Pittsburgh-based Allegheny Technologies Inc. plans to invest $95 million into its 1.4-million-square-foot plant in Cudahy to meet increased demand from the aerospace jet engine market.
ATI purchased the former Ladish Co. Inc. in 2011 for nearly $900 million and rebranded the Cudahy operations as ATI Forged Products. The plant currently has about 700 employees and the project is expected to create another 125 positions.
The project will include the addition of a fourth iso-thermal press to the Cudahy iso-thermal forging center and additional heat-treating capacity. It will take about three years to complete the capital investment and fully qualify for aerospace-related production.
“We continue to invest in our advanced forging capabilities in support of our aerospace customers’ ramp-up of next generation jet engine production,” said Rich Harshman, ATI’s chairman, president and chief executive officer. “Once completed and fully qualified, this critical growth project will enable us to meet the increasing production requirements for existing long-term agreements with our engine OEM partners.”
In landing the project, the Cudahy plant won out over ATI operations in North Carolina. In an interview, Harshman said those facilities make many of the raw materials that go into parts made in Cudahy.
“If you think about it from a logistics standpoint, it would be very natural,” Harshman said of North Carolina. “The location (in Cudahy) is obviously where we have our existing capability … it was a natural place and location for us to put it, but it also needs to be competitive.”
He credited the company’s unions for their willingness to restructure and extend their contracts to make the investment possible.
“We made a lot of work rule changes that allowed us to be more productive,” said John Minich, ATI Forged Products president. “And because we were more productive, we were able to be more competitive globally.”
“It wasn’t asking people to work for less money,” Harshman said.
John Sims, ATI executive vice president for high performance materials and components, said employees at the plant and in the company have developed a reputation for quality work.
“I’m carrying your reputation when I go and talk to these people,” Sims said of meeting with customers. “I can tell you, you’ve made my job easier.”
To support the project, the Wisconsin Economic Development Corp. is offering ATI $7 million in enterprise zone tax credits over the next seven years. Credits in the enterprise zone program are refundable; meaning the company could receive a payment from the state if the amount exceeds its tax liability. The exact amount of tax credits ATI will receive is dependent on the number of jobs created and retained and the amount of capital actually invested.
“This investment by ATI solidifies the company’s continued commitment to Wisconsin and the Milwaukee area, and is a testament to the strength of our manufacturing and aerospace industries,” said Mark Hogan, WEDC secretary and CEO. “It is also an example of WEDC’s ongoing commitment to economic development in Milwaukee County."
Aerospace and defense made up nearly half of ATI’s $3.53 billion in revenue last year. Revenue from that market has grown steadily over the last five years from $1.4 billion in 2013 to $1.72 billion last year. Overall revenues were up in 2017 after two straight years of declines.
The company, however, hasn’t posted an annual profit since 2012 when it reported net income of $158.3 million. Last year’s results included a narrowed loss of $91.9 million, down from $640.9 million in 2016.
ATI is forecasting continued growth this year in its high performance materials and components segment, which includes the Cudahy operations. The improvement is being driven by a switch to next generation engines by commercial jet makers. ATI is expecting 10 percent revenue growth in commercial jet engine revenues this year.
“It’s still relatively early in the cycle,” Harshman said. “We have a very strong view of what the rest of this decade into the next decade will be (and) then you see a little plateauing at a relatively high level. Remember, a business like this is primarily focused on making rotating quality parts and those and those rotating parts have engineered lifecycles to them so there's a significant aftermarket.”