Winter 2004 Newsletter

OCMA “WEATHERS” CASH CRUNCH THANKS TO ALL WHO CONTRIBUTED TO EMERGENCY ASSESSMENT

OCMA Treasurer John Burke, OSCO Industries Inc., reports on the successful Emergency Assessment and Membership Drives.

As reported in the Summer OCMA News, OCMA faced a significant cash crunch this fiscal year due to significant membership losses and reduced participation at OCMA meetings. To address the crisis, the OCMA Board of Trustees voted at the October Board meeting to request an emergency assessment from OCMA members equal to 30% of annual dues. Although the assessment was voluntary and did not apply to new OCMA members, more than 75% of the OCMA membership responded and we raised nearly $15,000.Additionally, since the July meeting when incoming OCMA President Walt Chaput called upon OCMA member companies to recruit new members to the fold, eighteen (18) additional members have been added! We will continue to press our recruitment drive because the efforts of OCMA members benefit all Ohio metal casters and everyone should be carrying their weight in this endeavor.

As a result of these successes, OCMA will make it through the fiscal year. To raise additional revenues for next year, the OCMA Board of Trustees is planning an annual golf outing, probably in July or August, to raise additional funds. The Indiana Cast Metals Association (INCMA) has raised significant funds each year with their outing and we should be able to do so as well. The OCMA Board of Trustees is making every effort to raise OCMA revenues without increasing dues. If we can continue to bring in new members, have a successful golf outing, and hold on to current members, we may succeed. If you have any additional ideas, please communicate them to the OCMA office by phone (614) 876-5100 or e-mail russ@ohiocastmetals.org. On behalf of the OCMA Officers & Board of Trustees, thanks to all who dug a little deeper to help us keep fighting for the Ohio metal casting industry.

MEETING UPDATE

Approximately sixty-five (65) OCMA members attended the OCMA membership meeting on Thursday, January 29, 2004, in Columbus. Ohio Senator Steve Stivers from the 16th Senate District (Western Franklin and Pickaway Counties) was the luncheon speaker. Senator Stivers, Chief Sponsor of S.B. 80, the tort reform bill, serves as Vice Chairman of the Judiciary Committee on Civil Justice. Not an attorney, Senator Stivers worked in the banking industry prior to his appointment to the Ohio Senate. The key points of his presentation are summarized below.

Ohio State Senator Steve Stivers explains the key points of his proposed tort reform legislation, S.B. 80.

1. The cost of litigation is increasing at more than 15% per year, three times the rate of growth of the economy. Litigation costs every Ohio citizen $800 per year. Since 2000, Ohio has lost nearly 175,000 manufacturing jobs. Enough is enough. It is time for tort reform.

2. Unnecessary and costly litigation stifles innovation and productivity and creates business bankruptcies. It is time to create an economic environment in Ohio that will attract businesses that create jobs and wealth.

3. There is an epidemic of frivolous lawsuits in Ohio. One out of every three small businesses has been sued in the past ten years. Merely defending oneself from a frivolous lawsuit costs these businesses more than $10,000 per case. Uncertain verdicts force these businesses to settle frivolous lawsuits rather than gamble on the jury outcome. Punitive damage awards are 60% more frequent and the overall penalty has increased by ten times as much.

4. To address the spiraling litigation killing jobs in Ohio, he introduced S. B. 80, a tort reform bill. The goal of S.B. 80 is to create a balanced civil justice system in Ohio, one that is fair to plaintiffs, but does not unnecessarily threaten the businesses and the jobs and wealth they create.

5. S.B. 80 would implement a “Legal Consumer’s Bill of Rights” that must be attached to every written retainer agreement or contract for legal services. The Legal Consumers Bill of Rights would outline the rights of the consumer and the responsibilities of his/her counsel. The right of a client to file a grievance against the client’s attorney is also specified. The bill would also place caps on Attorney’s Contingency Fees: 35% of the first $100,000 recovered on a claim; 25% of the next $500,000; and 15% of any claim on which the recovery exceeds $600,000. Nine other states have sliding scales for attorney contingency fees and four more allow maximum amounts for these fees.

6. S.B. 80 would redefine frivolous conduct and permit judges to impose penalties for frivolous conduct on their own initiative. The bill would also prohibit the use of delays to needlessly increase the cost of litigation as a method to force settlement. Most importantly, parties affected by frivolous lawsuits would be able to file a motion for an award of court costs, reasonable attorney’s fees, and other reasonable expenses incurred with a civil action.

7. The proposed legislation would provide more information to juries deliberating a personal injury case. The bill would allow a defendant to introduce evidence of any amount payable as a benefit to the plaintiff as a result of damage that results in injury, death, or loss to person or property. Members of the jury could be made aware of insurance, workers comp payments, and any other monetary benefit the plaintiff has received as they weigh the evidence in the case. Presently this information cannot be introduced, but this change would mirror the law enacted in 2003 pertaining to medical tort reform.

8. Use or non-use of a seatbelt could be introduced as evidence in a trial under the proposed legislation. Also the tax consequences of an award may be introduced as outlined in the bill. Presently, informing the jury that a reward is non-taxable is forbidden.

9. S.B. 80 would cap damages for non-economic loss in all tort actions. For catastrophic injuries, those including loss of a limb, permanent and substantial physical deformity, and loss of bodily organ system, the caps are $500,000 for each plaintiff or $1 million for each occurrence. For non-catastrophic injuries, the cap would be $250,000 or an amount equal to three times the plaintiff’s economic loss to a maximum of $350,000 for each plaintiff or a maximum of $500,000 for each occurrence.

10. The bill would also place caps on the amount of punitive damages recoverable in a civil action. The damages would be limited to the amount of the economic damages or $100,000, which ever is greater. If the defendant is a small business, employing less than 500 persons in full-time positions, the cap on punitive damages is the amount of the economic damages or $100,000 which ever is less. The state of Michigan does not include any punitive damages in their civil justice system.

11. S.B. 80 would create a limitation in the time in which a case can be brought in civil court. Under the bill, civil actions based upon product liability and construction-related claims must be filed within 10 years. Exceptions would include fraud, where a warranty exists that expires later than the 10 year period, and in cases of latent injury such as exposure to hazardous/toxic chemicals, asbestos, agent orange, etc. Sen. Stivers related a situation in which an architect was sued in the 1970’s for a design of a stage in a public school that was built in the 1940’s. The suit charged the architect and others because bleachers that were placed on the stage collapsed and caused injury. Even though the stage did not fail and was in no way responsible for the collapse of the bleachers, the architect was forced to defend himself at the cost of $20,000.

12. An element of the proposed bill of some interest to Ohio metal casters, asbestos related cases, has been removed from the bill in the Ohio House and reintroduced as a separate bill, H.B. 292. Sen. Stivers believes that asbestos related litigation is out of control. In 2001, more than 25 companies declared bankruptcy due to asbestos related liability. There are more than 40,000 cases in Cuyahoga County alone. In these cases, approximately 65% of the plaintiffs have been exposed to asbestos, but they have no symptoms, they are suing for future medical damages. Under the S.B. 80 proposal, a plaintiff filing an asbestos related claim would be required to provide a written report and supporting tests demonstrating physical impairment that meets specified minimum requirements. Sen. Stivers declared the real problem is that many individuals who are suffering from asbestos related exposure are forced to wait for their day in court because there are so many cases involving perfectly healthy plaintiffs.

13. The failure to enact tort reform legislation in Ohio is causing a loss of innovation and productivity gains. Ohio is a less attractive place to do business. It is important that Ohio has a civil justice system that provides for fair adjudication of claims, but Ohio is falling behind other states in reforming its system. Thirty other states have modified their punitive damage statute, 29 states have language pertaining to frivolous lawsuits, 21 states have caps on non-economic losses and 9 states have a sliding scale for attorney’s fees. He asked OCMA members to contact their state representatives to let them know that tort reform is needed in Ohio and that foundry owners and suppliers are supporting its enactment.

Senator Stivers provided a comprehensive summary of S.B. 80 that was handed out to OCMA members in attendance. Copies of the summary are available from the OCMA office.

Judy Huang, President & CEO, 889 Global Solutions Ltd., provided a glimpse of the China manufacturing juggernaut. Ms. Huang an entrepreneur born in China and educated both in China and the U.S. offered her perspectives on the tremendous expansion of Chinese manufacturing and the development of partnerships with U.S. companies. Highlights of her presentation are presented below:

Judy Huang, 889 Global Solutions Ltd., provides a "light moment" during her presentation on the growth of manufacturing in China.

1. China is the world’s largest country with more than 1.3 billion people. Most of the industrial development is taking place on the coast of China in cities such as Macau, Fuzhou, and Shanghai. Much like New York City in the U.S., Shanghai is the financial and trade center of China. Recently, the Shanghai port expanded its docks to allow for 10,000-ton container ships, the largest of such ships.

Manufacturing exports have driven this expansion in port productivity. Beijing is the capital of China with outstanding universities and the Olympics in 2008.

2. Ms. Huang outlined comparative cost data for U.S., Mexico, and China, and indicated that the major advantage for China is their low labor rates, average rates of 87 cents an hour compared to average rates in the U.S. of nearly $20. This translates into China having a significant competitive advantage in those castings that have labor intensive and/or have a number of processes involved with heavy labor inputs such as grinding. Interestingly, electricity and industrial rent were not that different from those found in the U.S. and Mexico.

3. Despite the fact that President Richard Nixon made his trip to China in the 1970’s, China still has an immature legal system. Although laws are on the books, in many areas of China these laws are not implemented or enforced. This is more true inland than on the urban industrial coast. Both banking and the media are undergoing significant reform. The transportation system has been much improved to facilitate the moving of goods from the inland plants to the coastal ports.

4. There has been rapid development of world-class suppliers in China for several reasons. One, there is abundant, relatively well-educated good, cheap labor. The education system in the urban areas emphasizes math and science and produces many good engineers. The Chinese Government is mature and stable, the currency is stable and pegged to the U.S. dollar, and there has been a tremendous amount of both domestic and world market demand for Chinese manufactured products.

5. The strong economic growth in China over the past several years is having a tremendous impact upon the urban areas and creating a Chinese middle class earning $20,000-30,000 annually who are demanding more goods and services. As a result, companies from Western Europe, Japan, Canada, and Australia are also entering China to provide these goods and services to this growing population. With a base of 1.3 billion people even a middle-class of 10% would be nearly 150 million persons.

6. Many Tier one and Tier two suppliers have followed their customers to China. Each multinational company would pull ten or more international suppliers to China. Major increases in demand for automobiles have driven increasing demand for castings. Many of these castings will be exported.

7. China’s entrance into the World Trade Organization (WTO) has opened the door for U.S. companies and reduced several of the obstacles of trade with China. For example, tariffs on imports have been reduced by more than 10%, antidumping regulations have been implemented, and intellectual property piracy protection is required. Under WTO, retailers will be permitted to establish 100% owned retail entities, eliminating the need for Chinese JVC partners.

8. Regarding castings, castings in which the Chinese have a competitive advantage are most likely those with 1) high labor content, 2) require secondary operations such as assembly, surface plating and chrome plating; 3) have low cubic size and weight translating into low shipping cost; 4) high volume items; 5) those items with infrequent engineering changes; and finally, 6) castings that are subject to stringent environmental controls.

9. Alternatively, castings with the following characteristics are not likely candidates for outsourcing to China: 1) specialized products with complex engineering; 2) castings with frequent modifications needed; 3) new products, and 4) both large and small low volume castings.

10. Potential pitfalls involved in outsourcing to China include: 1) must have a relationship with supplier, without it successful business is unlikely; 2) quality or levels of quality can be problematic when communications and mutual understanding of the quality standards fail; 3) there is a tendency for Chinese suppliers to over promise; 4) problems with customs, payment, and shipping terms. If you are contemplating outsourcing and your company is smaller than $100 million, you should definitely get professional advice.

11. Intellectual property protections remain in their infancy in China. Therefore it is critical that if you have proprietary process etc. or “Crown Jewel”, keep it safe at home. Another suggestion is to spread the manufacturing process around to several different manufacturers and do the assembly in U.S.

12. Regarding quality control, there remain lots of problems in Chinese manufacturing. It is imperative that the level of quality expected must be made abundantly clear to the Chinese manufacturer. She would recommend third party oversight of the inspection program, samples or pre-order shipped and inspected before entire shipment is made, pre-approval of all changes, and the setting of a “per shipment” failure tolerance.

13. U.S. efforts to convince the Chinese government to unpeg the Yuan from the dollar, in effect increasing the value of the Yuan has led to changes in the Chinese economy. China has reduced its trade rebates to Chinese manufacturing companies that export. Revaluation of the currency could lead to increased unemployment and political instability.

14. Alan Turley, former U.S. Consular Minister with the U.S. Embassy in Beijing provides the following Top Ten Tips for doing business in China:

1. Do your due diligence – twice;
2. Choose the right partners;
3. Pay attention to “Guanxi” (means “no problem” and usually means you have one!);
4. Don’t be afraid of the short-term;
5. Be flexible:
6. …but don’t be afraid to say “no”;
7. China is not a single market;
8. Get professional help;
9. …and hire an interpreter;
10. Be polite.

Ms. Huang’s PowerPoint presentation included a number of photos of modern foundries in China. Although the file is too large to e-mail, CD copies can be made and mailed upon request.

OCMA Vice President Doug Rowe, Ford Motor Company, Cleveland Casting Operations, outlined the actions taken at the Cleveland Casting Plant to avoid disaster when total power was interrupted on Thursday, August 14, 2003, a little after 3 PM. The highlights of his presentation are outlined below:

OCMA Vice President Doug Rowe, Ford Motor Company, Cleveland Casting Plant, alerts OCMA members to the dangers of electricity blackouts.

1. At the time of the blackout, three (3) 108” water-cooled cupolas with water-cooled tuyeres, nine channel induction furnaces with eleven (11) water-cooled inductors, and various metal ladles and transporters were in operation. The afternoon shift production start up was in progress.

2. In more than thirty (30) years at the Casting Plant, he had never confronted such a challenge. When the lights/power went out, they were facing a situation they had never faced before. The furnaces could not be heated or the transporters moved. As sole provider for the new Ford F150 pickup truck it was imperative that production capability be maintained and resumed as quickly as possible. However, no one was sure how to do that.

3. As a result of the blackout, the following situations existed. Called the Good, The Bad, and the Ugly:
1. The mill pond cooling water pumps had stopped….Bad!
2. Emergency city water switching values activated……Good!
3. All plant environmental and ventilation systems stop…..Bad!
4. Cooling water restored to tuyeres, cupola shell and inductor bushings….Good!
5. News reports indicated a huge power failure in the NE….Bad!
6. No immediate hope for a power resumption offered…….Bad!
7. The iron in the inductors was beginning to solidify…….Bad!
8. Compressed air pressure was dropping……Bad!
9. City water pressure was dropping fast…..Ugly!

4. How do you prepare for an emergency like this?
1. Install water switching gear to enable city water cooling;
2. Test and validate the functionality of the switching gear frequently;
3. Establish functional area workgroups involving engineering, maintenance, production and supervisory personnel;
4. Make sure that the contact information you have for utilities, suppliers, etc. will be available in the case of a blackout, i.e. do not have it stored only on the computer;
5. Distribute contact lists with phone numbers of critical personnel including support suppliers;
6. Develop dedicated, innovative, resourceful and empowered employees.

5. Steps Taken: First: Assess Your Needs
1. Electrical Power…..Out!
2. Cooling Water…Pressure Dropping!
3. Compressed Air…. Pressure Dropping!
4. Building Lights…Out!
5. Sunlight…Fading Fast!
6. Cupola Stack Burden…. Cooling!
7. Inductor Bushings…..Heating!
8. Inductor Iron Loops…..Freezing!

6. Second: Resourceful Innovation
a. Flashlights
b. Radio Communicators
c. Portable Gasoline Powered Welding Rigs
d. Portable Diesel Powered Contractor’s Air Compressors
e. Rental Diesel Powered Generators
f. Temporary Lighting Strings and Stands
g. Diesel Powered High Pressure Fire Loop Pumps
h. Building Fire Hydrants and Temporary Piping
i. Transport Vehicles. Lift Trucks, Payloaders, Flat Beds
j. A Small Army to Muster All of the Above to Drop and Clean Cupolas, and to Pipe “Fire Water” to Inductors

7. Third: Prioritize Your Actions:
i. Insure/Monitor cooling water flow to cupola shells and tuyeres
ii. Insure/Monitor cooling water flow to inductor bushings
iii. Secure molten metal containing transporters
iv. Assemble Emergency Teams and Assign Tasks

8. One key priority was to drain the liquid iron from the three (3) cupolas. Ford employees, all members of the UAW were consulted in the discussion of the plan. They were all instructed to wear all protective gear during the operation. By 8:00 PM, nearly five hours after the blackout, they successfully drained all three (3) cupolas without an injury.

9. Melt shop personnel were informed that the emergency water from the city of Cleveland that they had been using since the blackout was going to be unavailable after 8:00 PM. Employees used temporary piping and diesel power to get water to the nine (9) channel furnaces filled with iron.

10. What about all those frozen inductors on the channel furnaces? Doug had always thought that frozen iron in an inductor was a death sentence for a channel furnace. However, his consultant Bill Duca, Duca Manufacturing & Consulting, Inc., informed him that actually “cooling is cool”. The iron shrinks as it freezes. Just as molders provide molten metal risers to feed their shrink, melting’s entire channel furnace acts as a riser to the inductor as it freezes. The Inductor Refractory cools along with the freezing iron. As the furnace continues to cool, the upper case acts as a heat sink for the inductor, slowing the cooling rate. DO NOT DRAIN THE UPPER CASE!!

11. Reheating of the frozen iron is not cool! Induction reheating of the frozen iron in the channel furnace will only heat the metal, NOT the surrounding refractory. Reheating TOO FAST will cause the iron to expand faster than the refractory, causing cracks, fins, and run out failure. The iron must be heated SLOWLY. You must allow the heat to soak into the refractory and reach equilibrium. Both the iron and the refractory must be raised in temperature at the same rate. The two must expand at nearly the same rate in order to avoid any expansion cracking etc. The reheating recipe is available in the PowerPoint presentation. If you are interested, just contact the OCMA office.

12. It took the melt shop nearly thirty (30) hours to bring all the channel furnaces back to normal. This was done without a loss of iron or damage to the induction furnace. The power went out at 3:00 PM on Thursday and at 10:00 AM on Friday the reheating process began. Monday morning the melt shop was ready to run full production.

13. Lessons Learned: First order of business, maintain cooling water. Secondly, do not drain your furnaces. Thirdly, proceed with patience. Last, reward and recognize your TEAM.

Doug’s PowerPoint presentation is available from the OCMA office. Just call or e-mail if you would like a copy.

ENVIRONMENTAL UPDATE

OCMA Vice President for Environmental Affairs, Kurt Braun, Ford Motor Company, presented the environmental report. Copies of Kurt's PowerPoint presentation are available from the OCMA office upon request. Key issues are outlined below:

OCMA Vice President for Environmental Affairs, Kurt Braun, Ford Motor Company, Cleveland Casting Plant, provides the environmental update.

Iron and Steel MACT Standards

The USEPA Administrator signed the Iron & Steel Foundries MACT on August 29, 2003, prior to the legally imposed deadline. However, the rule has not been published in the Federal Register, the date that will start the compliance clock. The hold-up is the one-year compliance timing on the scrap inspection program. USEPA has indicated there are no other major changes expected. USEPA has continued to work on ways to “accommodate” cupola wet scrubbers.

· One year compliance timing for the scrap inspection program. To show environmentalists that USEPA is pushing to reduce HAP’s early, if appropriate, based upon scope and nature of requirements for compliance. The scrap inspection program is seen as a “Substantive Requirement”; therefore it would trigger major/minor source determination in same one-year period. Foundries planning to become a synthetic minor would be forced to obtain a FESOP permit in one year. USEPA claims to have a legal resolution to decouple these requirements.

· Anticipated Time Line:

Ø August 2003 – Signed by USEPA Administrator;
Ø February 2004 – Published in Federal Register;
Ø February 2005 – Compliance with Scrap Metal Inspection Program;
Ø February 2007 – Full compliance or FESOP’s in place.

The rule will be published without modification to cupola requirements. There will be a 60-day comment period once the rule is published. AFS Iron & Steel MACT Task Force is expected to file suit.

· AFS MACT Legal Appeal Fund has collected about $50,000 from thirty-three (33) foundries. Requests from major MACT foundries of $6000 per foundry. Any donation from other foundries would be appreciated. The goal is a $100,000 war chest.

· Concerning Cupola Wet Collectors: The MACT will be published without change to cupola requirements (existing cupolas 0.0006 gr TSP/dscf). USEPA has stated that efforts to “accommodate” cupolas with wet scrubbers will be handled after the rule is published. USEPA is looking at options and will contact AFS with most likely avenues during the 60-day comment period.

· AFS will address the Wet Collector issue in a lawsuit appealing the final MACT. Most likely, any change will be proposed then made final by USEPA. Possible alternatives for cupolas include baghouses, remodeled wet scrubber, and modified cupola with Van Roll design. USEPA could also sub-categorize the various cupolas. Anything logical can be categorized.

· If USEPA does alter the present MACT by going through the rule-making process, it may change the compliance timetable and could trigger another lawsuit. Stay tuned!

Join Us This Spring

· The next meeting of the Ohio Cast Metals Association will be our annual foundry tour. The site has not been selected at this time, but we will e-mail the information including the date of the tour as soon as we know it. As usual, we will attempt to schedule the tour in April probably later in the month to avoid conflicts with Spring breaks. Contact Russ Murray at 614-876-5100 for more information.

EMTEC Report

Nick Cannell, EMTEC, provided the report. Highlights are outlined below:

· EMTEC received a $3 million grant to promote fuel cell development. Fuel cells are a manufactured product so Nick is on the lookout for castings within the design.

· EMTEC received an $80,000 grant to assist investment casting research

· Solidification modeling money is still available if OCMA members are contemplating purchase of this software.

Photos courtesy of Nick Cannell, EMTEC.

Mike Collins, Metal Management Ohio, Inc. provides OCMA members with an impromptu outlook for scrap prices in the U.S.

Mike Collins, Metal Management Ohio, Inc., provides OCMA members with an impromptu outlook for scrap prices in the U.S.

OCMA Vice President & Membership Committee Chair Doug Rowe introduces three new members, Kim Myers, Griffin Wheel Company, Bill Vondriska, Equipment Merchants International (EMI), and Paul Sheehan, MACTEC Engineering & Consulting.

On February 24, 2004, the OCMA Environmental Affairs Committee sponsored an educational seminar presented by OCMA member company RMT, Inc., on industrial ventilation in the metal casting industry. Twenty-five OCMA members and non-members attended the workshop. We were fortunate to have the principal author of the new AFS ventilation manual, “Managing the Foundry Indoor Air Environment”, Bob Scholz of RMT, Inc., as our key speaker. We were also very grateful for the generosity of Ashland Casting Solutions for not only providing the space for the workshop, but also, picking up the tab for lunch. With these valuable contributions, the workshop was both an educational and financial success.

Joe Carter, Clow Water Systems pauses to ask a question while Ted Settlage, Ross Aluminum Foundries checks with OCMA Trustee Craig Schmeisser, RMT, Inc. and Batuk Modi, Ford Motor Company, Cleveland Casting Plant, seeks further explanation from the ventillation expert, Bob Scholtz, RMT, Inc,

Bob Scholtz and Hermann Jerger, RMT, Inc., outline the benefits of integrated ventillation design.