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Chemical Management

A tiny firm manages chemicals for giants

— As printed in the September 27, 1999 issue of The Philadelphia Inquirer
Haas Corp. of West Chester is a contractor for GM, Ford and others.

At General Motors Corp.’s factory in Oshawa, Ontario, 30 miles east of Toronto, Ian Bellinger heads a staff of 10 from the Haas Corp. in West Chester who manages the use of paints, greases, hydraulic fluids, lubricants, solvents and other chemicals.

The facility is GM’s largest, producing more than 800,000 cars and trucks each year. Haas staffers there also oversee inventory control, recycling, waste treatment, and all other aspects of “chemical management” – tasks formerly handled in-house by GM.

From unpretentious headquarters on West Chester Pike, the Haas Corp. operates internationally and expects to gross $30 million this year. Yet its workforce totals just 75.

“We’re a one-stop shop for all chemical processes”, said Thaddeus J. Fortin, 40, chief executive officer of the family owned business, which has no connection to Philadelphia based Rohm & Haas Co. “It’s a good sophisticated niche for us”.

Haas is capitalizing on what has been termed a “quiet revolution” as more and more manufacturers out-source work not directly involved in making their products.

The company recently received its first contract with the Ford motor Co. for chemical management of two engine plants in Ontario, not far from Detroit. As a Ford “preferred supplier”, Haas provides all the chemicals for the plants at Windsor and Essex.

“Ford was dealing with 500 suppliers,” Fortin said. “Now they’re dealing with one – us”.

However, General Motors is Hass’ prime customer. GM has been “very aggressive in letting out chemical management contracts”, Fortin said. And Haas, he said, has become the largest chemical manager for GM assembly plants in North America.

Last year, GM out-sourced to Haas that duty at its giant manufacturing and assembly complex at Ramos Arizpe, south of Monterrey in Mexico. GM makes 600,000 engines and 350,000 transmissions per year there. It also assembles 175,000 automobiles annually at that facility, and is planning to expand.

Scott Chapman is Haas’ program manager at Ramos Arizpe, with a staff of close to 50, a dozen being Haas employees and the others representing sub-contractors.

Next month, Haas will begin chemical management programs at 17 Mexican plants of Delphi Automotive Systems Corp., the former GM parts unit that was spun off in May.

And late last year, Haas received a chemical management contract for a plant that General Motors, in a joint venture with a Chinese company, is building in Shanghai. In that deal, Haas is partnering with a Taiwanese firm. Fortin made three trips to Shanghai to negotiate the venture.

Haas also has three staffers working at a Boeing Co. rocket plant under construction in Decatur, Ala. It got the contract in July. Boeing expects to make two Delta 4 rockets for satellite launchings in each of the next two years and then 40 a year for the ensuing 10 years.

Closer to home, Haas is in the second year of a chemical management contract with SPS Technologies, Inc. in Jenkintown, which makes products for the aerospace industry. Ed Chelo, head of purchasing for SPS, said Haas had reduced his company’s spending on chemicals and lubricants and has introduced it to the recycling of oil for machinery.

“Haas found the recycling supplier and did all the testing for us” Chelo said. “We’re looking at significant savings”.

What helps to attract customers to Haas is its guarantee of cost reductions. When an industrial company used many vendors in purchasing chemical products, said Fortin, each vendor seeks to maximize its sales and profits. The results often are higher costs and higher inventories for the customer, he said. Haas’ profits come from saving money for customers through reduced usage of chemicals, smaller inventories, and more efficient operations.

He said that for some of Haas’ competitors, chemical sales are the major line of business and chemical management is a sideline. That puts them in a “conflicting relationship,” he said, on the one hand pushing savings and on the other pushing costs.

“Our focus is on chemical management”, he said.

Haas is continually expanding the scope of its management. As the general contractor, it procures all the chemicals, but subcontracts such services as water treatment and recycling.

Haas began life as a specialty chemical manufacturer in North Philadelphia in 1925. Its reincarnation as a chemical manager followed acquisition of the company in 1975 by Thaddeus Fortin’s father, John J. Fortin.

A Bartram High School graduate who saw action with the U.S. Navy in the South Pacific in World War II, the elder Fortin had worked as a salesman for nearly 30 years, the last 19 with Quaker Chemical Co. in Conshohocken, when he decided to go off on his own.

For about $300,000, he purchased Charles J. Haas Inc., which made textile and bakery-goods chemicals in a two-story 17,000 square-foot factory at American and Cumberland Streets. The down payment was $30,000, and the balance was paid over 10 years. Fortin said he put $15,000 in savings into the down payment and borrowed $15,000 from one of his Quaker Chemical customers.

The plant remains in operation today with six employees. It makes chemicals that Haas sells to its chemical management customers, but the sales account for less than 10 percent of its gross revenues.

Thaddeus Fortin, whom everybody calls Thad, was the oldest of five children and the only son. He joined the company in 1981 after graduating from the Haverford School and Ithaca College. Company sales were about $750,000 a year, and its markets were in metalworking and specialty chemicals. One year later, Haas entered the automotive market with a new product that cleaned up the “over-spray” in shops where new cars were being painted.

Haas’ “economical non-methylene chloride paint stripper” removed splattering of paint from walls, floors and workers’ clothing, Fortin said.

“We developed a safer technique that was cost-effective”, he said. “That’s what got us into automotive”.

GM’s Wilmington plant was Haas’ first customer. Business continued to be brisk for its paint stripper until the U.S. economy fell into recession. Beginning late in the 1980’s and continuing for about four years, GM retrenched, closing plants and laying off thousands of workers.

“We lost half of our sales”, said Fortin. “We had a little business with Chrysler and Mazda, but GM was our only significant customer. Competition was increasing, and our marketplace was shrinking. There were a lot of pricing pressures. To grow the company, I thought we had to build a better mousetrap”.

At the same time, General Motors, in looking for ways to operate its plants more efficiently, began outsourcing management. “They were the pioneers in chemical management from the user end”, said Fortin.

Haas seemed like a long shot for a GM contract. It was tiny compared with billion-dollar competitors, such as Castrol, Henkel and PPG Industries. And GM was looking for companies with hefty spending on research and development. Haas’ R&D budget was miniscule.

In several visits to Detroit, Fortin pleaded with GM’s purchasing department to give Haas a chance. Finally, the automaker agreed. Because Haas had a “strong presence” on the East Coast while most of the other suppliers were in the Midwest, GM awarded it a contract in 1994 for chemical management of a minivan plant in Baltimore.

The contract was for three years at about $2.5 million a year. When that contract expired, GM renewed it for another three years without going out for bids. And with the credibility in Baltimore, Haas was awarded a three-year chemical management contract for GM’s truck plant in Flint, Mich., in 1996.

What put Haas’ on the map, said Fortin, was its three-year contract for GM’s giant Canadian plant later that year. The contract is for $10 million in Canadian dollars annually, or about $6.8 million in U.S dollars at the current exchange rate. “We hope for a stronger Canadian dollar”, Fortin said.

Both the Flint and Oshawa contracts have been renewed for three years. Those jobs and the big Mexican contract have helped to boost the Haas Corp.’s annual revenues from $7 million in 1995 to $15 million in 1996, $17 million in 1997, and $21 million in 1998.

Fortin says this year’s revenues will hit $30 million, and he is projecting $40 million for 2000. The biggest obstacles to growth, he said, is “getting qualified people on site”. The Haas model has been very successful, he said, “but it will fall without our hiring and training qualifies people. We’re very, very people intensive”.

Trade publications have reported that executives sometimes oppose relinquishing control of chemical management to outside specialists. “Sure”, said Fortin, in confirming the report. “The best way for us to deal with it is to let our customers do the talking. We encourage plant visits”.

Haas makes sure it really is going to be welcomed before taking an assignment, he said. As a result, it rejects more than half the business it is asked to bid on. “There have been horror stories about companies not supporting chemical managers”, Fortin said. “We can’t force change. We have to be supported. And if we’re nor careful, we’re going to chase business that we don’t actually want”.

So far, in building Haas, he has managed to avoid that pitfall. He was named president in 1996, succeeding his father, who at 77, is board chairman.

The company is owned by Thad Fortin and his four sisters, none of whom works there. “I own just over 50 percent, but they keep me in line”, he said of his siblings.

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