August 27, 2000 Precision Components Redux

Volume 3 | Issue 5

Flexibility and versatility are this company’s key assets for success.

In our first visit in May 1999 to Precision Components Corporation (PCC) of York, Pa., we learned how this company landed on its feet after what could have been a serious wipe-out. “We got burnt pretty badly in 1992 by focusing on one market,” says John DeFelice, chairman, president and CEO, referring to the cancellation of the Seawolf submarine program which accounted for 90 percent of the company’s backlog. Today, the company thrives in three core markets: manufacturing for the military, for industrial applications and high-level nuclear spent-fuel containers.

Setting Sights

The work PCC does on a daily basis is intrinsically bound to the way we live our daily lives. Think about how your life would be if there was no electricity. No e-mails, no air conditioners in the summer or heat fans in the winter, no TV, no microwave popcorn, and no evening lamps raging against the darkness. Electricity-generating nuclear power plants need maintenance that includes disposing of spent fuel. This is where PCC enters our lives, for about 50 to 60 percent of PCC’s business is dedicated to the manufacture of nuclear spent-fuel storage and transportation containers.

The reason behind why PCC focuses such a high percentage of its efforts on this equipment rests on a political foundation. As you read this article, the years-long debate continues over whether or not the ultimate storage of this spent fuel will be buried forever in Yucca Mountain, Nev. The U.S. Department of Energy has been studying the geological suitability of the Yucca site for years, to establish a repository for the nation’s commercial and defense nuclear spent-fuel and high-level radioactive waste.

“When Yucca Mountain begins operating, it is estimated that the industry will need approximately 10,500 new containers,” says DeFelice. These include transportation containers to ship the spent fuel, and ultimate storage containers certified to last thousands of years. “This is why we and others throughout the industry see quite a large future market for the fabrication of both transportation and ultimate storage containers.”

In anticipation of Yucca Mountain opening for business, container designers are designing and licensing what are called dual-purpose, or multi-use, containers. “These containers will serve as on-site, dry storage containers now, and as transportation containers for interim storage or when Yucca opens,” says DeFelice. Transportation containers must meet more stringent specifications, and the dual-purpose containers are designed to meet those specifications. Privately funded consortiums in two western states are now trying to attract business as interim storage sites as utilities run out of on-site storage space. “They will accept spent fuel and store it until Yucca Mountains opens.”

Designers of nuclear spent-fuel containers market their product to utilities and then subcontract the fabrication to a handful of fabricators. “There are about four major domestic designers,” says DeFelice. “We will provide price and delivery to any of the designers wanting containers built.“

Maintaining Defense

“We will still maintain a presence in the defense market,” says DeFelice. About 25 percent of the company’s business is devoted to this market. “The quality assurance systems and engineering systems required by the nuclear container business are very similar to what defense contracts require, so we have maintained our capability in this field.”

The company’s third core market offers excellent growth possibilities. “We manufacture very large, high-integrity containers and chemical reactor vessels,” says DeFelice. When major industry leaders like DuPont choose Precision Components to manufacture their process equipment, it is a testimonial worth a thousand words. “We just completed a project for DuPont, and they were pleased with our outstanding performance. We will be marketing to other companies like them.”

PCC’s unique capabilities are what attract leaders like DuPont. “For example, we have the capability to lift 150 tons,” says DeFelice. “This, combined with our highly accurate machining capabilities and our high-integrity welding, sets us apart from the competition in this country. Before meeting us, potential customers thought they had to go overseas for these kinds of capabilities.

“Part of our marketing strategy is spent educating the customer and getting them to understand total value. We offer high-quality systems, broad engineering capabilities, traceability of the materials we use and accuracy of our measuring equipment. These are things that quality companies like DuPont appreciate, and they recognize the value we offer. As a result of the good work we did for them, we anticipate more of their business.”

Valued Quality

PCC will continue to develop its three core segments. “Our premise is that we don’t want to commit 100 percent of our capacity to just one market,” says DeFelice. “If the spent-fuel container market takes off as we believe it will, we will still restrict it to 50-60 percent of our business. We would consider expansion possibilities, or perhaps focus on the segment of the market that recognizes overall value.”

In line with this thinking, PCC developed partnerships with international companies within the past year, aimed at both domestic and international markets. These international companies see a growing market for nuclear spent-fuel containers in the United States, and DOE figures would confirm this belief. There is also concern among U.S. utilities that there is not enough manufacturing capacity in this country to cope with the upcoming needs of spent-fuel containers. “We have teaming agreements with these companies, which means we jointly bid on certain contracts and each company has a pre-established position in that contract,” explains DeFelice. The natural evolution for these agreements would be eventual joint ventures.

Creme de la Creme

Since our last visit to the company, it has divested two of its four operations. “This was done to shore up our balance sheet and to make sure we had cash available to take advantage of the opportunities in our core markets,” explains DeFelice. “We are committed to improving our business and making sure everything here is state-of-the-art.”

DeFelice says that barriers for entry into the nuclear industry are severe. “You don’t just walk in with a new plant and plan to build containers,” he says. You simply cannot make product if you do not have an adequate quality assurance culture, which takes many years to establish. Container designers and their customers, the utilities, will audit fabrication companies prior to placing an order. “They don’t want to place an order with a fabricator who cannot pass an NRC audit,” explains DeFelice. “We live in a fish bowl here and there may be 12 to 15 customer inspectors resident in our plant at any one time. Utilities are very, very wary and they want to know that manufacturers are experienced and have been through audits with the Nuclear Regulatory Commission. We’ve been through the ‘qualification phase’ and it takes a long, long time to get to where we are today. There will always be competition and customers who shop for price only. But if that is all our competitors offer – price without the value and the quality – they will certainly be out of business very quickly. We intend to be around for quite some time,” concludes DeFelice.

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