§1. Where we are in the book; shear and redundant work [00:34]
At the very beginning of the class I said I'm going to lecture out of Backofen, but even if you had a copy of Backofen you realize I'm not going chapter by chapter from the beginning. Hosford was Backofen's student, so his book is not all that different. It has a slightly different order. We've essentially done chapters one and two, which is stress and strain. Chapter three, we've done part of that, which is plasticity. I've been working mostly on chapters 10 and 11 in Hosford — chapter 10 is deformation zone geometry. It's chapter 7 in Backofen. If you want to follow along in the book, just ask me which chapter I'm working out of. I probably won't know, but I can probably find out quicker than you can.
Since I'm not giving you reading assignments, sometimes students have criticized me and said they couldn't follow where we were in the book. Well, why do you need to? You're not being quizzed. So I have this lousy attitude. I used to hate quizzes and things, okay.
One of the things I wanted to talk about, because I don't know if it's just my poor explanation or something else — when I talk about shear going this way and that way, there is something called positive shear, which, depending on whether you define a right-handed or left-handed coordinate system, would be positive shear, and then there would be negative shear. It's just a question of whether the top is going in the positive direction or the negative direction in your coordinate system. Shearing in that direction is a mirror image of that, and so one's positive and one's negative.
I've talked about redundant work, and I think you understand that if I go this way and that way and then that way, I've done three times the work to get one times the shape change. But I'm not sure you've thought about it in terms of a streamline. If you took a streamline of a little rectangle of material along this streamline, and it had to first curve this way, it would take a positive shear, and it comes along here, and where it's going straight, nothing is happening in terms of shear. Then as it has to turn this corner, it has the opposite curvature. So that's a double shear to do a dog-leg type of path. The whole thing started out as a rectangle and it ended up as a sheared rectangle, but in fact it had to go twice to get there in the case of a dog-leg. In other forming operations it may go through three times.
So think of the contours — whenever you turn a corner, whenever you have a radius to that flow line, you're introducing redundant work. If you really want to know about that, chapter seven of Hosford I think is slipline field analysis. I've shown you a couple of figures from Backofen and Hosford on slipline field analysis. It's where you get the 1 + π/2 — remember, on the deformation zone geometry, for Delta equal to one you have P over 2 t_y equal to 1, so it's just the compressive yield strength. You get up to Delta equal to 10 and it's 1 + π/2, and I said don't worry about it. Well, that π/2 is how many radians of curvature the material had to experience to take that shape change. π/2 is 90 degrees. So if it took a 90-degree turn to make the change — well, here it's not a full 90, maybe 45 and then another 45, so it averages somewhere in between. So that's a little more on that, because I was getting some glassy-eyed looks.
§2. Buy-to-fly ratio and near net shape [05:45]
I wanted to put this up and talk about, again — to a certain extent this was the forgeability of aluminum. If you started out with some little disc of material, you actually could in a single shot get quite a bit of deformation — you turn it into an I-beam basically. Whereas if it was a nickel-based superalloy you would not be able to do anywhere near as much. So it's very dependent on the type of material, the work hardening at the temperature you're doing everything at, and whatnot.
When we start looking at things like this, we get to something I haven't discussed in this class, but it's probably on some of the other videotapes if you take the welding and joining — something the Air Force calls the buy-to-fly ratio. Carl, what's the buy-to-fly ratio? In the manufacturing side of the Air Force they actually used to use it a lot in the '80s and '90s. It's how many pounds of metal you buy in ingot form or billet form, and in order to fly something, how much does the part weigh. So if you need to start with a billet of material that weighs 100 pounds, but the part that flies weighs 3 pounds, you have a buy-to-fly ratio of 33. That's not good when you're paying $100 to $200 a pound for the material. That means 97% of your cost — and let's face it, if you're talking about a 100-pound ingot or billet at $200 a pound, you're talking $20,000 for the part, and you're going to fly about $600 of that $20,000 of material. The rest of it goes into machining chips. You can recycle those at twenty cents on the dollar, depending — if it's a valuable metal you might get twenty cents on the dollar for it. So you've lost ten or fifteen thousand of value, just because these things have to be made in big heavy bulk and then machined away to much less.
When I talked about the Boeing wings, they start with plate and then machine away all the material they don't want, and the buy-to-fly ratio on that aluminum wing is probably something on the order of 20 to 1. There are some parts in aircraft engines and other parts — I've seen buy-to-fly ratios of 100 to 1. Well, not anymore. The Air Force spent billions of dollars in the '90s on what we call near net shape manufacturing, and we're going to talk about a little bit of near net shape today.
§3. Closed die forging and forging laps [08:57]
Now, I was just starting to get into casting defects — or forging defects, types of forging defects you might get. This is an example of a closed die forging. An open die forging I've shown you before — that's where you have the great big press and you just put a big ingot in there, and if I want to turn this cylindrical ingot into a rectangular bar, I just come down and hammer it with a flat hammer and the anvil is also flat, and eventually I make something rectangular or flat or disc-shaped. That's open die forging, and you get barreling because you have nothing constraining it on the side.
[Tom sets up a clay demonstration of closed die forging using a polyethylene sheet and high-temperature lubricant.] A closed die forging — we put lubricant on both. You take a billet and you forge it in a closed die. Now, even though clay is fairly soft, I have to put a lot of pressure on there because I'm getting to a fairly high Delta operation. I'm also going to squeeze out the flash around the edge. When I'm all done, if I've really squeezed this flat up against the thing — looks like it's not working very well even with lubricant. Well, there's my part. I've made the beginning of half an Easter egg. But I've got all this flash on the outside, and I've got to trim that, and that's part of my waste in my buy-to-fly ratio. That's a closed die forging, and obviously you can get much better dimensional tolerances. That's the wrong lubricant for this application. Fortunately the buy cost of this was not very high.
You get much better dimensional tolerances, although you still have to have draft angles. You can't make something with absolutely square sides because you can't get it out of the mold. In a closed die forging, when you're trying to fill some cavity, as you're trying to fill this mold, you will get situations where you actually get overlaps.
How common are they? They're not very common. I actually can only think in my career of one forging lap defect that caused a problem. Well, I take that back, I can think of two. One was — the Germans had forged a 20-foot-long shaft for a plastic injection molding machine, and it had been machined and everything, went into service, and about a year and a half later had a big fatigue crack. It had a forging lap that was about an inch long and about a quarter inch deep, and that's where the fatigue crack started. I mean, you get a flaw that big in something that's rotating. Of course the Germans said it couldn't have been ours — except you always know it's a forging lap because the whole lap surface is oxidized. It was formed at 2,000 degrees Fahrenheit in the air, and so it's full of oxide and decarburization if it's steel. It's unmistakable. So eventually they had to own up to that.
Another one was actually not strictly a forging lap. It was a piece of pipe that had been laid in the Gulf of Mexico underwater, and they were doing the final hydro test before they started using it to bring oil from the well onshore. This thing had been hydro tested twice at the plant in Ohio where it had been made, and it passed the hydro test, and then it got down and they had to coat it with a plastic compound to give it corrosion resistance in the ocean. Then they put it in the ocean and they hydro tested it again, and when they hydro tested it, it opened up. It had a flaw 80% of the way through.
What had happened is — in order to make that pipe, and it's actually sort of neat to watch this — they start with a hot billet at about 2,000 degrees Fahrenheit of steel, and it might be as long as this room, and it comes rolling down out of the furnace onto the bed. Some metal jaws that are room temperature or slightly above grab it, and then a mandrel comes through — a big hydraulic press, big long steel mandrel about 40 feet long comes through and just goes right through it. It's called piercing the pipe. It's the way you make seamless pipe. You don't have a weld in the pipe. It punches right through and turns it into a tube, and you're doing it with an outside die that's drawing all this over. You now made a seamless pipe. Of course it's all oxidized and got scale all over it. It goes down to the next station, still hot, and they hit it with a blast of steam on the inside. The steam now is going to expand because it's not at 2,000 degrees, and you just see it blow all that oxide scale out of the inside of the pipe. They would make you pay to go and witness something like this if it was in an amusement park. But I get people to pay me to go and look at these things.
What was I getting into all that? Oh, I was talking about defects. That particular one — a piece of the mandrel had broken off and had gotten embedded into the surface of the steel. The mandrel is relatively cold. They have hundreds of mandrels, and the mandrels can be used once before they get rotated back through a cooling process. The mandrels have to be cold, they've got to be pretty strong to pierce this thing, so they get used once, and then they come back about an hour later after they've cooled down. So they've got about a hundred of these mandrels just running through in circles. They fatigued, and this one had fatigued. No one caught it. They did a non-destructive testing inspection, but the defect was at the end of the pipe. The technique they were using for the main 40-foot length was an automatic eddy current inspection. Very reliable — this defect was 3/4 inch long and 3/8 of an inch deep. The problem is, on the ends they couldn't do that because they had to grab it for the eddy current inspection. So the ends weren't inspected by eddy current, but they go in there with magnetic particle. That's all done with a bunch of what looks like immigrant labor, probably illegal immigrant labor. They squirt little magnetic powder on the inside, and they've got a flashlight, and they look to see if they magnetize it and if they see a flaw. You can imagine that if you do that for 8 hours a day, you might miss something from time to time. They did. They missed it.
So it wasn't that they hadn't inspected for it, but they missed it. Things will get through, even when you have very good quality control. If there are still people in the process, the error rate is still on the order of a percent or so. Just because something's been inspected, don't assume that it's good. You're still going to have some failures.
Another type of defect — I have never seen it personally, but I do have a sample of it here. [Tom locates and holds up an extrusion sample from Backofen's collection.] If you're extruding something, you get an end effect when you have the die trying to extrude out the hole. So you've got a die, you're extruding this, and at the end you basically get a dead zone. If you're extruding this way to make a cup, you're getting to the end, you end up with a dead zone that forms because the metal can't flow — it doesn't want to go too far in that direction and turn a 90-degree turn. It wants to have flow lines. So you can get a little defect — this is one of Backofen's samples, this is an extrusion, you can see it's the end of the extrusion press and it's got a little dimple right there. That defect is inconsequential, but in some cases that type of defect shows up in forgings, because people weren't careful about the end of the forging.
Here are some examples of forging laps out of the steel mill. Scabby surface — this case is a bloom, so it's actually been rolled. These are rolling laps. Semi-finished roll product — that one you can't see very well. Here are the types of things, semi-finished roll product. These little grooves are probably scale, it's been rolled in, and they could be an eighth of an inch deep. This whole thing is probably 6 to 8 inches wide. So when you see grooves like that, they're pretty sizable.
§4. Continuous casting and the LNG propeller shaft [19:55]
In fact at the steel mill you have a buy-to-fly ratio in a sense — they call it yield, whether it's a steel mill or aluminum mill, how much you cast to how much you ship. When I started at Bethlehem Steel in 1974, the overall product yield was about 65% for the whole corporation, all products. Bethlehem was the second largest steel company in the world at the time. They made everything from wire to I-beams to huge forgings, sheet metal — everything. They had an overall 65%. If they could have gotten to 67%, they could have doubled their profitability — maybe even with a 1% change. What happened is, somewhere between '65 and the early 1980s, over about a 20-year period, they went from ingot casting to continuous casting. The yield ratio got up from 65% to 97%.
If I cast an ingot, I have slightly beveled sides to the mold. The mold has to have fairly thick walls because if it's just a cast iron mold, it's going to have to carry out the heat from all this liquid. You fill it up to some level of liquid, but the liquid shrinks as it solidifies, and it is what we call a killed steel. The final product looks like this, and you have a big gap here.
In the welding course I actually talk about how one company ended up forging this casting into a 33-inch diameter shaft. I told you about my 33-inch diameter fracture in the mid '80s. This went as a propeller shaft on a liquid natural gas carrier, and it stopped dead full of LNG in the middle of the Philippine Sea. They were airlifting in Lear jets fittings so they could transfer the LNG to another empty LNG cargo tanker that was coming back from Japan. This is a whole series of LNG ships going from Indonesia up to Japan and back. This one was going up to Japan full, and when it lost power and couldn't go anywhere, full of LNG, you could have had a big explosion which would have upset a lot of people. May not have killed very many. But remember, those same LNG tankers come in once or twice a month into Everett, right through Boston Harbor. One of the biggest concerns that Homeland Security has for Boston is, all you need is a rocket-propelled grenade when that thing's coming in, and you will wipe out half of Boston. So they have a little security to try to make sure there are no terrorists with RPGs. But nonetheless, this thing stopped dead in the Philippine Sea.
The problem with the old ingot casting of steel was you threw away the top one-quarter of the steel. You were down to 75% to begin with. In spite of the scale losses in the forging mill, or the end crops in the sheet metal mill, you're lucky to get 65% when you lose the first 25% in your casting process. Since yield is such a big deal — at the time, the United States was making 150 million tons of steel a year here, and they were shipping about 100 million tons. There's your 60, 65% yield.
In the '70s — basically in the decade of the '70s, but starting in the '60s — they switched to continuous casting. In continuous casting you don't have to crop the top, because you just cut it off, and then the bottom of one is the top of the other. Your yield shoots up. Now in the worldwide steel industry, they still have to ingot cast some big forgings, where you may still have a 60% yield on your final product, but most of the product is continuously cast, and some steel companies have 97% yield now.
What happened to the steel industry — several things happened, but one of the things is, all of a sudden in a 10-year period you were producing one-third more steel than you needed in the casting shop, because you switched to continuous casting. All of a sudden your capacity in all your plants around the world is 50% larger than you need. There was a tremendous overcapacity because of continuous casting. Here is a wonderful development, but it nearly bankrupted the steel companies because they started competing with each other on price for the market because they all had excess capacity. The world decided the steel industry was a dying industry when in fact they had just had a huge gain in productivity, but that gain in productivity almost bankrupted them. Think of the irony. The moral of this story is, you have to be careful about what you wish for. Big disruptive changes in technology can be very painful.
§5. Rolling I-beams and the Bethlehem Steel story [25:32]
What I wanted to talk about — it may not be obvious until you think about it for about 30 seconds, but if I want to start with a square billet and make it into another smaller square billet — this is out of the US Steel book, and they show you the types of dies. First of all, you don't take a square billet like this and form it on its flat sides. You deform it on the edge, on the peaks. You go from being a square to being a parallelogram. Then you flip it 90 degrees and you take the long axis of the diamond and you squeeze it again. It makes sense if you think about it. It's easier to make dies, you're not trying to squeeze things from the side. But this gets sort of messy in terms of the shapes — if you wanted to make a straight I-beam, your final passes look sort of strange. The I-beam's coming through on a slightly diagonal.
The thing that built the steel industries in the 1880s was the railroads. Before we had the automotive business, the railroads were the big consumer of steel in the world. That's what made Andrew Carnegie the richest man in the world. He was the Bill Gates of his day. If I told you the story of Andrew Carnegie and my grandfather, I'll tell you that sometime. You start out with something that comes out of the blooming mill, which is called a bloom — sometimes called a billet or a rod — and these are the shape changes you go through to end up with an I-beam or a steel rail. So they've got 10 steps, 10 sets of rolls to make a railroad wheel.
Here's another example out of the same book, of the breakdown pass — you first just kind of squeeze it in and you get these things, you finally end up with the finishing pass. The thing that made Bethlehem Steel — Andrew Carnegie had started US Steel, and it was the king of all the steel mills in the world in the 1880s and '90s. His right-hand man in Pittsburgh was a guy named Charles Schwab. Not Charles Schwab the investor — well, Schwab, but a different Schwab. I can't remember the Schwab of Bethlehem Steel 1890 fame. They had a tiff, and Schwab went off and found this little iron mill in Bethlehem, Pennsylvania. Those guys had just learned how to put molybdenum in steel to make high-speed steel.
Without getting into all the metallurgy — molybdenum forms molybdenum carbides which don't dissolve until higher temperatures, so you can get these hard carbides, and the steel will retain its hardness to about 1,000 or 1,100 degrees, where ordinarily at 7 or 800 degrees the steel is starting to soften. You get what's called a secondary hardening peak because of these molybdenum carbides, and you can have a hot work tool steel that can hot work at 1,100 degrees Fahrenheit as opposed to 6 or 700 degrees Fahrenheit. This is going to improve the life of drills and all kinds of things that get hot when you work them. That was the first big invention that helped grow Bethlehem Steel.
The second one — Bethlehem Steel was the first firm to learn how to make I-beams. They learned how to roll passes like this for making I-beams, and they were close enough to New York City — the reason New York City now has buildings more than six stories tall is because Bethlehem Steel made I-beams. Manhattan was sort of flat. If you go to Manhattan, you won't find a lot of buildings over about 10 or 12 stories tall — actually those you won't find anymore because they turn them into 100-story buildings. But if you had gone there in 1900, you would have found very few buildings over about 10 stories tall, because brick and mortar just didn't give you enough backbone to build a building. Steel I-beams did. The other thing you would find in New York City in 1900 — 40,000 gallons of urine and horse manure. I don't know how many pounds of horse manure on the streets, because that was the biggest pollution problem in all the big cities around 1900. The automobile solved that. It just put out smog.
Student: Is there a heating step between?
Yep, you have to reheat it after each one. Well, you might be able to go from this one to this one, you've got a lot of mass, but then you have to have two mills, because usually these are bigger mills because they're bigger pieces. Once this thing's getting long like this, you have to — many times — I wouldn't say you have to do it every time, you might get two passes before you have to put it back in the furnace. It's a slow process.
Student: This is a rolling process?
It's a rolling process.
Here's another series of passes to make an I-beam. That doesn't look like it's going to be an I-beam at that stage.
Student: Was this all done by trial and error?
Yeah, basically. Trial and error where they had to build huge rolls to do it. These are two steps — this is a step to make a channel, and this is to make an angle. Here's another one to make an angle. Notice this one to make an angle, you're basically rolling it and sort of peaking it. This one you keep pretty flat to make that same angle iron, you're just rolling a little peak on it, and finally you straighten it out. Here's a Z channel, or actually it's a piling — interlocking things, this one interlocks into that one. You drive them into the ground so you can dig a pit and work in it without the wall caving in on you. A lot of steel used for pilings. So this is what you have to do to form a piling. These last ones, I don't know if they're hot formed in that same type of mill or in a separate little mill. I think it's sort of interesting to look at this.
Nowadays they actually probably would do it on a computer, but back then, it was trial and error.
Student: Are processes still roughly the same now?
I'm going to show you how they do it now, but until 1985 or so, yes — for about a hundred years that was the way they did it. For some of the smaller beams it might be 20 passes, or over 20 passes to go through the mill. Gets a little pricey. What that meant is, some of the smaller beams were pricier than the big beams. It takes a lot more rolling and reheating and everything else.
§6. Attleboro gold tubing and die design [32:54]
So far as people doing things empirically — once, 25 years ago, I used to consult for a gold company down in Attleboro, Massachusetts. I think I mentioned, they went through seven tons of gold a year, and they had their own continuous casters for karat gold alloys. That plant is still there. It's been there for 113 years now, started in 1899. To make gold tubing — I actually got them set up with a gold welding machine so they could weld karat gold tubing longitudinally. I had to go to Steamboat Springs, Colorado one winter to see the guy who makes these — he just had a big machine shop in Steamboat Springs, and he wasn't building welding machines, he was out skiing. But before that they made gold tubing. What do you use gold tubing for? If you make heavy-wall gold tubing, you can machine it into little circular things called rings — a lot of wedding rings are made with gold tubing.
One of the big very profitable things in the Boston area — you go down to downtown Boston, there's a Jewelers Building, and there's a bunch of flute manufacturers. I guess now I'm supposed to pronounce it "flout-ist," not flutist — they're a flautist. Professor Harry Gatos, a Greek, graduated from this department and then went off to Lincoln Lab and headed up the solid state division, and came back here in the mid '60s. He was called Mr. Gallium Arsenide. He was the world's expert on gallium arsenide before it went into cell phones. He's the one who really did all the basic research to make gallium arsenide a viable semiconductor. He's also a very accomplished flautist — he's well into his 80s now. If you walked down Building 13 when I was a student, you'd hear him in there during the middle of the day playing his flute. He played for the Boston Symphony and a few other people as a guest soloist. He had gold flutes, silver flutes, and he had one of the six platinum flutes in the world at the time.
They made their tubes by a deep drawing process — just a great big long press coming in. Start out with a piece of karat gold and make it. They also would do gold-filled material, which is a clad material — clad on copper or brass, with gold on the outside. They asked me to redesign their dies, which is why I started thinking about this when you asked the question, was this all done empirically. If you looked at the dies, some of them — when you went from one die to the next, some of them had a less-than-9% reduction, and another one had a 35% reduction. There's no logic whatsoever. So I redesigned their dies for them. It's basically calculating logical steps of progression. Some of the dies at 40% might be cracking, giving high failure rates. The other ones at 9% could have been setting up stresses that actually could have been bad later on. Remember, I told you, you want to get a fair amount of deformation in. You don't want to do these little light passes. They can do more harm than good.
§7. Chaparral Steel and the mini mill revolution [37:39]
So now let me tell you the Chaparral Steel story. Chaparral Steel was founded by a graduate of this department, who's now retired. He's from Vancouver, but he worked for a Canadian steel company in the mid '70s. Gordon — his name is Gordon Forward — used to be on the department's visiting committee back when I was department head. Gordon realized in the mid '70s that it cost $200 a ton to make cast iron in the blast furnace, but you could buy scrap iron at the time, scrap steel, for $100 a ton. What do you do with the cast iron from the blast furnace? You put it into the steelmaking furnace and make it into steel. If it cost you $200 for the liquid cast iron, and you could buy steel scrap for $100 a ton, you have a $100-a-ton advantage on a $300 or $400-a-ton product. That's not a bad advantage.
Gordon and a few other people around the world realized this, and they started what they called mini mills. Instead of a steel mill as big as — well, the last steel mill built in this country was the Bethlehem Steel Burns Harbor plant, from 1965 to 1972. It took 7 years to construct, it cost Bethlehem $5 billion. Bethlehem was the second largest steel company in the world at the time. They started the Burns Harbor plant, which is still in operation. It almost bankrupted them. I think they were only about $5 billion a year in sales, and so they were spending a lot of money on capital. It'd be equivalent today of Intel having to spend $20 billion to build a fab plant, or a $60 billion fab plant. It can bankrupt a company if things don't go right. Or Boeing deciding to build a Dreamliner — it can bankrupt the company if it doesn't come out properly.
Bethlehem actually finished the plant, and by '74 they were having the most profitable year ever. That's when they hired me, and they've been going downhill ever since they hired me. But since then, no integrated steel plant anywhere in the world has ever been built by a company. There have been plenty of them built, but only by countries. They have been built by the backing of an entire nation. POSCO Steel, which became the largest steel company in the world in the late '90s, was built by the Korean government. That's where the financial backing came from. It's a political thing to make that big an investment.
The mini mill guys could build a mini mill to turn out product for one tenth the capital cost of an integrated steel mill, and they did. Today about half of the US steel market is made in mini mills. What Chaparral did — they were making rectangular blooms, and then they decided, why can't we make something a little closer to net shape? So they did. They started casting a dog bone.
They kept on improving that until they got to this — now it's almost an I-beam that they're casting, and they went from 21 passes for the smallest I-beams to about seven passes. Not only that — for rolled steel bars, before Bethlehem started doing this, 41% of all the I-beams were imported into the United States. This is early '90s. But by the time they did this, they wiped out all imports because they were so much more efficient by doing net-shape casting to make the I-beams and wiping out two-thirds of the rolling passes. They were exporting 20% of the product outside of North America, including Asia, which in the early '90s was just incredible.
They had 75% energy savings. They had inline reheat because they didn't have this big heavy thing you had to stick back in the furnace. They were starting with something after the first couple of passes that was so thin they could basically heat it in line with induction heaters, and not have to put it back into the furnace. So inline reheat — 28 minutes total to go through the mill. They ended up with a fine-grain chill-cast structure that had a higher tensile strength and toughness. They were able to roll these things to get a finer grain size, and if you know anything about grain size and properties, grain size is the only thing that gives you both increased strength and increased toughness.
At the time, the garden-variety steel is what's called A36, ASTM A36. It just so happens — coincidence — A36 has a yield strength of 36 ksi, 36,000 pounds per square inch. If you go to the American Institute of Steel Construction manual, they would have back in 1990 design criteria for 36 ksi steel, 50 ksi steel, and 100 ksi steel. The 100 ksi steel was quenched-and-tempered steel, fairly expensive, but they put that in bridges and stuff when they needed weight savings. The 36 and 50 was the standard. You get a premium on the 50 ksi steel, because you can save one-third the weight when you've got 50% more strength.
Chaparral, by doing fewer passes, finer grain size, better reduction, was able to make product that could pass for either A36 or grade 50. They could cut their inventory in half. They didn't have to distinguish what was A36 and what was grade 50 — order whichever one you want, we're going to ship you what we've got, which meets both specs. You're getting a better steel if you ordered A36, but we'll sell it to you for the same price as regular old A36, because we don't care. It's profitable enough that we're going to save money on the inventory. We cut our inventory down by half. Here's an innovation that made Chaparral a world-beater on the I-beam market by going to net-shape casting, getting rid of a lot of these rolling passes, and getting a better product. So it's sort of a neat little story of something that helped them become more profitable.
§8. Homer Research, executive dining rooms, and management failure [46:15]
There are lots of good stories about Gordon Forward and Chaparral. I'll tell you the story when I worked at Bethlehem Steel. In the mid '60s, Bethlehem had built a Taj Mahal. It was the fanciest research laboratory in the world, probably, for metals research. It's called Homer Research Lab, after one of their chairmen named Homer. It was just south of Lehigh University. Lehigh's on the side of a mountain. The Bethlehem plant is north of the river, south of the river is a couple of slums where the steel workers lived, and then going up the hill which is called South Mountain was Lehigh University on the side, and then at the top was Homer Research, and that's where I was hired. A $600 million facility — in the late '80s, Bethlehem, when they were going under, gave it to Lehigh University to get it off their tax rolls. It's like 20 buildings, and these really were a Taj Mahal.
At Homer Research when I was there, we had the corporate dining room, which was on a second floor with huge windows looking out on the vista of the steel mill. You could see the smog from the coke ovens over here, and the pollution from the blast furnace over here. They had an executive dining room, which I snuck into once at about 2:30 in the afternoon, just to say I'd been in there. This is where the big shots, like the Don Trautleins, would eat lunch. I remember seeing a strawberry the size of a peach. I thought, this is amazing, it was going into the executive dining room. If I told you all the stories of how the upper management took care of themselves — I lived near the airport, and they had three Lear jets which would fly the vice presidents down to Florida in the winter to play golf on the weekends. This is good corporate management in the United States circa 1975, which is one of the reasons that after 13 months I said, where do I want to be in 5 years? And the clear answer was, not at Bethlehem Steel. So I left and came back here.
At Chaparral Steel — I did a study once with a guy from Harvard Business School, and we spent a few days down at Chaparral and visiting Gordon Forward. Gordon used to always talk about the corporate dining room at Chaparral. The corporate dining room at Chaparral was a couple of folding tables, plastic chairs — not as nice as these, nowhere near as nice as these. Plastic forks and the little things, because they would go out and get some barbecue from the local takeout. That was the corporate dining room at Chaparral. So difference in philosophy between the people who were at one time printing money.
Talk about printing money — what made the American steel industry, after World War II, great? We controlled 75% of the world's production after World War II. Why? We had bombed out all the rest of the capacity. Hey, it's not every day that a businessman gets to go and wipe out his competition that way. But the managers — think about it. In 1975 when I was working for Bethlehem Steel, the managers had been hired about 30 years before, right after World War II, and they came in with this arrogance. All through their careers they controlled 75% of the world steelmaking capacity. At that time US Steel was 40% of the world steelmaking capacity, and Bethlehem was like 20%. The two of them alone were over half the world steelmaking capacity, because we didn't fight the war in North America. At least not a lot of bombs fell in North America.
These guys thought they were the brightest managers in the world. It's sort of like a financial guy today on Wall Street who walks away with a half-billion-dollar income. He thinks he's the brightest guy in the financial market in the world. He's not brighter than anybody else, he just happens to be in the right place at the right time. The Bethlehem Steel managers when I was there, the guys at the top thought they were the most clever people in the world. It's why they no longer exist. They thought they were great managers, and in fact they were flying to Florida on the weekends in corporate jets to play golf, and they were eating strawberries the size of peaches. They couldn't sustain that. Frankly, I thought it was stupid when I was 25 years old. Unfortunately I've seen it repeated again and again in a number of industries.
Kodak. They were printing money. They called it film, but it was money. They had like a 95% margin on film, and they would not give up their film. They invented a lot of the best digital photography technology in the world, but the film guys didn't want to give it up because they had grown up knowing that film was their bread and butter, and they kept their bread and butter until it was all stale and rancid. So it's not just the steel industry, it's Kodak. We could go through a bunch of other industries. People — it just amazes me. These people at business schools will write articles. I remember articles written by some of my friends, one of whom became Dean at Harvard Business School. He was writing articles on the steel industry that were just — I said, Kim, that's wrong. He says, no, it's not. He had an economics degree, he studied labor relations, and he was lecturing me on the steel industry. He became Dean, and so he wrote all these papers, and industry would pay him tens of thousands of dollars a lecture, because he was — but that doesn't mean he knew anything.
Anyway, this is how you make a railroad wheel. Again, the steel industry grew up from Andrew Carnegie through the 1920s living off the railroad. You start out with a block, you forge it into a disc, you then take that and forge it after — second forging — and you make a little bit of a net-shape indentation, and then you punch it to make a hole in the center, and then you roll it. These flanges right in here are actually rolled. See the wheel here vertical, see the punched hole horizontal, and they're rolling these flanges in a special mill, and then they cone it to give it the right contour in another operation. So that's how you make a railroad wheel — a mixture of rolling and forging. Just gives you an example of how people vary those things.