on Idaho Street in Detroit, Michigan, he started Atmosphere Furnace Company and a commercial heat treater aptly named Controlled Atmosphere Processing Company (CAPCO).

 In March of 1962 Detroit had, perhaps, the most competitive heat treat market on the planet.  Commercial heat treaters were in great abundance.  One seasoned heat treater commented that, “In those days Detroit had a heat treat on every corner”. Bob Keough needed a niche if his businesses were to survive……so he invented one.

 Conventional quenching and tempering, carburizing and hardening, and nitriding were all well established in the area.  Austempering, however, was essentially a process that was restricted to the highest value applications.  Small, salt-to-salt processing lines (more often used for tool hardening) were the primary processing systems in use. These systems worked well for tooling and armaments, but when used for processing small, medium carbon, steel stampings the price for was prohibitive for high volume applications like automotive stampings.  Larger cast-link belt furnaces with controlled atmospheres and oil quenches were used to harden steel parts cost effectively, but these same controlled atmosphere furnaces could not be used with a molten salt quench due to the risk of explosion associated with a carbon and nitrate salt mixture. 

 Mr. Keough saw his opportunity.  He integrated a 1,500 lb/hr (680kg/hr) continuous, cast-link, atmosphere controlled furnace with a nitrate/nitrite salt quench using a clever combination of a quench curtain and a gas eductor that mitigated the risk of explosion.  Overnight, this development dropped the price for Austempering of steel stampings by an order of magnitude.  This continuous, atmosphere-to-salt process became the cornerstone of the Keough businesses and created a minor revolution in the light-weight steel stamping business.  It allowed for thin, complex stampings to be bright hardened to Bainite with little or no distortion, good ductility and resistance to hydrogen embrittlement, even at hardnesses exceeding Rc40.

 Bob Keough wasn’t done.  The continuous mesh-belt Austemper and the fully integrated batch atmosphere-to-salt (UBQA) types of equipment followed in the next two decades.  These developments have moved Austempering of steel and iron into the mainstream of thermal processing.  AFC-Holcroft, Austemper Inc., Atmosphere Heat Treat Inc. and the Applied Process family of companies can all trace their roots to these developments and they continue to innovate in Austempering.  With the introduction of the 10-ton Monster Parts™ UBQA line at AP Westshore in Oshkosh, Wisconsin, the legacy lives on.  But it all began 50 years ago in a little food warehouse in Detroit when Bob Keough took a risk and acted on an innovative idea.

Big is the operative word right now at Applied Process.  Big changes.  Big plans.  Big opportunities………in fact, MONSTER opportunities.

At AP we have increased our capacity by 40% in the last two years and, by golly, we filled it.  Thanks to our customers for their business and, at times, for their patience while we worked through BIG backlogs.  We are hitting stride now and helping our (very busy) customers to thrive .  Our foundry customers know that they make higher margins on Austempered Ductile Iron (ADI) than they do on regular ductile iron so they are happy to work with us to sell ADI conversions.  What’s not to like about replacing an imported welded-steel forging with a domestic ADI casting?  We think that’s a BIG win.

Speaking of BIG, our Monster Parts™ division is on track to be commissioned in Oshkosh, Wisconsin, USA within a few weeks.  It’s BIG news.  It’s a BIG furnace and we’re looking for BIG opportunities for it.  How much fun is a furnace with a 400,000lb nitrate/nitrite salt quench?  Big fun.  After all, at Applied Process we are passionate people providing innovative Austempering solutions.  With our new tool we’re talkin’ 10 tons BIG.

AP is working with Joyworks Studio on a developmental project that could have a BIG impact (pun intended) on its market.  When there’s a commercial problem to be solved the AP team sees that as a BIG opportunity.  We don’t just talk about ‘em.  We solve ‘em.  That’s what makes us a BIG player in the world of Austempering.  Just keep looking for BIG things from the AP team……the next one is, literally, right around the corner.

If we could tell you all the good stuff we’ve got going on your head would explode.  But there’s PLENTY of good stuff we can report.  With our aggressive capacity increases we have now worked our backlogs back down to historical levels.  In fact, we caught up so quickly that we happily surprised some of our customers who had dialed in extended turn times.  It’s good to see some concrete around the bins again!

 Just this week an OEM truck manufacturer gave AP Westshore the second highest quality audit score ever and the highest score ever awarded to a heat treater.  The auditor was effusive in his praise.  Well earned, Oshkosh.  Our customers know that for the highest quality Austempering services available anywhere the AP companies are the benchmark.

An international producer of critical pressure vessels is successfully testing ADI components.  A major tier supplier of heavy truck suspension components is forecasting a 30% increase in orders for critical ADI structural components that replaced expensive, heavy, steel forgings.  A major bearing manufacturer just cut AP Livonia the largest single purchase order ever.  Railcar production, and production of the critical ADI components on them, is skyrocketing. New ag, mining and turf care consummables are being converted to ADI and CADI™ weekly.  US light vehicle production is climbing and Austempered iron and steel components are included in their suspensions, engines and transmissions.

The Monster Parts™ Division is soon to be commissioned and we’ve already lined up major OEM’s and tier suppliers with components as large as 7 tons and two meters in diameter.  With our new Monster Parts™ capability we will be opening markets up to ADI and Austempered and Carbo-Austempered™ steel that heretofore were the sole domain of pearlitic and martensitic steel forgings, castings and weldments.

On a lighter note, just today, truck traffic into AP Westshore was blocked by a disabled truck.  Ironically, a cast aluminum wheel hub on the trailer had failed, shearing off the bolts and locking up the axle.  John Wagner and the APW crew were quick to point out to the driver that if he had been equipped with a lightweight, Walther EMC Duralight® ADI hub the failure would never have occurred.    

We’re here.  We’re energized.  We’re doing our jobs, making stuff in the USA……. and no amount of headwinds from Washington are going to stop us now. 

Energy. Green. Sustainable. Energy Independence. Carbon footprint.  Climate Change.  Greenhouse gases.

 The previous terms have been brought to you by the educational system and the media.  We’ve all heard them over, and over, and over.  So let’s have a rational discussion.  Perhaps as mere mortals we can, in fact, affect positive change.  But what IS positive change?  There is energy in everything we do, consume and utilize.  

We require energy to breath, to walk, to think and to do any function we perform.  It takes a lot of energy to heat us, cool us, feed us, water us and transport us.  We’ve heard that we need to have a smaller carbon footprint.  What the heck!? ….we ARE a carbon footprint.  All organic matter: humans, animals, plants are made of various carbon molecules and water.

 We’ve been told that CO₂ is a “greenhouse gas” that settles into our upper atmosphere and reflects heat back to the earth causing climate change.  Although millions of years ago CO₂ was higher than it is now, CO₂ content in the earth’s lower atmosphere is higher now than it is has been in thousands of years leading some to conclude that humans are to blame…..but then what’s with the much higher CO₂ millions of years ago?  Who caused that?  And what happens if CO₂  goes to zero?  What we used to learn in school is that plants take in water, carbon-based nutrients from the soil, CO₂ and sunshine to make cellulose and grow…..and give off oxygen.  If CO₂ in the earth’s atmosphere were to go to zero all plant life on earth would quickly perish, and so would we.

 At a recent Western Energy Alliance conference in Colorado author Robert Bryce, Senior Fellow at the Center for Energy Policy and Environment at the Manhattan Institute, cited statistics that world-wide energy consumption in 2010 increased 28% to the equivalent of 210 million barrels of oil per day, 87% of that from hydrocarbons (oil, coal, natural gas and their derivatives).  That’s a LOT of CO₂ being produced by burning hydrocarbons. 

 I could be a little cynical here and say that perhaps we should just plant a bunch of trees….which would grow like weeds in the CO₂-rich environment and provide additional carbon-based fuel and useful cellulosic materials.  But let’s just suppose that it’s a rational, sustainable solution that can’t POSSIBLY work.  So what’s left?  Conservation.  What is conservation?  It is doing the same amount of “stuff” with less energy or doing more stuff with the same amount of energy.  In manufacturing it’s what we call increasing productivity…..producing more with the same or less…..less man-hours, less materials, less space…..all things that embody a certain amount of energy.

 Speaking of sustainability, what about wind, solar and nuclear?  Nuclear provides clean, efficient power…..and low-level nuclear waste that must be safely stored for thousands of years.  Wind and solar power are conceived as sustainable but the reason they are so expensive is that they consume huge amounts of energy to produce the wind turbines and the solar panels.  That up-front energy cost is the barrier to entry and in some cases their lifetime energy output never equals the energy input to build and maintain the devices.  So, are these methods “sustainable”?  We hope that engineers and scientists can make them so in the future.

 Recent natural gas and oil finds in North America make the prospect of us becoming energy independent a near-term possibility.  At a recent meeting of the Kentucky Oil and Gas Association, Brian Havacivch reminded the attendees that five years ago we expected to be importing large quantities of liquefied natural gas (LNG) and we capitalized facilities in the Gulf States to receive those imports.  With the oil sands of Canada and fracking technology allowing us to reach huge fields of natural gas in the north-central and Appalachian regions of the US those facilities will be put to use soon but for EXPORTING instead of importing LNG.  The current US natural gas price of about $4/MMBTU makes the export of LNG to Europe at $10/MMBTU or Korea at $12/MMBTU very desirable to producers.  This same new upswing in, now accessible, reserves will keep the price of natural gas low for a long time going forward……but not forever.

 So, this is all very good news for the US.  We’ve got lots and lots of natural gas which produces less CO₂ than coal or oil when burned.  These reserves stand to make us energy independent.  But in the end it brings us back around to us…..we consume the energy.  We can argue about mankind’s effect on the climate but what we can agree on is that we need to continually increase our productivity and energy efficiency which, by definition, both require us to do more with less energy.

 At Applied Process Inc. we are doing our part.  As Austempering experts, a principal process of ours is Austempered Ductile Iron (ADI).  ADI, with its high strength-to-weight ratio can replace steel or aluminum castings, weldments or forgings at equal mass.  When you then add that ADI embodies far less energy per unit of mass than steel or aluminum technologies, ADI is a green alternative……and that’s just the material/process consideration.

 Applied Process Inc. is committed to continually increasing productivity.  In our fiscal year 2011 we increased our output per man-hour by nearly 11%, our output per furnace hour by nearly 6% and we reduced our energy consumption per unit sale by nearly 6%.  These improvements did not happen by accident.  They were the result of aggressive employee training, demanding internal quality systems, fervent preventive maintenance, focused capital expenditures and implementation of new technologies.  Our customers, our stakeholders and our communities expect it, and AP is delivering.

We were working in the lab, late one night,

When our eyes beheld an AWESOME sight,

When the MONSTER we created began to rise,

Then suddenly to our surprise…….

There’s a Monster coming!  With Halloween just around the corner it seems fitting that I’d be talking about a MONSTER in this blog.  It’s not some gored zombie, or Sasquatch, or Frankenstein (although it’s big and has bolts in its neck).  It’s not even organic, although we’re breathing life into it now.  It’s the Monster Parts™ furnace that’s dwelling in Oshkosh……and it’s a MONSTER.  With a footprint that is 7ft x 8ft and the ability to swallow ten tons in one sitting it’s the largest integral quench atmosphere batch furnace in the world.  Oh, and did we tell you that it has a salt quench?

Long in the making, this MONSTER will allow us to Austemper steel and iron parts heretofore not possible.  The furnace design required extensive (and close) teamwork between the Applied Process companies (www.appliedprocess.com) and AFC-Holcroft (www.afc-holcroft.com).  As described by AFC-Holcroft’s Bill Disler, “This project was a collaborative effort between AFC-Holcroft’s engineering and production staff and the engineering and plant services staff at the Applied Process companies”.  And here’s the cool part.  The Monster Parts™ furnace will run all the stuff that our customers now have AND adds the capability for us to run large and heavy steel, iron and Austempered Ductile Iron (ADI) parts.

The Monster Parts™ furnace will be capable of heating the parts in a carburizing or neutral atmosphere.  The recovery rate and temperature uniformity will meet or exceed that of our existing lines…..in a big way.  Quite frankly, this furnace is awesome.  Our Technical Sales Group Leader, Vasko Popovski says that “the new furnace means the engineering community is now freed from the overwhelming reliance on large-scale steel components in favor of less costly and lighter ADI components”.  Think about it; weldments, stampings, forgings all machined and welded together to make a large, gangly component.  Replace that with a one-piece, elegant ADI casting.  Wow!  That being said, this line will also carburize and/or neutral harden big steel stuff too. 

This furnace line will give Applied Process a unique opportunity to work with engineers, buyers and the management of manufacturers to develop new, cost-effective conversions of large parts….Monster Parts™…and will increase our capacity to process conventional Austempering work.  We’ve been anxiously awaiting this MONSTER…..and now it’s coming.  Trick or Treat.

If we haven’t scared you away yet you can contact Vasko at vpopovski@appliedprocess.com and he’ll be glad to listen to your scary story.

The Applied Process family of companies just concluded a record fiscal year.  It didn’t happen by accident.  It took the focus, energy and commitment of our employees and licensees worldwide.  Excuse me for waxing sentimental, but I’m certain that we’ve got the best team ON THE PLANET.

Now, if you think I’m just blowing smoke, consider this.  During a recent in-person customer survey the quality executive at a major international axle and suspension company stated “it is clear from the efforts that the folks at AP have made that they are focused on being a value-minded supplier”.  You couldn’t phrase it any better.  The customer has high praise for our AP Livonia team and makes no bones about sharing it.  That is not just a satisfied customer.  That is a loyal customer, and AP works 24-7 to continually earn that loyalty.

Recently, Henry Frear, one of our Sales Engineers, teamed up with one of AP’s foundry customers and engaged a prospective component supplier.  They defined a serious life problem with the incumbent consumables used in certain large recycling machines.  Henry saw the opportunity to help this customer solve this problem and he ran with it.  He consulted with the customer on the part design and the target material/process combinations.  Henry returned to his alma mater, University of Wisconsin- Platteville, and with the help of students Joe Gray and Philip Aliota, they modeled, machined and finished a multiple cavity pattern and produced 200lb chemically bonded sand molds.  With the assistance of the AP Tech R&D crew, the molds were poured in alloyed ductile iron at the Joyworks studio in Ann Arbor, Michigan.  The parts were then cut off, cleaned and sent to Oshkosh, Wisconsin.  Faced with a testing deadline, the AP Westshore team got the numerous iterations of parts Austempered and shipped to the test site on the west coast.

As I write this blog the parts are on test.  The customer explained to us that the regular life of those parts is 3 days.  The parts currently on test will soon enter their third week of testing.  The customer also indicated that the superiority of this new Austempered product could have them (happily) increasing their production plan by over 10 times……so much so that he questions if the casting supplier will be able to manage the volumes.  (That’s the kind of problem that particular foundry would LOVE to manage).  AP’s Technical Sales Group Leader, Vasko Popovski described this as “a total team effort”.

Each of these stories is unique, but together they form the character of Applied Process.  We are passionate people providing innovative Austempering solutions…….and, BOY, am I proud of our team.

We get paid to Austemper people’s steel and iron parts.  What we really do for a living is help current (and potential) customers replace one material/process combination with a better, faster, cheaper one.  Very often, that solution includes Austempered Steel, Carbo-Austempered™ steel, Austempered Ductile Iron (ADI), Carbidic Austempered Ductile Iron (CADI™), LADI™ or Austempered Gray Iron (AGI).  US manufacturers are discovering the benefits and thriving with the results.

According to an article in IndustryWeek.com (www.industryweek.com) by Carlos Cardoso, President, Chairman and CEO of Latrobe, PA based Kennemetal (www.kennemetal.com ), manufacturing is leading the recovery and our elected officials are finally starting to take notice.  Mr. Cardoso shares a long held belief of this author when he says, “To grow our economy, we have to make something or grow something, plain and simple”.  Amen. 

Jobs result when wealth is created.  Jobs created by governments or handouts are gone when the budget or stipend ends.  Jobs resulting from wealth creation are self sustaining.  In fact, in 2009 the average manufacturing worker made 17% more than a non-manufacturing worker.  According to the same article, manufacturing supports 18.6 million jobs in the US, and employs 12 million workers (9% of the workforce) directly in manufacturing.

In a recent conversation with this blogger, Brian Beaulieu, CEO of the Institute for Trend Research (www.itreconomics.com ), an economic consulting firm, indicated that we can expect continued growth at least into the first half of 2013.  After that, the jury is still out.  Recent talk about an imminent “double dip” recession is not helping peoples’ confidence.  Brian exhorted us to, “Keep the faith…no economic bust for the next 22 months”.  There, Brian, it’s in writing, ready or not.  Readers of this blog will be looking back in June of 2013 to see how you did!

It’s also easy to get a little depressed when high profile, big wigs like Donald Trump say things like, “We don’t make anything here anymore”.  I like his moxy but he seems to be a bit of an economic idiot.  According to IndustryWeek.com the US is the world’s largest manufacturing economy, producing 21% of all manufactured goods worldwide…..and doing it with under 6% of the world’s population.  You wouldn’t know it to listen to the news, but the US produces about 1.5 times more manufactured goods than China with about one fourth the population.

As to the notion that manufacturing is declining and we are becoming a “service economy”; don’t you believe it.  According to the IndstryWeek.com article, US GDP and US manufactured goods have both grown by about seven times (in inflation adjusted prices) since 1947.  Look around.  Our manufacturing plants are humming and backlogs are sizeable.  Construction equipment production is up by over 60% this year.  Heavy truck production is up by 50% and there is a 115,000 unit backlog for Class 8 tractors.  Class 8 trailer manufacturers are working through a 100,000 trailer backlog.  Railcar orders will double this year and there’s a 12,000 car backlog.  John Deere could sell an additional 19 combines per week if they could just get the parts and build them fast enough.  In manufacturing, there’s plenty of good news to go around and Applied Process Inc. is glad to be working with our manufacturing partners to grow the pie.

Strap in.  If Brian Beaulieu is right, we’ve got plenty of work to do.  Like Mike Rowe of popular show "Dirty Jobs" says, "We Make America".  So do we, Mike; so do we.

Austempered steel and iron components are critical to today’s Class 8 Trucks (over the road trucks with load capacity exceeding 33,000 lbs).  Austempered Gray Iron (AGI) cylinder liners make diesels more durable.  Austempered Ductile Iron (ADI) suspension, powertrain and engine components make those systems quieter, lighter, more durable and cost effective.  (In fact, heavy truck is the number one market segment for ADI worldwide).  Austempered and Carbo-Austempered^sm components in heavy duty powertrains push their performance envelopes.  Applied Process is proud to be a world-wide leader in Austempering technology and the significant role we play in the production of world-class heavy trucks.

Today’s Class 8 trucks are lighter, more powerful (yet more efficient) and more durable than ever.  Tiered, increasing Federal engine regulations in the last ten years have caused sales to lurch initially up, and then downward, from over 350,000 units per year at the peak to less than 150,000 units last year.  But those regulations (and the Great Recession) are now behind us and demand is stirring.  With TransCore’s North American Freight Index running 10-15% ahead of last year month-to-month and fuel prices moderating, trucking firms are in a buying mood.  Heavy Duty Tucking reported on research by ACT Research that orders in the first quarter of 2011 are the strongest since 2006.  In fact, the article reports that the backlog (as of June) of orders for new, Class 8 trucks is an eye-popping 126,000 units……a 55 month high.

In an interview with Heavy Duty Trucking, Navistar’s Senior VP of North American Sales was quoted as saying, “There are a lot of orders out there, but I’m going to tell you something: they aren’t going to get built because (there) just isn’t the supply base out there to handle the kinds of increases we’re seeing”.  Ditto comments by the President and CEO of Daimler Trucks North America, Martin Daum made at the Mid-America Trucking Show.  Hebe referred to supply chain problems with “tier two and three” suppliers in places like India, China and Korea failing to deliver and then, “the whole thing falls apart”.  In the interview Herbe verbalized what we already know, that “A lot of production has also moved to Mexico in the past few years.  There isn’t the capability to ramp up capacity in those other countries like we have here.  It’s just not going to happen”. 

Hmmm, that would seem to be an endorsement of US production capabilities.  If they went off shore for components and moved assembly to Mexico to save money and now cannot produce say, 50,000 additional trucks this year, I wonder how much money they actually saved?

So, this year in North America we’ll build 225,000 or up to 300,000 trucks depending on how well the Indian, Korean, Chinese and Mexican suppliers do?  Thank goodness for our Steady Eddy US manufacturing customers who are stretched to the limit, but supplying high quality components just-about-on-time. I’m all for sourcing parts in China for the Chinese market, or in India for the Indian market, or in Korea for the Korean market,  but do you think the Class 8 OEM’s might re-think sourcing parts in those countries bound for trucks built in North America?  I guess this year the answer to that question will depend on how much the “low-cost” outsourcing costs them in new truck sales.  Don’t mind me. I’m just the heat treater…..it must take a high-paid OEM bean counter to figure this stuff out.

Hundreds are expected to attend the 5^th China ADI Conference 7-9 August 2011 in Changchun, Jilin, China.

This week marks the 5^th gathering of the China ADI Conference.  The venue is the city of Changchun in the Chinese province of Jilin.  (If you are looking for it on the map just look a few hundred miles north of the Korean border).  Loosely translated, Changchun means “long spring” but the winters here are none too short and right now the summer is quite hot.  The conference will feature dozens of papers presented by authors from several countries.  (Sorry for you non-Chinese speaking people, the language of the conference is exclusively Mandarin).  It will include an Open House at Jilin ADI, a new commercial heat treating shop (and an Austempering licensee of Applied Process Inc.) that has as its centerpiece an 80”x80”x56” Universal Batch Quench / Austemper furnace, currently the largest integral salt quench batch furnace on the planet. 

A large turnout of the hometown First Auto Works (FAW) crowd is expected.  FAW already incorporates some ADI designs in their vehicles but they are busily designing components from differential gears to multifunction suspension brackets to axle components.  To give you an idea of the scope of FAW’s importance to this town, 2011 is a down year for truck production here and they’ll still produce about 120,000 heavy trucks……one company, in one city.

China is the worldwide leader in the production of ductile iron.  In recent years the quality and capability of the ductile iron producers in China has improved markedly.  In tandem, world-class Austempering capabilities have been capitalized and ADI production in China is climbing rapidly.  Heck, they’ve even got their own, brand spankin’ new ADI standard.

If you’re so inclined, hop a plane (or two, or three) and come on out to see what’s shakin’ with ADI in the Middle Kingdom.