Ben Rassieur / Paulo Products

Maybe years back Ben I remember you telling me a rather humorous story about how the name Paulo Products came about-if I remember correctly it came about because your grandparents who started the company were at the time not sure which direction the company was going and hence they chose a rather general name. Could you please refresh my memory?

“My grandparents had founded a mine equipment business, manufacturing drill bits. When they decided to leave that business in 1943, my grandmother, Pauline, suggested that they open a commercial heat treating shop. My grandfather, Ben, went along with the idea, but had reservations that one could build a business on heat treating alone. Honoring her, Ben named the company Paulo. Hedging his bets, he added Products Company. To this day we have no “products.”

What is the history of the company? How did Paulo get started down the road of commercial heat treating?

“Having manufactured drill bits, my grandparents had experience with operating a heat treating department. There were no commercial heat treaters in St. Louis at the time. Therefore, other manufacturers would ask them to take in commercial work. My guess is that during the Depression they were happy to have any revenues that they could get. When it came time to move on, they took their heat treat manager with them. They initially rented an old appliance showroom in downtown St. Louis, built their own furnaces, mostly salt pots, and began the struggles of building a new business. A few years later, my father, Frank Rassieur, joined Paulo and they decided to move the company to the site of our current St. Louis plant and company headquarters”.

The company has come a long way over the years and is now the third largest commercial heat treater in North America. What can you tell me about the number of locations, employees and the processes that you offer?

“Paulo operates 5 plants: St. Louis, Kansas City, Murfreesboro (TN), Nashville and Cleveland. We employ approximately 370 people. Each plant has been equipped to perform the processes required in its regional market-area. We always strive to be the first in our markets to bring new, proven technology and methods to our customers. St. Louis, Kansas City and Nashville all offer a wide variety of processes in integral quench, vacuum and mesh belt furnaces, as well as induction, salt bath, fluid bed and black oxide. Murfreesboro specializes in continuous heat treating (both oil and salt quench) as well as zinc plating and phosphate coating. Our American Brazing division, in Cleveland, is basically all vacuum and continuous hydrogen, for both heat treating and brazing. Although not every plant can perform all of the processes we offer, there is a lot of redundancy, giving our customers peace of mind in case of surges in demand or downtime. Our network of plants also gives our customers access to processes that are not available to them locally”.

This question ties into the one above-would you care to share what sales were in 2012? I know I have asked this of you probably 10 times over the years but I thought I would try yet once again.

“You know, our parents always taught us that we should never discuss money in public”.

I have been fortunate enough to visit 3 of your facilities over the years, Nashville, TN, American Brazing Division in Willoughby, OH and Murfeesboro, TN, all of which are very impressive by the way. Several things jumped out at me that are rather unusual for commercial heat treats the first being controls. Correct me if I am wrong but my impression is that Paulo is unique in that all your controls are designed in house. Why is that as I find it hard to believe there is no controls company out there that can’t offer you exactly what you want.

“I would not say that all of the control devices are designed in-house. However, since so many control systems are now PLC-based, we have become an integrator of control systems. In many cases we find that we want to take automation a step further than the rest of the industry. We also have proprietary shop management software allowing us to control any order from receiving to shipping. Our order writing, scheduling, process control, and inspection are very tightly integrated. And we gather large amounts of data throughout our operations. Since the backbone is proprietary, it is very difficult for most controls companies to provide cost-effective solutions I guess the short answer is that we have been doing it a long time, gotten good at it and try to take it further than our competition”.

Going hand in hand with the above question is how much Paulo incorporates their own ideas into your furnaces. I realize that you don’t build your own furnaces but your engineering department (which must be substantial) obviously likes to incorporate their own ideas into the equipment. Again why do you feel this is necessary?

“Yes, we have 18 members of our Engineering Department, not including our Quality Assurance, or the numerous engineers who work in operations and maintenance. We work closely with our furnace suppliers, trying to improve the performance, ease of maintenance, and life of the furnaces. Of course the suppliers are often the ones who bring the answers to us. We put a lot of emphasis on material handling. We have designed many of our loading, unloading, cleaning and packaging systems from scratch. They are important for the safety and efficiency of our employees. They also help insure the repeatable, high quality total deliverable of our customers’ parts: properly heat treated, cleaned and packaged.

I have pointed out 2 things that I noticed Paulo does differently than many heat treaters, your own controls and the amount of involment you have in furnace design. What else does Paulo do differently?

“Our strategy revolves around one objective and two values. Our primary objective is to help our customers succeed. Our two highest values are integrity and safety. We hope that our pursuit of productivity, quality and service, in order to help our customers succeed, sets us apart from our competition”.

Paulo is undoubtedly the largest family owned commercial heat treat in North America and must rank right up there in the world. For good or for bad this appears to be changing with the number of large family owned heat treats dwindling. Do you see at any point Paulo being swallowed up by a larger corporate entity?

“We believe that we have a strong process for transferring the ownership and management of Paulo to the fourth generation. Each succeeding generation learns a lot from the previous ones, in this arena. My brother, Terry, and I have operated Paulo on a day-to-day basis for 25 years. Our father, Frank Rassieur, did the same. As each generation has taken over day-to-day responsibility, they have been mentored and guided by the older generation at a strategic level. As long as enough members of the family are interested in the business and have the capability to manage it soundly, we should be able to maintain family ownership”.

Speaking of family businesses you mentioned recently that 3 of your sons are now involved in the business, Will, Ben and Tee. Is this something that each had always aspired to do get into the family business or did you have to drag them kicking and screaming into the industry? I am very curious because my 22 year old son Jordan has always wanted to be involved in the heat treating industry.

“Ben, Will and Tee represent the fourth generation, of which I was speaking. I don’t think we dragged them into the business, kicking and screaming. Every member of the family has had the opportunity to explore other field”s through their education and employment. There is nothing wrong with falling in love with heat treating at first sight, but playing the field has its advantages, too. I am happy to say that all of us are excited about working together and building a better Paulo”.

What in your opinion are the biggest challenges you see in the heat treating industry in North America? Smaller margins? Lack of good people? I am sure there are a number that spring to mind.

“I think the biggest challenge is that our society no longer values manufacturing as it once did. Some parents seem disturbed by the thought of their children working in factories. Although the manufacturing sector of the economy has rebounded quite well in the last three years, many are busy trying to undermine the view that newly developed North American energy can be combined with improved manufacturing technologies to create a manufacturing renaissance. Vast portions of the U.S. government bureaucracy are busy trying to stamp out the “evils” of manufacturing. Yet, our experience is that manufacturers from Asia and Europe are busy trying to localize manufacturing for the North American market. Our society has the opportunity to promote economic growth through manufacturing, if manufacturers and those of us support them can effectively make the case for the benefits of manufacturing”.

The processes you cover include batch IQ processing, austempering, vacuum and a whole host of others. Which gets you the most excited or are there any that you don’t currently offer but get you excited? Plasma nitriding? Vacuum Carburizing as examples?

“In line with the idea of improved technologies and improving our image, I think that vacuum technologies are very exciting. However, low cost natural gas has not yet translated into low cost electricity. Therefore, I am still a big fan of gas-fired, endothermic atmosphere furnaces for economical high production heat treating. I think you can say that I am excited by the technology that allows Paulo to do the best job for our customers with respect to quality and price”.

You have a number of mesh belt furnace lines, most of which I believe are for austempering. I have heard many times over the years that the margins in continuous processing are razor thin and that the only way to make money is by also offering associated processes such as coating, plating and sorting. Care to comment?

“Our first belt furnace line was a cast-link austempering furnace designed to heat treat fragmentation grenades in a dedicated facility. At the same time we had a plant in Memphis with a rotary retort furnace. There, we decided to get into the zinc plating business because the platers had a lot of trouble with the screws we were heat treating. And we ended up replacing the rotary with another cast-link belt furnace. Subsequently, we bought our Murfreesboro plant, which was equipped with integral quench batch furnaces and multiple plating lines. There, we replaced the batch furnaces with a cast-link belt furnace and subsequently with mesh belts. All of this is to say that mesh belts combined with plating and other finishing services often make sense. But the real key to making money with a mesh belt furnace is minimizing gaps and the effects of gaps: large lot sizes, minimal and/or quick process changes, and/or enough volume to keep it full. No matter what, the margins are still razor-thin”.

While heat treating is an integral part of the manufacturing process it is probably the least understood and the least appreciated of the whole cycle in my opinion. I still find it frustrating to go into a plant with 10’s of millions of dollars invested in brand new gear cutting equipment and to then witness a 1950’s vintage heat treat department. Do you share this opinion? Perhaps more importantly do you see any need to change this perception?

“We often see similar situations and believe that it is an opportunity for us to provide a good solution for a prospective customer. However, I do not agree that this is the typical captive heat treating department. We run a lot of work that is overflow from well-run captive departments. I do feel that heat treating is generally not a core competency for manufacturers and that a fair analysis will usually show that outsourcing heat treating to us is the best alternative.

So where are we going in the future? Will the industry become more recognized for the valuable contribution it makes? Is the era of the family owned heat treat coming to an end? Are revolutionary changes in the plastics industry going to make our expertise redundant.

“Occasionally there are stories in the general media about heat treat failures. I have yet to see one about the things that could not be accomplished without heat treating. I am not holding my breath, waiting for this to change. I doubt that the era of the family-owned heat treating company is ending. In fact, The Monty seems to have stories about new start-ups several times each year. I don’t think that it is bad to have a mix of family-owned, private equity and public companies in the business. In many ways commercial heat treating is a niche business. There are places for all sizes of companies. There will continue to be developments in materials that pose a substitution threat to heat treating. In the metals arena, nanotechnology and additive manufacturing come to mind. However, I feel that the future of our industry is still bright. The successful companies will continue to adopt improved technology, adapt to changing customer needs and continually seek better ways to do things”.