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With the support of its parent company, and upgraded equipment, this Chicago-based tubing manufacturer has a new lease on life. By Tim Triplett, Editor-in-Chief At a Glance Leavitt Tube Co. LLC 1717 W. 115th St. Chicago, IL 60643 1-800-LEAVITT Fax: 773-239-1023 www.leavitt-tube.com tubeman@leavitt-tube.com Key Personnel: Takabumi Konishi, chairman and CEO; Dave Klima, vice president of finance; Shunsaku Honda, vice president of operations and quality director; Joe Fattori, vice president of human resources; Pat Knutson, director of sales; Joe Davy, director of business development Total Employees: 120 Facilities: Two manufacturing plants totaling 740,000 square feet on a 46-acre campus in Chicago; 256,000-square-foot manufacturing plant in Jackson, Miss. (currently idled) Products: Broad line of structural and mechanical steel tubing Equipment: W80, W50 structural mills, #8, #7 and #5 mechanical mills in Chicago; #21, 22, 23, 24 mechanical mills in Jackson, Miss. Even though Leavitt Tube is about half its former size, its aspirations have never been bigger. With new equipment coming on line at its Chicago headquarters, and a market that is finally beginning to turn around, this long-time maker of structural and mechanical steel tubing sees 2012 as “a new beginning.” As Leavitt executives say, it’s not how big you are, but how profitable, that really matters. The company was founded by the Leavitt family in 1956, but it has changed ownership several times in the past 40 years (see History of Leavitt sidebar). In 2001, it was acquired by private investors in the Pinkert Industrial Group. Pinkert cashed in some of its investment in 2005, selling a 40 percent stake to Sumitomo Corp. of America. Then in 2008, Pinkert sold the remaining 60 percent to Maruichi Steel Tube Ltd., the largest steel tube producer in Japan. Today, the two large Japanese industrial companies jointly own Leavitt, with Maruichi holding the controlling interest. Takabumi Konishi, chairman and CEO of Leavitt, admits that the timing of the latest acquisition could have been better. Six months after the deal, the bubble burst and the U.S. economy plummeted. His early days at Leavitt’s helm were difficult ones as orders waned and the company was forced to lay off nearly half its workforce. It also closed a second manufacturing plant in Jackson, Miss., which remains idle today. Leavitt currently has about 120 total employees, a 50 percent reduction from its peak. “The timing was unfortunate, but the economy in the U.S. will recover at some point,” Konishi says. “We [Maruichi] have been in business since 1926, and we have seen the business go up and down with the economy many times. This is just part of history. Meanwhile, we continue to invest strategically.” “2009 was a very difficult year as we right-sized the company to our business,” adds Pat Knutson, Leavitt’s director of sales. “Fortunately, our parent company in Japan has solid confidence in Leavitt’s potential and its market. We knew they were in it for the long haul.” Maruichi is not new to the U.S. market. It opened Maruichi American Corp. in Santa Fe Springs, Calif., in 1978. The West Coast tube-making operation is jointly owned by Maruichi and Metal One, another Japanese steel company. “Maruichi wanted to expand its reach across the U.S. Their goal from the beginning was to focus on producing the highest quality tubing in the industry. To that end, they set forth a strategic plan to upgrade and modernize Leavitt’s aging equipment with a long-term focus on quality,” Knutson explains. Maruichi invested millions to acquire the best tube-making equipment available, and spent the past two years replacing and upgrading Leavitt’s three main manufacturing lines in Chicago. Effective this month, Leavitt will be producing a majority of its product line on the following new equipment, which gives it greater size range capabilities, faster turnaround times and tighter tolerances: W80 Structural Mill—Leavitt’s largest mill, the W80 structural mill, can produce tubing from 4-by-4 through 10-by-10 inches, from 0.188- to 0.500-inch wall thickness, in rectangles and HI-Y 50 pipe sizes from 5 Sch. 40 through 8 Sch. 80. The line also includes a new automated quick-change cartridge tooling system, which slides one set of tooling out of the way and replaces it with tooling for the next job, cutting changeover time from eight hours to less than three hours. Later this year the company will add 10.75- and 12.75-inch rounds to its size range. W50 Structural Mill—Replacing one older mill and eventually another is a new W50 structural mill, also with quick-change tooling. It produces 1.5- to 4.0-inch squares in gauges from 0.083 to 0.313 inch, as well as HI-Y 50 pipe size tubes from 1.25 Sch. 10 through 4 Sch. 40. The new mill is also equipped for flash removal of the weld bead to produce a smooth interior surface for applications where tubing must telescope. No. 8 Mechanical Mill—Leavitt’s new #8 mechanical tube mill, relocated from a Maruichi plant in Japan, produces A513 tubing in rounds from 0.625 to 2.75 inches, in one-half-inch to 2-inch squares, in gauges from 0.049 to 0.120 inch. It replaces a mill that had been in service for 40 years. Leavitt also operates two other existing mechanical ERW mills (#5 and #7) and one structural mill (W40) at the Chicago location. “Starting this month, nearly our entire size range can be produced on the brand new or upgraded state-of-the-art equipment,” Knutson says. Leavitt saw over 20 percent growth in 2011 vs. 2010, in terms of tonnage, and forecasts a similar gain this year. Historically, Leavitt has distributed over 90 percent of its volume through service centers—and that approach will not change, emphasized the company’s management team. “We will continue to support the metal service centers in North America, but our new equipment opens up opportunities for different customers we have not been able to service before,” Knutson says. Leavitt’s new equipment allows it to offer a higher quality product, suitable for applications with tighter tolerances. That will help the company expand its customer base in three ways, he explains: through greater penetration of existing service center customers; through new service centers that were not formerly customers because of the demanding markets they serve; and through end-users currently buying mill-direct from Leavitt’s competitors. “This new equipment will help us crack new markets that require especially tight tolerances, such as automotive and ag equipment,” Knutson says. “Many service centers have bought tube lasers, which require a consistent tube so the laser only has to be set up once. Now that Leavitt can make more sophisticated tubing, service centers can sell to more sophisticated users,” Konishi notes. He also sees an opportunity for Leavitt to sell to Japanese carmakers with plants in the United States that continue to buy tubing from suppliers in Japan. As part of its long-term relationship with service centers, Leavitt will continue to offer product knowledge programs for service center personnel. “We want to be able to educate their sales reps so they know how to sell our product,” says Knutson. “Ninety percent of our business goes through distribution. We count on our service center partners and their salespeople to be our sales force.” The new equipment does not add to Leavitt’s total capacity, which remains around 250,000 tons a year, but it enables the company to offer a better product at a lower production cost. “Our target is not to become the largest in terms of tonnage, but to become the highest quality tubing supplier,” Konishi says.