August 2008- With all of the modern gadgets of today's technology-driven society, it's a wonder that anyone gets anything done. Cell phones are just something to fiddle with during a meeting. The Internet is a bottomless well of distractions throughout the work day. And cable television, depending on your package and provider, works in a thousand different ways to tune out obligations at home, in high definition. Attention deficit disorder isn't just a clinically diagnosed condition, it's a 21st century epidemic.
The treatment, however, is simple. All it takes is a little focus. Kaiser Aluminum, Foothill Ranch, Calif., keeps its initiatives in the crosshairs by eliminating waste, adopting lean practices and concentrating on operational investments and upgrades to meet customers' needs. The company consolidated its efforts and in doing so, found expertise in a variety of products and markets.
"We can't be all things to all men so we're focusing on the areas where we have a significant market position and significant market expertise," says Martin Carter, vice president and general manager of common alloys. "The restructuring of the company during Chapter 11 was really the foundation for the results that we saw in 2007."
And Kaiser's fourth quarter and year-end results for 2007 were astonishing. In the matter of one year, the company nearly doubled its net income. For the fourth quarter of 2006, it had a reported net income of $12 million. For the fourth quarter of 2007, the company had a reported net income of $24 million.
In order to achieve specific goals, Kaiser’s investment initiatives are also substantial. Its $244 million organic growth program will act as a platform for expansions and acquisitions, and in the case of the company's Trentwood, Wash., rolling mill facility, it targeted heat-treated products.
"They were making a lot of coil products and brazing sheet products for the automotive industry," says Keith Harvey, vice president of sales and marketing for distribution and aerospace. "We took a look and said that those weren’t areas that we have a lot of expertise in. And so we took Trentwood, pared it down and focused it only on heat-treated products. That was a huge change for that business, but they’re good at what they do now."
The $139 million Trentwood investment was motivated by an existing customer base of aircraft manufacturers that had a need, which, at the time, Kaiser couldn't fulfill. "We took a look at Trentwood and knew what we had to do," Harvey says. "When the aerospace market came back and our competitors were still multi-focused, we saw the benefits of our decision. This was a plant that was entirely focused on the products that one particular market would use."
An upcoming project is taking place in Kalamazoo, Mich., and the justification for the construction of the facility lies heavily in servicing the distribution market. Fifty percent of what the company produces feeds into service centers. And, as with all of the company’s initiatives, the Kalamazoo project has a tight focus.
"One of the pieces that we're currently working on is the soft alloy distribution value chain," Carter says. "In terms of that exact philosophy, we're taking a close look at the inefficient value stream that we had to the east of the Rockies and we’re consolidating that into one operation that's at the epicenter of the most crucial market for us in those products. That’s exactly what we're doing at the Kalamazoo facility. While we now effectively serve from four operations, we'll do it from one operation which is optimally located for our customers and with all of the technological benefits that go along with that. It’s just another manifestation of the strategy that’s been in the works and executed in some of our other operations."
The facility in Kalamazoo will primarily feature bar and rod products once it’s up and running. Carter says that while the physical assets aren't yet in place, the site has been selected and the equipment has been ordered. The project will be in the works until 2010. Kaiser's Los Angeles operation will also benefit from company investments. Upgrades at that facility play into the idea of overall business sustainability.
Kaiser specializes in common alloys, the soft alloys found in the distribution, transportation and automotive markets, and in heat-treated products, which supply the aerospace and defense-related markets. 2007 marked record shipments for the company’s heat-treating segment. In addition, Kaiser announced a record operating income for its fabricated products. Harvey says that this segment of business is a recent area of concentration.
"We used to have, 10 or 20 years ago, the feeling that you really had to have both of those segments, the primary side and the fabricated product side, but that's not necessarily the outlook that Kaiser has going forward," he explains. "We've seen a lot of globalization on the primary side. When we looked at our fabricated products as we were coming out of Chapter 11, we realized that they fit our path. We’ve been successful in implementing that strategy while coming out of that period."
Kaiser’s fabricated products fall into three categories. In 2007, custom products made up 21 percent of its fabricated sales, general engineering items made up 40 percent and aerospace and high-strength products came in at 39 percent. End applications include air cylinder tubes, tooling plate, semiconductor vacuum chambers, ABS antilock braking systems, drive shafts and armored vehicles.
"I'm proud of the way that Kaiser has focused its product availability on the defense effort," says Harvey. "Kaiser was one of the first of the domestic mills to meet the challenge of providing material for armor protection, and I would say that we’re the largest supplier of that. We felt it was our responsibility. And that goes not just with our sheet and plate, but also with our common alloy market."
No matter the type of product or end use, however, Kaiser aims for superior production in all of its facilities. Kaiser Select is a branding applied to products that are meant to meet or exceed a customer’s particular needs.
"We're not a company that creates products to push out to a faceless market," says Carter. "That's not the way we work. And we go beyond that. One of the processes that we work with is Kaiser Select. It covers our product range. It sometimes starts out with a customer or even a customer’s customer with a specific need."
Carter says that it's all about what Kaiser can do to help a customer become more successful in his business. "Having understood that from a metallurgical point of view, from a metal processing point of view and from a way that we set up our systems, we can look at the entire value stream to meet a specific need," he says. "It's a measurable approach. The result is that the customer gets exactly what he wants.
"It's not just about putting a product on a customer’s doorstep and wishing him well," he continues. "It's about deeply integrating into specific manufacturing and engineering needs. I can point to a particular case, one among many, where we took a competitive product head-to-head against our own product. The customer was interested in improving efficiency. The machining time was reduced by 30 percent by using something that we designed specifically for that customer. When producing millions of these components, that’s a tremendous benefit."
To produce a product that can result in higher productivity and improved performance, the process starts by opening a dialogue with the customer. And Kaiser gives its undivided attention. There's no place for selective hearing when it comes to determining a need, just as there’s no room for inconsistencies.
"The key to our Kaiser Select offerings is being able to offer bundle after bundle after bundle," says Harvey. "These folks want to set up their machines, putting efficiencies in and taking waste out. If they can get someone to supply a high-caliber product from lot to lot, from batch to batch, every time they place an order, there's value to that. Our job is to put value in and extract value back out."
Making investments to Kaiser facilities and the company’s R&D efforts only makes it easier for the aluminum provider to become more efficient in meeting customer and product goals time and time again.
"It's not just about trying to improve the quality, it’s about ensuring consistency from the first bar to the millionth bar," says Carter. "The first bar and the millionth bar should be exactly the same." Customer service has always been paramount at Kaiser, ever since it opened its doors more than a half century ago. Some of its customers have been with Kaiser since Henry J. Kaiser founded the aluminum company in 1949. Whether a new customer or old, they have always been the focal point, and it's the company's attention to detail that keeps them coming back year after year, decade after decade. MM