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ATI unfazed by PCC’s acquisition: Harshman

Keywords: Tags  Allegheny Technologies, ATI, Precision Castparts, PCC, Titanium Metals, Timet, aerospace, titanium Richard Harshman


LOS ANGELES — Precision Castparts Corp.’s (PCC’s) recent acquisition of Titanium Metals Corp. (Timet) is unlikely to trigger a heightened battle for market share in the aerospace supply chain, according to the top executive at PCC rival Allegheny Technologies Inc. (ATI).

"We think there are enough opportunities in the world for the both of us," ATI chairman, president and chief executive officer Richard J. Harshman said during a conference call with securities analysts.

Portland, Ore.-based PCC’s purchase of Timet means that—along with PCC’s Huntington, W.Va.-based Special Metals Corp. unit—the company now has the ability to supply both titanium and nickel-based alloys to the aerospace sector and other major specialty metals consumers.

PCC, a major aerospace castings producer, acquired Dallas-based Timet for $2.9 billion in December. It also owns Grafton, Mass.-based Wyman-Gordon Co., widely considered the largest aerospace forging house in the United States, and Carlton Forge Works, Paramount, Calif., which it bought in 2009 for $850 million ( amm.com, Aug. 27, 2009).

ATI bought Cudahy, Wis.-based forgings and castings producer Ladish Co. for $778 million in mid-2011 ( amm.com, May 10, 2011). ATI already owned Monroe, N.C.-based ATI Allvac Inc., which produces both titanium and nickel-based mill products.

One analyst asked Harshman how the acquisition "of one of your titanium peers might reshuffle the market." Some outsiders had speculated that the Timet acquisition could put ATI and PCC on a collision course for a fight for market share.

But Harshman pointed to "direct source agreements" that aerospace original equipment manufacturers (OEMs) sign with mills as part of their long-term supply relationships. These agreements require forgers—often the first stop on the post-mill supply chain—to buy their ingots and billets from mills that aren’t necessarily related.

Harshman called the agreements a "big driver in terms of the supply and demand equation in the supply chain."

"That isn’t going to change, quite frankly," he said, noting that the trend was kicked off in the 1990s by aircraft engine manufacturer General Electric Co. and has since been adopted by other engine producers as well as airframe OEMs.

Moreover, when asked how much "nondirect" material ATI supplies might be shifted to PCC, Harshman replied "not much."

Harshman noted that PCC’s acquisition of Timet is "consistent with what you’re seeing in the supply chain of continued vertical integration."

An ATI spokesman in Pittsburgh declined further comment on Harshman’s remarks, while a spokesman for Portland, Ore.-based PCC couldn’t be reached for comment.


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