Metcalf Joins Inductotherm Group
Present were the following:
Representing 75% of the outstanding shares of Cragmet Corporation
- Henry Raufer
- James Metcalf
- Charles Cragnolin
- Inductotherm Corporation
- Henry Rowan
- Roy Ruble
- Robert Hotchkin
The above individuals representing their respective corporations met and for their mutual benefit and growth agreed to work together to improve their competitive position in the vacuum induction business and to develop Cragmet's growth in the engineering, design, fabrication, and installation field.
In order to implement the above, it is agreed that:
- Cragmet will repurchase from the minority stock holders the 75 shares outstanding among minority stockholders, leaving 225 shares divided equally between Messrs. Raufer, Metcalf, and Cragnolin, using corporate treasury funds for this repurchase.
- Cragmet will authorize 20,000 shares of stock, subject to their lawyer's approval.
- Through stock split, Messrs. Raufer, Metcalf, and Cragnolin will each own 10% of the issued shares, anticipated to be 1,000 each total.
- Inductotherm will pay $105,000 into the treasury of Cragmet and will be issued 70% of the issued shares, anticipated to be 7,000 shares.
- There will be only one class of stock.
- The relative ownership among the above parties will be changed only with the approval of 85% of the outstanding shares. No additional shares will be issued to any party without this approval.
- Each of the three above principals will agree to devote their full time and effort to advancing the products and opportunities for Cragmet and effective July 1, 1967 will be paid a salary of $20,000 per year, subject to restudy from time to time by the directors.
- The Board of Directors will consist of:
- The officers will be:
Henry Raufer President
James Metcalf Vice President and Treasurer
Charles Cragnolin Vice President and Secretary
- Inductotherm assures these gentlemen of their proper independence and autonomy in those areas that don't effect the business position or reputation of Inductotherm.
- Inductotherm will sell to Cragmet induction vacuum equipment at the normal user price, less a 10% OEM discount in those instances when Cragmet quotes directly to the customer as prime contractor. It is envisioned that customers may occasionally prefer a quotation from Inductotherm, in which case this discount will not apply, and it is possible that certain Cragmet operations sold by Inductotherm will carry a margin for Inductotherm.
- Cragmet can be available to install induction-melting equipment for Inductotherm when installation contracts are acquired. It is preferred that these be handled as separate contracts wherever possible.
- Cragmet is now a New York corporation and will establish offices convenient to its operations and at the discretion of the three above principals.
- These gentlemen may avail themselves of Inductotherm services at proper rates or they may develop their own services with regard to accounting, taxes, payroll, etc.
- The objective of all the parties is to re-establish a strong position in the vacuum induction market and to cause Cragmet to grow through the development of engineering, design, fabrication, and installation contracts and such other work as can be obtained. The parties feel that this association can strengthen the position and accelerate the growth of the Cragmet operation to the mutual benefit of all the parties.
- Inductotherm submits its good-faith check in the amount of $10,000 to the officers of Cragmet for deposit in Cragmet's account as an advance payment toward the purchase mentioned above. Agreement reached June 14, 1967.
Henry F. Raufer, President Henry M. Rowan, President
James Metcalf, VP @ Treas. Roy T. Ruble, Vice President
Charles Cragnolin, VP @ Sec. Robert F. Hotchkin, Treas.
From Rowan's book: The Fire Within, copyrighted 1995.
In 1962, (Actually early 1961) Metcalf became a competitor, signing on with John Logan as sales manager for Ajax Temescal, the vacuum melting division of Ajax Magnethermic. (Temescal was only a supplier for Ajax) Metcalf complained that Logan wasn't willing to make the commitment to vacuum melting, however, and when Ajax got out of the vacuum melting business in 1966, Metcalf formed his own furnace company with Chuck Cragnolin; they took the first syllable of each name and called their new company Cragmet.
The mid-sixties, though, were tough times for the vacuum induction market, and most of the vacuum suppliers had been floundering. It was a feast-or-famine business as the demand for the super-alloys fluctuated. If a company put together a staff of engineers to design these complex systems when sales were active, they'd lose everything they'd gained in carrying the experienced staff through the lean years. If they downsized in bad times, they'd lose their experienced staff. So, no one really had survived. We'd developed a great working relationship with Stokes Machine Company in Philadelphia, the same Stokes that had bought that first little $300, 30-pound vacuum furnace that had kept Paul and me alive back in Glenolden in 1954.
We'd also worked with other vacuum suppliers such as Consolidated Vacuum, Kinney Vacuum, Deltec, and even tiny ones such as Paul-Walp Corp. But they were all in trouble financially and most had withdrawn from the market.
Stokes took control of the furnace market from others in 1953 and showed steady growth that included the vacuum degassing equipment market. It was my pecking away at the vacuum induction market from 1961 to 1965 that reduced their share somewhat but the main decline was in the degassing market.
In 1967, though, prospects for vacuum induction melting appeared to be on the upswing. There was a new generation of wide-body jets--with bigger wings, bigger engines, and greater demands on load-bearing struts--on the drawing boards, and superalloy producers like Universal Cyclops and Allvac were stepping up their vacuum melting capacity. (It was a last chance to win this large at Cyclops that tipped the scale.)
Thus, we were elated when Jimmy Metcalf and Chuck Cragnolin called with a proposition. Their newly founded company had fallen on bad times, and they wanted to sell Cragmet to us and join us in Rancocas. (Actually we were doing just fine.) I knew Metcalf to be an enterprising guy, and to enhance our role in the vacuum induction equipment market by offering the entire package was an opportunity I couldn't pass up. Never mind the cyclic nature of the business. We'd find a way to solve that. So in 1967, Cragmet became an Inductotherm subsidiary. (Actually we sold 70% control of our stock to Inductotherm and retained independence.)
Coincidentally, at about the same time we acquired another company, Cheston, which specialized in resistance heaters for hot forming and forging, a technique derived from the techniques used in heating rivets for railroad cars. Cheston had, on its books, a big tax loss carry-forward, which Metcalf coveted. He didn't share my philosophy about taxes--that we don't really pay them, we collect them for the government--and just in case he made a profit, he was eager to have this deduction available. When he asked if Cragmet and Cheston could be merged, I gave my assent, and the two companies became one, under the Cheston name.
Rowan gets quite a bit ahead here. The above event took place several years later.
At Cragmet, just as at our other new subsidiaries, I left the founding owners in charge. After all, I reasoned, if they had known enough to build the company up to be attractive to us, chances were they knew more about their own business than we did. Once exposed to the principles that had guided Inductotherm to profitability, who knows how successful they might become?
The results weren't always what we expected. With the "successes" Jimmy Metcalf would bring us two decades later and other international repercussions, who needed failure? But more about that later.
During this time of rapid expansion and acquisition, I was often reminded of Bob Hotchkin's earlier advice. "It is not enough to be ethical. You must also associate with people who are ethical."
At the time, his advice sounded self-evident, even redundant. Since the day we opened for business in the corner of Paul Foley's little investment casting facility, Inductotherm had attracted a widely diverse group of men: hard-working shop hands, keen minded salesmen, pragmatic managers, idealistic scientists. But if there was one common denominator linking such men as Jess Cartlidge, Roy Ruble, Dick Walker, Tom Pippitt, and Ted Kennedy, it was principle. It was the awareness of their integrity, as much as my own feelings about business ethics, that, in at least that one instance with the foundry design firm, had led me to turn down the offer that would have made millions for Inductotherm.
I can't say that I consciously sought out men with principle. It wasn't as if it were a slogan, or the sort of thing we had carved over the doorway; it was the kind of thing we took for granted. Inductotherm seemed naturally to attract that kind of individual, men who sought more than a paycheck, who wanted a challenge, and whose word was their bond.
But, I was to learn that not everybody thought as we did, and I was in for some surprises.
Rowan writes about those that stuck with him over the years using glowing terms as he should, because they made him his fortunes. He writes about others in less than glowing terms. I was a competitor when Rowan finished his book in 1995, so I expected no favors. LATER in his book he hammered me in Chapter 33.