MEDIA SPOTLIGHT: PCC’s Donegan Makes Cost-Cutting Routine

Jason Sandefur

Editor”s Note: Articles in Media Spotlight are excerpts from publications or broadcasts that show the industry what the public is reading or hearing about fasteners and fastener companies.

“Precision Castparts flourishes under a chief”s obsessive control of the factory floor,” writes Stephane Fitch of Forbes.
Using investment casting – a process developed by jewelers 5,000 years ago – Precision Castparts manufactures aerospace fasteners and other components. Like other partsmakers, the company faces relentless pressure to reduce costs.
“Under Mark Donegan, a former Precision plant manager who became chief executive five years ago, the $6.3 billion (sales) company makes fewer mistakes and is more profitable than ever. Reason: a rigorous system of continuous inspection he calls, simply, ‘our operating system,”” writes Fitch.
Precision Castparts has expanded from its Portland, OR, base to 107 plants, including one in France that makes large titanium castings for the European aerospace industry.
Precision founder Edward Cooley, a Harvard-trained engineer, started using his casting plants to make parts for General Electric jet engines in the late 1960s. His successor, GE veteran William McCormick, engineered the company”s entry into the forging business by acquiring aerospace parts maker Wyman-Gordon in 1999. But neither man boosted Precision”s net margin out of the single digits, Fitch notes.
“During Donegan”s reign that margin has doubled to 13%,” Fitch reports. “Over those five years shares have jumped tenfold to a recent $138.”
Donegan”s system starts with the fundamental requirement that a plant must cut its costs by 2% every quarter. And once a quarter Donegan himself shows up to check on things. He”s on-site in a factory 200 or so times a year.
The focus is paying off. Precision”s receivables as a percentage of sales are down slightly from 19.8% to 15.8% since 2003. Sales per employee are up 95% to $271,000.
“To keep chugging, Donegan is eyeing other high-value components makers,” Fitch writes. “In 2003 he paid $729 million for SPS Technologies, maker of fasteners for aerospace and cars. These are hardly commodity parts: Some bolts have a tensile strength of 260,000 pounds per square inch&
“There”s lots of room for errorand for the fixes that have become standard procedure at Precision.” \ �2008 FastenerNews.com