Novocast's Optimistic Outlook
Reacquired by Grede Holdings in 2011, the Mexican ductile iron caster has boosted capacity and looks to have a bright future.
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In one of rock ‘n’ roll’s iconic lines of defiance, The Who’s Roger Daltrey sang, “Meet the new boss, same as the old boss.” For Novocast, a ductile iron casting facility in Nuevo Leon, Mexico, that line is literally true.
Grede Foundries Inc. was involved in the partnership that originally built Novocast in 2001, but exited the partnership in 2007. In early 2011, Grede Holdings, formed after consolidation with two other U.S.-based metalcasters, reacquired the metalcasting facility. In the ensuing three years, Novocast has operated at nearly full capacity while streamlining operations and, with significant investments in its melting/pouring department, boosting overall capacity by 15%.
The second time around, for both parent company and metalcaster, appears to be a better match.
Reentering Northern Mexico
Built as a $65 million partnership between Grede Foundries, Milwaukee, and Grupo Proeza, a Mexican manufacturing conglomerate, Novocast’s 230,000-sq.-ft. facility served the Monterrey area’s numerous customers in its key industries of medium/heavy truck, automotive and other industrial applications.
After its initial divestment in the facility, Grede returned to the negotiating table in 2011 after undergoing a significant transformation. Grede Holdings was formed in 2010 with the consolidation of Grede Foundries Inc., Blackhawk Foundry (USA) and Citation Corporation. Looking to reenter the Northern Mexican marketplace, Grede Holdings, based in Southfield, Mich., reached a deal to reacquire Novocast and nearby Teknik, a small iron caster also owned by Grupo Proeza that produced turbo housings, brackets and hubs.“We share complementary product lines and equipment, which will add to our existing manufacturing capacity in support of our customer growth projections in this expanding economy,” said Doug Grimm, president and CEO, Grede.
Producing cast components from 1 lb. to 200 lbs. including axle carriers, differential cases and turbo housings, Novocast had rebounded from the global recession of 2008-2009 to approach full capacity when it was reacquired by Grede Holdings. In 2013, the facility pursued the installation of a pressure pour system that would boost production by 10,000 metric tons a year to accommodate increased customer demand. The metalcaster’s new ownership was capable of making the $2 million investment, which would only increase its ability to serve local customers.
“It’s important for us to have a footprint where we can work closely with those customers and meet their needs as they expand in that region,” said Rob Allerton, director of product planning and marketing, Grede Holdings. “From an overall perspective, it’s a critical piece of our portfolio because of its growth potential.”
New Ownership, Improved Support
During its acquisition by Grede Holdings, Novocast continued its hearty rebound from the recession. With an annual capacity of approximately 62,000 metric tons, the facility shipped just 40,000 tons in 2009. But it exceeded its prerecession level of production within two years and shipped 62,000 tons in 2013.
Because of such optimistic outlooks for the facility and its customers in the region, Novocast began to explore options to boost capacity. A massive expansion in a new facility was not an option due to the necessary investment and time, so Novocast’s leadership looked for other ways to ship more castings.“We knew a new facility in the short term wasn’t an option,” said Raul Lopez, managing director of Grede Holdings’ two Mexican facilities. “We wanted to generate ideas to improve capacity and, at the same time, reduce our lead times.”
Revamping the facility’s melting and pouring operations was a possibility that made sense to Novocast and its new ownership. The facility didn’t necessarily have a bottleneck in its operation, but a boost in pouring efficiency would reduce downtime and allow for a 15% increase in molding production. The facility had been operating with pouring robots since 2001, so this upgrade was able to reduce the total cycle time in order to improve efficiency.
“You should be limited in production by the most costly part of your operation,” Lopez said in reference to the melting area. “Basically, we wanted to maximize the capabilities of our melting and pouring departments so we can fill molds more quickly.”
Novocast expected the new pressure pour system to boost overall capacity by 10,000 metric tons per year to around 72,000 tons, which would be an increase of more than 15%. Additionally, the required investment was approximately $2 million, a modest sum when compared to other, more comprehensive facility improvements.
“Considering we could increase capacity by 10-15%, we thought it was a great idea,” Lopez said.
The plans for the pressure pour system were announced in mid-2013, with the installation to be completed by February 2014. The logistical complications of installing one pouring system while another operates at full capacity proved to be the biggest challenge for Novocast’s team of engineers. The most crucial step occurred in December 2013, when much of the new system was installed during a routine 10-day maintenance shutdown.
“After that, from January to March, we would work on the system on Sundays (when Novocast normally is shut down),” Lopez said. “When the system was ready to pour, we had to do tests, get approvals and begin operations, all while the old system was still in full operation.”
Now eight months later, the pressure pour system is handling the large majority of Novocast’s production while the old system, which transferred metal from the melting area to two robotic pouring stations via ladles, continues to handle certain components. Considering the boost in efficiency, Novocast has increased mold filling speeds from 180 molds per hour to nearly 200.
“We’re still not at 100% of our expected capacity,” Lopez said. “But that’s just because of small issues regarding fine-tuning processes and learning about the entire operation. Everything has run according to plan, so now we’re just looking to make it run as best as it can.”
A Mutually Beneficial Partnership
In addition to its boost in production, Novocast has realized a number of other benefits since being acquired by Grede Holdings three years ago. Namely, the support offered by the ferrous casting giant has been a tremendous resource that previously was not available.
When a part of Grupo Proeza, Novocast was one of two metalcasting operations in the company’s portfolio. (Teknik, with a total annual capacity of 8,000 tons, was the other.) Since its acquisition by Grede Holdings, Novocast has an entire group of metalcasting facilities with which it can exchange sales support, technical information, employee training and engineering expertise. From Grede’s perspective, the existing management team and workforce at Novocast proved plenty capable, allowing the transition in ownership to move smoothly.
“There were great people who had been a part of the Novocast organization for a long time,” Allerton said. “Really, what we did was implement our standard operating procedures and bring them into the fold. We have a very well defined set of metrics, including quality control measures, hourly and monthly performance controls and other methods of increasing productivity, so we wanted Novocast to operate just like any other Grede facility.”
Grede Holdings can provide a host of support services to its newly acquired site. On the flip side, Grede Holdings expanded its stable of metalcasting facilities, increasing its ability to handle customer demands, especially those in the Northern Mexico.
“We have the similar capabilities to some U.S. facilities, so if a scheduling issue arises at a site in U.S. we can produce the same components,” Lopez said. “I think it has been a great transition for Novocast, and we’ve also been able to provide benefits for Grede Holdings as well.”
Tending toward medium to high production volumes, Novocast ships a majority of its castings—somewhere between 85% and 90%, according to company estimates—to Mexican-based customers. That same percentage of Novocast castings will eventually reach the U.S. after assembly and shipping. More than three years after joining Grede Holdings, the company’s first facility outside of the U.S. is firmly part of the larger organization.
“Novocast is an integral part of every discipline in our organization, from sales to engineering to operations and planning,” Allerton said. “They are a crucial part of who we are and our operating procedures.”
Considering Novocast’s recent internal improvements, and Northern Mexico’s rapid growth potential as a manufacturing hub, Grede Holdings and Novocast executives are optimistic about the future.
“We see a lot of potential in Mexico,” Allerton said. “Either for applications that end up in the U.S. or stay in Mexico, the markets, whether it’s automotive or agriculture or heavy trucking, are growing.”