February 7, 2005

MiBiz Network

By Karen Gentry

MUSKEGON — As new predictions of the death of U.S. manufacturing appear on a regular basis, there are some reassuring stories that seem determined to prove the doomsayers wrong. One of those stories comes from Muskegon-based Eagle Alloy Inc. The foundry operation has hired150 workers in the last 12 months.

Eagle Alloy is in a tough, labor-and capital-intensive business — providing primarily steel casting to about 50 customers representing15 different industries. Margins are low, yet Eagle Alloy is thriving, according to President Mark Fazakerley. "We've gained a greater market share."

Annual sales growth has averaged 10-20 percent. However, the names of 24 new accounts have appeared on the company’s client list in the last 18 months, and that has translated into 100 percent growth in tons of casting produced. It is the biggest leap in Eagle Alloy's 25-year history.

Eagle Alloy hasn’t turned to the stock market to fatten its client list.

"We specifically target privately held companies," Fazakerley said. Fazakerley has found that family-owned companies make decisions based on the long term and are more interested in buying U.S. products.

In addition to the new accounts, Eagle Alloy’s two biggest customers — Harley-Davidson Inc. and Bobcat Company — have been growing by double-digit percentages annually. Eagle Alloy makes frame components and transmission parts for Harley-Davidson and is now Bobcat's sole source of steel castings.

Eagle Alloy is in a growth mode. Egelston Township board members have approved a $2.92 million tax abatement request for new equipment and building improvements that will include the upgrading of the melting furnace, purchasing of an additional heat treat furnace, shot blasting equipment and the revamping of a cleaning room to accommodate lean manufacturing.

The township also granted abatements on $985,500 worth of equipment and $24,500 in plant improvements for Eagle Alloy’s sister company Eagle CNC.

"Egelston Township's been very business friendly to Eagle Alloy," Fazakerley said.

One reason Eagle Alloy has been able to grow and to sustain its growth is the introduction of lean manufacturing. Grand Haven-based CQD Consultants has worked with the company to implement lean techniques like single piece flow, which dramatically expedites the flow of casting through the plant. Through the use of more efficient processes the firm has been able to provide better service to clients, according to Eagle Alloy Vice President John Workman.

Those internal improvements provide the ammunition in the business battle Eagle Alloy is waging with its counterparts in mainland China.

"One thing we can provide that China can't is a short lead time," Workman said.

The current industry standard for lead time is 9-10 weeks. Eagle Alloy's lead time averages six weeks. Not one to be satisfied with merely besting the competition, Fazakerley wants to cut that time in half, to three weeks.

At the core of Eagle Alloy’s business is steel. It is no secret that the price of steel has gone through the roof. Scrap steel has gone up 400 percent since February 2003 when the cost was $90 per gross ton (2,240 pounds). The current price is around $370 per gross ton, although it has been as high as $441 per gross ton.

To offset the skyrocketing price increase, Eagle Alloy adds a surcharge to every pound of steel it ships. There is grumbling from customers but, said Fazakerley, "We have to do it or we can't do business."

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This article appeared in the February 7, 2005 issue of MiBiz, read by upper management executives in West and Southwest Michigan. Print subscriptions are free to qualified individuals who do business in West and Southwest Michigan. For further information about MiBiz Network, visit www.mibiz.com.