2004 Issue 2
Reman E-News

A Bi-Weekly Review For The Remanufacturing Community
A joint effort by The Remanufacturing Institute (TRI)
and the OEM Product-Services Institute (OPI)

Providing news for the $100B global remanufacturing community:
market trends, innovative offerings, government initiatives, acquisitions, expansions,
professional societies, trade groups, legal rulings, financial results, the environment,
productivity improvements, publications and events.

Acquisitions
Caterpillar Remanufacturing Services (“Cat Reman”) has acquired the business and assets of the 100 employee, privately-held Wealdstone Engineering Ltd., a gasoline/diesel engine remanufacturer located in Rushden, England. Cat Reman has also acquired the 500 employee, Summerville, South Carolina based, Williams Technologies Inc. (WTI), a wholly owned subsidiary of Remy International (formerly DelcoRemy).

These acquisitions represent an expansion of Cat Reman, which currently has six facilities located in the United States, Mexico and Europe, serving the automotive power train remanufacturing business.

Steve Fisher, general manager of Cat Reman commented, "These acquisition are an excellent strategic fit, providing an opportunity to leverage Caterpillar's primary remanufacturing strengths (core management, reverse logistics, machining of rough castings, salvage technology, etc.) with that of Wealdstone’s and Williams Technology’s portfolio of remanufacturing services to original equipment manufacturers (OEMs) in the automotive industry."

Tim Durdin, managing director of Wealdstone Engineering Ltd. will continue his current duties. Wealdstone has been a specialist OEM remanufacturer since 1965. Wealdstone's largest long- term customers are Ford Europe and the British Ministry of Defence.

WTI is a leading remanufacturer of automatic transmissions, torque converters, and engines for automotive and medium and heavy duty truck applications. It currently remanufactures over 40 transmission models for a variety of automotive OEMs and vehicle platforms. "This business has performed very well for us. We believe, however, that it is a very strong strategic fit with Cat's remanufacturing business and that as part of Caterpillar, WTI's customers, employees and other stakeholders will realize even more value," said Thomas J. Snyder, president and chief executive officer of Remy International.

Caterpillar is one of the world's largest remanufacturers, processing more than 2 million units annually and recycling more than 100 million pounds of used products each year. Caterpillar has been in the remanufacturing business for over 30 years. Today, Cat Reman products include on and off highway engines, engine components, transmissions, hydraulic components and electronic components.

Applied Materials, the world’s largest semiconductor equipment manufacturer, has agreed to pay $84.6 million in cash for the San Jose, Calif based Metron Technology, a $200 million/year semiconductor equipment services company, with extensive remanufacturing operations.

With 30 offices in the U.S., Europe, Asia and Israel, Metron caught AMAT's eye because of its global reach and its focus on providing services — and not just equipment — to semiconductor manufacturers. In addition to supplying spare parts and specialty materials to chip makers, Metron offers marketing help and provides the highly specialized cleaning services required to keep production lines dust-free.

"AMAT is buying Metron to expand its presence in the service business," says Timothy Summers, an analyst at Stanford Group, a brokerage in Boca Raton, Fla. "It wants to do this because service and customer support are not nearly as cyclical as its traditional equipment business."

According to Summers, AMAT Chief Executive Mike Splinter, who took the helm last year, has made it a priority to increase the company's presence in the service sector. While chip makers may curtail capital expenditures during downturns, they're more likely to continue spending on cleaning and maintenance services that ensure quality and extend the life of existing equipment. The recent acquisitions of Praxair Electronics and Phoenix Silicon International were made to boost AMAT's service offerings.

Applied Materials has also partnered with Meidensha Corp. to provide remanufactured used equipment and related repair and maintenance services to Asian chipmakers.
Meidensha, founded in 1897, is a Tokyo-based manufacturer in Japan's heavy electric industry.The two companies' newly-opened center is the Shanghai Meiden Semiconductor Company Limited (SMS), located in the Waigaoqiao Free Trade Zone, Shanghai, China. This new Shanghai facility is the fourth regional center in Applied Materials’ worldwide system remanufacturing network, in addition to centers in Texas, France and Japan.

"The industry is very fragmented," says Parakh of Robins Group. "Other companies do some services, but not all the services that Metron does. Metron is the only company we know of that has a global presence and offers one-stop shopping."

Market Trends
Independent remanufacturers and capital goods OEMs
One of the most interesting strategic areas of the remanufacturing market is the impact of OEMs not thinking strategically when it comes to controlling, directly or indirectly, the channels of distribution of remanufactured products. The market demands remanufactured products, and if the OEMs “are not in the business,” then the independents supply the market demands. Almost in all economic sectors, it is the independents that have the largest share of the remanufactured product market.

Besides the OEMs losing remanufactured product revenues, they also risk losing some of their new product revenue as well. Why, because remanufacturers often become the technical experts for a particular product; it is they who have disassembled and analyzed the product many times more frequently than the OEM. As a result, independent remanufacturers often see an opportunity to expand their business by reverse engineering the OEM’s product and manufacturing it for prices, reliability and deliveries that are superior to that of the OEM. This is especially true for components that are no longer in production. Electrical apparatus, automotive, aerospace and other sectors have seen remanufacturers become OEMs.

As long as OEMs define themselves as primarily suppliers of new condition final assembly products, with warrantees, most independents will continue to prosper from the narrow business focus of OEMs…but can OEMs continue to ignore the remanufacturing market when their Profit After Taxes, as a percentage of revenue, average a paltry 5%?…I think not. OEM owners will demand higher rewards for the risks being undertaken of: product liability, fixed investment in plant and equipment, R&D and others. The remanufactured product market is one of the tickets to grow OEM profits.

When the OEM elephants awake, it will be time for independents to align themselves with OEMs to ensure that they have access to the remanufactured products channels of distribution that will be controlled by OEMs and their partners…or sell out to the OEMs. How can you tell when an elephant has awakened? Read OEM 10K statements and if they start discussing the size of the installed base, you will know it is time!…right now that is only 10% of OEMs. Another way is when OEMs change their performance metric from # of new units produced to [(profits derived from a product during its lifecycle)/(investment in the manufacturing of the product)].

In conclusion, the remanufacturers’ world is changing and will continue to change…and be prepared to adapt as the OEMs inevitably move into the remanufactured product market.


The Environment
Environmental groups don’t recognize that they should be part of the remanufacturing community.
The environmental community has put remanufacturing into a “cubbyhole” which is outside of their focus. If these organizations understood the drivers of remanufactured products, they would enthusiastically join the remanufacturing community for they would quickly see that reman is THE most environmental friendly process available to reduce industrial pollution and waste. Remanufacturing is focused on improving productivity (output/input), which is a foundation of US capitalism. One measure of environmental performance is to measure remanufactured product productivity to that of new product productivity. Below is a productivity and environmental performance metric. As long as the environmental performance is > 1, a remanufactured product, as compared to a new condition product, favorably impacts the environment.

Product Productivity
Output:
(years remaining in which product value can be derived)/
Input:
(new material content %)
Note that one of the objectives of the remanufactured product market is
to increase output and decrease input

Environmental Performance
(remanufactured product productivity)/
(new condition product productivity)
>1 good, <1 bad

Example
Remanufactured Product
Output:
(delivered with 4 years remaining in which product value can be derived)/
Input:
(15% new material content)
=28
New Product
Output:
(delivered with 8 years remaining in which product value can be derived)/
Input:
(100% new material content)
=8
Environmental Performance
(28 remanufactured product productivity)/
(8 new condition product productivity)
= 3.5 > 1…that’s good!

The above is only an example of how environmental groups can rethink their metrics to include the remanufacturing community.

Below are some environmentally focused websites that should be touting remanufacturing.
www.recycle.net
www.recyclingtoday.com
www.greenbiz.com 
www.letsrecycle.com 
www.Environreport.com

The article, “Remanufacturing: The Next Great Opportunity For Boosting US Productivity,” provides further information about productivity and remanufacturing.
http://www.oemservices.org/articles.htm 


Publications
Order "Remanufacturing: The Ultimate Form of Recycling,” by Rolf Steinhilper.
This 100 page classic is an easy read and a great introduction to the remanufacturing industry. Examples of topics covered, with lots of pictures, are:

• What is remanufacturing?
• Repairing or remanufacturing?
• Core supply
• Disassembly
• Cleaning
• Reassembly
• Costing
• Product design for remanufacturing

You can buy this book by placing an order with Kathy Olson at olson@buyreman.com.
or calling her at 703.968.2772. Price is $20, plus postage and handling. Payment is via credit card.

Events
The APICS Remanufacturing & Service Parts (REMANSP) Special Interest Group (SIG) and The Remanufacturing Institute (TRI) are presenting “Reman U” at the “International BigR Show” on October 28 through November 2 at the Riviera Hotel In Las Vegas. Information is available at http://www.bigrshow.com/apics/  . This educational event is the largest of its kind in the world for the remanufacturing community. The Body Of Knowledge (BOK) to be presented will benefit all industry sectors.

Final Note
We encourage you to forward this newsletter to friends in the remanufacturing community. It is our intent to carry news on all industry sectors. If you have news to share or comments, please contact the Reman E-News editor:
 

Ron Giuntini

rgiuntini@oemservices.org
570.523.0992

Ron Giuntini, Executive Director
PO Box 48
Lewisburg, PA 17837
rgiuntini@reman.org
570.523.0992

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