A decade after facing crisis, Cleveland firm is on the move and hiring
CLEVELAND, Ohio — There is a little piece of Cleveland technology in the smart phone in your pocket, in the big flat-screen TV on your living room wall and in the high-end laptop you have been coveting. It’s a piece of graphite engineered to a high-tech thinness that makes it as flexible as paper without affecting one of its hallmarks — the uncanny ability to sop up and dissipate heat better than any metal. Without it, the gee-whiz gadgets would burn up from the heat they generate.
The stuff — made of pure carbon — is manufactured in Lakewood by a company steeped in Cleveland history, 130 years of it.
The high-tech microns-thin material is one of the reasons that GrafTech International is hiring. Big time. Four years after returning its headquarters from Delaware to Parma laboratories and winning a number of Third Frontier grants, the company is viewed positively by analysts as one worth a “buy.”
GrafTech will have hired 60 people by the end of this month at an average salary of $80,000 and is on the hunt for 40 more.
Openings range from jobs on the production line paying an average of $20 an hour at GrafTech’s Lakewood factory to marketing, engineering and research positions at the company’s headquarters and laboratories. By the end of the year, GrafTech projects it will have a work force here of about 350, an 80 percent increase since 2003. Globally, the company has about 2,200 employees.
GrafTech could be the poster child for a renaissance of Cleveland’s industrial might. In the space of a decade, GrafTech has faced the abyss that haunts many old-line manufacturers and fought its way back to profitability. It has not only engineered its way to salvation with new products for new markets, but it is also remaking itself — engineering its workplace culture by embracing the Lean Manufacturing principles made famous by Toyota and now widely followed by global manufacturers. “Lean is very much a part of our corporate culture, the culture we are trying to build,” said Craig Shular, GrafTech’s chairman, chief executive and enthusiastic advocate.
“GrafTech is on a mission to create a sustainable lean company. We’re very serious. It’s a 20-to-25-year journey,” he quickly added, in a rapid-fire chain of thoughts as if they could not be contained in full sentences. “We’re building it. Started about three years ago. You need top management to be deeply committed. As you go through this journey, you get tested many times,” he said, his speech accelerating to a velocity surpassing the speed of thought for most people.
Essentially, Lean puts the customer first while simultaneously empowering employees to change how things are done in order to meet customer needs. It’s a management philosophy in which everyone is accountable.
Here’s how Shular described Lean, again with a passion that could not be contained in whole sentences: “Adopt. Embrace change. Move quickly. Sense of urgency. Service the customer. Customer focus. Cash flow. Watch your expenses. Eliminate waste. Grow the top line, get more customers, increase profits, penetrate more markets.”
New leadership inherited disgraces, fines, debts
If Lean is as transformational as its adherents claim, Shular was correct in trying to implement it at GrafTech, which had lost its future. And his contagious enthusiasm is undoubtedly a good thing. GrafTech, which had moved its headquarters out of Cleveland years ago, saw its previous executives disgraced or jailed and the company fined for conspiring with competitors around the world to fix prices.
The new leadership team that arrived in 1999 struggled under a legacy of nearly $1 billion in fines, lawsuit judgments and other debts and had to close plants and slash payroll in half, Shular said. They also moved the home office from Delaware back to Ohio in 2005-06 after Gov. Bob Taft’s administration put together an incentive package worth about $1.5 million in tax credits and grants. Before returning to its hometown, GrafTech wasn’t even thinking about products for high-tech electronic makers.
The company was — and still is — a global manufacturer of monster-size graphite electrodes used in steel making and graphite bricks for lining super-hot furnaces. Its products also line crucibles that melt silicon to produce purified silicon for solar cells.
It also supplies graphite molds for the manufacture of railroad car wheels, which are cast whole from molten steel, and molds for diamond drill bits used to drill oil and gas wells.
From its headquarters here, it runs 11 factories on four continents and sells its products to industrial customers in 70 countries.
The company’s bread and butter, accounting for 82 percent of its business last year according to a filing with the Securities and Exchange Commission, are the huge electrodes used in electric arc furnaces that recycle scrap steel by melting and purifying it.
That steel shows up as “rebar” in highways, structural I-beams in buildings and in all sorts of consumer goods, from washing machines to automotive frames.
A healthy global economy means more steel-making and more graphite rods, which are themselves used up in the arc furnaces that run to several thousand degrees, heated by enormous flows of electricity between the rods. But a downturn in global growth shows up quickly.
GrafTech managed to make money last year despite the global recession, ending the year with $50 million in free cash. It cut staff in other countries, though not here.
For the first three months of this year, GrafTech reported a profit of $33.5 million — nearly four times 2009 first-quarter net income — on sales of $215.7 million, a 61 percent increase over first-quarter 2009 sales of $134 million. And now the company is about to snap up — assuming federal approval — a U.S. competitor and a U.S. producer of the raw materials it needs to produce graphite in deals with a total value of $690 million.
Big plans to add jobs to Ohio.
GrafTech has big plans for its “engineered solutions” products that include everything from components for consumers products to industrial fuel cells, tools for aircraft makers, and down the road, graphite-based modular nuclear reactors. Shular hopes to grow this part of the business well beyond the 18 percent to 20 percent it now accounts for.
“We need a portfolio, a suite, of things to come,” he said. “In 2009, total cell phone sales were down. But smart phones went up. So we did not see a big hit. Steel went down, almost to nothing. All of these products are graphite material science. And it is our job to find things it can do.”
The company has more than 750 patents, and Shular is having them mounted on plaques that are beginning to line the headquarters hallways.
In its SEC filing, the company describes itself as an engineering company. GrafTech has boosted its research-and-development spending from $8.6 million in 2007 to $10.2 million last year.
GrafTech has won $11 million in state and federal grants in recent years. Many of the futuristic products had their “genesis” in Ohio Third Frontier grants, said Shular. “We’ve spent a lot of time in Columbus,” he said. “A lot of the time the money goes to five or 10 scientists. They never commercialize anything. We told them — support us and we will make things and add jobs. “We have a global platform — engineers, technicians, a sales team all around the world. We use the grants to develop the product and we use the platform to commercialize it.”
The new GrafTech has won a half-dozen industry awards in the last seven years for not only inventing new products but also for commercializing them, Shular said. GrafTech is the technological grandchild of the old National Carbon Co. founded in 1886, later bought by Union Carbide and Carbon Co. and then spun off as a division of Union Carbide. In 1995, the company went public as UCAR International. The board and senior management changed the company’s name to GrafTech in 2002.
About GrafTech International
- One of the largest world’s largest manufacturers of graphite and carbon-based products, ranging from massive electrodes for steel making to linings for super-hot furnaces and molds for industrial casting involving molten metals. Also designs and makes critical parts for fuel cells and electronic devices and has some defense contracts.
- Headquartered in Parma with small production plant in Lakewood. Operates 11 factories on four continents and sells its products to industrial customers in 70 countries.
- Employs 2,200 worldwide, including about 300 here. By the end of the year, will employ an additional 50 locally, including 235 at Parma headquarters and research laboratories and 115 at Lakewood production plant.
- Has won $11 million in state and federal grants in recent years. Research is sharply focused on commercialization of breakthrough engineering.
- Practices the principles of LEAN manufacturing, a customer-focused and employee-driven workplace culture embraced by many global corporations.
- Has Cleveland roots dating to 1881. First incorporated as the National Carbon Co. in 1886. Bought American Ever Ready Battery in 1914 and became a division of Union Carbide in 1917. Spun off in 1995 as UCAR International, changing name to GrafTech in 2002.
- Moved its headquarters from Wilmington, Dela., in 2006 back to Greater Cleveland following offers of tax breaks and grants from Gov. Bob Taft’s administration.
|1881||An employee of the Brush Electric Co. in Cleveland and a partner begin manufacturing carbon rods for arc lights that Brush Electric founder Charles Brush began using in 1879 to light Public Square and surrounding streets.|
|1886||Another industrialist and associate of Charles Brush invested in the carbon partnership and reorganized it as the National Carbon Co.|
|1914||National Carbon Co. buys the American Ever Ready Co., a nearby manufacturer that had been making batteries and flashlights since 1905. National Carbon shortens the name of its new division to “Eveready” and expands production, making nearly 235 million batteries during World War II for the Navy at its West 73rd Street factory near Edgewater Park.|
|1917||The Union Carbide & Carbon Corp. purchases National Carbon, keeping its extensive laboratories and plants. Over the next 70 years, Union Carbide, with headquarters in New York City, becomes an important corporate citizen here. National Carbon keeps its name until 1963, when it is changed to Union Carbide’s Carbon Products Division.|
|1928||The National Carbon Co., already a larger manufacturer with 110 plants across the nation, including three here, begins manufacturing “radio sets” for a public hungry to tune in to an industry still in its infancy. The company’s products include radios that run on batteries that it manufactures.|
|1954||Union Carbide consolidates its Cleveland offices in a new building at 1300 Lakeside Ave.|
|1956||The National Carbon Co. opens its $10 million laboratories in Parma that boast 158 separate labs and some of the nation’s top researchers. GrafTech, now headquartered in the building, continues to use the labs.|
|1957||The new Parma lab unveils the “first practical fuel cell,” one that runs on gas and is immediately tested by the Army for small battlefield radar units.|
|1989||Union Carbide realigns its various global divisions. The business of the Carbon Products Division becomes a separate, wholly owned subsidiary called UCAR Carbon Co.|
|1997||UCAR reports the U.S. Department of Justice has begun an investigation into a price-fixing cartel organized by manufacturers of graphite electrodes. Authorities around the globe launch simultaneous inquiries. UCAR’s industrial customers, including more than 30 steel makers, file a class-action suit alleging the price of electrodes needed for steel making increased by 60 percent between 1992 and 1997.|
|1998||With its credit ratings sharply reduced, UCAR’s board removes top managers and settles the federal probe by agreeing to pay $110 million criminal fine, the largest antitrust fine ever at that point. Feds say they would have made it larger but doubted the company could pay. UCAR offers to settle various private lawsuits at a cost of another $80 million.|
|1999||UCAR’s former president, chairman and chief executive officer, Robert Krass, pleads guilty to price fixing, agrees to a $1.25 million fine and serves 17 months in prison. Former Chief Operating Officer Robert J. Hart agrees to pay a $1 million criminal fine and serves nine months in prison.|
|2000||UCAR sues former parent companies Union Carbide and Mitsubishi Corp. for $1.5 billion, charging they knew about the price-fixing scheme.|
|2001||UCAR’s GrafTech subsidiary is chosen by leading computer chip manufacturers as a research technology partner to figure out how to manage the terrific heat that new, faster chips produce. The agreement leads to breakthroughs and sets the stage for smaller and faster computers and cell phones.|
|2002||UCAR announces that a major downsizing of its graphite electrode manufacturing around the world will save some $275 million and announces it will ask shareholders to change its corporate name to GrafTech International Inc., reflecting its growing interest in engineered graphite technologies. Shareholders agree in May at the company’s annual meeting.|
|2003||CEO Gil Playford, the Canadian who led the new management team out of the fiscal crisis precipitated by the Justice Department’s probe into price fixing, retires after five years. Craig Shular, the chief financial officer also brought on board in 1998, is named CEO.|
|2005-2006||Ohio Gov. Bob Taft’s administration persuades the newly restructured GrafTech to return to its roots in Greater Cleveland, offering an incentive package of grants and tax breaks worth about $1.5 million. The company is also awarded federal and state grants totaling $11 million in the coming years for research and development into new graphite technologies.|