March/April 1995
This Georgia-Based integrated battery maker is among the top players in the lead industry thanks to a business approach based in operational improvement, expansion, and acquisition.
By Robert J. Garino
Robert J. Garino is Director of Commodities for the Institute of Scrap Recycling Industries (Washington, D.C.).
The secondary lead smelting industry may be a lot like other manufacturing sectors on the surface, but it faces emotional, environmental, and financial hurdles that go far beyond what most industries must encounter. The result is an industry whose health and image have been dramatically scarred in recent years.
Despite this, a few lead recyclers have survived--among them, GNB Technologies Inc. (Atlanta), a leading integrated lead-acid battery manufacturer that seems to have turned its long-range vision, solid financial commitment, timing, and a bit of luck into business staying power.
And, as its track record shows, the firm is continuing to commit considerable financial and personnel resources to improve its position in an industry that many others have chosen to exit rather than risk financial exposure today and the potential for long-term environmental liability tomorrow.
The State of the Industry
For independent lead smelters--those not part of larger integrated lead corporations--the 1980s were particularly difficult financially, marked by relatively low prices for refined metal, intense competition for raw materials, and a host of new worries related to increasingly stringent environmental regulations. Thus, it was an era marked by ongoing lead industry rationalization as literally dozens of North American smelters--accounting for several hundred thousand tons of annual lead-acid battery recycling capacity--closed their doors.
Since then, there have been additional bouts of price volatility and further smelter cutbacks and closures, but some lead companies have been able to look beyond these tribulations to plan ways to expand their market share.
RSR Corp. (Dallas), for instance--the nation's largest secondary lead producer with smelters in City of Industry, Calif., Indianapolis, and Middletown, N.Y.—has quality added capacity in recent years, bringing its annual total to around 285,000 tons. The company has also talked about building a greenfield smelter near Aiken, S.C., but that project is on hold at the moment, RSR sources indicate.
Similarly, Doe Run Co. (St. Louis), the nation's largest integrated primary lead producer, brought a new state-of-the-art secondary lead smelter on-stream in 1991--its Buick recycling facility in Boss, Mo. Today, Doe Run, which has a total annual refined capacity of around 300,000 tons, is the only U.S. operator with primary as well as secondary lead smelters and refineries.
And then there's GNB Technologies, which, after several years of expansion, entered 1995 with an annual smelting capacity of 185,000 tons in North America. And if all goes as planned, the company stands to boost that figure by 62 percent this year. This should put it in good position to take advantage of predictions that more independent, undercapitalized secondary smelters will close in the future, leaving the field open to a few well-heeled secondaries and fully integrated battery manufacturers like GNB.
What's in a Name?
GNB Technologies has existed in name since only 1987, when it was acquired by Pacific Dunlop Ltd. (Melbourne, Australia), a conglomerate whose five operating units earned A$6.9 billion (Australian dollars) in the fiscal year ended June 30, 1994. Prior to that, from 1984 to 1987, the firm was known as GNB Batteries, a name derived from the founding company, Gould-National Batteries, which was headquartered in Mendota Heights, Minn.
Currently, GNB is recognized as the world's largest industrial battery maker, largest integrated battery company in terms of current smelting capacity, and second largest automotive battery manufacturer. In financial terms, the company earned A$90 million on A$1.187 billion in sales in fiscal year 1994 and has assets currently valued at around A$808 million.
GNB's closest rival sizewise is Exide Corp. (Reading, Pa.), which has smelters in Reading and Muncie, Ind. Though Exide has less furnace capacity, it's considered to be the largest producer of batteries for the automotive sector. (For background, four U.S. battery companies--Exide, GNB, Delco-Remy (Anderson, Ind.), and Johnson Controls Inc. (Milwaukee)--produce close to 90 percent of the total output of starting, lighting, and ignition (SLI) batteries. Neither of the latter two, however, operate their own smelters.)
GNB's U.S. operations are divided into five divisions: telecommunications, electric vehicles, automotive parts, power control, and environmental services. Interestingly, since the company views recycling as a service industry, each of these divisions incorporates a recycling component.
Aside from a secondary smelter in New Zealand, GNB's lead recycling activities center on its three U.S. smelters-located in Vernon, Calif.; Frisco, Texas; and Columbus, Ga. With annual capacities of 100,000, 60,000, and 25,000 tons, respectively, these facilities give GNB a total of 185,000 tons of U.S. capacity--or about a 17-percent share of the estimated 1.1-million annual U.S. secondary lead smelting capacity. Put another way, these numbers enabled GNB to recycle an estimated 19.5 million batteries in fiscal year 1994.
That figure will rise in 1995, thanks in part to a strategic partnership GNB formed in February with Nova Pb Inc. (Montreal), reportedly Canada 's largest integrated lead recycler. In the partnership, GNB and Nova Pb will share smelting technology and facilities, as well as a preferred customer/supplier relationship.
With a current operating rate of about 60,000 tons a year, Nova Pb is considered to be running well under its potential (given an adequate supply of raw material). The plant, which features a new afterburner gas scrubbing unit, is permitted to bum waste oil and is looking into consuming used oil filters, which could give it the potential to become self-sufficient energywise.
The new strategic arrangement, coupled with upgrades at GNB's Columbus plant, could boost the company's secondary smelting capacity in fiscal year 1995 into the 300,000-ton-a-year range, giving it added prominence in the business and improving its Northeast and Canadian market positions in processing spent batteries.
In addition to its lead recycling activities, GNB manufactures SLI and industrial batteries at facilities in California, Texas, Louisiana, Mississippi, Tennessee (a joint venture with Japan Storage Batteries), Pennsylvania, Illinois, Kansas, Arkansas, and Georgia.
Investing in the Future
GNB Technologies is clearly established as a leader in the lead industry, and it has launched ambitious capital spending plans to increase its position in the automotive and industrial battery markets.
According to Pacific Dunlop's annual report for fiscal year 1994, GNB's capital expenditures totaled A$92 million--roughly a third of the A$269 million Pacific Dunlop spent worldwide--and GNB is reportedly looking to spend at a rate of $50 million to $75 million a year for some time to come.
This type of financial support from Pacific Dunlop has enabled GNB to explore a variety of business opportunities. In 1992, for instance, the company announced plans to build a greenfield secondary smelter in Waynesboro, Ga., with the capacity to recycle 9 million lead-acid batteries a year.
Continued costly delays in the permitting process at Waynesboro, however, prompted GNB to shift its efforts to replacing its existing Columbus facility. Currently, construction is well under way on a new 80,000-ton-a-year plant sited 150 yards from the existing smelter and scheduled to be commissioned May 1.
The Columbus project, which is expected to run up a bill in excess of $40 million, centers on installation of a reverberatory and rotary furnace to smelt scrap and refine lead. In addition, the plant will feature a 30,000-ton-a-year sodium sulfate crystallization circuit that will not only produce a salable product--sodium sulfate--but will also reportedly eliminate wastewater discharges.
Across the country, GNB's Vernon, Calif., plant--built with state-of-the-art equipment in 1982 for $40 million--recently upgraded its battery-breaking circuit at a cost of $2.5 million and is considering constructing a $9-million demonstration electrowinning plant near its current operations.
The electrowinning technology, purported to be more environmentally friendly than traditional smelting methods, has been used successfully to recover copper but is still unproven for lead refining. GNB officials, however, seem to express more concerns about the process's operating profit potential than its assumed environmental benefits.
GNB's Frisco, Texas, plant, meanwhile, isn't currently slated for major expansion, but it has, nevertheless, undergone significant renovation and upgrading in recent years. According to published reports, the firm has spent about $3 million annually in the past four years on the plant, with most of the improvements focused on reducing environmental concerns related to air and ground pollution. The improvements have included filtration systems to catch lead particles before they leave the emissions system, additional vents to pull lead away from work areas, and more pavement around the plant to reduce dust. These expenditures have helped the operation cut its workers' recorded blood-lead levels below the federal workplace standards, says GNB, noting that this same smelter recorded levels nearly twice the federal standard in the mid-1970s.
Growth Through Partnership And Acquisition
In addition to upgrading its existing operations, GNB has been aggressively expanding in its niches, not only through the strategic partnership formed with Nova Pb, but also through acquisitions.
Last September, for example, the company acquired Daeleo Inc., a subsidiary of Quenell Enterprises Inc. (City of Commerce, Calif.) and the supplier of lead oxide to GNB's City of Industry-based battery- making plant.
The Daelco operation, which has an annual oxide production capacity of about 45,000 tons, was a perfectly logical choice for acquisition because the plant already consumed lead from GNB's Vernon smelter, in turn shipping oxide to GNB's battery-making plant. This deal increased the number of GNB's oxide-making plants to five, with the other four located in Frisco, Texas; Florence, Miss.; Columbus, Ga.; and Dunrnore, Pa.
GNB also acquired Quenell's two other lead-related operations--a die casting plant in City of Industry and a powdered lead products plant in Garland, Texas. Financial details weren't available, but sources close to the lead industry say the Quenell acquisition was valued at "several million dollars."
GNB Technologies, of course, isn't the only secondary lead smelter with an eye on expansion and long-term growth. Exide, for example, made five acquisitions of battery or battery-related businesses in North America and Europe last year alone.
More recently, Exide bid to take over Schuylkill Metals Corp. (Baton Rouge, La.), an independent smelter with furnace operations in Baton Rouge (which has an 80,000-ton annual capacity) and Forest City, Mo. (with a capacity of 32,500 tons a year) in a deal estimated to be valued at between $40 million and $50 million. Talks recently stalled, however, and may have collapsed altogether due to unresolved environmental issues.
And RSR Corp. is planning to spend a whopping $35 million in the next two years--more than $20 million this year alone--on numerous projects at its three smelters. These upgrading and modernization projects are expected to boost the firm's capacity to some 360,000 tons annually, possibly by mid-1996, according to A1 Lospinoso, RSR's president.
Taking the Gamble
The future for GNB Technologies is inexorably linked to the prospects for lead-acid batteries--for better or worse--because, without question, lead-acids remain the battery of choice for SLI and industrial applications. While substitutes for lead-acid batteries exist, none can compare--thus far--with lead's technology, its relatively low cost, reliability, and, of course, recyclability.
Exactly how the secondary lead industry and market will evolve in the remainder of this decade is uncertain. Will lead encounter more health-related challenges that could limit its use? Will federal environmental regulations ultimately threaten the industry's viability? Will other battery technologies make significant inroads into lead's dominance in the battery market?
These and other questions touch on the issues primary and secondary lead producers must consider when planning their futures. But despite these challenges, industry leaders such as GNB Technologies--backed by significant financial resources-- are accepting the gamble and taking bold steps toward increasing their position in the lead marketplace.
This Georgia-Based integrated battery maker is among the top players in the lead industry thanks to a business approach based in operational improvement, expansion, and acquisition.