GM

Heat Treat Radio #117: How GM Started & Grew FNC for Brake Rotors

In this Heat Treat Radio episode, host Doug Glenn converses with Mike Holly on his extensive experience in ferritic nitrocarburizing (FNC). Listen as they discuss Mike’s career at General Motors, where he implemented FNC to improve brake rotor performance. This episode delves into the technical aspects of FNC, its benefits such as enhanced wear and corrosion resistance, and its application beyond automotive, including military and industrial uses.

Below, you can watch the video, listen to the podcast by clicking on the audio play button, or read an edited transcript.



The following transcript has been edited for your reading enjoyment.

Introduction (00:36)

Doug Glenn: Welcome to another episode of Heat Treat Radio.

I have the great privilege today of talking with Mike Holly who I think you’re going to find very fascinating; I know I have in the conversations we’ve had so far. We’re primarily going to talk about ferritic nitrocarburizing (FNC) because Mike has some great experience in that area. But first I want to welcome you, Mike, and give you an opportunity to tell us a bit about you and your work history.

Mike Holly: I’m currently retired but I am working as an engineering consultant on my own, primarily in the areas of heat treatment, casting, welding, coding, and plating. I specialize in automotive and heavy truck applications. As far as my education, I’m a graduate metallurgical engineer with a bachelor’s from Wayne State University in Detroit and a master’s from Purdue. I have 43 years of experience in the auto and heavy truck industry; 32 of those years were with General Motors who I retired from. I was assigned to the materials engineering group in Warren, Michigan, and I specialized in driveline, exhaust, steering, chassis structures, and brake applications, primarily metal applications.

Mike Holly, lead consultant for Mike Holly Metals LLC, on ferritic nitrocarburizing

FNC and Brake Rotors (02:30)

Doug Glenn: The topic that we want to focus on today is FNC. Although if you think of anything else that might be of interest to our thermal processing people, feel free to deviate. How did you get introduced to ferritic nitrocarburizing or case hardening in general?

Mike Holly: I’ve always been involved with heat treatment and case hardening as a metallurgical engineer working on heavy gearing applications. I’m very familiar with FNC and way back in the mid-2000s (about 2005), we were looking at our warranty. In brakes, we saw an opportunity to improve the performance of our brake rotor by reducing brake judder, or pedal pulsation, which caused a lot of customer dissatisfaction. It caused a lot of warranties, knowing that these vehicles would be brought in to be serviced.

We were aware of FNC being done on brake rotors. It had been tried, but brake rotors are a highly dimensional, critical part, and control of distortion is paramount. With prior efforts, that distortion was completely out of control. And that’s why it never went anywhere. So, another team member and myself at GM took it offline and worked out the details so we could FNC-finish machined rotors with no subsequent grinding.

And we were able to do that, working with a company in Detroit at the time called Kolene. We were working in salt, but later on we did change the process to gas. The learnings between salt and gas pretty much transferred completely. We issued some patents, both for the FNC process itself and as it applies to brakes and some subsequent processing to improve the corrosion resistance of the rotor. My name is not on the patent as my prior employer owns the rights.

Doug Glenn: That is often the case, right? If you’re working for somebody, it’s their patent and not yours. How many patents were you involved with?

Mike Holly: I believe the number is 14 different patents. Some relate to the process directly; some relate to the interaction and the selection between the brake rotor and the friction material. There are quite a few patents that my prior employer has on this process. The first application was in 2009 in the Cadillac DTS and the Buick Lucerne. That’s where the rotors were first used.

Success with FNC (05:36)

Doug Glenn: Backing up to 2005, what do you think had made the FNC unsuccessful up to that point?

Mike Holly: Control of the output: The FNC process that was being used produced almost a solid white layer and we could not get the stopping power out of the friction material. This has to do with the application of something called a transfer layer. We discovered that you need porosity to get the transfer layer down.

Also, orientation of the brake rotor in the process is important; the patents tell you in the specs to orient the parts vertically.

Doug Glenn: Are you talking about the orientation of the rotor in the furnace?

Ferritic nitrocarburizing is a case hardening heat treatment. We are actually making a composite material. It’s within the families of nitriding, carbonitriding and carburizing. These are all done at different temperatures, and they produce different case depths. But again, you are making a composite material.

Mike Holly

Mike Holly: Yes. So it wasn’t anything we invented.

To try to control distortion further, we stress relieved the castings. We took all the residual stresses out from the founding, or the casting, of the part prior to machining, and then put the parts through ferritic nitrocarburizing, fully machined, no other grinding necessary; doing so, we’re able to maintain the critical dimensions.

A brake rotor is a safety critical part, so there are a lot of steps and validations to get that implemented.

Doug Glenn: It sounds like before 2005, and correct me if I’m wrong on this one, Mike, they were FNCing unfinished parts? They were FNCing the rotors before they were machined?

Mike Holly: No, they were doing finished parts and discovered that the dimensions, but the lateral runout and the thickness were so out of control that they would have to go in and subsequently grind to get it back in the dimension. But the FNC case depth is only 10 to 20 microns. You may wind up just grinding the case right off!

What Is FNC? (08:38)

Finish machining FNCed parts really can’t be done without removing the FNC, and then you lose the benefit. It’s a difficult matter to heat treat finished machined parts. It is done. But it was control of dimensions that made the difference.

Doug Glenn: Let’s take a step back then. I want to talk some very basics. You can give us a little metallurgy lesson for people who might not know what FNC is. Can you tell us about what we are doing in this process?

Mike Holly: Ferritic nitrocarburizing is a case hardening heat treatment. We are actually making a composite material. It’s within the families of nitriding, carbonitriding and carburizing. These are all done at different temperatures, and they produce different case depths. But again, you are making a composite material.

FNC is a thermal chemical treatment. We diffuse carbon and nitrogen into the surface of the iron. This strengthens the iron and provides not only a wear-resistant case but corrosion resistance. That’s a peculiar advantage to FNC.

We can specify for steels, stainless steels, gray irons, nodular irons, a whole host of ferrous materials. FNC can be performed in a gaseous atmosphere, molten salt or even a fluidized bed. You involve two gases: a source of carbon, which could be carbon dioxide or natural gas, and a source of nitrogen, which is typically ammonia.

The process is done subcritical, which means below the critical temperature of like 723°C (1333°F) — it’s well below that. It’s performed at around 560°C to say 590°C (1040°F to 1090°F). It produces a very hard wear and corrosion-resistant case from 10 to 20 microns and thickness.

Screenshot from the ECM USA advertisement (embedded in the podcast video) highlighting the ferritic nitrocarburizing processing they provide

Benefits of FNC (10:35)

So, what are the benefits? Why would we even do this? For one thing, it’s done at such a low temperature that it’s a low distortion heat treatment; we’re not going through the transformation temperature.

Doug Glenn: For example, just for those who don’t know, like carburizing — that means going above critical.

Mike Holly: That’s right. With FNC, we get an improved fatigue durability due to the higher surface strength. Ferritic nitrocarburized parts have a compressive residual stress on the surface, and that’s beneficial for fatigue. It’s resistant to adhesive and abrasive wear, it provides a fairly good surface finish, and, very importantly, it improves corrosion resistance compared to other processes.

And a critical environmental concern is there’s no hazardous waste treatment or landfill involved. These gases are readily available. There’s really no waste treatment that we have to concern ourselves with.

Why don’t we do every gear this way? It has to do with the case depth; these are very shallow cases. For heavily loaded parts like ring and pinion high point gearing, we need a thicker case to resist the rolling contact fatigue.

In that application we have to go to carburizing or carbonitriding. And for some shafts where we get very high bending stress, we have to use induction hardening, which is a case hardening treatment that doesn’t use diffusion. You’re just modifying the microstructure of the surface.

FNC has a unique niche: It’s subcritical, has good wear and corrosion resistance, and it improves the fatigue properties.

Doug Glenn: I want to ask you about other applications for FNC besides brake rotors.

First, let me ask you this since you’re talking about the shallow case depth. I’m thinking to myself, you’ve got the rotor and you’ve got your friction product (which we would consider to be the pads that are mounted to the caliper, let’s say on a car). Are those pads not also kind of grinding off the shallow case depth of the rotors?

Mike Holly: It could if you had an aggressive enough friction material. In one of the designs that we had to make was selection of friction materials. And at the time the non-asbestos organic friction materials worked very well with FNC.

But as we go up in aggressiveness, one of the projects I’m working on is improving the case wear resistance of the FNC brake rotors. We’re doing that by alloying gray iron with niobium. We alloy with niobium and form niobium carbides in the case. This greatly improves the wear resistance on the iron side. So that’s how we’re addressing the more aggressive friction materials that would typically be used in Europe.

Applications of FNC (14:51)

Doug Glenn: I want to come back to that niobium, too, so we’ll probably hit on that again. What other applications of FNC have you seen?

Mike Holly: It’s used where wear distortion and corrosion resistance are very important. Many lightly loaded gears will fit into this category. Struts, the devices that hold up your hoods, they’ll be FNC. Some locking mechanisms are FNC. Brake backing plates are currently done. And I think one of the biggest applications is clutch pack discs, which are small 1040, 1050 steel materials (that may not be the only alloy that’s used). They’re FNCed to improve the wear resistance in the case.

Why don’t we do every gear this way? It has to do with the case depth; these are very shallow cases. For heavily loaded parts like ring and pinion high point gearing, we need a thicker case to resist the rolling contact fatigue.

Mike Holly

An upcoming application I’m working on is chassis cradles and frames. We stamp these pieces out of steel, and we weld them. But when we weld them, the weld heat affected zones can lose strength. What we’ve come up with is by using a niobium alloy, a high strength, low alloy steel, and FNC heat treating it, all the weld heat affected zones have good fatigue performance, along with the rest above the cradle. That’s something I worked on at GM, and there’s a patent on that. 

And brake rotors are the latest application which has benefited from FNC treatment. They provide very long-term durability, reduce brake judder, and they’re very commonly used for electric vehicles. Because of the regenerative cycle, there is not a lot of friction application. We have to be very concerned about corrosion buildup on an electric vehicle application.

Doug Glenn: When you start mentioning about car frames and things of that sort, have you gotten at all involved with this giga cast thing for Tesla? I mean is there any FNC going on there?

Mike Holly: Well, I’m not sure what Tesla is doing, but with chassis structures, you’re not only balancing strength. Strength is important; you’re also balancing stiffness. Stiffness could be related to the metal. Now steel has very high Young’s modulus value compared to aluminum. The way you have to make that up with aluminum is through section properties: Thickness and shape.

There’s always competition between steel and non-ferrous materials, whether it be cast aluminum or fabricated aluminum and steel. They each have their advantages, and there have been many vehicles made with both types of construction. Where stiffness is critical, typically steel dominates. That’s the story of chassis structures.

Doug Glenn: When we spoke before, I think you mentioned that there are some non-automotive applications for FNC like golf clubs and some other things?

Mike Holly: I have seen it performed at a company in Michigan where they’re doing, for example, very large gates that are used for hydroelectric plants. They’re FNCing the gate to improve its erosion resistance from water. It’s done in many military applications for devices that would hold onto ordinance. It can be used on stainless steels to improve their wear and strength. There are non-automotive applications for sure.

If you attend the Shot Show this month, January 2025, you’ll know that a lot of firearms are known to need FNC treatment. Learn more at https://shotshow.org/

FNC at General Motors (19:52)

Doug Glenn: I want to ask you a question about the business side of FNC. A lot of times there’s a lot of inertia to keep things the way they are, right? A lot of our advertisers have trouble breaking in with new technologies. From your perspective as one of the lead guys on this for GM, what did it take to get the FNC process into your production schedule?

Mike Holly: First, we had to prove that this is something that would benefit the client. The client would benefit twofold: The vehicles would resist distortion and corrosion; that would improve the performance of the brake in terms of resisting pedal pulsation.

Also, warranties can be very costly. Adding this type of enhancement reduces warranty costs. But you do have to balance the cost reduction of warranty versus the cost of the process. Initially it was very costly, but we wanted to see how it would perform in real time. And at game speed, which means in the customer’s hands.

There was a very willing group at GM, the Cadillac people, who wanted to be first. And they were willing to do this. It turned out quite well. And since that time, it’s been adopted by many car platforms including many competitors.

General Motors, the first to use FNC processed rotors on their pickup trucks and big SUVs, with Ford not far behind; in this Heat Treat Today article from April 2023, Michael Mouilleseaux reflects on the very commercial Mike Holly references in his interview: “I was shocked the first time I saw the commercial: a Silverado pickup truck, out in the snow, and the speaker saying, ‘We now have an 80,000-mile brake system because of a heat treating process called FNC!'” Read more at: https://www.heattreattoday.com/featured-news/how-tip-ups-forever-transformed-brake-rotor-manufacturing/

Doug Glenn: Do you have any idea what it was about the guys in the Cadillac DTS division that made it more attractive, more palatable to them than others?

Mike Holly: They wanted to be first. They wanted to offer a premium vehicle with premium performance. They advertised it in their brochures.

When it was adopted by the truck platforms, which was a really big deal in terms of volume, it was actually advertised on one of the Super Bowls early on. I still have that.

Doug Glenn: That would be very interesting to see a Super Bowl ad talking about brake rotors.

Mike Holly: Brakes and FNC. You know, the customer is king, and you have to provide something that they’re willing to go along with. Ultimately, we have to make money. Those were key characteristics.

Starting Out with FNC (23:26)

Doug Glenn: At that point did you just jump in full bore — buy the equipment and do it yourself? Or did you first start by doing some outsourcing of it?

Mike Holly: It was originally done in the existing supply base. We used existing heat treaters. The furnaces were not optimized for brake rotors; parts were being shipped a lot.

Before we started purchasing equipment, we wanted to make sure this was going to operate in real time at game speed as we expected. As the platforms were added, it was very clear from the beginning (and we know this from highly machined gearing) that the best thing is to have the heat treat shop right in the manufacturing facility. That way you’re not shipping these very dimensionally critical parts all over the place. And the dunnage is expensive.

Today the FNC operations are co-located for the most part with the machining plant. And in many cases, you’ll see the foundry, the machining plant and FNC all in the same locale. This eliminates shipping and transferring costs, maintaining your highly machined parts and eliminating the handling. These are heavy parts, and the furnaces have to be designed to accept the thermodynamic load of large parts. And it’s preferred to do it by the ton — a lot of parts at once. And these are batch processes, so they’re very receptive to that.

Part Fixturing (25:23)

Doug Glenn: Earlier you mentioned the criticalness of fixturing. Is there anything more you can say about that? We don’t want to disclose any secrets.

Mike Holly: Generally, our patents will just say vertical orientation. The heat treat suppliers all have different furnaces, so that’s for them. They design their own racking, and that’s their property. They don’t have to disclose that.

The OEMs just require dimensional control. So, show us statistically that your lateral runout, your thickness and your wheel mount surface meet our specs. And, of course, the guidance that the parts should be oriented vertically and should be stress relieved before machining is out there.

As far as the intimate details of the rack and how heavily loaded the furnace is, that’s all their efficiencies, and they own that. I don’t reveal that to anybody. That’s theirs. It’s not for me to cross fertilize the industry with that.

Early Players in FNC (26:49)

Doug Glenn: For posterity’s sake, it would be nice to know who some of the early players were in this. Obviously, your DTS Cadillac division were kind of the end users. But who were the people outside of GM who helped out?

Mike Holly: I’ll give some credit here: I mentioned Kolene. I think they’re out of the salt bath business now. The original salt bath heat treater was KC Jones in Hazel Park, Michigan, and then the gas processing was basically first implemented at Woodworth in Detroit.

Doug Glenn: I’m familiar with them, and I think they’re still doing it, right? From what I understand, Woodworth’s got a huge business in that.

Mike Holly: They are still doing it. They’re a very dominant player, but other players have entered the market and been very successful. It can be done. And from the OEMs perspective, competition is great.

I was involved in developing processors not only in North America, but in Asia and South America.

Doug Glenn: Were there are a lot of hoops to jump through for the folks at Woodworth or Kolene, for example? Do you have any tips or suggestions for companies who are wanting to supply stuff like that to GM?

Mike Holly: Initially there were a lot of lessons learned. We were able to work through that — mainly to get the scrap rate down. Now it’s down to very low levels. There’s continual learnings like stress relief, for example. It’s since been discovered that not all brake rotors need to be stress relieved. Depending on the geometry of the rotor, they may not develop a lot of residual stresses in the casting operation. Or the casting operations could be different if you have, say, a vertical part line with very long shakeout, the cooling rate is rather slow. We’ll develop minimal residual stresses that you may not have to stress relief. But at the end of the day, the dimensions must be met, and 100% of these parts are typically checked for dimensions.

The latest change occurring that’s driving new ideas is the Euro 7 regulation, the dust emission.

Mike Holly

FNC and New Technologies (29:39)

Doug Glenn: Let’s jump back to the process a little bit. This may have to do with some technology moving forward. But is there any alternative to FNC at this point? Any competitive processes?

Mike Holly: The latest change occurring that’s driving new ideas is the Euro 7 regulation, the dust emission. And I can describe that if you’re interested in a very short description.

They’re basically new rules from the European Commission. They’re intended to provide cleaner vehicles in terms of emissions and air quality. The latest implementation date appears to be 2026. They have a rollout date of when you have to meet the requirements. And it is particularly focused on brakes and tire-related emissions.

This is according to the SAE; I’ll give them credit where credit is due. They basically tell us that with Euro 7, brake particle emissions (size in the PM10 range; inhalable particulate around ten microns and smaller like dust and pollen and 2.5 microns) must reduce by 25% to 30% to a maximum of, say, seven milligrams per kilometer. 

It’s a very complicated regulation. I think the latest data I’ve seen is 20, 35, but even if it’s 2035, we have to start working on that today.

The two technologies that I think are going to come to the forefront is going to be FNC and laser cladding, which you may have seen coming out of Europe. In laser cladding, we’re going to clad the brake rotor, the thermal spraying type of application with a very hard wear-resistant layer of titanium carbide. That will require post-grinding.

What I’m working on is FNC and enhancing the case properties by alloying the iron with niobium. Now, is this an entirely new idea? I don’t think so. Most metallurgists will tell you that even in carbides and grades we use different steels to improve either the case or core properties. Alloying additions are well-known in the heat treat industry. I’m boosting the hardness of the FNC case with niobium carbides. It also benefits the core by improving the strength of the core.

I think those are the two technologies involved.

I think niobium plus FNC is certainly the low-cost approach. Will it be compatible with all friction materials? In the most aggressive friction materials out there, you might have to go to laser cladding. But I think for the majority of friction materials, FNC on its own or FNC plus niobium will work, and they’re very low-cost type additions. Niobium alloying with cast iron is very well-known, and it’s been done in the past. It doesn’t require a lot of capital investment. If you already have FNC-heat treated rotors, you don’t have to buy furnaces. In my opinion, it is the low-cost option to accomplish the objective of meeting Euro 7.

Doug Glenn: I want to go back to that process of niobium a little bit just to be clear. The niobium is alloyed into the rotor to start with, right?

Mike Holly: That’s correct.

Doug Glenn and Mike Holly discussing laser cladding, grinding, and carbides in FNC

Doug Glenn: You’re not infusing it with….?

Mike Holly: No.

Doug Glenn: Ok, you’ve got the niobium and the carbides in the rotor to start with, and you’re just FNCing it as usual.

Mike Holly: It’s an alloy furnace addition at the foundry. It has been done in either electric or cupola melting. There is a heavy truck rotor application that was niobium alloyed for many years, and that was advertised as a 1 million-mile rotor. It had a very high niobium addition, so it affected the machinability of the part.

In the heavy truck industry, it’s all about uptime — keeping the trucks out of the shop and on the road. It accomplished the client’s objective.

Doug Glenn: You mentioned advertising again. I’ve got to go back and find this DTS advertisement on the Super Bowl.

Mike Holly: I think it was a truck application, Silverado Sierra.

Doug Glenn: I’ve got to find that.

The cladding process, if we’re talking about which one of these processes might win out if there was competition between them, is the cladding process done piece by piece? How do they clad a rotor? In FNC you’re not doing it piece by piece.

Mike Holly: One at a time.

Doug Glenn: Do you think the cost element will be the deal-breaker there, besides the fact that you’re adding cladding and post-grinding?

Mike Holly: Yes, those are very costly. But the most costly part of it is the materials. You have to put an adhesion layer down, that’s basically a 316-type stainless steel all done with laser type thermal spray application and then a second layer of the carbide.

There are a couple carbides that could be used; titanium carbide is the favorite now. Niobium carbide could be used. Tungsten carbide can be used, but that has some environmental effects; I think tungsten has fallen out of favor. 316 contains both nickel chromium and molybdenum. Nickel is traded on the London Metal Exchange. Your ability to control costs with nickel is minimal. Nickel and molybdenum, especially, is used in other applications such as high temperature alloys. So, you’re going to get competition from the turbine engine material.

In the case of FNC, ammonia, natural gas, carbon dioxide, and propane are all readily available worldwide. They are not controlled by any LME (London Metal Exchange) or anything like that.

Also, once you grind the surface, you have to deal with the grinding swarf. You cannot just put nickel to drain; that has to be treated. And, of course, you would like to recover it.

But I don’t want to throw the laser cladding people completely under the bus; it produces a very hard, wear-resistant layer.

Doug Glenn: It sounds like there may be applications where the cladding makes sense, but for your everyday truck and car you probably don’t need that high end rotor.

Mike Holly: I think we have to get back to basics. What does the brake do? It’s an energy conversion device. It’s converting mechanical energy to heat, or in the case of regenerative braking, it’s charging a battery. There’s the brake rotor, the metallic surface and the friction material. It has to be looked at as a system. What are the performance objectives that we intend to meet? And what is the desired durability and cost?

Doug Glenn: It seems like from what you’re describing FNC would have a huge cost advantage.

Mike Holly: I think so.

Current State of Brake Rotor Industry (39:05)

Doug Glenn: In your consulting work which you mentioned earlier, you’re working on improving the wear life of these rotors using FNC by incorporation of niobium?

Mike Holly: Yes. I published an SAE paper recently, and I’m going to publish another one in the upcoming North American colloquium and also in EuroBrake. My clients are sponsoring various tests and evaluations both here, in Europe and in South America. We’re getting a lot of good data, but competition makes us better. It truly does. You see it at these brake meetings. There’s always the cladding people, and there’s always the FNC people.

Doug Glenn: What is the leading brake event in the United States?

Mike Holly: In my opinion, it would be the SAE (Society of Automotive Engineers) Brake Colloquium. But there’s also the regular SAE congress. In Europe, it would be EuroBrake. And I think there’s comparable activities in Asia.

Doug Glenn: I just thought of a question I wanted to ask you before: You said Euro 7 is for brakes and tires, and they’re concerned about the particles created by both when they’re used — tire wear on the roads or brake friction?

Mike Holly: Yes. And they’re concerned about the microplastics from the tire. I think the tire people have a bigger job than the brake people do. But brakes are a fairly significant challenge.

Doug Glenn: I’m laughing because I’m thinking it depends how you drive. Some people are a little heavier on the brakes than others. 

Are you fairly confident that Euro 7 will come to the U.S. at some point?

Mike Holly: I’m not a regulations expert, but I think it likely will. It’s more of a political question. I understand from talking to some contacts in Asia that they plan on adopting it. We’ll see; it’s definitely going to add cost.

Doug Glenn: Yes, most regulations do.

Final Thoughts (42:18)

Doug Glenn: Is there anything else you would like to add before we wrap up?

Mike Holly: I not only work on brakes; I’ve also worked in suspension springs. Some of those are microalloyed to improve their properties. I can do CQI-9 audits. I’ve worked on coatings and platings (hard chrome or electroless nickel). If someone would need an extra hand, I get to help out.

Doug Glenn: You’ve got my vote. When did you retire from GM?

Mike Holly: I retired in 2021, and I currently live near Green Bay, Wisconsin.

Doug Glenn: And you’ve built your own consultancy, which is great. Thanks for taking the time to visit with us. I appreciate your expertise.

Mike Holly: Thank you.

About The Guest

Mike Holly
Consultant
Mike Holly Metals LLC

Mike is currently a consultant with Mike Holly Metals LLC, specializing in heat treatment, coating, casting, metal forming and joining operations. He has 42 years of experience in industry, including 32 years at the General Motors Materials Engineering department where he was assigned to support automotive and truck chassis applications. He holds 15 patents and was key in the development of Ferritic Nitrocarburizing Brake Rotors. Mike has a Bachelor of Science in Metallurgical Engineering from Wayne State University and a Masters from Purdue University.

Contact Mike at mike.holly72@att.net.


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CQI-9 (4th Edition) Expert Analysis

Despite the precariousness that has defined the majority of 2020 thus far, the aerospace and automotive industries have not let that uncertainty deter them from releasing two major revisions that directly affect the heat-treating industry. Both, the 4th Edition of CQI-9 and AMS2750F were released at the end of June (AMS2750F: Expert Analysis).

In this Technical Tuesday feature, Heat Treat Today reached out to the AIAG CQI-9 Heat Treat Technical Committee with questions about the newest edition and how it might affect the automotive heat treat industry. Specifically, we were interested in the significant changes within the 4th Edition and how organizations can best prepare to implement them.

Several CQI-9 Technical Committee members responded and provided us with some outstanding expert analysis in this Original Content article. Those CQI-9 committee members included: Rick Metcalf, Materials Engineering – Valvetrain PMT, General Motors Company; Medina Kaknjo, STA Global Core Technical Expert/Global Purchasing, Ford Motor Company;Ed Rahe, Heat Treatment Engineer – Metals Group, Fiat Chrysler Automobiles; Jake Sloan, Product Development Manager, AmeriTi Manufacturing [formerly of FCA]; James Hawthorne, current CQI-9 chairperson, Corporate Heat Treat Specialist, Acument Global Technologies; Bob Ferry, Vice President – Engineering & Quality, FPM Heat TreatingJohn Vander Woude, Metallurgist – Automotive Division, Benteler Automotive Group; and Justin Rydzewski, Director of Sales & Market Development, Controls Service, Inc.


CQI-9 4th Edition vs. CQI-9 3rd edition (photo source: Control Services Inc.)

The Automotive Industry Action Group (AIAG), the organization responsible for the development of CQI-9, cites the Special Process: Heat Treat System Assessment 4th Edition (CQI-9) as a comprehensive assessment, “… covering the most common heat treat processes employed by the automotive industry, intended to provide a common approach to a heat treat management system for automotive production and service part organizations.” Authoring the 4th Edition of CQI-9 was a collaborative effort, supported by a diverse group of individuals from AIAG member companies representing Tier 1 suppliers, heat treaters (both captive and commercial), and critical service providers within the heat treat industry. However, the force driving CQI-9 forward are the OEM’s – Ford Motor Company, General Motors, and Fiat Chrysler Automobiles (FCA).

It’s been nine years since the 3rd edition was released. Justin Rydzewski explains the timing, “The 3rd Edition was a really good document. It was effective and it served its purpose very well. The prolonged life of the 3rdEdition allowed us to collect a tremendous amount of data and feedback about the document– strengths, weaknesses, etc. This data allowed us to identify, with greater accuracy, where updates and changes were truly needed. Lastly, because CQI-9 is an international document, we spent a great amount of effort ensuring the clarity we were adding to the 4th Edition was not going to be lost when translated to other languages. As a result of this development process, we feel confident that the 4th Edition will be an even more effective heat treat system assessment tool than its predecessor.”

What do you believe to be the most notable change in the 4th Edition of CQI-9?

Justin Rydzewski and his colleagues agree on the importance of the digital changes, “Requiring all instrumentation to be digital by June 2023 (3 years after release of the document) is a very notable change. For operations heavily invested in analog instruments and paper chart recorders, this change could potentially result in a significant interruption to operations; especially in the absence of proper planning. However, we are hopeful the change will be a welcomed one as the advantages associated with digital instrumentation are far too great and numerous to ignore any longer.”

Rick Metcalf
Materials Engineering – Valvetrain PMT
General Motors Company

Rick Metcalf concurs, “I agree with Justin’s comments on digitizing the process controls. This allows for better off-shift monitoring of the process and provides the OEM with a greater confidence in the supplier’s ability to control the process. This is one of the most notable improvements to the 4th edition.”

Medina Kaknjo, Ed Rahe, and Jake Sloan also cited digitization as an important notable change.

The Heat Treat System Assessment (HTSA) question formatting update is another feature that is encouraging to both Kaknjo and Sloan. Kaknjo shares, “The first notable change users will notice is the new format of the document which now requires the assessor to assess every single requirement and rate it.”

Sloan further explains, “I fall in line with Medina [Kaknjo]. The formatting update is great, especially coming from the OEM side that needs to rely heavily on self-surveys. I believe it makes communication between the heat treater and Customer much easier. Not only does it require each requirement to be evaluated by the assessor, but I think it gives them a much better opportunity to give a full response. Hopefully, this will cut-out a lot of the back-and-forth that can happen when the person reviewing the survey was not onsite for the assessment.”

Medina Kaknjo
STA Global Core Technical Expert/Global Purchasing
Ford Motor Company

Bob Ferry also cited the reformatting of the HTSA questions as a notable change adding, “This effort allowed us to review each question and break down the long question paragraphs of the 3rd Edition. Now, in the 4th Edition, the requirements for each question are listed separately. With this new approach, the Auditee will not miss important requirements which, in the previous edition, may have been buried in a lengthy paragraph.

The alternative temperature uniformity survey (TUS) testing method revisions were tops for James Hawthorne. “The expansion of the Alternative TUS Testing Methods (P3.4.8) is one of the most notable improvements. The requirements now account for proper procedures and reporting for both property surveys and site developed testing methods. These improvements will allow the heat treater to develop a structured, repeatable, and documented solution based on the requirements of this section.”

John Vander Woude sees the addition of Process Table I – Hot Stamping as one of the most notable changes to CQI-9. “I was involved in creating Process Table I a few years ago, but it was released between revisions and seemed like the stepchild Process Table.  So, personally, it is nice to see it incorporated in the 4th Edition.”

What change/update in the 4th Edition of CQI-9 do you think will be appreciated most?

James Hawthorne
Corporate Heat Treat Specialist,
Acument Global Technologies

Metcalf highlights the allowances for exceptions in the Process Tables: “I believe that the most appreciated change to the 4th Edition of CQI-9 is the increased allowance for exceptions to the requirements of Section 4 of the Process Tables. This will allow suppliers of large components to reduce the number of components required to be sectioned daily. However, this does require Customer approval and, ultimately, the OEM.  These exceptions offer the heat treater the ability to reduce some of their inspections, provided the supplier can show the process is statistically capable.”

Qualities of clarity, fluidity, and guidance were mentioned multiple times as “most appreciated.”

Hawthorne shares, “I personally appreciate how fluid the document is now. The effort that was put into ensuring the flow of the document works across the different sections is a great benefit to the heat treat community. As heat treaters read and implement the applicable changes to their organizations, these changes will be appreciated by them as well.”

“The 3rd Edition of the document was already very good. But, I think the most appreciated change will be the even greater amount of guidance and the improved clarity of requirements within the document,” says Rahe.

Ed Rahe
Heat Treatment Engineer – Metals Group
Fiat Chrysler Automobiles

Vander Woude writes, “I think the most appreciated change will be the guidance portion of the element questions.  This provides clarity, definition, and better understand to some questions that could be quite useful to many users.

Ferry’s appreciation lies in the pyrometry section, “The improved clarity of the requirements along with explanations, definitions of terms, and examples in the Pyrometry section.”

Kaknjo states, “I think the most appreciated change will be that document is now more user friendly as it is easier to use and follow due to the formatting changes that are done on this revision.

Rydzewski not only commends the formatting improvements for clarity and guidance, but also gives kudos to the reference illustrations. “I think the improvements to the formatting of the Heat Treat System Assessment Section 1-3 questions will be greatly appreciated. Question ‘Requirements’ and ‘Guidance’ are now cited separately.” He continues, noting that this change make it “much easier to effectively capture each requirement and to determine the expectations of each question specifically in terms of objective evidence. . . . [also] nearly every reference illustration in the document was updated/improved. Personally, I think they all look fantastic.”

What is something in the 4th Edition of CQI-9 that an organization should make sure they don’t overlook or misinterpret?

Rahe and Ferry both mentioned the importance of the Process Tables. Rahe states, “An organization should not overlook the specific requirements of the various Process Tables. They are an excellent “cookbook” type guide designed to produce best in class heat treated parts for OEM’s.”

Bob Ferry
Vice President
Engineering & Quality – FPM Heat Treating

“There was more attention put on the quenching section of the Process Tables with added requirements for quench media process controls including quench delay times, liquid quench controls, and gas quench controls. The intent is not only to control furnace temperatures but to also control cooling rates for consistency of quench and heat-treated product,” says Ferry.

Kaknjo advises, “An organization should not overlook that AIAG CQI-9 HTSA requirements are subordinate to Customer-specific requirements. This is not new for revision 4, but something that often gets overlooked.”

Jake Sloan
Product Development Manager
AmeriTi Manufacturing

Sloan cautions not to overlook the pyrometry section. “I would say do not overlook the new pyrometry section. The requirements have not only been improved, but it is also a great reference for when it comes to how to comply. Also, as Medina was saying, this document is subordinate to Customer requirements, which works both ways. This document allows exceptions to be given but, remember, there must be approval from up the supply chain.”

Socrates said, “The beginning of wisdom is the definition of terms.” Rydzewski shares this mindset as he highlights utilizing the glossary. “The ‘Glossary of Terms’ in CQI-9 is an outstanding resource that should NOT be overlooked or undervalued. In my opinion, the real key to mastering CQI-9 starts with ‘definition.’  When there is not a firm understanding of the terms being used, confusion and/or compliance issues are almost certain. So, for the 4th Edition, our team dedicated a significant amount of time and effort to enhancing the clarity and guidance provided by the ‘Glossary of Terms.’”

John Vander Woude, Metallurgist
Automotive Division
Benteler Automotive Group

Vander Woude concurs, saying, “Like previous edition, this edition not only focuses on heat treatment, but also on many areas that support heat treatment. Overlooking areas such as maintenance, training, document control, and testing (to name a few) may lead to difficulties ensuring compliance.”

“The examples in SAT section that are below the illustrations should not be overlooked. These examples provide guidance of what to measure and how to calculate. Use these examples and compare to your current reporting, it will help ensure compliance for your organization,” relays Hawthorne.

What advice would you offer an organization preparing to implement the 4th Edition of CQI-9?

What is the consensus of the experts when it comes to implementing this 4th edition?  Read it. Digest it. Use it. It’s a powerful tool that has been a game changer to the automotive industry. Here are the experts’ final recommendations.

Ed Rahe: “My advice would be to read the document thoroughly and take advantage of the many, many years of heat treatment experience that are captured as best practices in this document.  The knowledge base of those involved in the creation of this document is really quite impressive.”

Justin Rydzewski
Director of Sales & Market Development
Controls Service, Inc.

Justin Rydzewski: “Buy the document, read it carefully, and make notes. Big changes are going to standout, capturing those willbe easy. But, by and large, most changes made were minor or were merely intended to add clarity or guidance. Comparatively, these sorts of changes can be easily missed. And, invest in training where necessary. Now is a perfect time to do so. Invest in yourself and your team. If your organization outsources pyrometry services, lean on your service provider for guidance and expertise. Allow them to help. This is where the true value of a good partnership can be measured.”

[blocktext align=”left”]”The best advice I can give is to read the document. Several items were modified to make it easier to interpret and implement CQI-9.” – Rick Metcalf, Materials Engineering – Valvetrain PMT, General Motors Company [/blocktext]

Medina Kaknjo: “My advice would be to use the document as opportunity, as a tool of summary of best practices, lessons learned of many industry leaders to prevent heat treat process related issues that are often associated with significant cost.”

John Vander Woude: “Don’t underestimate the document. With the reformatting and “break out” of sub-requirements for many questions, I think organizations will find they are not compliant in areas they once thought they were compliant.  The 4th Edition forces added scrutiny to questions that were often overlooked.  Specifically, where many “shall” statements were once made within the same question in the 3rd Edition. In the 4th Edition, these “shall” statements are now separated and denoted individually. This approach makes it much easier to capture and provide appropriate objective evidence for each requirement.”

Rick Metcalf: The best advice I can give is to read the document. Several items were modified to make it easier to interpret and implement CQI-9. We also included more illustrations and a greater glossary in the 4thEdition to make it easier to interpret requirements and implement CQI-9.

Jake Sloan: “Like most people are saying, definitely read the document in its entirety so that your company has a full understanding of the requirements. Also, like Medina said, treat the document as a guide to improve on or maintain best practices. It is a great tool for doing internal reviews so that things don’t slip by the wayside between required assessments. Take advantage of the new format to give clear evidence of compliance instead of just treating it as a checkbox.”

Bob Ferry: “Read the Pyrometry section and make a list of the requirements that apply to your operation from thermocouples to instruments to periodic testing requirements. Set up your system for periodic testing and documented evidence, and then perform a complete CQI-9 HTSA Audit to identify and correct any shortcomings.”

James Hawthorne: “Use the Process Tables, Glossary, and the Job Audit as intended to ensure compliance while documenting your effective evidence in to the HTSA. Each section of this document is an invaluable tool that will help the heat treater remain compliant and effectively provide the objective evidence required.”

 

 

CQI-9 (4th Edition) Expert Analysis Read More »

Heat Treat Radio #32: A Discussion with Jean-François Cloutier, Nitrex CEO

Welcome to another episode of Heat Treat Radio, a periodic podcast where Heat Treat Radio host, Doug Glenn, discusses cutting-edge topics with industry-leading personalities. Below, you can either listen to the podcast by clicking on the audio play button, or you can read an edited version of the transcript. To see a complete list of other Heat Treat Radio episodes, click here.


In this conversation, Heat Treat Radio host, Doug Glenn, interviews Nitrex CEO, Jean-François Cloutier, to hear about how Nitrex has been able to expand and rebrand their company while creating mutually beneficial relationships between itself and end-users at a global level. Click below to learn more about the “art of the deal," strength-based management, and global growth.

Click the play button below to listen.


The following transcript has been edited for your reading enjoyment.

Doug Glenn:  Jean-François (JF) Cloutier, the CEO of Nitrex, will be sharing his background on how his company reenvisioned themselves in the industry, implementing six initiatives resulting in a transformative rebranding of the entire organization.  JF will also talk about what “the art of the deal” looks like and what a mutually beneficial business relationship looks like with GM Enterprises.

Let's start with some background before getting into Nitrex's synergy with GM Enterprises and “the art of the deal.”  JF, let's hear a little bit about your background.

Jean-Francois Cloutier,
Nitrex CEO

JF:  I've been in the industrial world for many years.  I worked for Bombardier a Canadian train and planes manufacturer, for roughly 17 years.  I had my own business for a few years before that.  I then worked for the rail division of Caterpillar called Progress Rail; it was acquired by Caterpillar in 2006.  I worked for them for 3 years.  I wanted to be closer to the family, so I came back and started at Nitrex in April of last year.  I've worked in different countries and in different places for both Bombardier and Caterpillar, from Canada and the US to Mexico and China.  I've worked in supply chain for some years, so we were involved in supply chain at the time with heat treating services.  I was not an expert, but I was familiar with the industry and knew some of the processes, so I decided to join Nitrex.

DG:  It's been interesting to watch over the last year or so, to see the progress made.  It seems to me you've got a really solid management team in place.

JF:  I think it's a well-balanced team between people of experience from the industry that worked at Nitrex for many years.  Obviously, Michel Korwin [President at Nitrex Metal and United Process Controls at Nitrex Metal Inc.] staying on board as an advisor was very good for me as he's got tremendous experience.  There is Chris Morawski [Special Acquisitions Advisor at Nitrex Metal Inc.] as well, and Paul Oleszkiewicz [Vice President at Nitrex Metal Inc.]. So we have people with lots of years of experience.  Even a gentleman like Jason Orosz [President of Heat Treating Services at Nitrex Metal Inc.] that you probably know.  Jason has been in the industry for many years and his family business has been involved with Nitrex for many years.  Jason is relatively young, he's not even 40 and he's got probably 20 years already in the business.  Also, we brought in some people.  Olivier Caurette [President at United Process Controls] who is a guy who used to work for Bombardier as well in different fields and different countries; he's quite a global guy.  There is Elizabeth D. [Vice President Global Human Resources at Nitrex Metal] from Caterpillar.  I think we have a solid team in place.  I mean, the team was very good before, as well.  But with the direction we wanted to take, with the growth, and becoming a bit more global, we felt the need to bring in people with global experience too.

DG:  Let's talk a little bit about the business units that currently exist in Nitrex.  I heard the webinar, but why don't you run down through the basic business units of Nitrex.  We'll talk about them independently, but let's get an overview first.

(source: Nitrex)

JF:  Absolutely. Nitrex was founded in 1984 and it grew throughout time organically, but also through acquisitions, and that's how the company, in the end, became vertically integrated with 3 divisions, especially UPC (United Process Controls) will now be branded UPC Marathon, as you probably heard on the webinar.  UPC grew through multiple acquisitions, Process-Electronic, and Marathon Atmosphere Engineering.  The company Nitrex grew throughout time through acquisitions, and more recently with GM Enterprises.  This is a unique position in the market.  There are not that many companies vertically integrated with design and manufacturing capabilities like furnaces (that's NTS), heat treating services which is what we call HTS, and United Process Controls (now UPC Marathon) with controls, software and different equipment for the heat treating industry.  So, this position is quite unique, and for us, it has been working very well because the goal of the company, or how we present ourself, and that's a bit where the rebranding came from.  We presented ourselves as a solutions provider.  It may look very wide, but what it means is that we can go beyond selling a product, so we have experts in different fields of metallurgy and obviously people with lots of experience in heat treating.  But, we can go beyond selling a furnace or we can go beyond selling a component.  When we're approached by a customer usually, unless they want to buy specific components, most of the time there is a challenge, there is a problem to solve.  We have to understand the problem, where it's coming from, what's the application and that kind of brings us into understanding a little bit more the component or the application and that's one of the reasons why we consider ourselves a solution provider.  We can work with OEMs and understand the problematic and go beyond the equipment itself.  Then we can sell them the proper equipment or upload the proper recipe to the furnace, if it's a problem related to that, but in any case, that's why we consider ourself a solution provider.  Since we started to grow internationally, and after the acquisition of GM Enterprises, presenting ourselves to the market as a solution provider, we looked at how the company was positioned in the market, in terms of corporate image. We realized that it was probably time to rebrand some of our brand and present ourself to the market with a more accurate image of who we are, and that's what generated the discussions around it's probably time to rebrand.  We had the new management team on board and the company, after putting together a strategic plan, definitively we saw a need to diversify as well.  So all of this together supported the need to rebrand.

DG:  Let's talk a little bit more specifically about your acquisition of GM Enterprises.  Address the thinking behind that and the vision that lies ahead for that company.

JF:  It is in line with our philosophy of being in the complexity, high range heat treating provider.  We're are in a big niche.  It is two words that may look contrary, but we are in gas nitriding, and we were known for gas nitriding, but we were a little bit more than that; we have other processes internally.  But to go back to the reasoning of acquiring GM Enterprises.  GM Enterprises is a lead in their field in the US and it was very complimentary in terms of product for its value with what we have.  GM was mainly focused on the American business and Nitrex was more global, so it's a good compliment for GM and for us.  And the other thing, and the main thing really, is to be in the vacuum and get in the segment where we were less present, which was the aerospace segment, as well as MIM, defense, and 3D printing.  We were not so much in those fields.  Nitrex is more industrial, automotive and a slight presence in aerospace, but now with the acquisition of GM, we reinforced those segments.  That was a good compliment to the product portfolio, a good compliment in terms of market, and also in terms of company values, were quite aligned.  Both companies were born with an entrepreneur mindset and grew like that throughout the years, and despite the difference in size, Nitrex is larger in size than GM, those values are still present in both companies.  I think it was a good fit, and the timing was right.  I'm glad that Suresh Jhawar, the previous owner decided to stay with us, because obviously he's a library of information and knowledge, same as Michel Korwin and Chris Morawski.  So to your point about the management team, yes, it is a good management team and I think it reinforces that point.

DG:  I've known Suresh for many, many years and he is a good guy.  I do like his entrepreneurial spirit.  Let's talk about “the art of the deal.”  Very briefly, can you give us a timeline and about how the deal came about with GM.

Mrs. Veena Jhawar, G-M Enterprises COO; Mr. Jean-François Cloutier, Nitrex CEO; Mr. Suresh Jhawar, G-M Enterprises President

JF:  The discussion started last fall and it went pretty quick and smooth.  Suresh and his team are good negotiators as well, so we had some good discussions, but honestly, I think it went pretty well and the deal was completed at the beginning of this year.  We started to look at the synergies between the two companies and one of them was definitely the potential to sell GM products in other geographies where Nitrex is a bit stronger.  That's why I was saying it was a complement to our product portfolio, but also in terms of market.  We started to work on that and started to train our people internally, both the GM sales team as well as vice versa on both products.  The Nitrex sales network will definitely benefit GM products, so there is great potential in Europe and China as well.  Even though GM has sold in the past in China, at Nitrex we have a sales force there.  We have a plant as well as opening a new one in the (15:45) of China, in Ningbo, more precisely.  We're expanding in China so that will benefit definitely GM and other products of Nitrex.

I think the future of GM is expanding in geographies where the products were not necessarily sold that much in the past; so leverage the sales network of Nitrex and share the knowledge internally between the two companies.  GM Enterprises remains an entity like it was but is now part of the larger group Nitrex.

DG:  Can you address the management team over there now?  I understand Pontus [Pontus Nilsson] is staying on but you've brought somebody else new into the GM position.

JF:  Yes, thank you for asking.  We've brought in a gentleman by the name of Larry Jackson.  Larry is a longtime aerospace guy.  He's been in the aerospace industry for many years in charge of various operations.  It wouldn't be a bad idea one day to organize something with him, if you have an interest.  But, Larry has been managing aerospace operations for a long time.  He joined us about 3 months ago.  That was part of the plan when we acquired the company that eventually Suresh would want to start phasing out gradually despite his long years of experience, he is still full of energy and wants to stay around.  In terms of succession planning, it was important to bring someone who would want to stay with us for a few years, so we brought in Larry.  He has brought in as well a supply chain manager and started to make some improvement in the operation.  It is going very well and he is well-integrated as well with Nitrex so operation, best practices, procedures, and processes that we were following at Nitrex are now being implemented at GM.  So far it is a successful integration.

DG:  You've got a very interesting, succinct, very powerful tag line: “Mastering Strength Worldwide.” You've already talked a little bit about some expansion going on in the Ningbo in China, maybe address for the readers some other things that might be going on, most notably, presence in Europe, Poland and any other places that you anticipate growth worldwide, maybe with the exception of North America, which we can address independently.

(source: Nitrex)

JF:  We're expanding our plant in Poland or starting to talk about expansion.  The plant in Poland is our flagship in terms of design and manufacturing of furnaces.  About a year ago when I joined, well, the team before me had started to look at the expansion potential or possibility, so we moved forward with that project.  That is going to double our capacity.  Right now, obviously, we're going through some challenges in the economy in general, however, the business is good for Nitrex and we still see lots of potential to grow, so we decided to pursue the expansion of that plant which should be completed before the end of this calendar year.  That is a very important project for us.  The other one I mentioned is Ningbo in China.  We already have a site in Wuxi, China, west of Shanghai, there is some demand in that area of China, and others. But we're starting with Ningbo after discussing with our partners in China, our team there, as well as some customers, we decided to move forward with the expansion.  That should be ready some time in the Fall as well.  Again, in line of strength and growth, I'll explain a bit where we're coming from with Mastering Strength.  In terms of expansion, we see ourselves expanding in China; in Poland, which is our flagship site, we'll continue to grow.

We are investing in the US, as well, in our Chicago plant, which is an important operation for us.  We signed, as well, a rep agreement with a company in India which was a geography where we were not so present, so we're making some steps into India as well.  So far, it's a story of growth.  There might be some other acquisitions.  I cannot talk about it right now, but we're still looking at growing.

DG:  These expansions internationally, the Ningbo and Poland, are they for heat treatment services, are they for equipment, or are they for controls?

JF:  Good question.  It is for NTS, Nitrex Turnkey Systems, so for furnaces, as well as United Process Controls.  We're making more space for both divisions.  And I should think we have some heat treating services capacity there, but the floor is mainly used for furnaces as well as for UPC.  So that site is becoming our main site within Europe to supply our customers.

DG:  Is there anything more you want to address as far as growth internationally?

JF:  No, I think on the international side, we talked about India, China, which we are seeing now a strong comeback in China after the situation being a bit more under control in terms of Covid-19, so there's a rebound in China.  So far, Nitrex has gone through the storm quite well.  This company has been through different storms in the past, like in 2008/2009 for instance, and because this integration of three different divisions, I think that's one of the key success factors of this integration.  When customers sometimes delay some decisions, then our other divisions do well, so we compensate.  The synergy between the three and now we will integrate a little bit more a “cell network” between the three companies, so that will help us going through future storms, if any, but we will be even better prepared on the global scale to face that kind of storm.  Also, in terms of manufacturing capability, we have the capability to manufacture in different sites inside the Nitrex group, so that should help us get through potential storms in the future.

DG: You were talking about plant expansion and Chicago.  Let's use that as a segue into discussing North America plans a little more.

JF: In the US, we have different HTS – site heat treating services – with UPC. We also have United Process Control as one facility in Milwaukee.  But, we are investing in our Chicago site with Nitrex equipment but some other processes as well that we will be talking in the near future that's underway.  We're expanding the infrastructure: Chicago is a good location for us, well located close to different industries.  We're serving industry all companies as well as automotive jobs there, so we saw the need to expand there.  This site, and others, will also grow.  We equip some of our sites with our own equipment, with Nitrex equipment.  We have other processes, although most of our sites are, in general, equipped mainly with Nitrex gas nitriding furnaces.  That's one of the reasons we were interested in GM as well.  It was a good diversification for us.  We were not so present in aerospace, and now it's a good balance between aerospace, automotive, industrial...  We started to see some growth in defense and that's a segment that we are going to keep an eye on.  When we put all this together, that's why we decided to keep investing in Chicago.  Our site in Indiana we simply equipped with an additional furnace.  Michigan, where we serve the automotive industry, but also industrial, there is some growth plan there as well.  In general, that's why the story has been quite good the last year, it's been a growth story.

To go back to your point about mastering strength.  We put a group together, and we tried to identify the values and what are the elements that bringing the three divisions together under a similar or harmonized set of values, and that's what people came with.  We have strong processes, we have strong people in the company, strong knowledge that was accumulated for years that we gained through working with different OEMs, but also people with a lot of experience still with us.  The word “strength” was coming often, so that's why we decided to build more on that.  That's why you'll see more and more mastering strength.  It's based on strong processes and strong people.  We make parts last longer and stronger, etc.

DG:  I also liked your 'LEAD' acronym that you used in the webinar- leadership experience agility and diligence.  Diligence is one of those things not often remembered as a real virtue.  Sometimes, you have to just stick to it, you know?

JF:  That's part of that focus group we put together.  They came up with different values and when we summarized them, we found it interesting that they made the word 'LEAD'.  It was a characteristic of the people here.  I was really proud of the team.  Agility is also a good one, because at times, especially in the situation we're in right now, I think remaining agile despite the growth is something we always have to keep in mind.  Always keep the entrepreneur and customer service.

DG:  I think we've covered all of these things, but I'll just throw these out because I thought this was a good slide that I captured off of your presentation.  You have- initiatives that we've started, and there were six items there and I think we've hit on all of these, but if you want to expound on any of these, let me know.  There was increased production capacity, expand heat treat services capacity, expand global footprint into new geographies, optimize sales network and good market strategies, implement modern management systems and selectively pursue M&A opportunities.  Of course, that one is of interest to me but I can understand your reservation to be cautious on that.  Does anything jump out that you want to expand on in those six?

JF:  Like you said, I think we covered the essence of most of them.  We're investing as well in a system because as we're growing and bringing on board, like GM for instance, there is a need to make sure we are connected all together and that we speak the same language in terms of financial language, but as well as operations, so metrics, etc. So we're implementing a system.  And that leads to connectivity.  We talk a lot about connectivity these days, but first internally, we have to make sure that we are all connected so that we can keep growing with a solid platform.  Then, when we make other acquisitions, we will make sure that we have a management system in place that allows us to quickly integrate any other companies.  But it leads also to connectivity.

You were asking me earlier where I see the future.  Definitely, digitalization and connectivity is something that will be quite important in our industry and for us.  When I look at different OEMs, what they're doing, and after I've worked for many years in OEMs, definitely the complexity of supply chain, velocity of supply chain is increasing and the OEMs want to have fast response with no disruption in their operation, and heat treating is part of their supply chain.  So, we need to adapt.  They are getting into connectivity; Caterpillar is doing it and many other OEMs, so I think that's the future of the heat treating industry.  At least for Nitrex, we are moving in that direction of having our equipment connected and making sure that all our sites can be managed in the standard way.  But connectivity to the equipment, having assets connected, etc.  So that's something we're investing in R&D now.

DG:  Two final things.  One if you can speak briefly to Novacap and their role in all of this and then I've got one other question after that I want to spring on you and see what you think.

JF:  Novacap invested in Nitrex, becoming a majority shareholder in 2015.  Novacap is a leading private equity firm in Canada.  They are basically composed of operators, so people who've worked or managed companies, a lot of them are part of Novacap team.  It's a really good partner for Nitrex because obviously they are interested in the operations.  They get involved when needed, but they leave enough space for the management to maneuver.  They were obviously instrumental behind the deal with GM Enterprises and other deals potentially to come.  So far, it's a very good partnership.  It's more than a partnership actually; they are our major shareholder.

DG:  Do they have a 51+, if you don't mind me asking?

JF:  Yes, they are a majority shareholder.

Another advantage is within their portfolio of companies, they invest in different companies and we are working with some of them actually.  Some are in the projects to double up for their capabilities for Nitrex, so it's been a good marriage so far.

DG:  Here's the question I want to spring on you.  I've got a big smile on my face because it's not a hard question to answer.  I just like getting a little bit more on the personal side of things.  You've been with Nitrex a year.  What is that excites you most about the future?  And secondly, what is it that's keeping you up at night, in the sense of, what are you worrying about?

JF:  Let's start with the first one.  While it's a global company with tremendous potential for growth – its amazing products, a good reputation, solid people on board, I think there's a good recipe here and lots of knowledge here in the company. – there is great potential to be better known to the OEMs because of the knowledge in metallurgy in this company in heat treating. Our people can go way beyond just selling a product.  There is a lot of potential and that excites me a lot.  I think a global team, a company of that size with a heat treating business, there are not that many, so that's very exciting.

Things keeping me up at night – I think we should always remain alert and agile with what's going on in the market, so not that it's keeping me up at night. But, when we go through challenges like we're going through right now, we need to move at a faster pace on many initiatives and that's why we are launching, or we have launched, multiple initiatives, some I shared with you here.  That's part of remaining agile.  It's good to be challenged and it's good to stay always on the edge because the market is changing, and it forces us to adapt and fast.  I like that actually.  My management team likes it.  They don't like to be in the comfort zone.

I think the key takeaway that I would like your readers to remember Nitrex as a solutions provider going beyond the sale of a product.  We can get involved and help customers solving complex engineering problems and that is how we want to present the company to the market and our customers.

Read more about Nitrex's rebranding: https://www.heattreattoday.com/industries/manufacturing-heat-treat/nitrex-reveals-new-brand-identity/ 

Read about the July expansion in at the Illinois plant: https://www.heattreattoday.com/equipment/heat-treating-accessories/vacuum-pumps-gauges-valves/vacuum-pumps-gauges-valves-news/commercial-heat-treater-expands/?oly_enc_id=

 

Doug Glenn, Publisher, Heat Treat Today
Doug Glenn, Heat Treat Today publisher and Heat Treat Radio host.


To find other Heat Treat Radio episodes, go to www.heattreattoday.com/radio and look in the list of Heat Treat Radio episodes listed.

Heat Treat Radio #32: A Discussion with Jean-François Cloutier, Nitrex CEO Read More »