November/December 1993
Republic Alloys/Republic Crane & Equipment is half scrap processor, half equipment distributor, a split personality that offers benefits to both parts of the company and the customers they both serve.
BY JEFF BORSECNIK
Jeff Borsecnik is assistant editor of Scrap Processing and Recycling.
In 1977, William Allen, a 28-year-old vice president of marketing for Nations Bank in Charlotte, N.C., saw a chance to apply what he describes as "just enough knowledge of the scrap industry to be dangerous." He had already developed an interest in the industry from the financing end and had set up a part-time business collecting industrial scrap when the proprietor of the scrap plant Allen had been selling to mentioned that he was looking to sell his business. Allen's reaction: an ambitious takeover plan that saw his tiny peddler business stepping in and buying the company's assets. "It looked like the tail wagging the dog," he remembers.
At the time, Russell Scrap, the company acquired, was a small but solid firm that processed industrial scrap mostly from peddlers and other processors, especially aluminum, which was typically melted in a sweat furnace. But by 1981, Republic Alloys Inc., the operation's name since Allen took over, had changed substantially and annual sales had leapt from about $800,000 to $10 million, thanks primarily to the firm's jump into the new business of recycling used aluminum beverage cans (UBCs), which soon accounted for about 85 percent of its business.
Getting Into Cranes
That move into UBCs wasn't the end of Republic's shift into new business directions. In the early 1980s, Allen, who was impressed with a small Atlas crane Republic had inherited from its previous owner, developed a relationship with the Atlas dealer located in Erlanger, Ky. The dealer had strong technical skills but seemed to lack sales ability and scrap connections, so Republic stepped in to help the dealer reach the scrap industry with used and, eventually, new, cranes.
This entrance into the equipment business seemed to promise much for Republic by the late 1980s. After all, the recycling industry was booming and demand for scrap handling equipment surged. But Atlas was unable to keep up, order lead times stretched, and Republic and its dealer partner increasingly frustrated. Nevertheless, Allen believed in the opportunities equipment distribution offered Republic, and approached the American division of Liebherr, a major German crane maker (like Atlas) with a product similar to Atlas's and a real interest in the U.S. scrap industry. "We convinced the people at Liebherr that to be successful marketing their scrap machines they needed somebody like us who knows the business, understands the language, knows the different layers," says Allen. "They always had the product, but their regular dealer network didn't concentrate on scrap or have the qualifications to really market to the scrap industry." John J. Deschenes III, the firm's vice president of operations, puts it this way: "While other crane dealers come from a `dirt background' and understand digging, at Republic we understand stacking."
Liebherr granted Republic a national franchise for scrap sales, quite an unorthodox arrangement by crane industry standards, according to Robert F. Fiorenza, national sales manager for Liebherr-America (Newport News, Va.). "In the beginning, we were told it would never work, and I think we have proven many people wrong." Although the manufacturer had made several previous attempts to crack the U.S. scrap market through its construction-oriented dealers, none of those dealers was willing to purchase and stock scrap machines. As a result, Liebherr's U.S. scrap industry success was "very, very limited" prior to developing its relationship with Republic, says Fiorenza. "We sold more machines to the scrap industry in one year with Republic than the total for the 10 years prior."
Today, Republic's equipment business, known officially as Republic Crane & Equipment Co., generally works independently in selling to scrap processors across the country, but it also assists some other U.S. Liebherr dealers, and it has a special relationship with Oregon Tractor (Portland, Ore.) to help it serve the West Coast. Republic's Charlotte facility may not look much like an equipment showroom, but, as a working scrap plant, it probably functions far better than most for the purpose—at least for any scrap recycler's purpose. "Say a scrap recycler comes in to see a Liebherr 932 crane with grapple. The customer can get in that crane, run it in this yard as long as he wants, and we can sell him that machine," says Deschenes, adding that customers can also talk directly with the people who operate the equipment in Republic's scrap facility.
Because of this arrangement, the scrap handlers used in Republic's own scrap operation are regularly sold. In fact, seldom does a crane remain more than a few months. Deschenes and Vice President and General Manager Steven W. Wilson, who together oversee the scrap business, grumble that Allen, who spends his time running the equipment side, is always selling equipment out from beneath them. Then again, they always get brand new replacements.
They also get to contribute to new product development. Some of Liebherr's scrap industry products, such as its very large scrap handlers and its electric pedestal cranes, came out of putting Republic's knowledge into the design of products built to satisfy particular U.S. scrap industry needs.
Covering Scrap Options
Liebherr offers 12 models of scrap handlers, including tracked crawlers ranging in operating weight from 36,000 to 172,000 pounds as well as rubber-tired machines and pedestal cranes. All 12 are designed specifically for scrap jobs, and typically feature a broader and heavier undercarriage, a straighter boom-and-stick arrangement, a longer reach, and a higher cab than excavators, according to the manufacturer.
Republic usually stocks several of each of the most popular scrap handlers and a few of the higher-ticket, heavier machines, depending on its forecasts of the direction of ferrous scrap prices, which control equipment demand and therefore are used to determine how many of which machines it will buy and stock for resale. "The scrap dealer typically will buy a piece of equipment because he needs it right now, so having machines available for prompt shipping is very important to our success. Very few of our competitors stock new machines," says Allen, noting that the lead time on cranes can be as much as five or six months.
Republic also acts as a dealer of mobile shears for LaBounty Manufacturing (Two Harbors, Minn.), serving as that firm's scrap industry representative for the Southeast. The mobile shear dealership is distinct from its Liebherr business—the shears are typically used on excavators, with their curved "goose neck" booms, not scrap handlers—but it is closely aligned with yet another Republic business, selling used excavators of all makes to the scrap industry. Many of these used machines find their way to Republic as trade-ins, but the company also aggressively seeks used scrap handlers and excavators to buy and resell. Thanks to this used equipment segment of its business, Republic is able and typically tries to provide three "price points" in response to inquiries, Allen explains—for a new machine, a late-model used crane, and an older used one—providing options to help best fit the buyer's needs and budget.
It's all part of the firm's attempt to be a "full service" dealer, says Allen. "We'd like to be known as having everything for the scrap man. If we don't have it, he doesn't needs it." In addition to offering a range of product types and pricing options, full service at Republic means being able to offer technical expertise not only on internal crane systems from the drive mechanism to hydraulics, but also on auxiliary equipment like magnet generators and controllers—service unlikely to be available from most other dealers, says Allen.
On the Scrap Side
Though Republic's early surge in aluminum cans put the company on the scrap map, the streak ended in the early 1980s as the large can makers took over much of the wholesale UBC role played by Republic and other middlemen. To keep its place on the map, therefore, but not limiting itself to the traditional commodities it was founded on, the Charlotte processor switched directions again, moving back into a focus on more traditional scrap commodities.
In 1982, for example, Republic put in a new Mosley 500-ton shear, opening the door to a substantial ferrous business serving industrial clients, a sector that has continued to expand for the firm and today accounts for about 75 percent of the its scrap material volume and 30 percent of its sales.
Diversifying again a few years later, Republic purchased MetelPel, the scrap division of the large telecommunications company Siecor Corp. (Hickory, N.C.) as that firm switched exclusively to fiber optics. Republic retained the MetelPel name for its telephone scrap division, which handles mostly copper-bearing cable from GTE and all the other major telephone companies except AT&T in a region stretching from the Carolinas to Kentucky and Alabama. Using specially equipped trucks, Republic collects the cable—as well as some other miscellaneous scrap ranging from telephone booths to telephones—from about 100 phone company locations, then brings it to the plant, where it's sorted and baled in a high-speed, relatively low-density Harris HRB 10 baler before turning it over to cable choppers. Under its arrangements with the phone companies, Republic actually buys very little cable, instead processing most of it on a fee-for-service basis.
A wide variety of scrap from industrial clients and a smaller amount from peddlers and other processors fills out Republic's nonferrous scrap business. About a third of the firm's scrap income comes from sales of highly segregated baled aluminum, and the non-cable, nonferrous balance includes smaller amounts of copper and brass scrap, as well as some nickel, magnesium, and high-temperature alloys.
The commodity breakdown at Republic could be changing again. This past summer, the firm expanded its ferrous processing potential three-fold by installing a new 1,000-ton Lindemann shear assisted by several new Liebherr cranes. The firm expects the shear to also cut material handling costs since it will be able to keep up with a much higher pace of scrap inflow, so less material will need to be stored and shifted around the plant. This, in turn, will allow the company to be more aggressive in ferrous scrap purchasing, says Wilson.
Hand in Hand
Although Republic has clearly demonstrated that it's not conservative when it comes to diversification, the firm takes a much stricter approach in keeping its overhead low, according to Allen. A total workforce of about 40 including few managers operate the firm's scrap and equipment divisions in Charlotte (another seven staff its equipment facility in Erlanger, Ky., purchased from the Atlas dealer that originally got Republic into the equipment business.).
"In the scrap industry, bigger is not necessarily better," Allen says, adding that where Republic does seek to improve its volume, it does so "through more efficient equipment and productivity rather than adding more bodies" in order to keep overhead down. Another weapon employed in this strategy is a salary structure that incudes profit sharing for all employees and executive compensation that leans heavily toward bonuses, both of which base pay in part on the firm's financial performance, thus keeping costs down in lean times.
Of course, the company's structure also helps shield it in down times. Though both of Republic's business segments is broadly based, ranging from its wide mix of industrial material and suppliers to its service-oriented MetelPel operation. And this foundation is further strengthened by the equipment division. Though both businesses are subject to scrap's periodic downturns, the equipment side enjoys some insulation because it is national in scope. And even when the country's economy as a whole drags, Republic's equipment business is buoyed by sales of used machines, which often pick up when new crane sales drop.
Furthermore, Republic's scrap business helps the company sell Liebherr and LaBounty equipment, while benefiting from access at the wholesale level to the newest material handling equipment available. And its constant need to keep a pulse on the national scrap industry and the steady flow of recyclers through its facility—not to mention the somewhat different perspective on recycling Allen brings back from visits to European scrap processing plants during regular trips to Liebherr's German headquarters—can't help but provide plenty of tips to Republic's recycling managers.
In fact, who knows what new business directions such leads might prompt Republic to venture on in the future. As Allen puts it, "We'll change our company when necessary, when new opportunities arise, to try to stay on the leading edge." •
Republic Alloys/Republic Crane & Equipment is half scrap processor, half equipment distributor, a split personality that offers benefits to both parts of the company and the customers they both serve.