Rebuilding U.S. Manufacturing: California Dreaming

The following was overheard at Haas Automation Inc., Oxnard, Calif., recently: "Make machine tools in China? . . . And miss the bargain rates on all the empty cargo containers returning to China?"

Behind that quip is a lot more than the company's policy of making everything at its Oxnard, Calif., headquarters. While manufacturing is local, customers are global. Its business model is built on management's intimate involvement with product, process and technology -- enough to establish and grow a global leadership position via customer value and even enough to be emulated by (gasp) some Japanese manufacturers! (The company refers to its relentless pursuit of excellence as "The Haas Way.") Gene Haas, president and owner, readily admits that he didn't set out to become a machine tool manufacturer -- much less a global leader.

Gene Haas

It's almost as if he were inspired by a message from an old Warner & Swasey corporate ad campaign. In the decades before its demise in 1992, that Cleveland-based machine tool maker's ads emphasized fundamental values. In 1944 an ad promoted America over competing nations and warned of the dangers inherent from a lack of individual initiative. Titled "Let (George) Washington Do It," it reads, in part: "If one thing more than any other has made America great, has given us the highest standard of living in the world, it is the grand American custom of 'paddling your own canoe.' It is that manly habit that has led millions of Americans to launch their own businesses, creating millions of better jobs for others."

In the early 1980s, Gene Haas was already "paddling his own canoe" by operating a machine shop called Pro-Turn Engineering in Sun Valley, Calif. It was basically him and a couple of machine operators who ran production parts for the aerospace industry. They specialized in machining parts that many other shops turned away because of their complexity. Satisfying those customers rapidly led to new ones via the following series of defining events:

The founding of Haas Automation Inc. in 1983.
The debut of the first Haas CNC machining center at IMTS in 1988.
The building, sales and shipment of 10,000 machine tools in one year (2005), a record increase of more than 22% over 2004 and more than 200% over 2003.
The milestone shipment of the company's 50,000th machine tool in 2005. The CNC machine, a SL-20APL turning center with an automatic parts loader was sold to Western Saw, an Oxnard, Calif., neighbor that now has five Haas machines.

How did Pro-Turn Engineering, a job shop, become the global leader, by unit volume, of CNC machine tools?

In the 1980s one of the jobs Gene Haas and his machine operators were running required indexing a part with a manual 5C collet head, which was time consuming and labor intensive. Gene thought there had to be a better way to run the job, so he began developing the first fully programmable automatic 5C collet indexer. He became his own customer.

Haas growth and plant expansion are driven by innovation -- as with the unique Haas Office Mill. It's small enough to fit through an office door and light enough for most freight elevators. Customer Matt McCormick is shown setting up a unit at the University of Southern California's Doherty Retina Institute.The mechanical aspects of the Haas 5C were pretty straightforward, incorporating a stepper motor as the driving mechanism and a manual 5C head modified to accommodate a worm and gear housing. But deciding how to drive the motor and control motion was another story.

At times, Gene entertained the idea of using someone else's control, but costs were too high. So he called his old school buddy Kurt Zierhut, who happened to be an electrical engineer, and together they came up with the first version of what is still called "the black box" -- the Haas rotary control. (Zierhut later designed the Haas CNC controls and currently serves as director of electrical engineering.)

Gene built a few of his indexers and put them into the hands of friends and acquaintances at other machine shops for real-world testing, asking only for feedback in return. Everybody loved them and thought they were a great way to increase productivity on manual machines. When Gene offered the Haas 5C for sale to the general public in 1983 at Westec in Los Angeles, Haas Automation was born.

Machinist Raudel Marquez inspects lathe output.Customers loved the concept and soon began asking for something bigger. This led to the development of an 8-inch rotary table in 1985. As with the 5C, the Haas rotary table consisted of a manual device fitted with a stepper motor and control. By 1986, demand for the Haas 5C and 8-inch rotary table had outstripped the capabilities of the manufacturer supplying the manual units. To meet the growing demand, Gene developed heads and tables of his own design and began manufacturing them himself. By bringing manufacturing in-house, Haas Automation was better able to control quality, cost, delivery times and pass the savings onto customers.

Constant feedback and suggestions from customers led to the development of more new rotary products and eventually the development of a vertical machining center. At Chicago's IMTS in 1988, Haas introduced the VF-1 a 20-inch x 16-inch vertical machining center priced less than $50,000 -- a major feat.

See Also: The Racing Links
The passions of winning, racing and machine tools have played important roles in the life of Gene Haas. By always designing products that he would use himself, Gene Haas discovered a formula that resulted in phenomenal success and rapid growth, even in the face of a recession that slowed global economic growth. That design approach continued resulting in the 1993 introduction of the company's first horizontal machining center, the HS-1RP, at Westec in Los Angeles. The following year saw the introduction of the first Haas CNC lathe, the HL-1. In March 1997, the company moved into a new 420,000 square-foot facility at its current location in Oxnard, Calif. One month later the company produced its 10,000th CNC machine. The following year, in March 1998, the 15,000th machine tool rolled off the assembly line, and by April 1999, that total surpassed the 20,000 mark.

By the end of 1997, monthly production of CNC machines exceeded 550 units making Haas the largest unit-volume machine tool builder in America. To accommodate continued growth, a new 200,000-square-foot building was built adjacent to the existing facility. That expanded production lines and increased machine shop capabilities while providing space to house one month's supply of finished machine stock to speed shipments to customers. The expansion brought the total square footage to 620,000 to become the largest single machine tool facility in the U.S. By September 2000, the 25,000th Haas machine tool was in service (in the Chicago area).

Haas makes all of its machines at its Oxnard, Calif., headquarters. Shown is the production line for its medium vertical machining centers. More than 900 CNC machines are made each month.In 2001, the addition of another 200,000-square-foot building brought the total to 820,000 square feet. Richard Mountan, director of operations, says this month will see the addition of 211,000 square feet with the goal of increasing monthly output of machine tools by 300 units -- to 1,300. Mountan's constant challenge is increasing production output without jeopardizing quality or efficiency.

Today, Haas Automation manufactures four major product lines -- vertical machining centers, horizontal machining centers, CNC turning centers and rotary tables -- as well as a number of large five-axis and specialty machines. Mountan says employment is about 1,100 and growing. With the largest, most modern machine tool manufacturing facility in the U.S., Mountan says Haas ships more CNC machines per month than any other U.S. producer. He expects that to continue as the company pursues a goal of growing 2005 revenues of $600 million to $1 billion by 2010.

To maximize throughput and efficiency, Haas teams a Motoman robot with a Haas vertical machining center and two Haas lathes. The cell runs unattended.Haas general manager Bob Murray is enthusiastic about the potential for growth in overseas markets. "Last year of all the units we produced, about 44% went offshore. By 2010, he expects Haas to export between 65% to 70% of output with as much as 4,000 units being shipped to Europe. "Last year Europe accounted for 1,500 machines." Murray is also optimistic about China, where Haas has had a presence since 1994. By 2010 he expects shipments to China growing to 3,000 from 500 in 2005. Murray's 2006 estimate: 900 units. Murray doesn't see that projected growth changing the current policy of making all products at the Oxnard, Calif., headquarters. He sees two compelling reasons -- low shipping costs and the ease of management control.

Among machine tool builders, that manufacturing policy means Mountan leverages a unique operating model, one that always seeks to gain maximum strategic value from the manufacturing step. Another example: the Haas policy of emphasizing in-house production when it comes to make-or-buy decisions. For example, Haas doesn't buy CNC controls -- it designs and builds its own, explains Mountan. Haas also builds a competitive edge with its distribution strategy. "Domestically we devised a whole new distribution model, and now we're implementing it globally, including China," says Mountan. He describes the Haas Factory Outlet program as kind of a McDonald's approach for the company's dealer network. The intention is to eliminate inconsistencies in bringing the product to customers such as sales people selling a multitude of different things. With the McDonald's approach, Haas Factory Outlets, regardless of location, conform to a set of best practices that facilitate customer interaction. "In addition to a common marketing approach, the customers experience personnel in Haas uniforms and only Haas products are sold and serviced." Mountan says he knows of no other machine tool builder using the approach.

About This Series
IndustryWeek presents Rebuilding U.S. Manufacturing, a year-long series that will focus on case studies and expert advice that executives at U.S. manufacturing companies can use to strengthen their companies.

A characteristic of "the Haas Way" is the responsibility to leverage all the potential relevant to the enterprise. For Haas that even means going beyond customer satisfaction, product quality, production efficiency and technology. In a mode both altruistic and self-serving, Haas trains tomorrow's buying influences. By partnering with learning institutions such as Henry Ford Community College, Dearborn, Mich., Haas offers students a way of gaining shop-floor experience before entering the real world. The initiative, dating back to 1999, enlists assessments of local Haas Factory Outlets (HFOs) to select college candidates, says Henry Ford's Kenneth Wright, lead instructor, Manufacturing Productivity Systems Department. Wright says students, typically in the 28-to-30 age group, often have career affiliations with job shops, a key Haas market segment. Many of them pursue shop-floor management careers, and some students have started their own operations, he notes. Nationally more than 40 Haas Technical Education Centers are training students with machines entrusted by Haas, says Bob Skodzinsky, president of the Flat Rock, Mich.-based Haas Factory Outlet, a division of Gerotech Inc. Michigan, a state with more than 6,000 shops that cut metal, has five Haas Technical Education Centers, adds Skodzinsky.