Howmet Aerospace: Drivers of Operating Margin Improvement

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How did he change the way Howmet approached customers?

His view was that capacity was something we could take advantage of, especially in the pre-Covid era when there wasn't enough capacity in the market. I'm specifically referring to aerospace and airfoils, where I have expertise and responsibility. He insisted that we demand a premium from customers. When renegotiating long-term agreements, prices went up with every customer. Previously, customers felt they had the upper hand, expecting suppliers to come up with cost reduction initiatives, leading to price decreases over the long term. Plant flipped that script, insisting that prices go up because we have to allocate capacity for them, and to lock in that capacity, they would pay a premium price. This approach has continued to drive margin improvement. Plant has been there for six years, and every contract negotiation has been approached this way.

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Can you explain the concept of the core being IP? Maybe walk through it in layman's terms, explaining how it works and what the proprietary part is.

The proprietary part involves how you make the core, which is a ceramic piece, and how you position it inside the wax mold. Eventually, the wax is melted out, leaving the core fixed inside the mold. When you pour in the molten metal, the core creates the hollow space, which is later leached out with potassium hydroxide. The creation of the core, how you fix it inside the wax, and how you create the passage are all proprietary. In advanced castings, these passages can be serpentine, not straight. Some advanced designs use a multi-wall core for advanced cooling. The casting house is responsible for creating a core print, which may involve multiple cores, and interlaying them in the wax mold, which is their intellectual property.

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