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Fastener makers pin the shortfall on a lack of skilled labor

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The dark, gloomy days that followed Sept. 11, 2001, had many wondering if the clouds would ever lift.

Economic turmoil and the sharp downturn in aerospace orders meant parts suppliers to the industry had to reassess their production schedules, with many concluding that cutbacks, or at least some significant realignment of their operations, was unavoidable.

But as fears of more terrorist attacks and economic ruin faded—helped by new measures to make highjacking commercial aircraft far harder to accomplish—new optimism emerged, and within just a few short years, it seemed, everyone was flying again.

For Alcoa Inc., one of the world's largest suppliers of fasteners for the aerospace industry, the rebound was a double-edged sword. Orders were returning, and quickly, but only after it had already adjusted production levels to reflect a depressed aerospace sector. It was difficult to keep up with the requirements coming from Boeing Co., Chicago, and other airplane manufacturers that were busily racking up sales for their latest plane models.

Given industry projections that the world aircraft fleet is expected to more than double by 2024, thanks primarily to emerging markets in China, India and the Middle East, meeting demand will be a challenge that won't go away.

Pittsburgh-based Alcoa supplies more than 1 million fasteners for every Airbus 380 and Boeing 787 produced—the two biggest stars in world aviation right now. It's an incredibly complex product segment, involving a broad array of specialty-engineered fastening systems ranging from high-strength fasteners for both airframe and engine applications to very complex latches, installation tool systems and such machine components as hydraulic fittings. Fulfilling demand is made even more difficult given the limited amount of skilled labor available to do the work on some specific products.

Fasteners account for about 25 percent of Alcoa's aerospace revenue, making it a critical part of the aluminum producer's bottom line. The company is believed to have cut about 40 percent of its fastener work force in the days that followed the terrorist attacks on New York and Washington. In recent months, it's been busily replenishing this lost capacity while expanding its fastener product range.

In March, Alcoa acquired two Newbury Park, Calif., aerospace fastener manufacturers Republic Fastener Manufacturing Corp. and Van Petty Manufacturing Co. Bought from the Wood Family Trust for an undisclosed amount, the two companies employ a combined 240 people.

Republic Fastener makes aerospace fastener locknut products while Van Petty makes high-performance precision aerospace fasteners used primarily by engine and equipment manufacturers.

The two companies produce fasteners that were not being made by Alcoa, a company spokesman said.

"They are complementary businesses to our existing aerospace portfolio," he said. "It is our goal to grow the businesses."

For that reason, the acquisitions don't resolve one of the critical problems facing fastener producers a shortage of skilled labor. But the acquisitions will help Alcoa Fastening Systems become a broader supplier.

That's important, because by 2009 Alcoa expects the aerospace fastener market to have grown 30 percent from 2006 levels, according to a recent industry presentation given by Olivier M. Jarrault, president of Alcoa Fastening Systems.

Headquartered in Torrance, Calif., Alcoa Fastening Systems operates 15 manufacturing plants and is adding new production capacity in China, Mexico and Hungary. At the same time, the company is consolidating manufacturing sites and reducing the complexity of its manufacturing operations.

"We are adding capacity in a number of different places across the globe," the spokesman said. "This is a market that's growing very strongly and we want to be in a position where we can help our customers please their customers. And in order to do that, all we have to do is make more fasteners and make the right ones and get them there on time."

As for the current U.S. economic downturn, Alcoa appears to have little concern that demand for fasteners is headed for a crash landing.

"We have seen the terrible things that happened after Sept. 11," Alcoa's spokesman said. "The market has grown steadily since then and is projected to continue to grow, and even if it were to scale back slightly it would still be growing very strongly."

Executives from Precision Castparts Corp., the other major U.S. manufacturer of aerospace fasteners, refused to comment for this article.

However, the Portland, Ore.-based company said in its earnings report for the quarter ended Dec. 30, 2007, that its aerospace fastener sales grew 40 percent from a year earlier, although that included new revenue generated from its acquisition of Cherry Aerospace earlier in 2007.

Like Alcoa, Precision Castparts is positioning itself to take advantage of strong demand.

"Fastener Products is seizing additional opportunities on every front increased volumes, share gains and qualification of new part families," the company said in its financial report.


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