September/October 1989
Keep an eye on this company. Already a success (they've attracted not only the attention but
the backing of major corporations overseas), LMC has its sights on nonstop expansion.
By Gerry Romano
Gerry Romano is editor of Scrap Processing and Recycling.
"Well, we all speak a little funny and drink Foster's now," says the president of Northern California's LMC Metals about the influence its new Australian parents have had on the company. But Bob Lewon, widely known in the scrap industry not only for his sense of humor but for his business acumen, adds in all seriousness the tremendous growth opportunities ahead with Simsmetal's and Elders Resources's combined philosophical and financial backing of what was already an expansion-minded LMC.
"We're looking for growth in three areas," Lewon says about the ferrous and nonferrous recycling firm, with 300 employees and with facilities in Richmond, San Jose, Redwood City, Sacramento, and Stockton. "First, internal growth through new pieces of equipment and new opportunities within the existing operations of our company and within Northern California. Second is by acquisition; we are looking at purchasing additional scrap metal facilities in the western United States. Third, we are looking at nonscrap opportunities, but in somewhat allied fields--again in the western United States."
Included is the field of waste, Lewon says, "related to what Simsmetal is doing in Australia." He also mentions possible involvement in the nonmetal arena. "We're looking into the whole resource recovery area to see whether opportunities exist that make sense for us. We think the entire scrap metal industry will become more involved in plastics, glass, and paper as time goes on, and we intend to be a part of that.
"To grow," he adds, "we need good people. Finding them is a top priority for us."
"I think it's fair to say that we're a very growth-oriented company," says LMC Vice President Alan Ratner. "Our parent companies are also very growth-oriented and provide us with much stimulus to expand for the future."
Not just the parents' money but their desire to increase world market share will drive many of LMC's business moves. Discussing the acquisition of LMC by Simsmetal 17 months ago and the subsequent acquisition of Simsmetal by Elders in March of this year, Simsmetal Ltd. Chief Executive John Crabb, also the recycling division executive director at Elders, says, "The strategy quite clearly is to grow our American business. ... In Simsmetal's traditional business [recycling], the areas for growth in Australia are limited by the fact that we already have major market shares. We saw a need, if we wanted to continue to grow, to go offshore. After researching the American market for a number of years, we decided that staking a claim on the West Coast was something that fit in very nicely with us." The LMC fit, according to Crabb, was in similar export markets, materials handled, and multifunctional facilities. "As far as the future goes," he says, "we want to grow LMC operations. ... It might well be that in time we'll look at becoming a little bit more vertically integrated, with smelting of aluminum, copper, etcetera." Elders is "100 percent behind what we're doing," Crabb continues. "They're very supportive and are, in fact, pushing us to do it."
Ratner adds: "It would certainly be fair to say that LMC will be more diverse and larger a year from today."
If not sooner. Progress isn't slow at this aggressive enterprise, which Lewon describes as the largest scrap metal processor and exporter in Northern California and one of the largest domestic suppliers in the state. Many acquisition efforts, equipment upgrades and additions, and operation expansion plans are in the works if not already completed. Announced in June and begun in July is an LMC-Key joint venture. Operations shared by LMC and Samuel G. Keywell Company, which is based in Baltimore, are located at LMC's Richmond plant. All grades of stainless steel, high-temperature alloys, and titanium scrap are handled at this site, touted as big enough to accumulate large tonnages of material for domestic and international marketing.
"Visibility Is Everything" … But There's Also Control
While actions such as these may make scrap industry members take notice, Lewon is most concerned with internal watches on operations.
"Visibility is everything," he says, sitting in his office, which overlooks much of the Richmond facility. He shares this physical and philosophical view with Director of Operations Joe Cataldo, Richmond Divisional Manager George Garafalo, and Ratner, who points out that all divisional managers have offices similarly situated. Looking out his windows constantly as he discusses LMC culture, Lewon says the concentration on observation reflects management's belief in keeping close tabs on business.
Additional beliefs behind the day-to-day execution of LMC business include cultivation of a teamwork attitude among personnel and mobilization of the team into activities all geared toward serving customers and consumers.
"I always had a vision about this company," Lewon says, "that we could service the needs of the consumers in California while taking care of our overseas consumers--both ferrous and nonferrous--in what I consider a unique and mutually advantageous long-term relationship. We structure our supply programs to various consumers around their needs, trying to take care of all of them in the most cost-effective manner." According to Lewon, LMC has been quite successful in doing so, proven through their transition in the ferrous portion of their business from 90- to 95-percent export (typical for a West Coast operation) to a 50-50 ratio of export to domestic for ferrous. For nonferrous, the ratio of export to domestic today also is approximately 50-50.
Customer and consumer service can only be supported, Lewon says, by a company that focuses on control in all areas of its operations. Included is plant upkeep: "When you see a well-run company, you'll see that housekeeping is good, which usually means they have a good safety record. You won't see the obvious environmental problems like puddles of oil, batteries laying on their sides, motorblocks laying all over ferrous operations."
A major aspect of material control, Ratner says, has to do with inventory. "We're strong believers in stock turn--ensuring materials come in and go out the door--controlling our profitability through acquisition and processing of materials, rather than gambling and playing the markets. ... With our size and the volumes that we handle, we have to pay more attention to locking up our profit right up front rather than risking it at the end."
Lewon echoes these thoughts: "A well-run company really controls its inventories and its timing of sales; a poorly run one winds up with large inventories of unprocessed materials, and if they hit good markets it's by accident rather than by plan."
Implementing the Vision
Want an ambitious plan? How about the design of "a plant for the future," as Ratner describes the Richmond facility. Built in 1986 to replace the former Richmond plant, this one emphasizes efficiency in layout and strong attention to environmental concerns.
Joe Cataldo points out the motor block pile, which sits on a layer of material through which no liquid can seep. All waste oil and water runoff is collected and purified in an extensive underground system.
Aboveground at this 20-acre facility on the ferrous side are a Harris 1335 guillotine shear, a Harris 1218 baler, two LaBounty shears for dismantling railroad cars, an auto flattener (cars are flattened and sent to Redwood City for shredding), and numerous cranes, grapples, and magnets. A shear and a baler share the nonferrous side with the new equipment purchased for the LMC-Key operations.
All this equipment is operated with one intent, says Cataldo: to satisfy the consumer. "We're doing a lot of custom processing," he says, preparing material with attractiveness in mind. "What I mean by attractive is making the material easy to handle, packaging it in a manner so that the consumer will get a better return by using the material. It could be a little bit smaller than usual, or bigger, or a looser bale, or whatever. We gear ourselves to what we feel our consumer's needs are. That's why we'll always try something different."
This practice prevails at all LMC plants, Lewon says, and pertains to customers, too. "If it's recyclable and not hazardous and it's made of metal, we buy it, so our customers can go to one market. No quantity is too small or too large. We also give help in identifying odd items and in finding markets for problem materials, and we've been innovative in receiving hours to avoid traffic congestion."
Lewon adds that LMC has offered customers assistance in safety programs, of paramount importance inside the company as well. Dennis Haw, director of corporate services, oversees the companywide program, which includes regular safety meetings and training. There's also a safety incentive program: If a division goes for one full quarter without a lost-time injury, Haw says, all the employees in that division share in a bonus.
San Jose: Significant Changes
"San Jose is dramatically moving along," says Ratner of this LMC arm. Although ferrous is processed at this site, the significant changes are on the nonferrous side. With the help of a one-year-old wire chopper and a Harris HRB, the facility now is processing all the scrap generated by one of the largest privately held utilities in the nation, Pacific Gas and Electric.
Also for nonferrous is equipment dedicated to processing irony aluminum and wire not suitable for the chopper.
The portion of the 12-acre facility dedicated to ferrous processing centers around a Harris shear and baler.
In charge of all operations is LMC's general manager of nonferrous, Chris Miller. This newcomer to the company-he joined about a year ago-says the thing that strikes him most about LMC is that it's run "as a manufacturing organization as opposed to a scrap organization. The emphasis is on inventory turn, on quality control, on streamlining efforts for efficiency. The concept of 'it's only scrap' or the feeling that this is a 'Secondhand Rose' business is not here, no way."
Redwood City's Increased Capacity Plans
"It's a production game" at the 13-acre Redwood City site, says its divisional manager, Keith Elkins. "We just try to produce as much as we can."
The winnings come from one source: a 4,000-horsepower fragmentizer dedicated to auto shredding. The shredded scrap is sent via conveyor to a ship docked at the export terminal. A 25,000-ton ship is loaded in about five days.
By the end of the year, the proceeds from this facility should start to increase. LMC will be installing a new mill, supplied by Texas Shredder Parts, that, according to Ratner, "will significantly increase our capacity at this site and enable us to produce tonnages and types of materials that we have been unable to handle. ... It's a large investment and one that we are really excited about."
With the installation, Lewon says, we will be shredding a certain amount of material that we have been baling. Bales, while still quite acceptable to most steelmakers, can be in oversupply on occasion; so we are trying to shift our emphasis to shredding."
Australian Enhancements
Tracking production and costs resulting from all these operations is Bob Rouse, vice president of finance. Through a cost-center system, he develops monthly and year-to-date statements of costs for each division and major piece of equipment. In nonferrous, he also tracks profit margins for each of the commodities. It's an information system that Rouse says was in place before the acquisition, but that has been made more comprehensive over the past year.
Also in the past year, the sales posture of the firm has changed, according to LMC's vice president of nonferrous marketing. Gene Kaplan, who is based in San Jose with metal traders Rick Groetzinger, Richard Greenspun, and Harvey Speer, says, "The expansion of LMC Metals with Simsmetal has certainly opened up some new vistas in distribution of materials."
The effects of the acquisitions on marketing may be most apparent in nonferrous, but they're present on the ferrous end, too. General Manager of Ferrous David Marco says, "I think our influence has become more worldwide. We were exporting to just a few mills in our normal markets in Taiwan, Korea, and Japan; but now, with Simsmetal, we have more information on world economies, world consumptions of scrap metals, and production of new material."
The marketing positions of both companies have been enhanced, says Lewon. "We share information, and both have benefited. ...The consuming markets are pretty well known," he adds, "but LMC's position to take advantage of those markets has been improved by being with the Simsmetal Group."
The Big Get Bigger: Development of LMC
February 1988: Simsmetal USA Corporation, owned by Australia-based Simsmetal Ltd.--John Crabb, chief executive--acquires multifacility LMC Metals, with scrap processing operations throughout Northern California. Bob Lewon becomes president of LMC--formerly Levin Metals Corporation; Simsmetal's Alan Ratner is appointed to LMC's No. 2 spot, vice president. This acquisition marks Simsmetal's expansion from Australia and New Zealand operations (50 locations combined) into the United States. Combined Simsmetal/LMC total annual purchases of ferrous scrap are estimated at a minimum of 1.5 million tons. For nonferrous, the combined total is estimated to be a minimum of 150,000 tons per year. In addition to its scrap processing operations, Simsmetal encompasses refining, smelting, reusable ferrous and nonferrous sales, manufacturing, and waste hauling-potential growth areas for LMC.
March 1989: Elders Resources, Melbourne, Australia, headed by Geoffrey Lord, chief executive, establishes a recycling division by acquiring Simsmetal Ltd. John Crabb is appointed executive director of the division. Elders's other operations, which span 20 countries, include forest products, mining, oil and gas, marketing, and resources financing. In addition, Elders IXL, the second largest company in Australia, is the majority shareholder in Elders Resources, with interests in worldwide breweries (including Foster's), agribusiness, airlines, and more.
June 1989: LMC expands its stainless operations by forming a stainless steel, high-temperature alloy, and titanium scrap processing enterprise with Baltimore-based Samuel G. Keywell Company-Morton Plant, president. Keywell, combined with its Vac Air divisions, is among the largest processors and suppliers of stainless steel and vacuum-melt alloy scrap in the world. Operations of LMC-Key, located at LMC's headquarters in Richmond, California, are expected by the two firms to position them as a major factor in the western U.S. stainless and alloy market.•
Keep an eye on this company. Already a success (they've attracted not only the attention but the backing of major corporations overseas), LMC has its sights on nonstop expansion.