Intermet Corporation
Address:
5445 Corporate Drive, Suite 200
Troy, Michigan 48098
U.S.A.
Telephone: (248) 952-2500
Fax: (248) 952-2501
http://www.intermet.com
Statistics:
Public Company
Incorporated: 1984
Employees: 6,890
Sales: $841.6 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: INMT
NAIC: 331511 Iron Foundries; 331312 Primary Alumi-num Production; 331524 Aluminum Foundries (Except Die-Casting); 33633 Motor Vehicle Steering and Sus- pension Components (Except Spring) Manufacturing; 33634 Motor Vehicle Brake System Manufacturing
Company Perspectives:
At Intermet we believe that the most valuable resource we have is our people. Advanced technology means little without the skilled technicians to manage it. We are as confident in the quality of our workforce as we are in the quality of our products. Some of our employees have been with us for nearly half a century, developing the kind of priceless experience that only comes from years on the job. The strong and stable relationship we enjoy with our workforce is Intermet's true strength. Intermet is also strengthened by our relationships with personnel at other companies--relationships that broaden our capabilities and allow us to offer more options to customers. We have very successful working relationships with a number of well-regarded technical services firms that specialize in advanced design and engineering. Our well-trained and technically proficient employees complement our advanced technology ... making the company an unbeatable resource for the design, manufacture and assembly of world-class products.
Key Dates:
1846: Intermet's earliest predecessor company, Columbus Iron Works, is founded.
1984: Intermet is formed.
1995: Bodine-Robinson Aluminum Foundry is acquired, ushering Intermet into the aluminum castings business.
1996: Sudbury, Inc. is acquired, substantially increasing production capacity of iron castings and lifting sales by $300 million.
1999: Company's aluminum business is bolstered with the acquisition of Ganton Technologies and Diversified Diemakers.
Company History:
Intermet Corporation is one of the largest independent foundry companies in the world, involved in producing ferrous and non-ferrous casting products for the automotive and industrial equipment industries. Intermet manufactures ductile iron, gray iron, and aluminum castings at 19 locations in North America and Europe, deriving approximately 85 percent of its revenue from sales to the automotive market. The company's products include castings for steering components, camshafts, crankshafts, chassis, and brake parts used in passenger vehicles, industrial vehicles, and in marine applications. During the 1990s, the company entered the aluminum business, quickly developing a strong market presence through acquisitions that built on its mainstay involvement in ductile iron castings.
19th-Century Origins
Intermet's lineage winds its way through a tangle of subsidiaries and predecessor companies to one of the oldest chartered companies in the United States, Columbus Iron Works, established in 1846. As a founding predecessor, Columbus Iron Works lent Intermet the type of prestige only history can impart: Aside from manufacturing armor plate for military applications, the 19th-century metal-worker was involved in the development of the first breech-loading cannon, and later, manufactured the cast iron pipe used in Manhattan Island's turn-of-the-century water system.
Intermet's modern-day origins begin in 1971, when Columbus Foundries Inc. was founded, incorporating the link to the past, the 19th-century Columbus Iron Works. During its first decade of operation, Columbus Foundries' internal growth was augmented by a methodical acquisition campaign. A machinery facility was acquired in 1976, followed by the purchase in 1980 of a foundry located in Germany, and the acquisition of the Lynchburg Foundry Company in 1983, which owned three Virginia-based foundries. Intermet, founded by George Mathews, Jr., was formed a year after Columbus Foundries acquired the three Virginia foundries. The new company, which was based in Columbus, Georgia, assumed control over Columbus Foundries.
More than a century after Columbus Iron Works' pioneering military work, Intermet geared itself for an entirely different sort of existence. The company manufactured cast iron pieces for the automobile industry, operating as an automotive parts supplier to original equipment manufacturers (OEMs) such as Ford, General Motors, and Chrysler. In 1985, a year after its formation, Intermet's stock began trading on the public market, touching off an energetic acquisition spree. In 1986, the company purchased Northern Casting Company, based in Hibbing, Minnesota, and New River Castings Company, based in Radford, Virginia. Two years later, Intermet acquired the Ironton Iron foundry in Ironton, Ohio, completing an initial surge of welcome additions to the company's fold. However, with the good came the bad. In an effort to extend its geographic reach and strengthen its capabilities and capacity, Intermet became involved in deals its management would later regret. Although the company eventually would rank as the largest concern of its kind in the world, its path to future dominance would not prove an easy road.
International Mistakes of the Late 1980s
As Intermet pursued an aggressive expansion campaign during its first decade of business, its zeal resulted in two acquisitions that represented notable failures. Intermet purchased a foundry in Sweden, intent on bolstering its international presence, but slackening demand by European automobile manufacturers delivered a fatal blow to the new acquisition. The foundry failed to attract sufficient business to remain profitable and, consequently, the entire facility was shuttered, save a machinery division.
Intermet's progress was hobbled by another misguided overseas adventure, a joint venture named INTAT Precision. The company was formed through a partnership agreement between Intermet and a Japanese concern named Aisin Takaoda. Together, Intermet and Aisin Takaoda invested $25 million in an automotive parts facility located in Indiana, with Intermet controlling 60 percent of the joint venture and Aisin Takaoda controlling the remainder. Through INTAT Precision, automotive parts were to be manufactured first for Toyota, then for Honda, Mitsubishi, and Nissan, and finally for Japanese brake manufacturers. Under the terms of the agreement, Aisin Takaoda assumed control over the marketing and sales of the products manufactured by INTAT Precision, convincing Intermet officials that Aisin Takaoda's management possessed a greater understanding of the Japanese market and business customs governing trade in Japan. Ceding control to Aisin Takaoda proved to be a costly mistake, as Mathews later acknowledged in a March 1992 interview with Business Atlanta, saying, 'We were asleep at the switch when we made the rudiments of that transaction.' Projected sales of the new joint venture failed to materialize, but Intermet's partners preached patience, promising that sales would recover. Mathews and his staff waited, but eventually the losses became too significant to endure, forcing Intermet to withdraw from the joint venture with only financial losses to show for its efforts. 'It drained our money from the company and drained theirs, too,' Mathews explained in his interview with Business Atlanta. 'Only thing, it was draining 40 percent of theirs and 60 percent of ours,' he added.
Despite the costly miscues, Intermet's stature within the industry was impressive. By the early 1990s, the company was generating in excess of $320 million a year in sales through its worldwide operations. Intermet employed 3,600 workers spread among 12 foundries and two machining operations, primarily involving itself in ductile iron casting, which was stronger and lighter than traditional gray iron. Although the company manufactured housings, hubs, gear boxes, and other parts for farm and construction equipment, as well as parts for industrial manufacturers, the overwhelming majority of its sales were derived from OEM car and truck manufacturers. The company's' major customers included Ford, Chrysler, General Motors, Toyota, Honda, Caterpillar, and Bendix. For these and other customers, Intermet manufactured casting products such as brake parts, steering and transmission components, camshafts, and crankshafts, earning distinction not so much for the particular products it produced but more for the manufacturing processes it employed. The company was capable of producing a broad range of casting products, from small castings to castings weighing up to 400 pounds, which enabled Intermet to pursue a commensurately broad range of contracts.
The opportunities available to Intermet promised to increase significantly as the company's management surveyed the industry during the early 1990s. Domestically, the automotive market was mired in a decisive slump during the early years of the decade. In 1991, the industry sold 12.3 million cars and light trucks, 11 percent less than it had sold the previous year. Further, the one-year drop in sales appeared to be part of an unwelcome trend: unit sales had peaked at 16.3 million in 1987, then began a five-year decline that intensified during the economically recessive early 1990s. At first blush, the anemic performance of Intermet's mainstay market pointed toward a commensurate decline in Intermet's business; a likely scenario considering OEM suppliers would suffer along with the manufacturers they supplied products to. For Intermet, however, the recessive conditions worked to the company's benefit. Because of the economic decline, major automobile manufacturers were forced to implement sweeping measures to improve efficiency and reduce costs. As they scaled down their operations, the automobile manufacturers increasingly turned to outside suppliers for the components they had traditionally produced on their own, using outsourcing as a means to reduce costs. For Intermet, the trend toward outsourcing not only led to an increase in business, but also reduced the strength of some of the company's largest competitors. In addition to competing against other independent foundry companies, Intermet battled for market share with companies such as General Motors' Central Foundries, which dramatically reduced the scope of its operations in the midst of the recessive early 1990s. Accordingly, while the automotive market suffered, Intermet increased its market share, exuding a vitality that was exemplified by the announcement in 1992 of a three-year, $100 million capital-expenditure program.
Diversification into Aluminum: Early 1990s
From an early 1990s vantage point, there were other positive developments that pointed toward promising growth for Intermet in the years ahead. The company was searching to add to its already formidable market position in iron casting by diversifying into aluminum, which was expected to be a high-growth segment of the automotive market in the future. During the early 1990s, a typical car manufactured in the United States contained 175 pounds of aluminum, a proportion that was expected to double to 350 pounds per vehicle by 2000 as automobile manufacturers sought to reduce the weight of their various models. Intermet was intent on tapping into the burgeoning aluminum castings market and took its first steps into the business during the early 1990s. In 1992, the company formed a new division, Intermet Aluminum Inc., to produce cast aluminum chassis parts and signed a joint venture agreement with Australia-based Comalco Ltd. The joint venture, named ICA Castings, comprised a pilot plant and a smelting and rolling facility in Kentucky, which were to be used to make cast aluminum cylinder heads and engine blocks for U.S. automobile manufacturers. The agreement was terminated two years later, however, primarily because manufacturers were reluctant to place orders until further competition in the industry ensured competitive prices. Although its initial foray into aluminum suffered a setback, Intermet was determined to push ahead. In 1995, the company achieved its goal.
Midway through the decade, Intermet's iron castings business was growing robustly, enabling it to reach the half-billion-dollar mark in sales, which ranked the company as one of the largest independent foundry concerns in the world. In late 1995, Intermet added to its massive iron castings business by acquiring the Bodine-Robinson Aluminum Foundry, marking the company's formal entry into aluminum castings production. Based in Alexander City, Alabama, the foundry, which was renamed Alexander City Casting Co., was equipped to make automotive intake manifolds, transmission clutch parts, marine engine components, and castings for lawn and garden engines, possessing an annual capacity of more than 12 million pounds of light-alloy castings. For Intermet, the Bodine-Robinson acquisition represented an important first step into aluminum, touching off further aluminum acquisitions to follow, but the company's acquisitive activities were not restricted to building a presence in the fast-growing light-alloy market. The 1990s were heady years for Intermet, highlighted by an aggressive expansion campaign that cemented the company's standing as a global giant, particularly after a significant transaction in 1996 was completed.
Roughly a year after the Bodine-Robinson acquisition, Intermet struck again, purchasing Ohio-based Sudbury, Inc. for a reported $195 million. The acquisition lifted Intermet past all rivals, pushing its annual sales to $845 million and making it the largest independent ferrous castings foundry in the United States. Sudbury, a manufacturer of castings and machined parts and a provider of powder coating services primarily to the automotive industry, comprised five operating companies employing 2,300 workers, the largest of which, Wagner Castings Co., made the same kind of ductile iron castings as Intermet. Aside from adding substantially to Intermet's casting capacity, the Sudbury acquisition also expanded Intermet's product lines and capabilities to include zinc and aluminum die-casting, cantilevered cranes, and specialty service truck bodies.
Late 1990s Expansion
During the late 1990s, Intermet continued with its prevailing theme of the decade: expansion through acquisition. In May 1998, the company entered a joint venture for PortCast, a foundry company located in Portugal. In December 1998, the company completed another strengthening move overseas when it purchased an iron foundry in eastern Germany, but the biggest development of the month was Intermet's announcement that it was acquiring the Minnesota-based Tool Products division belonging to Quadion Corp. The purchase represented another important step toward the expansion of Intermet's aluminum business, giving the company the capacity to produce an additional 17-18 million pounds of aluminum castings annually. Tool Products, with plants in New Hope, Minnesota, and Jackson, Tennessee, manufactured precision die-castings for automotive and industrial electronic products, as well as small castings for anti-skid braking systems, fuel pumps, and steering wheel cores, deriving 60 percent of its annual revenue from the automotive market.
Intermet ended its most prolific decade of growth with yet another aluminum acquisition, leading some industry observers to speculate that the company would eventually abandon ferrous castings. The acquisition, announced in November 1999, included two companies, Ganton Technologies, Inc. and Diversified Diemakers, Inc., which, combined, were expected to generate $235 million in sales in 1999. Ganton Technologies, one of North America's largest aluminum die casters, operated three manufacturing facilities, two located in Wisconsin and another in Tennessee, and an engineering center in Wisconsin. Diversified Diemakers specialized in magnesium die-cast products such as brake pedal brackets, instrument panel frames, and housings used by automotive, commercial, and electronics industries, operating three production facilities in Michigan. With the addition of the two companies, Intermet's annual revenues were expected to reach $1.3 billion by the end of 2000, four times the total generated eight years earlier. The growth, however, was not being achieved at the expense of the company's longstanding involvement in the iron castings business, according to Intermet officials. Although the company announced the closure of its Ironton Iron foundry in December 1999 because of declining business, Intermet management scotched rumors that it was pursing a long-term strategy that excluded the company's involvement in ferrous castings. Instead, the company declared it was pursuing a growth strategy that would shape Intermet into a full-service metal caster. As the company pursued its comprehensive growth strategy, the likelihood of further acquisitions was strong, setting the stage for the company's progress in the 21st century.
Principal Subsidiaries: Cast-Matic Corp.; Frisby PMC, Inc.; Iowa Mold Tooling; Intermet Wagner Castings Co.
Principal Competitors: Worthington Industries, Inc.; Citation Corporation; Precision Castparts Corp.
Further Reading:
'Alvin W. Singleton, Intermet President, Dies,' Foundry Management & Technology, February 1991, p. 9.
'Ductile Iron As Good As Steel,' Ward's Auto World, May 1999, p. 3.
'Intermet Acquires Leading Automotive Suppliers; Major Boost to Aluminum Manufacturing Capability,' PR Newswire, November 17, 1999.
'Just-in-Time Manufacturing Is Working Overtime,' Business Week, November 8, 1999, p. 36.
Kingman, Nancy, 'Drive for Lighter Cars Sets Intermet on Expansion Path,' American Metal Market, April 26, 1993, p. 14.
Smith, Faye McDonald, 'Self-Inflicted Wounds All Healed,' Business Atlanta, March 1992, p. 72.
Vanac, Mary, 'Ohio-Based Automobile, Industrial Parts Manufacturer to Be Bought Out,' Knight-Ridder/Tribune Business News, November 20, 1996.
Wrigley, Al, 'Aluminum Castings Deal Canceled,' American Metal Market, December 29, 1994, p. 5.
------, 'Intermet Gets Deeper into Aluminum,' American Metal Market, December 29, 1998, p. 7.
------, 'Intermet Moves to Aluminum,' American Metal Market, October 4, 1995, p. 2.
Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.
