CEO of AFC-Holcroft
Bill I appreciate the opportunity to ask you a few questions about your background, about AFC-Holcroft and its parent company Aichelin and also for your thoughts about where the industry is going. First off how did you come to be in this industry and end up where you are now as CEO of one of the largest furnace builders in North America.
“I was introduced to the heat treat industry while I was still in college, working for a computer company selling networks and doing database development. We sold a job to Holcroft to automate their proposal and estimating department. Following my graduation with a degree in Electrical Engineering I started working for Holcroft in 1988 as an electrical engineer and soon was asked to travel to China to help with some field startup issues. Incidentally, that work included networking temperature and carbon control instruments for one of the very first Marathon Monitors ProcessMaster Supervisory computer systems. Dan McCurdy was the man behind that system at MMI. Later AFC purchased that software from MMI. My six-week assignment in China turned into two years and during that time I was able to learn hands-on what goes into making a furnace system work. I helped build and commission all aspects of batch furnaces, rotary furnaces, automated press quench systems, and many large pusher furnace systems. It was a tremendous opportunity to learn about all facets of heat treat equipment and their processes. It also opened my eyes to culture outside of the United States which has proven invaluable to my career. After that I worked in various positions at Holcroft including performing estimating and proposal work, managing Holcroft’s Advanced Controls Group, a stint as Operations Manager for the Pacific Rim territory which brought me back to China in the early 90s, and eventually Domestic Sales Manager. In 1998 Holcroft was sold out of the Thermo Electron Group to a venture capital company. Suffice it to say the new owners and I did not see eye to eye and I left Holcroft to work in a global sales position for the German company Dürr. We sold industrial automation and high-level cleaning technology. This period in my career was valuable as I look back because it exposed me to both European business and non-heat treat markets. After the venture capital company was done doing damage, Holcroft was sold to Atmosphere Furnace Company. I was asked by Bill Keough to come back to lead the company’s Sales and Engineering activities and eventually assume the position of President and CEO. The merging of AFC and Holcroft, along with the several other furnace companies Mr. Keough had previously purchased, lead to a great era of growth and re-organization in the company with tremendous support from Bill Keough.”
Perhaps you could share with us a history of AFC-Holcroft and how you came to be part of the Aichelin Group of Austria.
“As mentioned previously, AFC-Holcroft was owned by Bill Keough and over the years the company had been in more of an acquisition mode without any real desire to sell. In 2015 discussions started between Aichelin and AFC-Holcroft about options to find synergies together. I believe that both parties quickly learned that we could identify many business synergies, but we also realized that our philosophies and business cultures shared considerable commonality. As discussions continued, I believe that Aichelin’s interest in acquiring our group grew at about the same rate as Bill Keough’s openness to sell. Aichelin is a big player in Europe and China and AFC-Holcroft is a big player in North America. The combination of the Aichelin group of furnace companies and AFC-Holcroft created a powerful global organization with leading positions in Europe, North America, and Asia. The fit just made sense. In July of 2016 we officially became part of the Aichelin Group. In 2016 we celebrated our 100-year anniversary and 2017 was Aichelin’s 150th anniversary. Together we have a tremendous combined history and experience and an unmatched global presence.”
Tell us about AFC-Holcroft, what products you offer and which products really get you excited.
“As you know, we have a very wide range of products. We will continue to be known for our large, custom engineered systems. Our next generation of furnace engineers will continue to be equipped to serve these market needs. That expertise is diminishing within our industry and we are going to great lengths to assure it continues at AFC-Holcroft. Most of our key products are atmosphere furnaces with various quench systems. We have a strong line of modular “standard” products such as our EZ-Gen endothermic gas generator and Universal Batch Quench (UBQ) family. These products have strengthened globally over the past 10 years and have become a bigger percentage of our sales year by year. We have worked hard to have well–thought–out, top performing, easy to maintain equipment at fair prices. High volume processing and online furnace diagnostics have played a big role in the evolution of our modular product families. They are standardized modules, however we remain more flexible than most in our ability and willingness to customize per customer requests. You can expect to see a couple of interesting products added to our modular products group throughout this year. Regarding what products get me most excited, I think that the best answer is the ones that our customers have not seen yet.”
Where does AFC-Holcroft fit into the Aichelin structure?
“AFC-Holcroft fits neatly into the gap that Aichelin had in the North American market. In other parts of the world we share in various ways within those marketplaces. AFC-Holcroft is in a good position to help bring other Aichelin products into the North American market. Within our group we have a strong induction company, EMA, located in Germany and have a strong center of excellence for equipment serving the hot stamping market in Austria. This has been a great benefit to all of us within the Aichelin Group.”
With the background information out of the way lets get into some “meatier” questions starting with one that is on everybody’s mind these days-COVID-19. I know that AFC-Holcroft has taken every precaution possible to safeguard your employees and customers but that is not what I want to ask. What I want to ask is; is this “pandemic” going to change the industry? Do you see that in 12 months this will be a bad memory and everything will be back to normal or do you see this causing some fundamental changes in the industry?
“Although I am still processing the impact and likely changes that the world and specifically our industry will see after this crisis, I am happy to share my current view. I have little doubt that this crisis will impact our industry in many ways. I can highlight some areas that I expect have changed for at least the mid-term. First, for companies like ours – manufacturers of industrial equipment – day to day work will be impacted for many of our workers who have been teleworking. With the new generation of engineers and other office workers desiring more flexibility, I had envisioned more teleworking being required over the next several years. I was not a proponent of it before the crisis, but today my view has changed. With the ease of video conferencing and teleworking technology, our company’s forced transition to this way of working accelerated the inevitable from my perspective. Our Team has been incredibly effective in this mode of operation. Although face to face meetings and working physically together will remain necessary and clearly beneficial in many situations, I no longer see it as mandatory on a daily basis. I suspect we will not be alone in this conclusion. Managed correctly with more technology investment, we can become a better and more flexible Team. Obviously those members of our workforce who physically load and maintain equipment or physically build equipment will not be impacted the same way. The second significant factor that I believe will impact our industry is a trend to localizing manufacturing to minimize risks. That means that for regions like North America, I expect to see the return of manufacturing to this area to accelerate. It may not remain the long-term trend, as many tend to have short memories when it comes to things like this, but initially we already see this happening.”
How bad is it these days for furnace builders? I understand that because of the long delivery times of new furnaces there is always a long lag time between a general economic slow down and when a furnace manufacturer would see the slow down. Now I’m sure you are making projections so lets phrase the question this way- do you see the current situation as bad as 2009, the same or not as bad?
“You are correct that our furnace manufacturing business seems to lead other aspects of economic change by about a year. That means we tend to be affected by slow downs earlier and feel recovery sooner as our customers plan further in advance. Just prior to the crisis we had fortunately seen a nice rise in business including several larger, greenfield projects. In my opinion we were starting to see an increased trend of manufacturing returning to this region. Given the unique nature of what this crisis represents globally compared to anything else we have ever seen, my favorite forecasting crystal ball just got a whole lot foggier. My current feeling, however, is that we will see a much quicker initial recovery in most industry segments. However, some segments like the airline industry will be hurt for years to come and this will be felt hard by many of the suppliers and commercial heat treat folks that support aircraft production. Of course, the oil industry has other problems compounding this mess, but there is only one way to go in that industry as this crisis relaxes and that is up. Our inquiry level remains surprisingly high with many customers continuing their willingness for significant capital investments. Of course, that optimism may be crushed when true cash flow impacts are accessed and PO’s go for final signatures. In the USA, the huge cash infusion into the economy will certainly help, but the next stages of government action will be critical. If we see a program to accelerate much-needed investment in infrastructure like roads and bridges, this will be terrific for us.”
Lets switch gears a bit. AFC-Holcroft and I am sure Aichelin must always be looking at heat treating technologies, which are growing, which are stagnant, and which hold a great deal of potential in the future. So Bill what do you see as growing technologies and which do you see as mature technologies?
“The biggest thing changing fast in this industry remains the technology to gather useful data from our equipment. We have several technologies that are available for our systems and they are getting smarter every year. We are using that data for a few critical purposes. It helps us make our equipment better and more reliable via remote diagnostics tools like our RDX system. It can help customers have more forward planning capability for maintenance to improve uptime with the use of the tools. Most interesting in my opinion, and likely what will become the most welcome tool by our customers, is technology to automatically validate furnace calibration. Not just what a TUS tells you but also other aspects of the furnace setup that are often equally important to process quality. This may be what finally gets our customers’ attention as it seems like as much as people ask for and want maintenance prediction tools, it is hard for them to change their traditional ways and actually use them. Being able to push a button and have the furnace validate if it is operating as it did prior to the last PPAP can really help support many heat treaters needs. All of these technologies and tool sets are also changing the landscape for annual service contracts so that OEMs can help customers better utilize their equipment. The data can now help end users see that the upfront investments needed to gain uptime availability are justified. Although habits are tough to change, we see it happening and it will help everyone be more competitive and profitable with our equipment.”
Do you have any plans on introducing new technologies to the market? Either new to AFC-Holcroft or new to the heat-treating industry in general?
“Other than the IoT items mentioned previously, we have two significant products that our customers will see this year. Both are based on our Modular Product platform and philosophy. This means that they will offer shorter lead times and carry less custom engineering expense than similar products. One of them will complement our UBQ family of products and the other will offer a unique continuous furnace solution that can be installed on a flat floor in a fraction of the time required by any other system built today. This system will also offer some unique ways of managing salt quench options to contain and recover 99+% of the quench salt, hence making it both clean in the plant and green for the environment. As much as salt has had a bad name in the past, it has made a huge comeback. When it comes to distortion control, it is a single phase quenchant, like gas quench systems. This allows it to provide results far better than oil with respect to distortion control and it does not require 300HP motors and huge volumes of nitrogen and water to achieve better and more predictable heat transfer. Combine all of this into a quick install or quick relocate system that fits into shipping containers and I think it will get some attention.”
What keeps you awake at nights these days? I realize there are a lot of things to worry about right now but what is the one thing which you think about the most?
“This single biggest thing that keeps me awake at night is the welfare of our employees. I doubt I am alone, as other company leaders are struggling with the same challenge. I worry about everyone’s safety, both working at the facility or just managing through this crisis at home. This has impacted every employee and their families in so many ways. I worry about the financial impact this situation has created for them and the uncertainty of what is to come. As we bring more and more people back into the facility, how do we manage this with the right attention to safety? It is not just following government guidelines; it is more about what we as a Team are comfortable with. Fortunately we have a great group of people and together we seem to be navigating these tough decisions well. One other thing that might seem odd which is heavily on my mind is our planning for a major facility update which has been in the works for some time. Prior to this I was worried that the planned office space allocation might be too big if we started having more flexibility with teleworking in our workforce. Too much empty space is better than too little space, but it is also not optimum. Two things are likely to happen with this crisis. First, we will delay this project a bit to recover from the financial impact of this year. Second, the new office facility design will be far better equipped for the future than previously planned. This crisis has given me a glimpse into the future and will help us plan better for our next 20 years.”
This question to some extent ties in with the one above. There are a lot of predictions out there that in a short period of time we will all be driving electric cars which would of course mean a lot less heat treating of transmission parts. Many of your installations are heat treating transmission components. Do you see that the possible growth of electric cars will have an adverse effect on the heat treating industry?
“The transition to electric vehicles will certainly change the shape of the heat treatment needs of our automotive markets over time, but I am not losing sleep over it. First, we serve many markets and industries to dilute our dependence on automotive. Most of the smaller vehicle transmission work has already shifted to modular LPC systems and we participated in that transition with ALD-Holcroft long ago. That is a saturated market today. Second, I just do not agree that the timeline for this will be nearly as fast as our politicians would like it to be. The impact will also be felt much differently region to region. In the USA, for instance, I think electric vehicles will continue to struggle to get wide support without significant government subsidies. Not only do most Americans drive longer distances, but smaller autos are not the bread–and–butter products for American auto companies; trucks and larger SUVs are. Those vehicles will continue to favor conventional powertrains. In places with dense downtown traffic an electric solution is more appealing, provided user expectations for heating and cooling in the car are not too high when the outside environment is either extremely hot or cold.
We all hear lots about the auto industry’s transition to electrics. In Europe, much more than the USA, governmental mandates for this transition’s timing have been so extreme that the auto industry is in a tailspin. The political goals just do not seem to align with reality. In a similar way, in my opinion, neither do the environmental benefits touted politically align with the overall environmental gain by shifting to electric, battery operated vehicles. Making batteries is not a clean business and critical materials needed to make next generation batteries are not exactly located in regions without complications. Even if cobalt, lithium, and other elements were widely available in the USA, I can only imagine the environmental pushback against the strip mining and chemical treatments required to extract the elements. It would make drilling for oil and fracking look like environmentally friendly ideas. That does not get any more media attention than the recycling challenges of the same materials which is fraught with problems. From the practical side, the charging infrastructure and tracing back of what fuels were used to make the power feeding the batteries is a whole other story. My point in all of this is that I feel that politics has been pushing electrification of vehicles at a pace faster than technology can practically support.
I read an interesting and objective article in SAE’s magazine a few months ago. It was about a simple 600-mile round trip test drive in a leading EV. Even having received free charging overnight at a hotel that was good for 111 of the 600 miles, the energy costs for the trip were $153 and added hours of extra time to the trip. The drivers felt fortunate that they found each of the planned recharging stops to be available when they arrived. The equivalent trip in a gas vehicle would have cost less than $60 (with gas at $2.75 USD per gallon) and the time for the round trip would have been far shorter. The required infrastructure is not even close to being ready in the US as well as most other places around the world. Even when it is, cultures that typically drive longer distances and value convenience will be slow to adapt.
Most people probably do not relate the current crisis as being anything that could impact the intensity and focus on EVs. I have to say that, as wrong as I might be, I am not so sure that the launch rate of EVs might not be one of the things impacted by this global crisis. The amount of money that the leading auto companies are investing in electrification when it seems likely the market is not ready for them on the same scale is extraordinary. Investments are measured in the 10’s of Billions of dollars for a few percent of the total market. I wonder if, after the massive financial impact to these businesses is finally realized from this crisis and hands go out to governments for help, the political pressure might relax a bit to allow them more time to better synchronize the transition to electric vehicles to other realities. This will be a welcome change to many in our industry that still heat treat many parts for conventional gas or diesel powertrains. If it happens, expect it to be subtle and out of the political limelight.”