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PUBLISHER’S LETTER

t has been from a complex and diverse toolbox that the United States has shared its merchandise, its textiles, all of its goods, with its North American partners, first through a

pact with Canada in 1965 and then through the North American Free Trade Agreement (NAFTA), a product that came into its own during the Clinton administration. It allowed Mexico to participate in the trading game, and opened up another causeway of growth through the U.S. as it acted to cement vital trade relationships. An article in this issue discusses “the very large and mutual gains from free trade within North America” which began with the U.S.-Canada Auto Pact of 1965 and extended into 1994’s North America Free Trade Agreement, which completed the regional economic integration among the three democracies based on private sector–driven free trade and marketbased currencies. While commentary to the contrary bemoans the structure of free trade, a report by Ernest H. Preeg, Ph.D. recounts the free trade success story, a three stage process that started with the U.S.-Canada Auto Pact of 1965, which will be 50 years old in 2015. Begun to reverse a protectionist path in Canada, which was set to become self-sufficient in automobile production, at considerable cost to U.S. exporters and Canadian consumers, what was called the Auto Pact produced rapid and reasonably balanced growth in the largest manufacturing sector of trade, of benefit to both countries, and especially to Canada. In its final form the agreement eliminated barriers to 2 INDUSTRY TODAY

PUBLISHER’S LETTER

trade and liberalized cross-border investment.

states.

The next move was the extension of North

Preeg maintains that the overall assessment

American free trade to include Mexico through

for U.S.-NAFTA trade in services is that it is

NAFTA, whose negotiations were far more

flourishing in all directions. In particular, all

complex, involving comprehensive free trade

three governments should support an “action-

with a newly industrializing Mexican economy.

oriented, integrated energy strategy” to make

It involved 14 months of intense talks, including

North America a large net exporter of fossil

100 pages of rules of origin for trade, and was

fuels. Globally, he states, this would undermine

signed following the election of Bill Clinton to

OPEC and Russian oil and natural gas monopoly

succeed George Bush in 1992.

pricing.

NAFTA brought to a successful conclusion

The NAFTA relationship also is of growing

the three-stage, 50-year process of North

importance for U.S. international trade and

American free trade and investment, including

investment and provides the free trade, market-

the historic breach of the north/south divide

based currency model for restoring a fair and

with the inclusion of Mexico, and also created

balanced trading system. U.S. manufactured

the basic framework for the next decisive phase

exports to Canada and Mexico of $407 billion in

of regional economic challenges.

2013 have risen to 35 percent of global exports,

By far, according to Preeg’s figures, the most

while the surplus of $23 billion stands in dramatic

important feature of the trade agreement is

contrast with the $524 billion deficit with the rest

the dominant role of manufacturers. “In 2013,

of the world. “These basic facts go a long way

U.S. exports by manufacturers of $406.6 billion

for understanding the policy course ahead,”

accounted for 77 percent of total exports and

Preeg states.

the $383.9 billion imports were 63 percent of

There is more to be done, of course, to

total imports,” he writes. “Manufactured exports

consolidate and improve the North American

grew by 52 percent from 2009 to 2013, much

free trade relationship. So far, the course of free

faster than the 34 percent export growth with

trade had enabled a steady stream of progress

the rest of the world, rising to 35 percent of

into Mexico, Canada and the United States.

global exports, and with NAFTA manufactured

Manufacturers should continue to take

exports, more than five times larger than the $76

advantage of this 50-year growth strategy that

billion of exports to China.”

many of them had no involvement in establishing

Even more striking, the 2013 NAFTA surplus of $22.7 billion stood in dramatic contrast with the

but in whose continual improvement all of them have a stake.

$524 billion deficit with the rest of the world, “of which $351 billion was with China. Moreover, this strong U.S.-NAFTA export performance for manufacturers is likely to continue,” Preeg INDUSTRY TODAY 3

CONTENTS

06 FOCUS: NAFTA

FEATURE ENTRADA GROUP

A 50-YEAR SUCCESS STORY FOR U.S. MANUFACTURING

FOUCS FOCUS • NAFTA

NAFTA • FOCUS

NAFTA:

A 50-year success story for U.S. Manufacturing

The very large and mutual gains from free trade within North America began with the U.S.-Canada Auto Pact of 1965, which created the economic and political momentum for the comprehensive U.S.-Canada free trade agreement of 1988. The path-breaking extension of free trade by these two industrialized nations to a major developing country, Mexico, in the 1994 North America Free Trade Agreement completed the regional economic integration among the three democracies based on private sector–driven free trade and market-based currencies. This report by Ernest H. Preeg, Ph.D. recounts this extraordinary success story, which refutes recent ill-informed adverse commentary, and is in three parts.

he 50-Year, ThreeStage Historical Path

Comprehensive regional free trade among two industrialized and one developing country—the United States, Canada, and Mexico—was a three-stage process of bold and forward-looking initiative by the three governments that began with the U.S.-Canada Auto Pact of 1965, which will be 50 years old in 2015. This agreement for the dominant manufacturing sector of trade was a creative response to strong nationalist pressures in Canada to turn inward and become self-sufficient in automobile production, at considerable cost to U.S. exporters and Canadian consumers. There was growing anti-Americanism in Canada, with concerns that U.S. automotive production would overwhelm Canadian industry, including through special interest actions in Washington at Canadian expense.

Mexico’s

To reverse this protectionist path, the two governments acted boldly to create a broadly based sectoral free trade accord, including a safeguard that Canadian automotive production would not fall below the 1964 level. The Canadian government acted in the face of strong protectionist opposition. For the United States, this preferential trade policy initiative was fundamentally at odds with postwar U.S. trade policy based on most-favored-nation nondiscrimination in trade. The 16 INDUSTRY TODAY 1962 Trade Expansion Act was President Kennedy’s number one legislative priority, designed to cut tariffs across the board by 50 percent in order to reduce protectionism within the preferential European Community. Moreover, free trade limited to one sector was in violation of the GATT system, which only permits free trade agreements that include substantially all of the trade among members. Nevertheless, to avoid the

Manufacturing Might

INDUSTRY TODAY 17

16 FEATURE: ENTRADA MEXICO MEXICO’S MANUFACTURING MIGHT

INDUSTRY TODAY 3

2 INDUSTRY TODAY

26 LEADERS: AKZONOBEL

FEATURE FOLEY & LARDNER

Re-Shoring and U.S. Regulation of Exports and International Conduct:

TAKING A LONG RANGE VIEW TO ADAPT TO MARKET TRANSFORMATIONS LEADERS AZKONOBEL

LEADERS AKZONOBEL

The world has always been in constant change, yet it has accelerated at an unprecedented rate in recent decades. Andrew Burgess, Chief Scientist for Akzo Nobel, lays out 5 keys for businesses trying to stay above the fray.

Taking a ‘long range’ view to adapt to market transformations

e live in an era when technology and society are evolving faster than the ability of many organizations to adapt. Whether it’s iPods replacing walkmans, e-readers edging out books or digital downloads making CDs obsolete, the pace of change is relentless. As one eminent sociologist said in paraphrasing Charles Darwin’s Origin of the Species, “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change.” The world is changing at a rapid rate. It’s not confined to technology. Climate change, often thought of as a long-term challenge, is affecting ecosystems and economies around the world today. Resources are being depleted, an increasingly urbanized population is creating new demands, economic powers are emerging, and more advanced technologies are continually entering the market-

corporate@industrytoday.com

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place. All of these are creating waves of economic and social change. Global mega-trends such as these – and the unavoidable shift and need to do more with less – are driving major transformations in our society. Businesses need to think about how these trends are impacting their customers, not just today, but tomorrow. They need to think in a structured and constant way about the future, challenge their assumptions about the world, assess and navigate risk, and seize opportunity. It is vitally important for industries and companies to 34 be INDUSTRY TODAY aware of signs of coming trouble and hints of opportunity. Recent history is littered with examples of companies that failed to keep up with shifts and adapt accordingly. At AkzoNobel, we believe there are five keys for us to stay ahead of the competition: • For one, we believe success depends on the organic growth of one’s business through

“Wily” Ways to Deal with the Regulatory Consequences of America’s Manufacturing Renaissance

INDUSTRY TODAY 35

34 FEATURE: FOLEY & LARDNER

INDUSTRY TODAY 27

26 INDUSTRY TODAY

www.industrytoday.com

When people think of low cost manufacturing, the first location that most often is referenced is China. And yet, in a recent report issued by the Entrada Group, titled “Where in the World?”, covering the competitiveness of manufacturing locations worldwide, a different country emerged as one of the most attractive for low manufacturing locations, and was one that may surprise some. That country is Mexico, and in a conversation with Industry Today, Doug Donahue, Vice President of Business Development for the organization that commissioned the report, talks about the history of Mexico manufacturing that led to these results, the current success manufacturers are enjoying in the region, and why the future of low cost manufacturing isn’t necessarily an “either or” scenario between China and Mexico, but rather will most likely rely on utilization of both locations, among others, in what is an increasingly global economy. Steve Engelhardt reports.

RE-SHORING AND US REGULATION OF EXPORTS AND INTERNATIONAL CONDUCT

Managing Editor: Susan G. Poeton Art Director: Seema Mazhar Project Managers: Marcos Elias, Editor: Steven Engelhardt, Contributing Designers: Jonathan Fordney, Renata Ginter, Project Director: Brian McMillan Margaret Hanscom, Amanda Larkin, Jonathan Listig, Production: Melissa S. Burge Jorge Leandro Rodrigues Juliana Teixeira Profile Writers: Dan Harvey, Reuben Ford, Rachel Hartman, Lorie Greenspan, Michael Sommers, David Soyka Morristown, NJ 07960

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Industry Today is published bi-monthly by Positive Publications LLC, 65 Madison Avenue, Suite 510, Morristown, NJ 07960. Subscription price is $55 per year. Single copies may be purchased at $15 each plus shipping. Email, fax or phone the above address for details. POSTMASTER: Send address changes to Industry Today, 65 Madison Avenue, Suite 510, Morristown, NJ 07960. Copyright © Industry Today 2014. All rights reserved. No part of this publication may be reproduced in any form or for any purpose without prior written consent from the publisher and payment of the agreed fee. ISSN # 1521-8058

4 INDUSTRY TODAY

VOLUME 17 • ISSUE 2

PROFILE • THALES CANADA

THALES CANADA • PROFILE

54 GRAND BAHAMA

Thales Canada is a company that, while part of a much bigger global conglomerate, has been making a name on its own for quite some time. Whether it’s bringing revolutionary control systems to the transportation marketplace, bolstering a nation’s defense through its sensors, or implementing flight control systems for regional and commercial aircraft, the company’s influence is as far in distance as its impact is in depth. In a conversation with Industry Today, Mark Halinaty, President and CEO of Thales CanPROFILE • GRAND BAHAMA ada, talks about the roots of his company’s flagship products, their significance in today’s world, and why the present has him optimistic about big things in the future. Steve Engelhardt reports. hales Canada serves as the pioneer of Communications-Based Train Control (CBTC) technology, beginning their efforts back in 1985. Over time, the system evolved to meet changing needs in the transportation world, gaining in success and reputation from its

44 INDUSTRY TODAY

ability to optimize operating and maintenance costs throughout the system’s life cycle. “Our CBTC SelTrac® system was the first of its kind in the 80s, and it really has grown to become the industry standard today,” Halinaty says. The technology has a global influence,

GETTING SHIP READY GRAND BAHAMA • PROFILE

as CBTC SelTrac® system has been implemented in over 60 projects and operates on more than 1,600 kilometers of track around the world, mostly in major urban centers, and carries an estimated 3 billion passengers annually. And with Boasting three recent contracts locked

one of the region’s two largest floating docks, Grand Bahama Shipyard is the strategic harbor for cruise ships and commercial vessels. David Soyka reports on a key port of call in the heart of a major tourist destination where ships dock to “take a vacation” for repairs and upgrades.

INDUSTRY TODAY 45

44 THALES SIGNALING THE FUTURE

PROFILE • VANDERLANDE

54 INDUSTRY TODAY

VANDERLANDE • PROFILE

INDUSTRY TODAY 55

100 BERETTA TRIGGERING A DYNASTY

PROFILE • BERETTA

BERETTA • PROFILE

It’s been 488 years since Italian gunsmith Maestro Bartolomeo Beretta was paid 296 ducats for 185 harquebus barrels by the Arsenal of Venice. The invoice from 1526 A.D. is in the Venetian Archives, as that single transaction laid the foundation for what is known today as the world’s oldest industrial dynasty. Steve Engelhardt reports. eretta firearms today is an established name and leader of the global firearm industry, bringing the same craft and quality to their products that Bartolomeo Beretta demonstrated centuries ago. Headquartered in Gardone Val Trompia, Italy since its inception, the company expanded its operations to the United States in 1977. Jeff Reh, Vice-General Manager and General Counsel for the company’s U.S. division, talks about the unique philosophy that has spurred continued success for the Italian firearms manufacturer over the years, the impact the U.S. division is having in the North American gun market, and a recent significant investment into a new manufacturing facility in Tennessee, sending the message that Beretta USA is here to stay.

It’s been 65 years since Vanderlande Industries was founded, beginning as a small, family owned, tool manufacturing company based in the Netherlands. Since then, the company has evolved and grown to become a billion dollar global enterprise, integrating complex material handling systems across four industry sectors, helping companies of all sizes bring their supply chains and distribution centers up to speed in today’s dynamic business world. Martijn van der Lande, grandson of the founder and President Warehouse Automation, Parcel & Postal NA for the company, talks about the past and present state of Vanderlande Industries, as well some exciting news about the future. Steve Engelhardt reports. 82 INDUSTRY TODAY

INDUSTRY TODAY 83

SEAL of Approval Beretta USA was initially established to both serve as an importer of products to the United States from Italy, and as a repair station for any Beretta guns

82 VANDERLANDE INNOVATING TOMORROW’S WAREHOUSE

100 INDUSTRY TODAY

INDUSTRY TODAY 101

74 AIRDESIGN Designing with Speed

124 HUSSEY COPPER Element of Success

110 PTI

94 ELECTROCRAFT Crafting Custom Motion Control

118 NUTEC Powerful Insulation

64 TMSA Loading Superiority

Stepping up a Gear

INDUSTRY TODAY 5

FOCUS • NAFTA

A 50-year s story Manufa

6 INDUSTRY TODAY

AFTA:

success y for U.S. acturing

NAFTA • FOCUS

he 50-Year, ThreeStage Historical Path

To reverse this protectionist path, the two governments acted boldly to create a broadly based sectoral free trade accord, including a safeguard that Canadian automotive production would not fall below the 1964 level. The Canadian government acted in the face of strong protectionist opposition. For the United States, this preferential trade policy initiative was fundamentally at odds with postwar U.S. trade policy based on most-favored-nation nondiscrimination in trade. The 1962 Trade Expansion Act was President Kennedy’s number one legislative priority, designed to cut tariffs across the board by 50 percent in order to reduce protectionism within the preferential European Community. Moreover, free trade limited to one sector was in violation of the GATT system, which only permits free trade agreements that include substantially all of the trade among members. Nevertheless, to avoid the

INDUSTRY TODAY 7

FOCUS • NAFTA

consequences of a sharp protectionist turn in Canada, the two governments began negotiations in mid-1963 with highly able and experienced negotiators. Deputy Minister of Industry Simon Reisman headed the Canadian delegation with determination and foresight. The Department of State provided the U.S. negotiating team, since the newly created Office of the Special Trade Representative (now USTR) was not yet fully operational, headed by Assistant Secretary for Economic Affairs Philip

8 INDUSTRY TODAY

Trezise and Deputy Trade Director Julius Katz. The negotiations were completed in early 1964 and the agreement received congressional approval for implementation in 1965. Thus the first stage of North American free trade was achieved on a fast track, resolving a serious problem through creative leadership. The Auto Pact produced rapid and reasonably balanced growth in the largest manufacturing sector of trade, of benefit to both countries, and especially

to Canada. As Machiavelli observed 500 years ago, people “do not truly believe in anything new until they have had actual experience of it. Despite continued strong nationalist pressures in Canada against free trade, the Auto Pact experience was striking, and a number of Canadian academic and government studies supported further movement toward free trade, perhaps through additional sectoral agreements. The United States, however, opposed such limited agreements, in part from com-

FOCUS • NAFTA plaints lodged in the GATT over the Auto Pact, and in part from domestic opposition to further safeguards, by sector, for Canadian production. This set the stage for the big option of a comprehensive free trade agreement, which Canadian Prime Minister Brian Mulroney proposed despite strong opposition from the other two major political parties. President Reagan welcomed the initiative and negotiations began in May 1986. Simon Reisman was called out of retirement to lead the Canadian delegation and the American team was headed by experienced former deputy USTR Patrick Murphy. The negotiations were concluded in August 1987, another fast track accomplishment. The U.S. Congress approved the agreement with a comfortable majority, based on fast track presidential

authority, while the 1988 Canadian election, called the “Free Trade Election,” saw Mulroney barely win over the anti–free trade opposition parties, and the agreement promptly entered into force. The agreement was comprehensive in eliminating barriers to trade and liberalizing cross-border investment, with only a few sensitive sectors excluded by both countries. The growth in bilateral trade from this agreement was again rapid, especially for Canada. Canadian exports to the United States, about 25 percent of GDP through most of the 20th century, surged to almost 50 percent by 2000. The U.S.-Canada free trade agreement also became the first demonstration model, outside the European Union, for the global proliferation of free trade agreements over the ensuing

25 years. And the next major free trade agreement, which also bridged the divide between industrialized and developing nations, was the extension of North American free trade to include Mexico through NAFTA. The NAFTA negotiations were far more complex, involving comprehensive free trade with a newly industrializing Mexican economy. The Mexican state oil monopoly, Pemex, was excluded, and the agricultural sector involved three separate bilateral agreements, including a 15year phasing out of Mexican import restrictions. The initiative for NAFTA came from Mexican President Carlos Salinas, with the aim of integrating the Mexican market-oriented economic reforms of the 1980s within a broader regional free trade framework. President Bush responded positively, and in June

SENIOR ADVISOR FOR TRADE AND FINANCE, MAPI Ernest H. Preeg, Ambassador (Ret.), Ph.D., is the Senior Advisor for Trade and Finance. He has extensive experience in international affairs, including service as the American Ambassador to Haiti from 1981 to 1983. Preeg was a Foreign Service Officer for 25 years, and was a Member of the U.S. Delegation to the Kennedy Round of GATT negotiations in Geneva. Among his many previous high-profile positions, Preeg was the William M. Scholl Chair in International Business at The Center for Strategic and International Studies and a Senior Fellow at the Hudson Institute. He is the author of numerous books and publications, including The Decline and Fall of Bretton Woods? (MAPI, 2012) and India and China: An Advanced Technology Race and How the United States Should Respond (MAPI and CSIS, 2008).

INDUSTRY TODAY 9

FOCUS • NAFTA 1990 the two presidents announced the intent to open negotiations. Canada was at first not interested, fearful of losing trade preferences from the U.S.-Canada agreement, but once it was clear that the United States and Mexico would begin negotiations, Canada was obliged to join in. Such is the economic dynamic of expanding regional free trade. After 14 months of intense negotiations, including 100 pages of rules of origin for trade,

10 INDUSTRY TODAY

the three presidents signed the agreement in December 1992, following the election of Bill Clinton to succeed George Bush. Clinton approved of the agreement provided there were strengthened consultative provisions for environmental and labor cooperation, which were incorporated. The agreement was approved by the Congress in late 1993 and came into force on January 1, 1994. Much has been written about the NAFTA negotiations, the fi-

nal agreement, and the initial years of implementation and no attempt is made here to summarize them. Without question, however, NAFTA brought to a successful conclusion the threestage, 50-year process of North American free trade and investment, including the historic breach of the north/south divide with the inclusion of Mexico. It was characterized throughout by bold and creative leadership by all three governments. It also created the basic framework for

FOCUS • NAFTA the next decisive phase of regional economic challenges addressed in the final section. But first, a look at the rapid and balanced recent growth of NAFTA trade.

The Rapid and Balanced Growth of NAFTA Trade, 2009-2013

Recent U.S. trade with Canada and Mexico is presented in the following six tables. The first three present U.S. merchandise trade, by principal sector, for NAFTA partners together and then separately for Canada and Mexico, from 2009 to 2013. Tables 4 through 6 present trade in services in the same format, although available statistics are limited to 2009 to 2011. Total U.S. merchandise exports to NAFTA partners, as shown in Table 1, grew by 58 percent from 2009 to 2013, to $526.4 billion, while imports were up by 52 percent to $612.6 billion. The $86.2 billion deficit in 2013 was more than accounted for by the $94.6 billion deficit in energy, offsetting the $22.7 billion surplus in manufacturing. Agricultural trade was close to balance, with a $2.6 billion deficit in 2013. The most important feature of this trade is the dominant role of manufacturers. In 2013, U.S. exports by manufacturers of $406.6 billion accounted for 77 percent of total exports and the $383.9 billion imports were 63 percent of total imports. Manufactured exports grew by 52 percent from 2009 to 2013, much faster than the 34 percent export growth with the rest of

the world, rising to 35 percent of global exports, and with NAFTA manufactured exports more than five times larger than the $76 billion of exports to China. Even more striking, the 2013 NAFTA surplus of $22.7 billion stood in dramatic contrast with the $524 billion deficit with the rest of the world, of which $351 billion was with China. Moreover, this strong U.S.-NAFTA export performance for manufacturers is likely to continue. The other large sector of trade presented is energy, which accounted for 9 percent of total exports and 23 percent of imports in 2013. The large 2013 deficit of $94.6 billion reflected imports three times larger than exports. It is difficult to identify trends in energy trade because of wide swings in energy prices, but the steady rise in U.S. exports reflects, at least in part, the increase in domestic production and a corresponding decrease in import dependence. This should continue and perhaps accelerate in coming years, further reducing the NAFTA energy deficit. It could also reduce the energy share of NAFTA trade and further increase the manufacturing share. Agriculture is always a troubled sector for trade negotiations, especially within a free trade agreement, because of high and varied forms of import protection for farmers. But as shown in Table 1, the agricultural share of U.S.-NAFTA trade in 2013 was only 8 percent for exports and 7 percent for imports, at $39.6 billion and $42.2 billion, respectively, with a small deficit of $2.6

billion. The outlook for agricultural trade is uncertain, but trade restrictions and consequent disputes will almost certainly continue, and agricultural trade will likely remain relatively small.

U.S. Merchandise Trade With Canada and Mexico (Table 1)

U.S.-NAFTA trade is evenly balanced between Canada and Mexico. As shown in Table 2, U.S. exports to Canada in 2013 of $300.2 billion were 57 percent of total NAFTA exports, and imports of $332.1 billion were 54 percent of total imports. The Mexican shares, as shown in Table 3, were thus 43 percent and 46 percent, respectively. Looking ahead, however, U.S. trade with Mexico has been growing much faster than trade with Canada. U.S. exports to Mexico grew by 75 percent from 2009 to 2013, from $128.9 billion to $226.2 billion, while exports to Canada were up by only 47 percent, from $204.7 billion to $300.2 billion. The differential growth was even larger for exports of manufacturing. U.S. exports by manufacturers to Mexico grew by 69 percent to $173.3 billion in 2013, compared with growth of 41 percent to $233.3 billion for exports to Canada. If these differential growth paths continue, U.S. trade with Mexico will soon equal if not surpass trade with Canada. As for the energy sector, the large deficit with Canada of $82.8 billion in 2013, and the smaller $11.8 billion deficit with Mexico, should decline as U.S.

INDUSTRY TODAY 11

FOCUS • NAFTA energy production increases and dependence on imports falls, but probably by less than the decline in U.S. imports from other sources, as discussed below. And agriculture will likely remain a small share of total NAFTA trade, with exports to and imports from both Canada and Mexico remaining less than 10 percent of total trade.

U.S. Merchandise Trade With Canada (Table 2) U.S. Merchandise Trade With Mexico (Table 3) Statistics for U.S. trade in services by trading partner are much more limited. There are few available U.S. statistics, and the most recent year for WTO statistics is 2011. Nevertheless, the WTO figures for 2009 to 2011, broken down into the three categories of transportation, travel, and other commercial services, do give a broad picture of trade in services, including its size relative to merchandise trade. It is also important to note that the WTO category “other commercial services,” as applied to global U.S. exports, breaks down to roughly 70 percent business services and 30 percent financial and insurance services, and is thus deeply integrated with the manufacturing sector. U.S. trade in services with NAFTA partners, presented in Table 4, is in large surplus, at $39.6 billion in 2011, with more than half of the surplus, $23.6 billion, in other commercial services. The smaller $11.1 billion

12 INDUSTRY TODAY

surplus for travel is predominantly from NAFTA students in American universities and vacation travel. Transportation services were much smaller, only 15 percent of total services, with a $4.9 billion surplus, reflecting the relatively smaller use of maritime and air freight services for U.S.-NAFTA trade compared with more distant trading partners. U.S.-NAFTA trade in services is growing steadily in all sectors, but remains relatively small compared with merchandise trade. The $81.4 billion of U.S. services exports in 2011 were only 17 percent as large as the $479.3 billion of merchandise exports shown in Table 1.

U.S. Trade in Services With Canada and Mexico (Table 4)

U.S. trade in services with Canada and Mexico, as shown in Tables 5 and 6, is generally in surplus, with the exception of the 2011 $2.0 billion deficit with Mexico for travel, reflecting the American tourist flow south of the border. The most important dimension of services trade with Mexico is the highly favorable trade balance for other commercial services, predominantly business services, with U.S. exports in 2011 of $14.3 billion more than four times larger than the $3.3 billion of imports. U.S. services trade with Canada is far larger than with Mexico. U.S. exports to Canada of $56.1 billion in 2011 compare with $25.3 billion of exports to Mexico, and includes surpluses in all three sectors.

FOCUS • NAFTA

U.S. Trade in Services With Canada (Table 5)

U.S. global trade and financial strategy:

U.S. Trade in Services With Mexico (Table 6)

1) The Mexican economic reform program under way. Mexico has reached the takeoff stage to become a private sector–driven and export-oriented industrialized democracy, as seen with South Korea and Taiwan two decades ago. This has been the Mexican reform strategy since the 1980s, but the dynamic free trade path also has had adverse shortcomings now being addressed in President Peña Nieto’s reform program, all of which are deeply connected with the U.S. relationship. The opening of Mexico to more competitive and productive private investment, including the end of the Pemex state oil monopoly, is critical for the rapid expansion of the modern sector of the Mexican economy and the creation of more productive and higher-paying jobs compared with small-scale subsistence employment. Related infrastructure investments and rapid growth of education for engineers, managers, and vocational skills are essential for this transition. And the longstanding tragic costs from Mexican organized crime and public sector corruption remain debilitating for the overall economy. These issues are being addressed by the Mexican reform program, but they face strong vested interests to weaken or resist change. The Mexican government needs to maintain firm leadership for these reforms, but the United States also needs to play

The overall assessment for U.S.-NAFTA trade in services is that it is flourishing in all directions, with an almost totally positive trade balance for the United States. What is more important for all three NAFTA members is the vital international role for the services sector, both through trade and subsidiary-provided services, for the deepening and broadening of economic integration within North America. Indeed, this integrating role is likely to become even larger for the NAFTA course ahead.

Three Decisive Challenges Ahead

The 50-year history of free trade within North America has been an ever-deepening success story for all three nations. The economic integration process is far from complete, however, especially for Mexico as it rises to become an export-oriented, industrialized economy. In fact, there are three decisive and interacting challenges now facing NAFTA that should be a high priority for the three governments and be given greater action-oriented attention than they have received over the past several years. Each of the challenges is presented in brief and pointed terms to stimulate such attention, with a concluding comment on how NAFTA strategy should be a bedrock for

INDUSTRY TODAY 13

FOCUS • NAFTA its part by publicly supporting the reforms and providing technical and financial assistance. There can also be binational expert analysis of the large and potentially positive results involved for both nations. In economic terms, a more productive, higher-growth Mexican economy, with a higher-paid labor force, can bring much larger mutual gains from trade. In broader policy terms, the serious adverse consequences for both nations from organized crime in Mexico are a mutual interest that needs to be dealt with more forcefully by both governments, acting together. 2) A North American energy strategy to become a large net exporter of fossil fuels. This prospect has received much public attention, but little action, especially by the United States. Increased competitive investment in the Mexican energy sector, which would include

14 INDUSTRY TODAY

lead technology American companies, has already been noted. For the United States, a number of important decisions blocked by special interests remain at a virtual standstill: the end of the oil export embargo from the 1930s; the construction of the Keystone oil pipeline to bring Canadian oil to Gulf refineries; license approval for LNG exports; and greater use of public lands for oil and natural gas production. For Canada, the five-year pipeline impasse has caused adverse impact on the Canadian economy, as a result creating bitter, anti-American feelings, similar to what occurred in 1963, when the situation came close to shutting down bilateral automotive trade. The difference, however, as recounted earlier, was that in 1963 the two governments reacted quickly and positively, whereas over the past five years the American government has been sitting on its hands.

The response by all three governments should be to support an action-oriented, integrated energy strategy to make North America a large net exporter of fossil fuels. Globally, this would undermine OPEC and Russian oil and natural gas monopoly pricing, establish higher safety and environmental standards for production, and reduce CO2 emissions by accelerating the transition to natural gas. For the North American economies, it would create jobs, improve fiscal accounts, and reduce the protracted large current account deficits facing all three NAFTA members. These global and national economic goals, moreover, lead to the third, broadest challenge. 3) An active NAFTA role for restoring the multilateral trade and financial systems. The multilateral trade and financial systems, which are deeply connected, have deteriorated

FOCUS • NAFTA greatly since 2000, and face collapse on current course. The nondiscriminatory multilateral trading system since the 1940s has been transformed into an expanding network of preferential trading blocs. The 1971 agreement for market-based exchange rates by industrialized trading nations, embedded in the IMF Article IV obligation not to manipulate currencies to gain an unfair competitive advantage in trade, has been grossly violated by a number of newly industrialized nations, most importantly China, converting the financial system largely into a mercantilist currency war. There are ways to restore an open-ended, nondiscriminatory trading system with market-based exchange rates, but this will require a strong U.S. leadership role in concert with like-minded trading partners. Within this like-minded grouping, the three NAFTA partners can provide the demonstration model for free trade and mar-

ket-based exchange rates, including between the advanced and newly industrialized groupings of nations. And to this end, the three partners should concert their strategies to respond to the protectionist trade policies and manipulated exchange rates that currently confront all three NAFTA members, and which have led to their large and undesirable current account deficits.

Annual Meeting Needed

The NAFTA relationship is of growing importance for U.S. international trade and investment and provides the free trade, market-based currency model for restoring a fair and balanced trading system. U.S. manufactured exports to Canada and Mexico of $407 billion in 2013 have risen to 35 percent of global exports, while the surplus of $23 billion stands in dramat-

ic contrast with the $524 billion deficit with the rest of the world. These basic facts go a long way for understanding the policy course ahead. Work remains, however, to consolidate and improve the North American free trade relationship, and the three nations can and should act together to pursue their global economic interests, the most important of which have been presented here. One specific proposal is necessary to get the NAFTA ball rolling on a more productive path. Occasionally the three heads of government meet, but the result has been bland speeches ignored by the media. What is proposed here is an annual meeting centered on an action agenda, to be developed during the course of the year, with the results announced at the meeting. And the initial action agenda should consist of the three principal challenges addressed in this article.

INDUSTRY TODAY 15

FEATURE ENTRADA GROUP

Mexico’s

Manufacturing Might 16 INDUSTRY TODAY

FEATURE ENTRADA GROUP

exico has almost a 50 year program in manufacturing, and over those years, while low cost has always been a strength, they’ve also added quality and a high level of productivity to the country’s identity,” Donahue says, adding, “the consumer today is not afraid to see that 20 percent of their automobile’s parts were manufactured in Mexico, in fact quite the opposite.” Donahue and his organization have been well entrenched in the Mexican manufacturing scene for quite some time,

assisting foreign businesses with setting up operations and facilitating a smooth transition into the Mexican marketplace. And while they could see the progress of the country’s labor force and supply chain develop right before their own eyes, they knew they needed actual quantitative information to shed light on what perhaps is one of the manufacturing world’s best kept secrets. “Where in the World”, seeks to do just that.

Progression of Confidence In terms of key findings, overall, respondents ranked the United

About the Entrada Group Headquartered in Texas, Entrada Group partners with international manufacturers seeking to enhance their competitiveness in the global market by swiftly and easily establishing a cost-competitive production facility in Mexico to serve North and South American, as well as European, markets. On behalf of the manufacturer, Entrada Group assists with the strategic, legal and practical requirements of setting up operations in Mexico, and also provides ongoing production support (General & Administrative) services, which leaves the client free to focus fully on their key competency: manufacturing great products.

18 INDUSTRY TODAY

States as the most attractive low-cost manufacturing location worldwide, with Mexico taking the second spot. However, among those respondents who already have one or more Pictured: Companies such as this heavy transport industry supplier leverage a long tradition of manufacturing in Mexico.

FEATURE ENTRADA GROUP

“Mexico has almost a 50 year program in manufacturing, and over those years, while low cost has always been a strength, they’ve also added quality and a high level of productivity to the country’s identity.” INDUSTRY TODAY 19

FEATURE ENTRADA GROUP

Report: Mexico vs. China Here are some statistics from the report, comparing companies with current manufacturing operations in Mexico, versus those in China:

Mexico • 95 percent manufacture for delivery in North America; • All have headquarters outside of Mexico; • 64 percent plan to open an additional facility in the future; • Over half also have a facility in China; • “Low operating costs”, “Reliable Supply Chain”, and “Proximity to US/Canada” were equally important factors as these companies expanded to a low-cost location; • “Achieved Goals at Low-Cost Location” • To Large Extent: 45 percent • To Moderate Extent: 55 percent

China • 97 percent manufacture for delivery in North America; • All have headquarters outside of China; • 75 percent plan to open an additional facility in the future; • About 40 percent also have a facility in Mexico; • “Low operating costs” was the most important factor as these companies expanded to a lost-cost solution; • “Achieved Goals at Low-Cost Location” • To Large Extent: 44 percent • To Moderate Extent: 53 percent • Not At All: 3 percent

www.entradagroup.com/survey2014

20 INDUSTRY TODAY

manufacturing locations outside of the U.S. or Canada, Mexico tied with the U.S. as the most attractive low-cost location. Donahue says that the results didn’t surprise him, given what he and his company have seen in the country over the years. “We’ve seen this trend in Mexico over the last ten years or so, where OEM’s have gone in and established significant operations that aren’t just tailored to the North American market any-

FEATURE ENTRADA GROUP

more, but for the Mexican market, the South American market, the European market, and even in some regions of Asia,” referencing Mexico’s gradual rise from a niche location, to its evolution into what could soon be a central hub for much of the world’s product flow. It’s been a careful and deliberate effort by the country, as Donahue says. “I think Mexico has been brilliant in their strategy over the years, negotiating a

slew of agreements in a number of different trading blocs and countries throughout North, Central, and South America,” he says, adding, “through these bilateral agreements it has been established that at least 50 percent of the value added needs to be produced within a specific region, and if achieved, the company will have access to over 44 different trading blocs and countries.” And where is that specific region? Mexico.

Sound Approach Now, companies around the world are beginning to take notice of the huge benefits that come along with opening up an operation in Mexico. Take D&M Premium Sound Solutions (D&M PSS) for example, a world-leading audio company that delivers audio solutions and services to automotive OEMs. They had been operating primarily out of China until they came into a contract with INDUSTRY TODAY 21

FEATURE ENTRADA GROUP

22 INDUSTRY TODAY

FEATURE ENTRADA GROUP

“Sixty-nine percent of respondents in the report pegged a low-cost manufacturing strategy as ‘very important’ or ‘important’ to future growth, and Mexico is as viable an option as there can be in attaining such goals.” BMW, which favored parts production occurring within North America in order to qualify for NAFTA’s rules of origin requirements. “D&M PSS promptly set up shop in Zacatecas, Mexico, which offered proximity to the US border by road, links to Atlantic and Pacific ports, and the presence of a highly skilled population of blue collar workers, engineers, and managers,” Donahue says. And the move has paid off, in an unexpected manner. “They originally moved to Mexico due to a requirement by BMW, however, they quickly realized the web of benefits that comes with investing production operations in Mexico,” he says, adding, “Their Mexican presence has allowed D&M PSS to win contracts with other OEMs they previously hadn’t sold to before in North America.” D&M PSS’s example is a direct representation of the report’s findings, particularly on

the success of those who have already established an operation in Mexico and are looking to expand. “For those companies that had prior experience operating in Mexico, much like D&M PSS did in their work with BMW, they understand that quality isn’t going to be an issue and as a result, they are inclined to continue their operations in Mexico for future partnerships, given their confidence in the fact that they’re not losing a step in any area of their process.” Donahue says that he sees the world’s market and the corresponding demand for low cost manufacturing taking on a “regionalized” nature, stating, “It’s not about an ‘either or’ scenario, where companies have to decide between two locations,” adding, “It’s soon going to become that you need to have operations not just in China and North America, but also in Europe, South America, and even

perhaps in other parts of Asia.” Another key finding in the report found that 55 percent of respondents manufactured their products in two or more locations, and of this demographic, 67 percent had plans to expand to an additional location to meet global demand. Donahue says that many of these companies, particularly those looking to impact the South, Central and North American markets, should be seriously considering Mexico to serve as their next location. “Sixty-nine percent of respondents in the report pegged a low-cost manufacturing strategy as ‘very important’ or ‘important’ to future growth, and Mexico is as viable an option as there can be in attaining such goals.”

Further Support In addition to the report, the Entrada Group also found further support of Mexico’s manufacturing landscape in a recent INDUSTRY TODAY 23

FEATURE ENTRADA GROUP

study conducted by Boston Consulting Group (BCG). The study found that Mexico manufacturing exports, due to a widening cost advantage over China, could grow by as much as $20 billion to $60 billion annually by 2017, figures derived partly from Mexico’s advantage 24 INDUSTRY TODAY

of proximity to US markets as well as more affordable energy. However, in addition to these factors, the study found that Mexico’s 44 global free trade agreements enacted, as well as the high level of productivity of the Mexican workforce, contributed greatly to its bright

future forecast. “Mexico is a low cost solution, but what separates it from other low cost areas is the quality of Pictured: This manufacturer, a supplier to the auto industry, benefits from central Mexico’s costcompetitive labor.

FEATURE ENTRADA GROUP

labor, and the increasingly deep supply chain that can open up, quite literally, a world of opportunities for businesses in areas they may never have anticipated,” Donahue says, adding, “aside from the huge conglomerates, we have smaller first and second tier suppliers that

have already come in here and set up operations that are doing very well, and we hope our report provides the necessary confidence to more of those types of companies in future.” Mexico’s manufacturing scene appears to surging full steam ahead, offering both sides of the

quality and cost ‘coin’. To download Entrada Group’s study on low cost manufacturing, visit http://www.entradagroup.com/ survey2014.

INDUSTRY TODAY 25

LEADERS AZKONOBEL

Taking a ‘long range’ vie to adapt to ma transformations 26 INDUSTRY TODAY

ew arket s

LEADERS AKZONOBEL

place. All of these are creating waves of economic and social change. Global mega-trends such as these – and the unavoidable shift and need to do more with less – are driving major transformations in our society. Businesses need to think about how these trends are impacting their customers, not just today, but tomorrow. They need to think in a structured and constant way about the future, challenge their assumptions about the world, assess and navigate risk, and seize opportunity. It is vitally important for industries and companies to be aware of signs of coming trouble and hints of opportunity. Recent history is littered with examples of companies that failed to keep up with shifts and adapt accordingly. At AkzoNobel, we believe there are five keys for us to stay ahead of the competition: • For one, we believe success depends on the organic growth of one’s business through INDUSTRY TODAY 27

LEADERS AKZONOBEL

28 INDUSTRY TODAY

LEADERS AKZONOBEL

customer focused research, development and innovation. If organizations are not able to identify and adopt major transforming technologies in a timely manner, they face the loss of a leadership position and adverse impacts to the business. For us, this means working

multiple ways to mitigate the risk of missing relevant technology developments — among them, committing to a healthy R&D budget and managing our global open innovation capabilities to identify, assess and acquire the most recent and promising emerging sciences

and technologies. • Now more than ever, we have to be prepared for resource limitations, and to constantly reduce both the volume of raw materials we use to produce our products and the waste as part of the production process to limit our footprint

INDUSTRY TODAY 29

LEADERS AKZONOBEL

and our losses. In our business, manufacturing, the loss of raw materials is inherent in the various processes involved – but the key is to ferociously look for ways to minimize the waste. • When looking for glimpses into the future, it’s important to look beyond your own industry. One doesn’t need to look far to find an example of how one industry’s innovativeness revolutionized another indusPrevious Page: An open innovation ship model enabling sustainable shipping; Below: Powder coatings production area; Right: AzkoNobel invests heavily in R&D.

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try’s market. In the U.S., the music industry was upended by Napster, then Apple and those that followed, while websites like Facebook and later Twitter established a vast “Social Network” that reshaped how we communicate. Though our company does not sell lights, LED lighting is a significant market for us because of the specialty chemicals needed to produce them. LED systems now have the capability to change color at the press of a button. This presents both a threat and an opportunity for us. It is a threat because it might negate the need for different colored paints. But, it is also an opportunity because

the growing demand for this more sustainable alternative of conventional lighting is driving a very profitable niche market. For a very different area of business – the shipping industry – one challenge is the shared goal of many to identify more sustainable and cost-effective methods to meet evolving environmental standards. Our understanding of this challenge, combined with R&D investment and an open innovation-inspired collaboration with the U.K.’s Newcastle University led to the development of anti-fouling coating that enable ocean-going ships to move faster and use less fuel. • Really focus on the custom-

LEADERS AKZONOBEL

er of the future. Organizations are often open to adapting to trends — if there’s a business case to be made for it and a path that doesn’t involve much risk. In practice, however, decision makers do not focus enough on the way their customers’ expectations are changing or the manner in which their market is transforming. When they are finally ready to react, it’s typically a technology-first rather than a people-first initiative. Without understanding behavior, expectations and patterns, technology is often the right answer at the wrong time. • Constantly assess the big trends facing your markets. At AkzoNobel, scenario planning is a key part of our analysis. We use them to investigate the impacts of global trends, to develop more resilient strategies, and to innovate sustainable products, services and processes. One scenario we have spent a lot of time exploring is the development of mega-cities in high-growth countries. In these cities, we anticipate that people’s sense of individuality will become even more important than it is today – and more uniform globally and not as concentrated in Western countries as it is today. As more of the population moves into mega-cities, they

will be faced with the specter of becoming a faceless individual in a sea of 75 million others. In this world, the personalization of possessions will become much more important to people. Already, we are seeing some brands get ahead of this trend. This winter, Coca-Cola launched a campaign that allowed fans to “Share a Coke” that could be personalized with the name of a friend. And last year, Jaguar Land Rover launched a dedicated bespoke engineering division giving customers the ability to individually tailor their cars.

This trend could provide substantial opportunities for a company like AkzoNobel that specializes in color. So too will be tackling disease in fast expanding mega-cities. For a coatings company such as ours, this is significant. As such, we are investigating techniques that can interrupt the spread of disease through the development of anti-bacterial and insect-repellent coatings. We are working to be as ready to capitalize on such trends by preparing our product portfolio accordingly. According to the World INDUSTRY TODAY 31

LEADERS AKZONOBEL Left: LED systems have the capability to impact wall coverings; Below: A modern paint facility. Business Council for Sustainable Development’s (WBCSD) Vision 2050 report, some of the changes that we should expect by 2050 include: a globe with a population of nine billion, with associated demands for food and natural resources; 95 percent of new buildings to be net-zero energy; universal access to low-carbon vehicles; and landfills obsolete in industrial processes. The Vision 2050 report is among the sources we use to inform our long-term strategy and to help us identify changes in the market. In our buildings and infrastructure customer segment, the growing demand for buildings with lower energy costs incentivizes us to develop more sustainable products. For example, products might include powder coatings that can be cured at lower temperatures, paints that release fewer solvents and coatings that need little or no maintenance or can reflect heat. The same applies to our transportation segment, where the need for more fuel-efficient vehicles has prompted our shift to new, lighter materials. 32 INDUSTRY TODAY

LEADERS AKZONOBEL

Chief Scientist Andrew Burgess serves as Chief Scientist at AkzoNobel. Burgess has more than 30 years of research experience and fulfilled several scientific leadership roles, such as Director of Open Innovation. In addition to his position at AkzoNobel, Burgess holds a number of posts in the academic and research policy-making worlds, including Visiting Chair at Imperial College, London and Advisory Board member of the Nanotechnology Knowledge Transfer Network. He graduated from the University of Glasgow, where he obtained a BSc and PhD in Chemistry.

Resource scarcity is a key driver in our consumer goods and industrial segments. We have focused our innovation on eco-efficiency, using waste as a resource rather than simply as a disposal problem. We are also improving resource efficiency in the supply chain (with customers, consumers and in the endof-life phase). None of us has a crystal ball. The best we can do is to continually refine our analysis with more information to make the best decisions today to prepare for tomorrow. It’s a constant cycle. We know the further you look into the future, the riskier forecasting becomes. If you look at futurologists’ predictions, it’s true they are almost always wrong. But this should not stop us ‘imagi-

neering’ what the future might look like and taking measures to start adapting. There really is no other choice. Ultimately, the ability to adapt successfully to changing circumstances re-

quires long-term thinking. Without such thinking, businesses will inevitably miss the danger signs and opportunities presented by technological, economic and societal changes.

INDUSTRY TODAY 33

FEATURE FOLEY & LARDNER

34 INDUSTRY TODAY

FEATURE FOLEY & LARDNER

Re-Shoring and U.S. Regulation of Exports and International Conduct:

“Wily” Ways to Deal with the Regulatory Consequences of America’s Manufacturing Renaissance

INDUSTRY TODAY 35

FEATURE FOLEY & LARDNER

wo of President Barack Obama’s initiatives are on a collision course – with many manufacturers potentially being caught in the middle. One is the U.S. government’s support for re-shoring manufacturing and the build-up of next generation manufacturing. The other is the increasingly aggressive enforce36 INDUSTRY TODAY

ment of U.S. export controls which, as part of a reform initiative designed to “build higher walls around fewer items,” promises increasingly rigorous oversight and enhanced penalties. These two initiatives collide because U.S. export regulations are designed before the age of distributed production and dig-

itized, real-time collaboration. As a result, they do not account for the realities of twenty-first century production and global supply chain models. They also neglect the growing number of non-U.S. persons involved in design and production processes within the United States itself. With U.S. export controls covering both the export of

FEATURE FOLEY & LARDNER

goods and the communication of controlled technical data to non-U.S. persons – even if the information is communicated within the United States – these old rules can be problematic even for companies operating entirely within the United States. Goods produced in the United States are primarily governed by two sets of export control

regulations. They are the Export Administration Regulations (EAR), which control the export of commercial products, and the International Traffic in Arms Regulations (ITAR), which control the export of defense articles and services. The government also maintains economic sanctions – including those recently imposed on Russia – ad-

ministered by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). These regulations prohibit U.S. persons from dealing with banned individuals, countries, and governments. With the U.S. government imposing more than $2 billion in export controls and economic sanctions penalties last year, compliance is a priority for any business that sells abroad, even if it manufactures here at home. An additional concern is the Foreign Corrupt Practices Act, which forbids bribery of foreign officials (which is a category that includes anyone who works for a state-owned entity). As this law is interpreted by the Department of Justice, U.S. companies are responsible for any payments made by third parties acting on their behalf, including in situations where they only “knew” about the payments because they failed to perform sufficient due diligence. With the FCPA regularly seeing annual assessed penalties of $1 billion a year or so, supervision of the supply chain and selling operations in the anti-bribery context is at a premium as well. Consider the implications for a hypothetical business which, in honor of Golden Age cartoons, we will call the Acme Corporation. Now, while Wily INDUSTRY TODAY 37

FEATURE FOLEY & LARDNER

38 INDUSTRY TODAY

FEATURE FOLEY & LARDNER

E. Coyote was always able to purchase even highly customized anti-Road Runner rocket launchers without considering any export control implications, our own Acme Corporation is operating in a new era of regulatory enforcement. As a U.S. corporation on the cutting edge of the re-shoring trend, Acme Corporation has carefully considered the cost savings – reducing energy consumption, lower logistics costs, improving coordination, maintaining close proximity to customers, and tapping a high-quality, U.S. labor force. Acme believes that it has considered all relevant cost factors, and that everything appears to favor re-shoring operations. What it has not considered, however, are the export control and other regulatory implications of its reshoring initiative. This oversight reflects the fact that re-shoring generally does not involve bringing all production back to the United States. Most companies find that “right-sizing” the organization involves re-shoring some manufacturing and design work while continuing to rely on other production from selected offshore affiliates and suppliers. The result is a new and more complicated supply chain that places an even greater premi-

um on coordination and the sharing of technical data across borders. Brace yourself for the complications that are to follow. Although the journey is one that encapsulates the difficulties of complying with thousands of pages of regulations, at the end, there is a happy ending—if the term “happy” is evaluated on a risk-adjusted basis. Acme has also failed to consider the role of automation, cloud computing, and other drivers of next generation manufacturing in its updated production processes. Although this manufacturing allows rapid, small batch production that is highly tailored to customer needs, it also means that a lot of company information and components may be going to a lot of different people and places. In some cases, export controlled technical data must be shared across the organization or even with foreign business partners. By failing to consider these issues, Acme is unaware that its re-shoring initiatives are raising its regulatory risk profile. Acme is going to find that it can be much more difficult to keep tabs on its global supply chain after re-shoring. The company’s diffuse manufacturing using overseas affiliates, joint ventures, and other partners makes INDUSTRY TODAY 39

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it more difficult to monitor the actions of foreign counterparts. Acme has also not considered that when companies are operating on its behalf, the U.S. Government often will attribute these actions to Acme, such as through claims that Acme “knew” about or “facilitated” its partners’ violations of the law, such as where it conducted insufficient due diligence. Nor has Acme realized that prudent risk management means implementing enhanced compliance measures and internal controls to help ensure that its business partners across its supply chain are not violating anti-bribery, export controls, economic sanctions, and other laws that can be applied outside the United States. As a result, Acme is not meeting regulators’ “know your partner” expectations, which require that companies examine their partners for these and other risk points. What else is missing in Acme’s plans? Well for one thing, Acme’s re-shoring exercise will sharply increase its production of U.S.-origin goods. And because export controls directly apply to all U.S.-origin goods, even when incorporated into downstream products, more manufacturing at home means that these laws are more likely to govern company’s export 40 INDUSTRY TODAY

patterns. The increased involvement of U.S. persons in production, sales, and export activity that comes with re-shoring also means greater liability for Acme’s officers, directors, and others that fail to comply. Acme also needs to consider how the export control laws will shape its re-shored work environment. Under the EAR and ITAR, the “deemed export” rule prohibits the unlicensed transfer of controlled articles, technology, and technical data to nonU.S. persons - including those living and working in the United States. This means that Acme cannot share any information related to the production, servicing, maintenance, or use of a controlled item with any foreign persons unless they are U.S. Permanent Residents or have a specific license from the relevant agency. So Acme needs to survey its work force, identify any non-U.S. nationals, and determine whether these particular nationalities are cleared for the controlled technical data and items that the company produces. If not, then it needs specific licenses for the nonU.S. persons in its workforce. Until that occurs, it needs to wall off any persons who are not supposed to access the controlled technical data at issue.

Acme also needs to re-examine its plans to bring non-U.S. employees from its formerly offshore operations to help with its newly repatriated U.S. production. While this is a common tactic for companies engaged in re-shoring, it could increase the number of potential deemed export control violations. For example, a violation of U.S. export rules can occur when nonU.S. persons, including Canadians and Europeans, gain access to blueprints, designs,

FEATURE FOLEY & LARDNER

product specifications, and other controlled information on the shop floor or otherwise. They may use design technology and production equipment subject to the EAR controls, especially in cases involving high tech products or certain types of next-generation manufacturing techniques. Even the storage of EAR or ITAR-controlled information on Acme’s computer network can pose problems. Because government regulators draw no distinction be-

tween the ability to access controlled information and actually doing it, failing to segregate this kind of information can violate U.S. law, even if there is only a single non-U.S. person on the network. So what should companies like Acme do? A company seeing these issues for the first time could become frustrated, because the rules can be frustratingly complex. Nonetheless, companies do not need to abandon their re-shoring and

next-generation initiatives. In most cases, the business justifications for doing so outweigh the potential regulatory drawbacks. Although the risk profile of the company may increase, compliance measures that appropriately identify and control for these risks can often neutralize much of the increased risk, even taking into account the potentially heavy penalties at stake. These are the kinds of risk-mitigation steps that INDUSTRY TODAY 41

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companies like Acme can take: • They should perform a global risk assessment and create a company risk profile. Key issues to evaluate include the types of products sold (with sales of controlled goods increasing risk), the ways in which the organization conducts business (with the use of distributors and third parties further increasing risk), and the countries of oper42 INDUSTRY TODAY

ation and sales (with countries with a reputation for corruption or for diversion of goods posing the most significant risk). • They should survey current compliance measures to determine whether they adequately address the company’s changing risk profile. Common failure points include inconsistent global standards; neglecting to translate compliance

measures into local languages; deficient training for relevant personnel; inadequate due diligence on agents, affiliates, and prospective acquisitions; and the failure to update materials to reflect changes in the laws (especially for economic sanctions, which change regularly). • They should review existing compliance training programs to determine whether they are

FEATURE FOLEY & LARDNER

conducted regularly, appropriately address identified risk areas, and cover the relevant personnel. • They should determine whether the company’s screening of shipments adequately control the risk of shipping to the “bad guys” and the “bad places,” i.e., whether they adequately screen for OFAC’s Specially Designated Nationals and Blocked Persons, the Commerce Department’s Denied Parties, Entity, and Unverified, and the State Department’s Debarred Persons Lists. The primary focus should be on whether there is sufficiently comprehensive screening (including for non-U.S. affiliates) and whether the organization sufficiently investigates and resolves potential matches.

• They should evaluate whether the organization adequately identifies, and follows up on, red flags. • They should evaluate all of its high-tech equipment, in the form of next-generation equipment or otherwise, to determine whether any of it is controlled, especially under the EAR. • They should re-evaluate its training protocols and training materials to determine how they should be changed to reflect the company’s new manufacturing footprint and the application of U.S. regulations to its new manufacturing paradigm. • And they should determine whether the company’s compliance program is operating effectively, including through regular compliance audits. Acme may be fictional, but

the trade-off of balancing the advantages of re-shoring and next generation manufacturing with the risks posed by the aggressive application of U.S. laws to exports and international conduct is not. Whether in the re-shoring paradigm or otherwise, companies cannot eliminate all regulatory risk. But a combination of regular risk checks, candid assessments of the state of compliance, and close examination of the resources invested in compliance will pay significant dividends. Most significantly, these efforts will minimize the impact of the aggressive enforcement of U.S. laws on exports and international conduct—a compliance risk much closer to home than many manufacturers realize.

Greg Husisian is a partner in international law firm Foley & Lardner’s Washington D.C. office and a leader of the firm’s Legal Innovation Hub® for NextGen Manufacturers, which counsels manufacturers on the unique issues facing the industry as technology and manufacturing continue to converge. He focuses on export controls and economic sanctions, the Foreign Corrupt Practices Act (FCPA), corporate risk management and compliance, and issues arising from international trade. The author can be reached at ghusisian@foley.com. Email for a copy of a white paper on “U.S. Regulation of Exports and International Conduct: An International Compliance Guide,” which provides detailed coverage of the topics contained in this article. INDUSTRY TODAY 43

PROFILE • THALES CANADA

44 INDUSTRY TODAY

THALES CANADA • PROFILE

Thales Canada is a company that, while part of a much bigger global conglomerate, has been making a name on its own for quite some time. Whether it’s bringing revolutionary control systems to the transportation marketplace, bolstering a nation’s defense through its sensors, or implementing flight control systems for regional and commercial aircraft, the company’s influence is as far in distance as its impact is in depth. In a conversation with Industry Today, Mark Halinaty, President and CEO of Thales Canada, talks about the roots of his company’s flagship products, their significance in today’s world, and why the present has him optimistic about big things in the future. Steve Engelhardt reports. hales Canada serves as the pioneer of Communications-Based Train Control (CBTC) technology, beginning their efforts back in 1985. Over time, the system evolved to meet changing needs in the transportation world, gaining in success and reputation from its

INDUSTRY TODAY 45

PROFILE • THALES CANADA

Previous page: Dubai Metro, Red and Green lines, @ Thales; Above: TableC2 is an integrated multi-touch LCD table and tailored software designed to provide a collaborative work environment for planning and management of military and security operations. TableC2 leverages multitouch gestures to enable a very simple, flexible and productive user experience. Below: London Jubilee Line @ Thales.

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THALES CANADA • PROFILE

THALES GROUP QUICK FACTS: • Thales Group invests 2.5 billion euros in R&D; • The company holds a portfolio of 15,000 patents and patent applications at the end of 2013; • Thales runs five joint laboratories with universities in France, the United Kingdom, the Netherlands, Singapore and Canada;

Above: Mark Halinaty, President and CEO of Thales Canada; Above: Bombardier Global 600 in Flight, Courtesy of Bombardier Inc. 2014.

• Thales has more than 30 partnerships with universities and public research institutes in Europe, Asia and the United States; • There are three worldwide centres of excellence in Canada: Business & Regional Jet flight Control Systems, Optronics and Transportation Solutions. INDUSTRY TODAY 47

PROFILE • THALES CANADA

Left: Integrated Mast (IMAST) 500: Best in Class solution to integrate state of the art sensors suite such as AESA radar. up, with one in Japan and two in South America, those numbers continue to grow.

International Integrator Amongst the three, the East Japan Railway in Tokyo is the most significant for the company, as Halinaty says that while it represents a major project in general for Thales, it’s perhaps better understood as a huge milestone for the company’s identity going forward, particularly in regards to its expansion of influence in what is typically a closed off market. “It’s really a significant project for us, as the Japanese market, in terms of train control and signaling, has traditionally been a closed market, utilizing domestic suppliers only,” he says, adding, “It’s key for us to be the first to break into the

48 INDUSTRY TODAY

THALES CANADA • PROFILE

Above: Iroquois and Halifax Class Ships: Thales Canada is a longstanding and trusted sensors supplier for the Royal Canadian Navy; Below: Thales GM403 Mobile Air Defense Radar is unrivaled in his class; market through our CBTC technology, as it will set the precedent for future projects as well.” The East Japan Railway, which spans 30 kilometers and has 70 trains docking at 14 different stations, was looking for a system replacement for its previous, more conventional automatic train control system. Halinaty says that the Japanese are highly knowledgeable customers and needed something that met “their specific needs.” He says that Thales’ well-renowned ability to work with customers and successfully adapt to their local environments was very important to

the railway, and is an attribute of the company that he credits as the driving force in their success in foreign markets.

Crossing back over the Pacific Ocean and heading south, Thales also recently locked up significant con-

INDUSTRY TODAY 49

PROFILE • THALES CANADA

tracts in the respective markets of Chile and Brazil. The first contract, announced in December, is a $451.9 million contract by the metro operator of the Chilean city of Santiago. Thales, alongside CAF, a Spain-based rail car manufacturer, will respectively supply a SelTrac® CBTC signaling solution to Lines 3 and 6 Cockpit Avionics 2020 civil; @ Thales Avionics.

50 INDUSTRY TODAY

for the metro, as well as the necessary trains. The combined delivered system will ultimately provide a passenger throughput capability of greater than 50,000 passengers an hour, per day. “I think it was really important to get together with CAF, as they already had an established sense of the South American transportation market,” he says, adding, “One of our strengths

as a signaling and train control supplier is that we do not need to align to any train car builder per se, and that flexibility allowed us to find the ideal partner to go in and do this job with.” Thales Canada’s most recent project, announced via a press release in March, is their primary role in providing a signaling solution to Lines 1 and 2 for a new metro system in Sal-

THALES CANADA • PROFILE

vador, Brazil’s third largest city. Once again, the city specifically asked for their SelTrac® CBTC solution, which will allow for fully automatic, driverless operation, influencing 31 kilometers of rail line across 19 different stations. Halinaty says that his company’s success in transportation, aside from possession of a cutting edge technology like SelTrac®, stems from their successful shift from supply-

ing ‘greenfield’ applications to ‘brownfield’ applications. “Instead of coming in and setting up an entirely new system for subways systems, we began to come in and build off and upgrade their existing systems.” He says that while ‘brownfield’ applications are much more difficult, it allows them to work extremely closely with the customer and in doing so, provide them with a better idea of varying factors that differ from region to region around the world.

Three-Pronged Attack While Thales Canada’s Transportation sector is their main source of business, the company also has its feet firmly entrenched in the Aerospace and Defense and Security sectors as well. Aerospace capabilities include the development and installation of leading flight control systems for regional and business jets, as well as integrated systems for cockpit, cabin, and flight controls for aircraft around the world. “We have developed quite a bit of skill in flight systems over the years,” he says, adding, “we integrate fly-bywire systems, and you’ll find us doing a lot of ‘mission critical’ software engineering, supplying such to companies like Bombardier and Gulfstream.” In terms of defense and

security, Thales has a deepseeded history in its relationship with Canada’s armed forces. “We’ve been working with the Canadian Army and Navy for over 30 years,” Halinaty says, adding, “our capabilities began as merely importing radar and sonars for the Navy, but today we find ourselves performing large system integration and software development for many of their sensors.” He says that Thales Canada is the primary supplier for Command and Control software on board every Canadian Coast Guard vessel, and are also currently partnered with Seaspan Shipyards in Vancouver as part of Canada’s national shipbuilding procurement strategy. “For this project, we are the primary electronic system integrator for a few of the ships being built for the Coast Guard, and doing the same for a massive support ship for the Canadian Navy.” Additionally, Thales works so closely with the Canadian military, that they specifically built an extra facility in Montreal, dedicated to the sole production of optical sensors for the army. “We have 60 passionate individuals working here, and employ a fair amount of lean manufacturing programs,” he says, adding, “we take all of our partnerships very seriously, but INDUSTRY TODAY 51

PROFILE • THALES CANADA

with the armed forces, we understand the significance of the task at hand and do whatever we can to get our products to them as efficiently as possible.” The company’s intimate work with the Canada’s armed forces recently earned them a five-year, 20 million research and development contract from Canada’s Department of National Defence. “We are very proud of this contract because of its validation towards our company

52 INDUSTRY TODAY

being a Canadian company, something we have worked very hard to establish,” Halinaty says. He says that the contract is highly motivating for them, as “it’s key for us to help shape the future and give back to the Canadian environment.”

Commitment to Success Halinaty says that his company’s achievements across each of their three branches of business stems from an open-minded philosophy and a commitment to their roots. “We really work hard to

THALES CANADA • PROFILE

maintain our Canadian identity as a company,” he says, noting, “and yet, we are boundary-less in our business mindset, there’s really no region we won’t go after if our products can improve the current system in place, and create a safer, more effective platform.” He recalls the London Olympics in 2012, when his branch was tasked with a re-signaling project for the Jubilee line in London’s subway system. “They were nervous about how the system would hold up, with all of the increased traffic going in and out due to the Olympics,” he says, add-

ing, “We pulled out all the stops and had our experts on standby if nothing else than to ease their minds. In the end, record numbers of people went through the system and everything went smoothly.” For Thales Canada, a company that has global capabilities and a deep-rooted pride in its base country, the future is bright both domestically and internationally. With products that truly ‘signal’ the future, Thales Canada looks to be a major player in the transportation, aerospace, and defense and security industries for many years to come.

“Our CBTC SelTrac system was the first of its kind in the 80s, and it really has grown to become the industry standard today.” Below: London’s Jubilee Line.”We pulled out all the stops and had our experts on standby, if nothing else than to ease their minds. In the end, record numbers of people went through the system and everything went smoothly.”

INDUSTRY TODAY 53

PROFILE • GRAND BAHAMA

Boasting one of the region’s two largest floating docks, Grand Bahama Shipyard is the strategic harbor for cruise ships and commercial vessels. David Soyka reports on a key port of call in the heart of a major tourist destination where ships dock to “take a vacation” for repairs and upgrades.

54 INDUSTRY TODAY

GRAND BAHAMA • PROFILE

INDUSTRY TODAY 55

PROFILE • GRAND BAHAMA

hen you think of the Bahamas, the first thing that comes to mind is tourism. You might also know that it is one of the largest container ports in the world, thanks to its geographic proximity to the eastern seaboard of the U.S. But as Carl-Gustaf Rotkirch, the CEO and chairman of Grand Bahama Shipyard Ltd., points out, “Freeport is also a growing industrial center. We have the pharmaceutical firm Pharmachem Bahamas (for-

56 INDUSTRY TODAY

merly Syntex) that’s owned by Novasep, and the BORCO oil facility(a Buckeye company). It’s an interesting place that does have an ambition to become a significant industrial hub. It’s one of the reasons why we’re here.” The main reason why Grand Bahamas first established a beachhead in Freeport back at the turn of the century (remember when that used to mean the 19th century and not the 20th century?) was to provide a bet-

ter port of call for the cruise ship industry. “Up until Grand Bahama was established, cruise ships had contracts with the U.S. Navy to dock at their shipyards throughout the eastern coast. The problem was that Navy work took precedence—if an aircraft carrier needed some maintenance, that took precedence and any work on the cruise ship had to wait. The problem for the industry was that you cannot tell customers waiting on a dock in New York

GRAND BAHAMA • PROFILE

that their ship won’t be ready to sail today because of an aircraft carrier. Grand Bahamas Shipyard offered the cruise ship industry a convenient location and an exclusive dedication to repair and maintenance work for cruise ships.” In fact, as Rotkirch notes, “If you go on the Internet and Google trading route schematics, you’ll discover that the Bahamas is in the middle of the highest shipping traffic in the world.”

A Strategic Location And Grand Bahama Shipyard is strategically located right in the middle of this traffic. Its sheltered, deep water harbor (minimum 45 foot depth for entry) in the free trade zone of Freeport on Grand Bahama Island is less than 80 miles from the Florida east coast, central to ships on Caribbean and U.S. eastern seaboard trade, as well as transatlantic ocean

Pictured: Carl Gustaf Rotkirch, Chairman and CEO.

You can’t have people waiting in Ft. Lauderdale because their ship has been delayed getting out of dry dock. Part of our job is to anticipate problems or issues and plan to address them, and then schedule accordingly. In the fourteen years of our operation, we’ve never had a single unanticipated delay. Ever.

INDUSTRY TODAY 57

PROFILE • GRAND BAHAMA

The Bahamas is in the middle of the highest shipping traffic in the world — the Grand Bahama Shipyard is strategically located in the free trade zone of Freeport, less than 80 miles from the Florida coast. 58 INDUSTRY TODAY

GRAND BAHAMA • PROFILE

For nearly 20 years, City Services Ltd. (CSL), has operated out of Freeport, Grand Bahama as a leading civil and marine construction company. Working on the water is our specialty and we are proud to be a preferred supplier to GRAND BAHAMA. Contact us for further information on our marine constructions services: · Docks, Harbors, Breakwaters & Marinas, Tug & Barge Services · Clamshell, Dragline & Dredging Services · Seawalls, Retaining Walls, & Bulkheads · Submarine Utility & Pipeline Crossings · Demolition & Salvage · Piers, Jetties & Inlets, Concrete, Wood & Steel Piles As a leader in the heavy civil construction area we also offer: · Land Development, Commercial & Residential Site Work · Roads/Highways, Bridges & Structures, Grading & Paving · Demolition Services, Excavation, Blasting & Mining · Underground Pipe & Utilities, Water & Drainage Systems

City Services Limited

P.O. Box F-42410 - Queen’s Highway - Freeport Grand Bahama - The Bahamas Phone: (242) 351-5800 - Email: cityservicesltd@aol.com

crossings. Consequently, it is an ideal destination for vessels in need of general ship repair, special upgrades, refurbishments, conversions and life-extension projects. Grand Bahama Shipyard also offers full fabrication capabilities to fashion a range of deck components and living sections for cruise and merchant ships using both steel and alloy materials. Rotkirch points out that the shipyard doesn’t build ships, but rather refurbishes, outfits and maintains large seagoing craft. The shipyard comprises three floating dry docks capa-

ble of handling large ships, up to 1,000 feet in length, with a maximum lifting capacity of close to 90,000 tons. In addition, wet berths and piers with water depths up to 60 feet can accommodate deep draft vessels. The yard houses various steel, mechanical, pipe, electrical, rigging, and maintenance shops as well as a range of warehouse and subcontractor facilities. The Grand Bahama Shipyard is certified according to Quality Assurance Management Standards of ISO 9001:2008, Health and Safety Management standards of OHSAS

Above: One important part of a docking is always the cleaning and painting of the underwater hull. It helps maintain control of the fuel consumption of the ship. 18001:2007 and Environmental Management standards of ISO 14001:2004.

Safety and Quality are Key As important as ease-of-access coupled with premium shipyard facilities and accommodations, Rotkirch says Grand Bahama Shipyard’s commitment to three core principles makes it a choice port of call. “The first is INDUSTRY TODAY 59

PROFILE • GRAND BAHAMA

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GRAND BAHAMA • PROFILE

SEUSS AT SEA In April, Grand Bahama Shipyard welcomed the Carnival Freedom to its dry dock so as to execute a multi-million dollar makeover that facilitated a variety of new shipboard features based on the famous Dr. Suess books. The project includes installation of a new diesel generator, the addition of a high-end Captain’s Suite compartment on the deck above of the bridge, various technical modifications as well as normal ship maintenance activities. The Seuss at Sea program is part of Carnival’s Fun Ship 2.0 line of cruises in which a number of dining, bar and entertainment innovations are geared towards a specific theme. In this case, that includes the Cat in the Hat attending a Green Eggs and Ham breakfast, as well as the first ever Bookville family reading venue and play space featuring iconic décor, colors, shapes and funky furniture. For the Carnival Cruise Lines, the Grand Bahama is just what the doctor ordered to perform the necessary work and ensure everything is ship shape to the delight of voyaging families and residents of Whoville. safety. We operate in a safe and secure environment and are constantly performing risk assessments to ensure whatever work we do can be done as safely as possible, for our clients, for the ship’s crew and, last but not least, our own workforce. I always emphasize to our people that it’s better to come to work in the morning and go home, maybe a little more tired but safe and sound. We owe it to every employee’s family. We have to do everything in a methodical, safe and sound way because that ensures you’ll be Left: Aerial view of the floating docks.

coming in the next morning. Next, Rotkirch says, is maintaining and achieving the highest level of quality. “We aren’t always the least expensive, but our clients appreciate that what they are paying for is our ability to meet their highest expectations.”

Reliability is Paramount Those high expectations, he adds, are not just the ability to meet and exceed technical specifications, but also to deliver as promised. “Reliability is paramount. Failure to deliver on time is catastrophic in the cruise industry,” Rotkirch emphasizes. “You can’t have people waiting

in Ft. Lauderdale because their ship has been delayed getting out of dry dock. Part of our job is to anticipate problems or issues and plan to address them, and then schedule accordingly. Very much the same goes for the off shore industry when opening up new fields. In the fourteen years of our operation, we’ve never had a single unanticipated delay. Ever.” He adds, “Our success is based on our ability to meet the challenges of our clients. We have a reputation of being comfortable and competent at handling the logistics of big ship repair and maintenance. That INDUSTRY TODAY 61

PROFILE • GRAND BAHAMA

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GRAND BAHAMA • PROFILE

is our most important skill and attribute. Here’s an example. Last January we were refurbishing a ship that required loading 700 containers of new material on board. All the work we did created a lot of garbage—500 skiffs of garbage, as a matter of fact. We developed a meticulous plan to manage the loading and unloading the material to the point where we had four cranes operating over a 25 day period with one lift every 12 minutes. Everything worked like clockwork because we knew exactly what had to be done at exactly what time, and we made sure it was done exactly as we expected it to be done.” Rotkirch emphasizes that the only way you achieve such clockwork precision is the quality of your workforce. “Depending on the time of year, we employ anywhere between 500 to a 1,000 people. About half of our workers are local to the Bahamas. Since we started business here in Freeport we’ve instituted apprentice programs to train people in shipyard skills, and we’re particularly proud of our contributions to Left: Since the start the Shipyard has had apprenticeship programs that have trained Bahamian high school graduates in shipyard trades.

KE MARINE (See Outside Back Cover) KE Marine and Worldwide Diesel Power (WWDP) specialize in diesel engine maintenance solutions, including repair and maintenance to two and four-stroke diesel engines and turbochargers. Our experienced crews are available on site 24/7 and ready to travel worldwide to your site, ship, shore or underway. We also offer in-situ machining, honing, grinding, reconditioning services and diesel engine spare parts supply. Our facilities include a 26,000 square-foot work and machine shop which is equipped with the latest test equipment. We carry a vast supply of new and reconditioned parts in our store warehouse, located on the US East Coast in Jacksonville, Florida. We now also have a service hub inside Grand Bahama Shipyard. For further information visit our web site at www.kemarine.com. the local economy and community as a whole,” Rotkirch notes. “The other half involves specialized skills that we usually source from the Phillipines, Peru and Mexico, countries where the shipbuilding industry is in decline and people are happy to come here for the opportunity to work.” After fourteen years in operation, the Grand Bahama Shipyard foresees smooth sailing and clear skies ahead. “We’re investing some five to ten million dollars every year to improve

the shipyard,” Rotkirch says. “While cruise ships will always remain an important part of our business, we are looking to expand our business in merchant ships and off shore ships and structures, especially during the months of June to August which is typically our slowest period.” While for many a trip to the Bahamas is a vacation, for those in commercial seafaring, a trip to the Grand Bahama Shipyard is essential to keep their business afloat. INDUSTRY TODAY 63

PROFILE • TMSA

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TMSA • PROFILE

A leading Brazilian manufacturer of equipment for the handling and movement of bulk materials TMSA is fortunate enough to have innovation in its DNA. As commercial director Paulo Lambert tells Michael Sommers, the almost 50-year-old company is betting on another half-century of global growth through its creation of personalized products that are equally customized and cutting-edge. hen TMSA was founded in 1966, Brazil’s agribusiness segment was really starting

to take off. This was particularly the case in the South, where since the late 19th-century, European immigrants had

been purchasing small and medium-sized plots of fertile land and transforming them into highly efficient and productive

INDUSTRY TODAY 65

PROFILE • TMSA

farms. It was even more particularly the case in the southernmost state of Rio Grande do Sul, home to a strong agricultural and industrial equipment manufacturing tradition – and where TMSA chose to begin producing equipment for the milling and storage of grains. “The company’s founder and first president already had lots of experience in the grains segment and had built up a strong network of relations,” says Paulo Lambert, TMSA’s commercial director. “Agribusiness was growing a lot in the South and TMSA’s mission was to grow along with it by creating

“Forty percent of all grains exported from all Brazilian ports pass through equipment manufactured by TSMA.” equipment to meet escalating demand.”

New Markets and Territories Rio Grande do Sul was the first Brazilian state to cultivate grains on a large scale. As the market grew, producers began to seek out new land, first in the neighboring states of Santa Catarina and Paraná, then in the vast territory comprised by the Central-West states of Mato Grosso and Mato Grosso do Sul. During

this time, TMSA’s robust growth accompanied that of the rapidly expanding sector. In order to meet its expanding needs, the company began producing equipment for the handling and conveying of grains and other bulk materials, which soon became its main focus. As output soared, exporting grains overseas suddenly became a viable, and profitable, activity. When grain producers found themselves lacking loading and conveying equipment

Equipment that propels Brazil. TMSA helps Brazil to stir its riches and ANTARES, a leader in flexible couplings, has joined forces to support them. Flexible couplings

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www.antaresacoplamentos.com.br 66 INDUSTRY TODAY

In Löhne approx. 180 employees meticulously develop and manufacture safe switchgear for demanding and critical applications. Devices include safety and position switches, as well as switchgear for extreme industrial applications. Another business field is responsible for the manufacture of switchgear for explosive atmospheres – Ex position switches, Ex pull-wire switches, Ex safety switches and solenoid interlock systems as well as Ex magnetic sensors. steute also provides a wide range of switching devices for medical equipment. All three business areas, control technology, explosion protection and medical equipment, make good use of highperformance and innovative radio technologies.

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TMSA • PROFILE

for large volumes at port terminals, TMSA stepped in to fill the demand, first at Porto Alegre’s port (the largest port in the Mercosul region) and then at others throughout the South, and the Southeast (including São Paulo’s mega-port of Santos), gradually expanding all the way up to the North. At the same time as it was branching out geographically, beginning in the 1980s, the company also began to extend itself into other market sectors, Below: Shiploader for grain assembled on a floating platform.

notably heavy industry and mining. The prominence of mining in particular led TMSA to assert a strong presence in the state of Minas Gerais, traditional home to the industry’s most important mining conglomerates. Indeed, one of the company’s largest projects to date has been supplying equipment for the expansion of the famous Carajás mine, in the Amazonian state of Pará; the largest open-air iron mine on the planet, it is owned by mining giant Vale, the largest producer of iron ore in the world. More recently, in 2010, with the objective of further

consolidating its presence in the sector, the company opened an affiliate based in Minas’ capital of Belo Horizonte.

Instability – and Opportunity “Business, and profits, really depend on the state of the Brazilian economy at any given time,” says Lambert, when asked about revenues and market share. “We currently focus on three major segments; agribusiness, maritime ports and mining. Right now, we’re seeing a lot of opportunities in terms of the first two areas, while

INDUSTRY TODAY 67

PROFILE • TMSA

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Above: Paulo Lambert, Commercial Director; Below: Shiploader for sugar; Right: Shiploader for iron ore.

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TMSA • PROFILE

INDUSTRY TODAY 69

PROFILE • TMSA

AT A GLANCE: Company Name: TMSA; Headquarters: Porto Alegre, Rio Grande do Sul; Core Business: Develops, manufactures and supplies equipment for the handling and conveying of bulk materials for the agribusiness, mining, and heavy industry sectors; Main Products: Ship loaders and belt conveyors with capacities of up to 20,000 tons an hour; Facilities: 377,000 square feet of constructed area on a 1.3 million-foot site; Employees (direct): 600; Average Annual Growth Rate: 20 percent over the last 10 years. mining projects have decreased due, in part, to a reduction in Chinese demand. Ultimately,

these segments rise and fall independently of each other, and at different times, and as a re-

“We focus less on the products themselves than their characteristics.”

70 INDUSTRY TODAY

sult our market share varies. It’s safe to say, however, that 40 percent of all grains exported

TMSA • PROFILE

Above: Shiploader tower for grain; Left: Shiploader for grain in USA. from all Brazilian ports pass through equipment manufactured by TSMA.” Such fluctuations are a strong motivating factor fueling one of the company’s major goals: to enter Brazil’s thriving oil and gas segment. “Doing so will increase the company’s resistance in the face of any crises that inevitably occur in the other segments,” explains Lambert. “Unfortunately such instability is com-

mon. Agribusiness, for example, is very cyclical. Every five or six years, there’s an enormous demand for products, which then falls. In terms of maritime ports, however, we believe that activity will continue to increase for quite some time, creating a demand for expanded capacity at ports. For this reason, it makes sense for us to break into the oil and gas field. We can take advantage of the logistics that we already have in place in terms of other segments and add hightech equipment that has more added value and which, in turn,

will lead to higher revenues.” With this objective in mind, TMSA is investing heavily in qualified labor and integrative management software (Microsoft Dynamics ERP) as well as seeking out technology partnerships. “Our main products are ship loaders and belt conveyors with capacities of up to 20,000 tons per hour. It’s important to point out that, when it comes

“We produce very few standardized products.”

INDUSTRY TODAY 71

PROFILE • TMSA

MAJOR MILESTONES: 1966 – foundation of TMSA in Porto Alegre; 1987 – installation at current facility; 1993 – the Elter family takes control of 100 percent of the company; 1998 – inauguration of the environmental controls unit; 2004 – a major expansion doubles the size of production facilities; 2006 – awarded the FINEP Innovation Prize for the development of a ship loader with a capacity to convey 3,000 tons of sugar per hour; 2007 – receives IS0-9001 certification; 2010 – consolidation of TMSA’s presence in the mining sector with the inauguration of an affiliate in Minas Gerais. to equipment, the concepts are already very segmented and solidified in terms of industries. As a result, we focus less on the products themselves than their characteristics.” In today’s global market, one of the most important characteristics is sustainability. Consequently, TMSA invests a lot in solutions that attempt to resolve three major problems; noise, particle emission, and energy consumption. Since 1998, the company has possessed a special unit at its Porto Alegre facilities dedicated to the development of environmental control 72 INDUSTRY TODAY

equipment such as filters, dust suppressors, and fans, all of which promote health and safety.

Innovation and Customization The ability to provide innovative solutions is what the company sees as its biggest differential – not to mention a necessity for its survival on the global stage. Aware of this need to remain in the technological vanguard, the company continuously seeks outs partnerships with world renowned companies. Recently, for example, it paired up with

Right: Pipe conveyor for coal. Doppelmayr, an Austrian-based group that is the world’s leading producer of cable cars, but which has applied its technology to pioneering conveyor systems that TMSA has already supplied to clients in the U.S. “Due to the ‘Brazil cost,’ exports have been a challenge,” admits Lambert. “In terms of price, it’s hard to compete with low-cost, high-volume producers in Asia and Eastern Europe. However, we constantly strive to stay in the vanguard in terms of quality and technology. As a result, we continuously sell customized equipment to clients in the U.S. Europe, Africa, and the Middle East.” Customization is, indeed, the key to the company’s success both at home and abroad. “Our main business objective is to create personalized projects that meet the specific needs of our clients,” declares Lambert. “In fact, we produce very few standardized products. Instead, we study specific situations and then create engineering applications that offer the best cost benefit solutions for our clients. In doing so, we have carved out a real market niche for ourselves. This approach has defined us since the company’s foundation; it’s in our DNA.”

TMSA • PROFILE

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INDUSTRY TODAY 73

PROFILE • AIRDESIGN

When it comes to creating specialty products for a variety of large industries, AirDesign, S.A. de C.V., based in central Mexico, leads the way. Focusing on the auto industry, the company offers clients solutions ranging from original accessory components to Special Editions, covering everything from the design to the finished product. Rachel Hartman reports on this global-reaching, fast-growing company, and the innovative strategies that have steered its direction from the very beginning. hen clients come to AirDesign, the company offers them an efficient, results-driven process, beginning with the concept design. “Between 90 and 95 percent of the products are designed by us for 74 INDUSTRY TODAY

clients,” explains Miguel Avalos, Jr., CEO of the company. AirDesign focuses most of its activities in the auto industry and specialty equipment. It designs, develops, and produces original accessory components in plastic, aluminum and steel, for both exterior and interior applications in passenger vehicles. It also

AIRDESIGN • PROFILE

INDUSTRY TODAY 75

PROFILE • AIRDESIGN

produces special editions of vehicles. AirDesign has operations in other industries as well, including medical, transport, industrial, and pet segments. While it operates in large industries, the company has found a way to carve out a niche for itself in each of these. “We’ve developed a technology that can develop parts with prototyping,” notes Avalos.

In all, the family-owned company has approximately 400 employees. Of these, 50 are based in the company’s office and headquarters in Mexico City; the other 350 workers are in Cuernavaca, Mexico, where AirDesign has its design center and manufacturing facility. The facilities in Cuernavaca, Mexico, sport the latest technology and robotic equipment, as

well as advanced software. All of these features have helped the company rise to the top of its industry in the vehicle personalization industry. It serves as a tier 1 supplier for auto assembly plants, and also has a network of 1,000 distributors.

Innovative from the Start Even before members of the Pictured Previous: Air Design’s Fitting Lab; Above:Air Design’s utilizes state-of-the-art technology; Left: Air Design’s 12,000 sq. meter plant is located in Cuernavaca City, 100 km South of México City.

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Quality. Innovation. Environmental consciousness. Senoplast – globally successful with innovative and high quality plastic sheets and ﬁlms. Thermoformed senosan® products are used in various industries and applications – such as in the automotive, sanitary and furniture industries as well as for suitcases, roofboxes and refrigerators.

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PROFILE • AIRDESIGN

Pictured Above: Miguel Avalos, Jr., CEO of the company; Left: Air Design employs approximately 360 engineers, designers and plant personnel from 15 different countries; Below Right: PUR-RIM Injection Molds.

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AIRDESIGN • PROFILE

Avalos family launched AirDesign, they had a special interest in aerodynamics. In the winter of 1984, Miguel Avalos Sr. and his two sons set out in a handmade double engine, six wheel drive Liberty I Camper. Departing from Mexico City, the family embarked on a 40,000-kilometer on and off road expedition. The father and sons first headed north along the Pacific Coast, and drove all the way to the Arctic Circle. Then they traveled south, making their way back through the Gulf of Mexico. Along the way, the crew tested advanced aerodynamics and innovative composite con-

struction in extreme weather conditions. The temperatures ranged from 40 degrees Celsius to 40 degrees Celsius below zero. In all, the trip took three months to complete. At times, the family covered up to 1,000 kilometers a day on Arctic soil.

“We wanted to go where humans don’t trek,” explains Avalos. The trip helped the family gain the knowledge and experience that, several years later, would serve as a propelling force to start a company dedicated to innovative auto design.

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PROFILE • AIRDESIGN

In 1991, the family launched the firm AirDesign. In its first year of operations, the company introduced the Suburban Air Flex styling kit. Several years later, it redesigned F3 Corona Championship race cars. Then in 1998, the firm expanded its manufacturing plant. During the process, it doubled the plant’s original indoor surface, creating a new version that measured 12,000 square meters. In 2000, AirDesign opened new sales offices and a service center in Mexico City. During the following years, the company continued to grow and expand. In 2005, it created a new building dedicated to advanced design and product develop-

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ment. Five years later, in 2010, it produced Ford Colombia Special Editions for Ecosport, Edge, and Fiesta. As it grew in the automotive industry, it also branched out into other areas that had a need for specific parts and prototyping. With its quick turnaround time and ability to product specialty products, AirDesign quickly found itself in high demand, both in Mexico and countries around the world. In the past five years, the company has had double digit growth in its sales. Avalos credits much of this success to the company’s ability to adapt to the ever-changing conditions in the automotive industry.

Another component that has helped with the increase in sales can be seen in the firm’s grasp of globalization. Today, more than 80 percent of its sales are exported. “We’ve grown from a local company to an exporting one,” notes Avalos. That reach into a global world has led the company to direct its sales to countries around the world. Of its exports, AirDesign concentrates most of its efforts in South America, reaching places like Brazil, Colombia, Argentina, and Chile. It also sends products to Central America and the United States. A small percentage of exports are shipped to Japan and diverse countries in Europe. In

AIRDESIGN • PROFILE

all, it exports – either directly or indirectly – to more than 30 countries. Its client list includes Volkswagen, General Motors, Ford Motor Company, Seat, and many other established global firms. The company also prides itself in its flexibility in the market. It is able to respond quickly to the changing needs of clients. “We have record development times,” notes Avalos. In each of the markets it operates, AirDesign has a product ready to sell every three days. One of the recent projects the company took on involves the taxis being developed for New York City. AirDesign is currently putting together various parts for Nissan that will be used in the new version of the New York taxi.

Reducing Waste Since its founding in 1991, AirDesign has actively sought ways to develop and support sustainability projects. This was recognized early on. In 1995, just several years after AirDesign was established, the United Nations awarded the company with the Ozone Preservation Act Prize. This eco-focus has continued over the years. Recently, the firm’s design and engineering department in Cuernavaca

developed a system to reuse 100 percent of the company’s plastic waste. In this setup, all of the plastic scrap is saved to manufacture bricks. The process, which involves mixing the plastic with cement, is carried out by the company. “These bricks are then given to the people according to a merit system,” explains Avalos. By sharing the blocks with its workers, the company enables them to build, or add on to, their own homes. In addition to finding its place in the environment, AirDesign has settled into a unique position in the market. To do this, the company has maintained a focus on filling specific gaps that are present in prominent segments. “In many large industries, such as the auto one, large international companies tend to cover the majority of the necessities,” notes Avalos.

AirDeisgn uses the latest technology, robotic equipment and software. “Medium-sized companies can cover holes that these large companies leave behind.” Over the years, this strategy has enabled AirDesign to not only find its own key niches in the market, but also dominate those areas. Looking into the future, the company plans to keep building on the foundation it has created. “We want to make the most of what we have in Mexico, and keep serving other markets,” says Avalos. The company plans to continue spreading its global presence as well. To do this, AirDesign will keep its focus on designing and creating innovative products for the specific needs of world-renowned firms.

INDUSTRY TODAY 81

PROFILE • VANDERLANDE

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VANDERLANDE • PROFILE

PROFILE • VANDERLANDE

or the bigger businesses around the world, the question isn’t where the demand is going to come from, but more about how they’re going to effectively manage their supply chains, and distribute their products to their customers in an efficient manner. In regards to baggage handling, parcel and postal, and warehouse automation, Vanderlande Industries provides solutions that do just that, while also extending maintenance and repair services to each of their systems and third party programs as well. Van der Lande says his company has worked tire-

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lessly over the years to establish itself as a trusted name in each of these sectors, and their balanced approach has led to a balanced stream of business. “We basically have four verticals, or business sources, and if you look at it from a ten year perspective, each of them represents, more or less, 25 percent of our business,” he says, adding, “we are very pleased with our significant roles in each of these areas.” While the company has been steadily expanding throughout its expansive history, van der Lande says that growth really began to surge at the beginning

of the millennium, and hasn’t shown any signs of slowing down. “At the turn of the century, with everything that happened, such as the beginning of ecommerce’s rise and the events of 9/11, warehouses and material handling in general became much more sophisticated,” he says, adding, “there became a much greater need for our capabilities in the airport and baggage handling business, as well as the warehousing and parcel and postal industries.” Instead of folding under new levels of demand, Vanderlande Industries took the business in

VANDERLANDE • PROFILE

its stride and today serves as one of the world’s premiere options for each of the industries they serve. In particular, with respect to baggage handling, van der Lande says, “we are number one or two in the world based on turnover and projects executed.” Van der Lande says that the industries they work with vary in their overall makeup, and the manner in which they impact them varies as a result. “You look at baggage handling, there Pictured: CROSSBELT SORTER 700 with automated inducts for high capacity sortation.

aren’t a lot of players so we find ourselves doing large, comprehensive projects,” he says, adding, “warehouse automation, on the other hand, is a very diversified and segmented market, so we focus on specific sub-mar-

kets within them, such as fashion and food retail.” He says that the postal system industry is currently experiencing a strong decline in letter volume, so they have been actively marketing and

INDUSTRY TODAY 85

PROFILE • VANDERLANDE

“[ADAPTO] brings a revolutionary concept to the marketplace.”

implementing parcel sorting systems to help companies in the industry transition smoothly amidst new trends in their product flow. Covering all three of these industries is their service and maintenance program, but, again, van der Lande says their

role in such varies from company to company. “Our role in maintenance depends heavily upon the customer’s capabilities, as some will have everything in place internally, some will have some sort of presence, while others have none at all and require us to be onsite at all times.” In parcel and postal, van der Lande says that companies like UPS, Fedex, and DHL have a strong legacy of being highly skilled in technical affairs, and

many of them already have operation systems in place to handle any issues, so their need is less. However, referencing what is perhaps his company’s ‘crown jewel’ project in North America to date, an implementation of the UPS’ Worldport’s sorting system during the mid Pictured: Martijn van der Lande, General Manager Warehouse Automation, Parcel & Postal USA; right: Picking operations using RF terminals.

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VANDERLANDE • PROFILE

INDUSTRY TODAY 87

VANDERLANDE • PROFILE

90s, van der Lande says as systems get more complex, even these bigger companies will need some help. “We have a nice history with UPS, and serve as one of their key integrators, but with respect the Worldport facility, which is the largest parcel landing system in world, we still are working with them in an ongoing relationship by ensuring that everything in the Worldport’s system is up to date and optimized for changing needs in today’s world.” With regards to baggage handling, he says, “we have a good amount of customers that only need a support contract, where we can step in and help out with an issue, if they cannot solve it first.” However, he says there are also a great number of companies in the industry that already have third-party systems in place, but require full-time assistance on the floor to operate and take preventative measures should they be needed. “There’s a good amount of companies in baggage handling where we come onsite and work there permanently and, more or less,

Pictured: Top: BAXORTER with automated induct; middle: Baggage carousel; bottom: PICK@EASE goods to person solution. INDUSTRY TODAY 89

PROFILE • VANDERLANDE

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VANDERLANDE • PROFILE

learn their systems and perform maintenance, helping their system adapt to new requirements and changing environments,” he says, adding, “Vanderlande has a total of 19 onsite teams in the U.S. baggage and handling industry, totaling about 350 employees.” Van der Lande says this is a strong part of his company’s workforce here in North America and he expects it to continue to grow. Van der Lande says the Pictured: Left: Automated case storage and retrieval; Top right: BAXORTER with automated induct;

area that requires the most maintenance on his company’s end is in warehouse automation. “On the warehousing side, we see the greatest

need for the presence of our people onsite, given the complexity of the system and the software that is being utilized.” He says that a lot of

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INDUSTRY TODAY 91

PROFILE • VANDERLANDE

MORE ABOUT ADAPTO: ADAPTO provides high levels of flexibility and availability, maximizing service level for a company’s customers. It is a 3D concept, consisting of the following components: • Racking structure with an integrated shuttle track system. • Multidirectional Microshuttles that transport product carriers between rack locations and system exits/entries. • Lifts that allow the shuttles to move between rack levels and system exits/entries. • Shuttle traffic control software that maximizes system throughput and minimizes order lead times. • A highly user-friendly interface that provides a real-time overview of the entire system and its components. The modular design makes it possible to adapt the system to a company’s changing needs. Storage capacity and throughput can be scaled independently. ADAPTO requires a low initial investment and enables step-by-step extension as business grows. companies in the fashion and food consumer industries, which they primarily target, only have a few warehouses throughout the United States and don’t have the infrastructure in place when it comes to maintaining the automation side of their warehouse as a result. One of these companies is Urban Outfitters, for whom Vanderlande has already installed two of their warehouse automation systems in their facilities, and are set to implement a third in the clothing company’s new 1,000,000 square foot facility in Gap, Penn. 92 INDUSTRY TODAY

While there are plenty of positive things happening for Vanderlande Industries in the present, the company has even more exciting prospects coming in the future. One of these is their new ADAPTO shuttle technology, a highly flexible storage, retrieval, and transportation system, which van der Lande believes, “brings a revolutionary concept to the marketplace.” “It’s a full roaming shuttle, in that it can maneuver in all three directions, aisle to aisle, and up and down at any height,” he says, adding, “it enables you to have an extremely high capacity

and density of storage.” Van der Lande says part of the motivation behind the development of the ADAPTO technology was in response to increasing labor costs, combined with diminishing warehouse space and small orders with short delivery times. “This system provides companies with scalability, product availability, cost efficiency, and operational excellence,” he says. The first ADAPTO system was recently sold in Europe, and while it has yet to be implemented, van der Lande believes its expected success

VANDERLANDE • PROFILE

“Our end goal is to make a meaningful impact on a company’s supply chain, their distribution practices, or both, using only the best breed of products, because we are only as good as our last project and a happy client means a lasting partnership, something we value greatly.” could soon open to the doors to its arrival upon the shores of North America. “We tend to use Europe as our launching platform for new products, given the proximity to our headquarters in the Netherlands, but I’m excited about its future impact here in North America.” And that future impact, in general across their company, is what really excites van der Lande about his company’s presence in North America. He said he is quite optimistic about

2014, predicting a growth between twenty and twenty-five percent between parcel and postal, warehouse automation, and baggage and handling. He says the growth is a result of the marketplace is beginning to come around to the significance of e-commerce and automation and his company’s role in it. “We showed one of our customers recently the financial benefits of automating their facilities versus their established manual solution of handling,”

he says, adding, “basically they were using conveyors belts and a huge workforce on the floor, but after seeing the benefits of our automated systems relative to his business, they did a complete 180 and now refuses to use anything but automation in their facilities.” And that’s where Vanderlande Industries excels as a company. Van der Lande says they stick to certain verticals of business and don’t try to branch out too then we have However, adhering to this mindset, they have become experts of their craft in their own respective divisions. “Our end goal is to make a meaningful impact on a company’s supply chain, their distribution practices, or both, using only the best breed of products,” he says, concluding, “because we are only as good as our last project and a happy client means a lasting partnership, something we value greatly.”

INDUSTRY TODAY 93

PROFILE • ELECTROCRAFT

Headquartered in New Hampshire with operations in Europe and Asia, ElectroCraft builds customer partnerships with innovative motor and motion control technologies. David Soyka reports on how this company crafts custom manufacturing services to engineer improved productivity and lowered expenses.

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ELECTROCRAFT • PROFILE

s the state that holds the first primary, New Hampshire is famous as a proving ground for prospective presidential candidates. Dover-headquartered ElectroCraft is famous for proving how its motorized and electronically-controlled motion devices effectively power the applications that underpin mod-

ern life—from military vehicles to airplanes, medical and lab equipment to factory and industrial automation, electronics and semiconductor technologies to agricultural and lawn equipment. ElectroCraft makes the motion that make business work. These application-engineered, precision motor and motion encompass a range

of capabilities. These include servo and stepping motors, AC and DC motors, servo drives, stepping drives, as well as completely integrated motor-drive-control systems. “More than 90 percent of our products are the result of working with a customer to solve a specific problem or address a unique issue,” explains INDUSTRY TODAY 95

PROFILE • ELECTROCRAFT

Tom Ouellette, Vice President of sales. “If it’s not completely a custom-build, it’s a custom configuration of components. It’s the exception more than the rule that a customer would call and simply order something offthe-shelf.” He adds, “Our philosophy is to develop partnerships with

customers to work together to design and develop the technologies that best fit their needs, as opposed to imposing technologies on them that they have to force fit to work for them.” As a private company, ElectroCraft also has the advantage of greater flexibility to assess and respond to market needs with less pressure to achieve immediate results. As Ouellette points out, “We don’t have to answer to Wall Street, which sometimes tends to focus on short-term profitability at the expense of long-term customer relationships.” One example of Electro-

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Craft’s customer-centric approach is the appointment last June of Mike Karsonovich as President and CEO. A graduate of West Point with a background in the sales and marketing functions of various medical and scientific instrument companies, “Mike understands how our products need to work from the customer’s perspective,” Ouellette notes. “It’s that attitude that distinguishes us from a mere parts manufacturer.” ElectroCraft has over 400 employees worldwide, with facilities in Ohio, Michigan and Arkansas, as well as operations in the United Kingdom, Ger-

ELECTROCRAFT • PROFILE

many, Hong Kong and Mainland China, totaling about half a million square feet of production capability. The company relies on a mix of direct sales and manufacturing representatives domestically, and distributors internationally, to market its services. “Our sales force is highly technical, with a focus on creating value with custom applications that help our customers improve their designs, lowering their costs and increasing their revenue. Hands-on, responsive service is what drives each and every customer interaction,” Ouellette emphasizes. “About 70 percent of our sales are to North American-based OEMs,” Oullette says. “These days even companies based in North America participate in the global marketplace, and ElectroCraft is no different. In particular, we see a lot of opportunity particularly in Asia, which has seen rapid

growth in manufacturing and other high technology industrial businesses where our competencies play a vital role.”

Doing More with Less Ouelette describes ElectroCraft’s manufacturing as primarily, “high mix for low-medium volumes. While we have highly automated processes to machine and test components, because everything we do is built around the customer and is highly customized we depend on skilled associates for precision assembly. While this requires an investment in skilled labor, it is also highly suitable to lean manufacturing practices. We’ve found that rigorous application of lean processes globally allows us to expand our business without increasing overhead. So, we’ve been able to do more for our customers without having to endure the costs and challenges typically

associated with expansion. We’ve learned how to free up floor space and achieve higher levels of productivity per employee to support growth.” As you might expect from any technology company, ElectroCraft values research and development, albeit from a slightly different viewpoint. “Our laboratory is the customer’s workbench. We’re not developing things in a vacuum simply because our engineers think of something. Our engineers look to develop what solves customer problems,” Ouellette says. He also notes that Dover is about an hour north of Boston, home of the Massachusetts Institute of Technology and top intellectual capital. “We’re fortunate to draw upon a nearby pool of world-class technical talent eager to use their problem-solving skills to deliver the high quality systems customers require.” Ouellette points to a number of emerging trends in the design and use of motion control systems. The first is the increasing proportion of electronic versus mechanical parts that comprise a system. “You are Electrocraft uses innovative motor and motion control technologies. INDUSTRY TODAY 97

PROFILE • ELECTROCRAFT

always going to need a motor of some kind to make something work, but what OEMs are really looking for are integrated electronic controls that make the motors more intelligent and to become integral an part of these complex machines.”

Motors that Work Better Take something as simple as a fan. “When electricity was cheap and there weren’t any other options, the fan could run all day. Obviously not energy-efficient, not to mention undue wear and tear on the motor, thereby reducing its life expectancy. Today, we have control sys-

tems that regulate operation in sophisticated ways beyond cycling on and off at certain times. Sensors, for example, detect exactly when a fan needs to run and when it doesn’t. That’s a very basic situation. In more complex applications, it requires very sophisticated engineering to ensure everything runs when it’s supposed to, only when it’s

supposed to, and at optimum efficiency. As important as the basic motor is, the emphasis is on the electronic controls that make the motor work at optimum levels.” Related to that is increased emphasis on distributed control using a single computer control multiple motion controllers, without the need to add infraTOTAL MAGNETIC SOLUTIONS

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ELECTROCRAFT • PROFILE

structure. This not only lowers operational cost and raises productivity, but enables various otherwise disparate systems to “talk to one another” and better coordinate operations. As computer processing power improves in speed in ever-smaller packages, the benefits are a combination of improved precision and faster execution while greatly simplifying the physical component chain. Oullette

explains, “The whole literally is greater than the sum of its parts. You have the ability to implement more complex motion control without the cost of added hardware.” The manufacturing industry as a whole has been hard hit by worldwide economic downturns, but Ouellette believes the worst is behind. “North America more or less came out of the recession last year. For 2014,

we anticipate a lot of growth for our customers and, consequently, for us. We think Asia in particular is going to be a hotbed of continued growth in the manufacturing sector. By working closely with our customers to understand their needs and prepare for their future, ElectroCraft is well-positioned to help achieve greater profitability in the global marketplace. He adds, “We tell our customers that they are the inventors. When they get inspired to create something, we’re there to partner with them on a motion solution that helps make their invention work.”

The ElectroCraft brand for motion control products dates to the 1970s. It was acquired by Rockwell Automation and subsequently folded into the Allen-Bradley of factory automation equipment Rockwell purchased in the mid-1980s. In 2006, ElectroCraft was bought by a privately-held company. Although it continues to support certain legacy products, its primary mission is new product development. Case in point is the new Pro Series™ of integrated servo motor drives that offer a level of function precision hitherto unavailable in a single, rugged and compact high performance package. “While the ElectroCraft brand is still widely recognized,” Tom Ouellette says,” it kind of got lost in the larger scheme of Rockwell’s Allen-Bradley identity. Today, we’re re-establishing the tradition of our brand, beginning with the Pro Series™ as an example of our commitment to achieve new levels of motion control capability.” Other key brands of the ElectroCraft product line include CompletePower™ Motion products, RapidPower™ BLDC Motors, AxialPower™ Linear Actuators, MoblePower™ Mobility Products, TorquePower™ Stepper Motors, DirectPower™ PMDC Motors, SolidPower™ Plus AC Motors and SurePower™ C-Frame AC Motors. INDUSTRY TODAY 99

PROFILE • BERETTA

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BERETTA • PROFILE

SEAL of Approval Beretta USA was initially established to both serve as an importer of products to the United States from Italy, and as a repair station for any Beretta guns INDUSTRY TODAY 101

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BERETTA • PROFILE

owned in North America. However, the company’s U.S. presence was elevated to another level in 1985, when it wrested the highly-prized contract from Colt Manufacturing in becoming the standard service side arm supplier to the United States military through its M9 pistol. Reh, who has been with the company since 1983, marvels at the company’s surge over the last thirty since that contract. “During the late 70s, we worked very closely with members of the U.S. Navy Seal Team Six, a partnership that began when they approached us after their previous success and approval in using our guns.” Since then, Reh says Beretta saw its opening and greatly expanded its operations and employment in the U.S., presenting a line of products today that include handguns, rifles, and shotguns. For a story that began in a small valley in Italy so many years ago, the company recently finds itself writing new chapters with Previous page: Camouflaged Beretta semiautomatic shotguns being made by Beretta U.S.A.; Right: A highly-figured, hand-engraved and colored Beretta over-andunder shotgun made at the Company’s facilities in the town of Gardone Val Trompia in northern Italy. INDUSTRY TODAY 103

PROFILE • BERETTA

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BERETTA • PROFILE

each year that passes. Reh says that while the company’s initial contract with the U.S. military was crucial to their North American identity today, their subsequent creation and presentment of a wide variety of firearms has been instrumental in their sustained success. “In terms of the global firearms industry, we are the only firearms manufacturer that makes all types of small arms,” he says, adding, “we sell to civilian, law enforcement, and military consumers.” Reh says that part of Beretta’s ability to continue as a business for nearly 500 years is in their philosophy of always

BERETTA & T.WORX The T.Worx-powered rail technology, developed through the US Army SBIR funding and patented as the Intelligent Rail, is currently the NATO standard for powered rails. The two companies are working to integrate the rail technology into Beretta’s ARX160 and ARX100, with tentative plans to have working prototypes by Summer 2014. Below: Pistol frames being machined at Beretta U.S.A. having the capability to “have something under development for the future, while having an established line of products able to impact every type of customer.”

Real-World Respect He says this kind of mentality is necessary, given the way the firearm industry has evolved over the years. “The firearm industry is an extremely mature

INDUSTRY TODAY 105

PROFILE • BERETTA

industry, given the fact that a bolt action rifle made a hundred years ago could function perfectly today, so for a lot of companies it’s really about discovering improvements upon these existing technologies in a way that is applicable to the large scale market.” Beretta is no different in this regard, he says, pointing to his company’s recent partnership with T.Worx Ventures in developing a powered rail that can be integrated into its assault rifles. “The Department of Defense recently conducted a study into military combat rifles and the efficiency of the battery packs installed in the various components attached to them, such as flashlights, laser-aiming devices, or GPS coordinating 106 INDUSTRY TODAY

equipment,” he says, adding, “Beretta is working with T.Worx to develop a battery pack that is actually part of the rifle, enabling it to power every additional piece of equipment on its own, and has a charge meter that can be recharged when needed.” The rechargeable battery pack for the assault rifle is crucial because often times when soldiers are about to be deployed, they will switch out all of their current batteries in their guns to replace them with fresh ones, given the uncertainty of mission conditions and time. “A lot of these batteries that are switched out for fresh ones often still have a decent amount of power in them, so this rechargeable battery will not only reduce the weight of the batter-

Pictured Above: Beretta U.S.A.’s headquarters located in Accokeek, Maryland; Right: A sample of the Company’s products on display at its Maryland facility. ies and the gun itself, but also their waste.” And yet, while the company is at the forefront of continuous research and development of new firearm technologies, Reh believes that their awareness of the present-day customer and their diversity of wants and needs is what is most integral to their prosperity. “The customer base for firearms is kind of diverse in that some are very casual while others are complete aficionados, similar to those

BERETTA • PROFILE

“Our customers are very committed to the products they use and we share that sentiment in the way we produce our guns.” who play golf.” He says that while each customer has their own values, Beretta produces every gun with the goal of “meeting the demands of the most demanding customer.” “We have men and women who buy our guns for self-defense or recreational activity such as trap or skeet shooting, we have Olympians who rely on our shotguns when they’re competing on the international stage, and we also have soldiers who are on the front lines

in life-or-death situations and need their weapons to function perfectly,” he says, adding, “our customers are very committed to the products they use and we share that sentiment in the way we produce our guns.”

Tennessee Transition Beretta’s attention to detail and a comprehensive understanding of its products’ end user has caught on in a big way in the U.S. market, with 2013 producing a record year of profits for

the firearms manufacturer. And while the company begins its transition into an updated, modernized manufacturing facility in Gallatin, Tenn., Reh says that the decision to shift operations and open a brand new site came from a variety of factors. Presently based in Accokeek, Md., he says, “This investment was something that we have been planning for quite some time, something we actually had initially expected to implement at our Maryland site,” he says,

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INDUSTRY TODAY 107

PROFILE • BERETTA

adding, “however, at the beginning of 2013, we saw Governor O’Malley and the state of Maryland attempt a bunch of gun controls bills, and felt the need to start looking at a more gunfriendly state.” He says that between Governor O’Malley’s gun control push, and issues with previous administrations in the state of Maryland, they were fearful of the long-term sustainability of their operations and their ability to get their products into the hands of those who wanted them. “Finally, Ugo Gussali Beretta, our company’s patriarch, 108 INDUSTRY TODAY

said ‘if we’re going to add this many jobs and make an investment as significant as this, let’s go to a state where we don’t have to worry about an anti-gun climate’,” he says. Reh was appointed by Beretta to lead the search for a viable new location, and was tasked with not only identifying states that have displayed consistent support of the 2nd Amendment in the past, but ones that were expected to continue their support well into the future. “We also needed somewhere that was going to be relatively close to our origi-

Pictured Above: Hand-engraving performed by a Beretta employee at the Company’s studios in Gardone Val Trompia, Italy; Right: Beretta A400 shotguns made by Fabbrica d’Armi Pietro Beretta S.p.A. in Italy. nal facility in Maryland, because we still have a lot of product and equipment there that would be very expensive to move,” he says, adding, “availability of flights to Europe were also important, given the company’s headquarters of Gardone Val Trompia in Lombardi, Italy.

BERETTA • PROFILE

The firearm company was particularly keen on looking at Greenfield locations, given their desire to build from the ground up, and Reh’s search took him across seven states and 80 locations, working with the states’ governor’s office and their respective economic departments. “After going through all different kinds of talks, discussing everything from white and blue collar employee availability and educational resources, to operational taxes and cost of living,” he says, adding, “We came up with 6 A-rated sites where we told Ugo and his son Franco, ‘if you locate here, you won’t be disappointed.” After having the Beretta family fly in and visit these locations, it was decided unanimously that Gallatin, Tenn., was the best choice.

Tenets of Commitment Reh says that everything inside the new facility will be a direct representation of Beretta’s overall philosophy, demonstrating their commitment to the product, and the person. “One of the tenets of Beretta’s business philosophy is to invest in equipment and people to ensure the best possible product and quality,” he says, noting, “while we may be the oldest industrial dynasty in the world, our equipment is cutting-edge

and enables us to produce at any capacity in the time we need to.” He points to one such example back in 2001, just days after the terrorists attacks of 9/11 on the World Trade Centers. “We had existing contracts in place at the time with the US Army prior to those attacks, but a couple days after September 11th, I get a call from their contracting office,” he says, adding, “we weren’t supposed start production for another few months but he asked if we would be able to accelerate the process without increasing the charge.” Reh and the employees at Beretta USA got right to work and were able to complete an order that was expected to take 8 months in just under one month. Reh says he wouldn’t have been able to get it done without the hard work and dedication of the employees on the factory floor.

“Many of our employees have sons or daughters in the armed forces and while they never know on a pistol-to-pistol basis if they specifically will be using that one in combat, they know there’s a good chance at least one of our parts will be in their use,” he says, adding, “and as a result, they put their heart and soul into the product and it leads to exceptional quality.” Beretta firearms have been around for centuries and, given a glimpse into the company’s current makeup and direction, it looks like they should continue their presence for many more. “It’s a company that’s almost 500 years old, so when we make decisions, like our transition to the Tennessee facility, we’re not looking one or two years ahead, we’re looking at decades, potentially even centuries to come.”

INDUSTRY TODAY 109

PROFILE • PTI

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PTI • PROFILE

The Brazilian market leader in mechanical transmission continues its tradition of providing integrated solutions and powers forward with new plans and products. Reuben Ford reports on equipment, experience and engineering that drive the company’s success.

ower Transmissions Industries do Brasil Ltda (PTI) manufactures gearboxes, and couplings and provides maintenance services for diverse sectors such as the mining, steel, transportation, sugar and alcohol, pulp and paper, cement, chemical and energy generation

industries among others. With an overwhelming market share in the mining industry, PTI is licensed to produce important brands in Brazil and has built a solid reputation based on technology, quality control and competent customer services. “We are always renewing our product portfolio – launch-

ing new products and designs to increase efficiency and monitoring and investing in development,” says Sales Manager for Brazil, Sérgio Bonassa Manfrim. PTI has been awarded numerous prizes for design and innovation and plans to launch new systems and software in 2014. INDUSTRY TODAY 111

PROFILE • PTI

COMPANY OVERVIEW Power Transmissions Industries do Brasil Ltda (PTI). Products: Power transmission systems, couplings and services; Location: São Paulo, Brazil; Growth:

10 – 20 percent (yearly average).

International Quality Founded in Brazil in 1955 by US company Falk Corporations, PTI’s operational management adheres to ISO: 9001. “Every year we are oriented and

112 INDUSTRY TODAY

audited by Det Norske Veritas (DNV), one of the world’s leading certification bodies for management systems, which indicates performance and allows constant improvement,” explains

Above: Ricardo Podval, Director of International Operations for SGI. Ricardo Podval, Director of International Operations for PTI’s

PTI • PROFILE

technological partner company SGI. Over the decades, PTI developed mechanical transmissions according to Falk technology and in the last 20 years has produced its own equipment, following extensive research and studies. Besides producing its own

line of products, PTI aggregates licensed brands, such as the WDS gearboxes, considered the most modern in the market and consolidated brands Transmotécnica (TT) and Power&Motion (P&M). As well as international standards and certifications, PTI has developed quality tests that

“We don’t sell products. We provide solutions.” Ricardo Podval Director of International Operations for SGI (PTI’s software and technology partner).

make its gearboxes and couplings the best in their segment. An example is the WBX gearbox line, winner of the IF Design Awards, one of the most important industrial design prizes in the world. “The secret of any gearbox is in the quality of manufacture and especially the quality of the

STRENGTHS AND SERVICES In addition to manufacturing gearboxes and couplings, PTI provides the following services: • Technical evaluations and reports for gearboxes; • Revitalizations, renovations and re-empowerment (national and imported gearboxes); • Machining; • Inspection and diagnosis by ultrasound;

Cruzaço is a Brazilian company which is presented in several segments such as railroad, mining, crushing and parts for equipment. Its history is marked by its efficiency and commitment to quality of its products. Our current installed capacity is 2.500 tons/month and we are able to cast parts up to 20 tons. We also supply to the market solutions for steel castings parts in low, medium and high alloy carbon steel, stainless and manganese steel.

• Vibration analysis; • Oil analysis; • Balancing; • Laser alignment; • Telediagnostics; • Consultancy; • Training;

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• Installation and start-up for all products.

INDUSTRY TODAY 113

PROFILE • PTI

teeth, the pinions and the gears. We pay special attention to these parts, from the purchase of raw material to the thermal treatments during production,” Manfrim explains. State-of-theart machinery guarantees the expected form and finish of the parts and translates into greater resistance and durability. The assembly process of the gearboxes follows constant checks. Gear shafts are made without a press, using only contraction and expansion of the parts. Components that will spin over 900 RPM go through a dynamic balancing process that guarantees low levels of vibration. PTI’s testing facilities can isolate and align gearboxes, standing over 30 tons: performing operational tests that ensure 100 percent satisfaction. “PTI’s credibility is founded on engineering, more than 100 years of experience in the United States and in Brazil, modern production and testing equipment and agile, competent customer services,” Podval summarizes.

Solution Provider PTI manufactures and installs gearboxes and couplings and offers start-up services for all brands. “The goal is to install the equipment correctly from the very beginning of operation 114 INDUSTRY TODAY

PTI has built a solid reputation based on their technology and quality control. and maintain efficiency through programs of preventative and predictive maintenance. Only original parts are used, increasing the lifecycle and productivity of our clients’ machinery,” Manfrim comments. PTI also provides gearbox revitalization and maintenance (giving customers factory-guaranteed renovations), 24-hour customer service, a dedicated administrative team and specialized technicians in many Brazilian states. The company services and guarantees previously installed gearboxes in imported equipment. Podval af-

firms: “We don’t sell products. We provide solutions.” He explains that this business concept is the key to PTI’s market leadership – especially in the mining industry: “Where many multinationals try to standardize markets, we know that this is not always possible. Our solutions are customized according to client needs.” PTI has developed a preference for efficiency and evolution – combining technologies to produce an extensive and task-specific portfolio of parts. It comes as no surprise that PTI has a 90 percent market

PTI • PROFILE

“For years we have been investing in software, design and technology.” Sérgio Bonassa Manfrim, Sales Manager for PTI Brazil.

EXECUTIVE PROFILES Sérgio Bonassa Manfrim is a qualified engineer and has 23 years of experience in the PTI Group. As Sales Manager for Brazil, he is responsible for the complete commercial line of gearboxes, couplings and services. Ricardo Podval, also an engineer, is Director of International Operations for PTI’s software and technology partner SGI. With eight years of experience in the group, Podval has led the international market since 2010, based in SGI’s Shanghai offices.

share of the mining sector and is considered the Brazilian market leader in couplings used in cement, paper and cellulose, sugar and ethanol, food and petrochemical production. As well as a recognized pioneer in engineering and technology and acclaimed customer services, PTI owes its enviable position to excellent infrastructure. Located in the south zone of Brazil’s industrial capital city, São Paulo, PTI’s 30,000-square-meter facility employs 480 staff and is one of the largest of its kind in Latin America. The company also has administrative offices in Recife (Pernambuco), Contagem (Minas Gerais), Campinas and São Carlos (São Paulo), and Volta Redonda (Rio de Janeiro). The network covers all national territory. Through its valued partnership with SGI, PTI has manufactured products for export to INDUSTRY TODAY 115

PROFILE • PTI

many countries worldwide such as the United States, Korea, China, Peru, Mexico and Chile.

Born in the USA PTI’s products have their roots in US-created technology. However, through an extensive manufacturing program and vast experience, acquired over 50 years of gearboxes and couplings production, PTI has developed its own product portfolio in Brazil. “For years we have been investing in software, design and technology for components, which are produced and assembled in Brazil,” Manfrim confirms. 116 INDUSTRY TODAY

Thanks to an elaborate infrastructure, research and development, PTI has a complete product line, whose quality and reliability are internationally known to comply with the strictest working conditions and market demands. According to Manfrim and Podval, the company’s international presence is reason for optimistic prospects. A firm foothold in the country’s strong mining industry, supplying Brazilian multinationals such as Vale, is an opportunity for future growth. “After overcoming erratic growth between 2003 and 2006, we now average between

10 and 20 percent annual growth figures,” Manfrim says. PTI has invested in and focused on Brazil. The company confirms its presence in three national trade fairs in Brazil this year: Fenasucro, Exposibram da Amazônia and Feira da Mecânica, where it will launch new software for real time, online monitoring and measurement of vibration and temperature. PTI’s development, production, strategy and plans emphasize a growing market lead, dominating an important market and consolidating an international brand.

PTI • PROFILE

INDUSTRY TODAY 117

PROFILE • NUTEC

Consistency is key at NUTEC, the front-runner in Mexico’s industrial heating industry. With more than three decades of experience, the company, which produces high temperature insulation fibers, sends its top-notch products to countries around the world. Rachel Hartman reports.

118 INDUSTRY TODAY

NUTEC • PROFILE

hen a high temperature insulation wool blanket rolls leaves the production site at Nutec, customers can be certain that the product continually meets both the market specifications and the client’s exact requirements. Perhaps the company’s most notable products consist of insulation wool blankets, which are designed to meet the

specific heat containment need of customers. Nutec also specializes in bio soluble blankets and thermal insulation systems. The company offers installation drawings and services as well. Headquarters for Nutec are found in Monterrey, Mexico. In addition, the company has two plants in the country, both of which are located in the northern city of Ramos Arizpe, Coa-

huila. It owns a subsidiary in the U.S. and has a plant in Berriz, Spain. Nutec has a joint venture with IBAR refractories in Sao Paulo, Brazil, as well. Nutec’s products are present in more than 50 countries around the globe. The company operates in a variety of industries, including the petrochemical, ceramic, power generation, glass and heat segments. INDUSTRY TODAY 119

PROFILE • NUTEC

Decades of experience Nutec was first incorporated in 1975. At the time, the company manufactured industrial burners and combustion equipment. It carried out operations under license from North American Manufacturing Company of Cleveland, Ohio. Several years later, in 1979, it began distributing high temperature insulation wools. Then in 1985, the company began manufacturing high temperature insulation wools under its trademark FIBRATEC. A little more than a decade later, in 1996, Nutec Premier was incorporated as a joint venture with Premier Refractories, Inc., for the acquisition of a manufacturing plant in Ramos Arizpe, Coahuila. During the following years, Nutec experienced growth and expansion. In 2004, Nutec Ibar was incorporated as a joint venture with Refractarios Ibar, LTD., with a manufacturing facility in Sao Paulo, Brazil. By 2005, Nutec was considered to be the leader in Mexi-

120 INDUSTRY TODAY

AT-A-GLANCE Company name: Nutec Fibratec; Headquarters: Monterrey, Mexico; Established: 1975; President: Gilberto Walls; Website: www.nutec.com.

co’s industrial heating industry, and had a presence in 46 countries. In 2010, the company added two new products to its line: appliances and grease ducts. In 2012, the company opened a new vacuum forming facility in Ramos Arizpe, Coahuila. The second Mexican plant focuses on the manufacturing of boards and special shapes products.

Blanket Products In its blanket category, Nutec manufactures the MaxWool spun ceramic wool blanket. The product is made of long, flexible, interwoven fibers that are manufactured by a special spin-

ning process. This results in a strong, yet lightweight, material. In the refining and petrochemical segment, the MaxWool blanket can be used in applications such as reformer and pyrolysis furnaces; tube seals, gaskets and expansion joints; high temperature pipe, duct, and turbine insulation; and crude oil heater linings. In the steel industry, the MaxWool blanket serves in the following areas: heat treating and annealing furnaces; furnace door linings and seals; soaking pit covers and seals; furnace hot face repairs; reheat furnaces; and ladle covers. It also is used in the ceramic industry for kiln car insulation and seals, as well as continuous and batch kilns. For the power generation industry, the MaxWool blankets has applications such as boiler insulation, boiler doors, reusable turbine covers, and pipe covering. Some of its other ap-

NUTEC • PROFILE

plications are the insulation of commercial dryers and covers, veneer over existing refractory, stress relieving furnaces, glass furnace crown insulation, and fire protection. Another of the company’s products, the MaxWool Tank Car Blanket, uses silica sand and calcined alumina. These materials are melted in an electric arc furnace, and then dropped onto high speed wheels to create the fibers. These fibers are stripped off with air and placed on a conveyor, and the accumulation of the fiber is needled to the required thickness and density. The MaxWool Tank Car Blanket meets the thermal properties for fire protection required by the Department of Transpor-

tation (DOT). It can be used as insulation in various DOT rail car classes, and as an insulation system for chlorine tank cars as well. Nutec also produces Supermag, which is a high temperature body soluble fiber. It uses a spinning technology to create a special fiber with top-notch thermal and mechanical properties. The fiber consists of a mix of calcium, silica, and magnesium. The Supermag products can be used in refractory linings, thermal insulation, and fire protection applications. In addition to these, the company manufactures the MaxWool Acoustic Grade Blanket, which absorbs sound and resists vibration. It also pro-

Above: Internal view of Nutec’s plant. duces the MaxWool Wet Pack Blanket, which is presaturated with a solution that causes it to harden when exposed to ambient air or heat. This can be used in applications with high velocity or process atmospheres for corrosion resistance.

Additional Products In its state-of-the-art facilities, Nutec produces MaxBlok Modules, which are full thickness furnace linings. Each module is continuously folded and compressed to exact density levels to provide a longer furnace life. MaxBlok Modules can be used in the ceramic industry for INDUSTRY TODAY 121

PROFILE • NUTEC

Left: Arial view of Nutec’s plant; Right: A selection of Nutec’s insulation products.

applications such as low mass kiln cars, continuous and batch kilns, door linings, and glazing

and porcelain furnace linings. In the power generation industry, these products serve in duct

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linings, heat recovery systems, boiler insulation, and stack linings. For the steel industry, MaxBlok Modules have applications such as pre-heat ladle covers, heat treat furnaces, soaking pit covers and seals, and reheat furnaces. Other applications include the insulation of commercial dryers and ovens, veneer over existing refractory, stress relieving insulation, and glass furnace crown insulation. Nutec offers clients module

NUTEC • PROFILE

hardware, including attachment systems that can be easily be installed in furnaces. It also produces MaxBoard, which are vacuum formed products that are made to resist high velocities. In addition, its MaxForm shapes, which are processed from alumina and silica blends, can be used in furnace linings, boiler duct and stack linings. Nutec makes MaxMoldable, which is a tacky, putty-like material that adheres to ceramic wools and refractory material. Another product, known as the MaxWool Rigidizer, can be applied to insulation surfaces. After drying, the substance hardens the surface, making it more resistant to high velocity.

SPANNING THE GLOBE While its headquarters are located in Monterrey, Mexico, Nutec’s products can be found in more than 50 countries around the world. To help support its global operations, the company oversees manufacturing facilities and offices in Mexico, Spain, Brazil, and the United States.

Ongoing quality To continually improve its output, Nutec has pilot facilities where new products can be tested. Additionally, the company has various certifications to help it focus on quality and consistency, including ISO 9001-2008 certification. Several years ago, it received Customs-Trade Partnership against Terrorism (C-TPAT) certification. It also has UL certification for various applications. While the focus on quality products continues to serve as an umbrella over the company’s

operations, Nutec considers its people to be the real key to success. By viewing its employee base as its strongest resource, the company helps workers develop talents and increase capabilities. In the coming years, Nutec plans to maintain a focus on

consistent products. It also is prepared to continue expanding through its distribution network. As it manufactures products for the insulation needs of clients in a variety of industries, Nutec looks to not only meet, but also exceed, customers’ expectations. INDUSTRY TODAY 123

PROFILE • HUSSEY COPPER

It’s been almost 170 years since Dr. Curtis G. Hussey founded Hussey Copper in 1848, beginning as a small medical instrument business set up on the rolling banks of Pennsylvania’s Monongahela River. Today, the company still maintains the classic Hussey name brand, but has greatly evolved from the humble company it was, and into a trusted and widely-relied upon name across North America when it comes to copper-based products. In a conversation with Industry Today, Joseph Mallak, President and CEO of the company, talks about the history of Hussey, the current philosophy that’s energizing their business, and why the future is shining quite brightly for them. Steve Engelhardt reports.

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HUSSEY COPPER • PROFILE

hile Hussey Copper took its roots in the construction of copper-based medical instruments, Mallak says that the late Dr. Hussey did so, “because it was really all he knew, given his profession and desire to start his own business.” However, he soon found that while copper was certainly in demand, it was much more popular in the form of sheet, strip, plate, and bar, rather than as medical instruments, to supplement a growing nation of makers and builders. Years later, with the rise of telegraphs, telephones, and electricity in households, Hussey found themselves once

again in high demand. Exploiting copper’s benefits with regards to electrical equipment, Hussey found their long term niche in the market and have used their success and reputation today to become a world leader in producing copper bus bar. However, while a significant portion of their business rests upon their melting, casting, and finishing of electrical copper bars, another emerging part of their business is related to the medical benefits of copper, ironically. In the late 1920s, scientists found that copper was notably strong in fighting infections and bacteria-related health issues, and today, its widened

applicability has demand for copper increasing at a fast rate. It appears Dr. Hussey got into the right business, after all. Mallak says he laughs whenever he thinks about the history of his company, “It’s always fun looking at our history, as here you have this doctor who founded a copper company without knowing any better, found a different market for his products, but then almost a hundred years later it becomes known that copper actually fights bacteria and infections in a highly effective manner,” he says, adding, “so, in effect, through our company’s origins we found an additional business outlet as well.”

INDUSTRY TODAY 125

PROFILE • HUSSEY COPPER

Above: Joseph Mallak, President and CEO; Right: Hussey Copper serves multiple markets.

Cradle to the Grave Mallak says that Hussey Copper’s vertical integration is what enables them to effectively at-

tack multiple markets in a consistent manner, saying, “We are a ‘cradle to the grave’ kind of company.” With a 275,000 square foot facility in Leetsdale, Pa., as well as two additional plants in Eminence, Ky., spanning 125,000 and 50,000 feet respectively, and an employee workforce of 550 individuals, Hussey has both the manpower and facilities to handle its production process from top to bottom. Their main mill is in Leetsdale, where a bulk of the metalworking processes are carried out. “It’s where our shop is, and here you can find rolling mills,

hot mills, cold mills, and finishing slitters,” Mallak says, adding, “we have a cast house that does 535,000 pounds of copper, and furnaces that have the ability to produce base material and customer products such as strip, sheet and plate.” In addition, they have CNC machines that do bending and punching, as well as full-scale fabrication processes for all of their products. These processes, along with the manufacturing of their bus bars, are all handled between their two Kentucky facilities.

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126 INDUSTRY TODAY

MD-Cu29 antimicrobial copper products are EPA-registered and laboratory tested to kill greater than 99.9 percent of bacteria* within 2 hours. Frequently touched surfaces in public, at work and sometimes even in your own home can be dangerous because they are breeding grounds for bacteria. Hussey Copper’s new line of MD-Cu29 products includes a wide range of antimicrobial touch surfaces for the home, for public spaces and for life in general. *An EPA-backed claim can be found on MD-Cu29’s website at: http://md-cu29.com/

HUSSEY COPPER • PROFILE

Mallak says that when he took over the company in 2011, one of his initial goals was to establish a high functioning, lean culture within his company’s production processes. “Right after taking over, we implemented six sigma practices also (as well as having a lean culture). ” Hoshin planning is a collective-based practice, designed to capture and solidify strategic goals while also shedding light on future trends that could come about. “Every department in the company has core projects being worked on that are going towards two or three main objectives that the entire corporation is trying to achieve,” he says, adding, “working on a common goal brings more ideas to the table, and a greater overall understanding for executives and employees of where

the company is headed.” Mallak says that since Hussey is in the commodity business, employing strategic programs like hoshin, among others, is becoming more of a necessity than an option. “We have global competitors in South America, Mexico, Asia, and Europe, so we have to continue to drive growth and practice efficiency in order to stay ahead.”

Traditional and Innovative In terms of actual commodities, Hussey’s copper bus bar is by far their most popular product. “Our biggest product line here in North America, is our bus bar which goes into electrical applications,” he says, adding, “we have the largest range of sizes, from as thin as wire to up to a foot wide, and it’s really served as our flagship product over the

years.” On the antimicrobial side, Hussey offers ‘EPA registered’ copper touch surfaces with bacteria-destroying properties, INDUSTRY TODAY 127

PROFILE • HUSSEY COPPER

a service born from their already extensive knowledge in working with copper, and boosted by their increased level of material flow in their production facilities. “Our vertical integration has really given us a big push with our capabilities in antimicrobial products,” he says, adding, “and consequently, we’re really finding a receptive market with regards to antimicrobial applications in commercial areas as well as inside peoples’ homes.” Mallak says that his company’s extensive history in installing push and pull plates, light switch covers, and engineering 128 INDUSTRY TODAY

services (covering existing surfaces with copper in institutions like hospitals and laboratories)

provide a nice segue into future applications for their antimicrobial products.

HUSSEY COPPER • PROFILE

Respecting the Past Mallak attributes a large part of the company’s recent success and renewed identity to the company’s buyout in 2011 by American business magnate Lynn Tilton. “We had a lot of ideas in terms of how we wanted to reinvent the Hussey Copper name brand,” he says, adding, “but without her passion and open-mindedness towards our goals, I’m not sure we’d be where we are today.” And yet, for as strong as Hussey’s leadership has been, Mallak believes it’s his workforce that really puts his com-

pany over the top. “Hussey went through some tough times during the recession of 2008, and it created a large number of employees who weren’t sure if they were going to lose their jobs or not,” he says, continuing, “but they didn’t let it affect their work, and came to the job every day with their sleeves rolled up and ready to go. You could tell they really cared about what they did.” Now, as the storm has cleared and Hussey appears to be steamrolling their way into the future, it appears their hard work and faith

in their company has paid off. With a flagship product established in their bus bar, and a fast-emerging antimicrobial market, Hussey Copper looks poised to continue their success in a variety of markets for quite some time.

INDUSTRY TODAY 129

ADVERTISER’S INDEX

VOLUME 17 • ISSUE 3

A Antares.........................................................................66

International Rental Services..................................... 60 Interroll..........................................................................88

B Boshert Precision Machinery, Inc............................. 126

K KE Marine Worldwide Diesel Power.......................OBC KEM Design, Berlac Group......................................... 78

C Check-Mate Industries.............................................102 City Services Ltd. (CSL)...............................................59 Cruzaco......................................................................113 D Dipebor .......................................................................71 F FIRELOCK®.................................................................122 Forbo Siegling, LLC......................................................91 G GMA Electric Corp......................................................91 H Hydratight......................................................................1 I Insulation & Abrasion, LLC........................................122

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130 INDUSTRY TODAY

L LCS Company.............................................................96 M Magnet Applications, A Bunting Magnetics Company.....................................................................98 Metals USA...................................................................60 Modis............................................................................48 P Projelmec.....................................................................68 Q Quantum Devices, Inc............................................... 98 R Regal Industrial Sales................................................ 104 S SAE Power....................................................................53 Santec Automation Ltd.............................................. 73 Senoplast, SA de CV...................................................77 Sotres Group.............................................................. IBC Steele Solutions Inc.....................................................86 Steute...........................................................................66 Supreme Screw Products, Inc.................................. 104 U Unifor Aluminum Forgings LLC................................. 107 Ultra Hi..........................................................................69 W Wisconsin Economic Development Corporation...................................... IFC World Wide Manufacturing........................................ 87

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Celebrating over 35 years of experience on construction sites. We are recognized worldwide for bentonite preparation, storage and de-sanding units for: • Drilling works • Micro tunnelling • Jacking-Bored piles • Trenchless operations • Hydromill • Diaphragm walls • Hydro-shield tunnel construction • Bentonite mud preparation plants • Mud de-saturation processes

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SOTRES GROUP

PARC EUROPÉEN DES ENTREPRISES, RUE RICHARD WAGNER, 63200 RIOM FRANCE N° TVA INTRA. FR58320203482 TEL : +33 (0)4 73 15 36 00, FAX : +33 (0)4 73 15 36 20

Specializing In Diesel Engine Maintenance Solutions

Representing

INNOVATION BASED ON 35 YEARS EXPERIENCE.

Diesel Engine Overhaul, Repair And Maintenance Services In-Situ Grinding, Honing And Machining Parts Reconditioning And Spares Supply For Diesel Engines 732 PARKER STREET JACKSONVILLE, FLORIDA 32202 UNITED STATES OF AMERICA

SERVICE HUB LOCATED AT GRAND BAHAMA SHIPYARD THE FISHING HOLE ROAD FREEPORT, GRAND BAHAMA ISLAND THE BAHAMAS

TEL: +1 904 354 6566 FAX: +1 904 358 7862 EMAIL: INFO@KEMARINE.COM URL: WWW.KEMARINE.COM