a homegrown leader - New York Air Brake

20 QUESTIONS
NORM JOHNSTON | NNY BUSINESS
A HOMEGROWN LEADER
N
ew York Air Brake boasts a storied
history in Northern New York, at
one point employing thousands to
manufacture train and truck brakes.
Today the firm remains a vital part
of the region’s economic landscape. On July 1,
18-year NYAB veteran Michael J. Hawthorne, a
Harrisville native, assumed the job of president.
We sat down with Mr. Hawthorne for his first indepth interview since he moved into the top post.
1
NNYB: How has the company transitioned from the
leadership of J. Paul Morgan, who was president for
more than 20 years, to a new leader? How does
that happen?
HAWTHORNE: The thing I always say in any of these
discussions is that Paul did an amazing job. I grew up
in the area, so I can remember back when Air Brake
was dominant on the landscape and really sort of split
away and at the time that Paul took over, I can remember coming in looking for a footprint in the market,
bringing in the products and we were just a licensee of
our competitor. So, he got the company back on good
footing and slowly turned it to where it became profitable, and I think the man has made at least a black
zero for the entire time he has worked here, which is
incredible given that he had to transition from old and
tired to new and modern. I spent the first part of my
career working in engineering with only peripheral access to Paul. We bought assets of a company down in
Fort Worth called Train Dynamic Systems, so I became
involved with them to cut the directorship, which was
the business lead, and that’s when I started to interact
more regularly with Paul. That became my opportunity
to learn from him and his behavior. As I got closer to
this role, we moved me into operations lead to get a
better understanding of our manufacturing floors and
all our responsibilities here and he brought me to the
board meetings, to the world meetings, to the different
elements because Knorr-Bremse is a very big company,
it’s a €4.5 billion-a-year business, and New York Air
Brake will be over $300 million this year. We’re big
but they’re giant. And, the transition was really hav-
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NNY Business | September 2012
n Michael J. Hawthorne, new NYAB
president, committed to growth, success
ing Paul make both the tactical introductions to the way
the business runs and teach me why we are structured
the way we are and then the personal introductions to
the broader business elements because of our board of
directors and our shareholders.
2
NNYB: How does a young man from Harrisville
wind up on the path that you’ve taken and leading a
major company?
HAWTHORNE: I would say most of my interest in
technology came when I started high school. We had
a very capable chemistry and physics teacher who got
a bunch of us interested in computers and at that point
I was starting to find my engineering legs and decided
Clarkson was a good place. Leadership to me is really
irrelevant of discipline. I found that in every opportunity
I’ve taken up the role of trying to organize and lead.
Going into the technical realm helps satisfy my inner
need to be designing things and building things and
then as you get the opportunity to lead people, organizations, taking that same design need and then building
a way that the organization is structured in the business
and trying to make it so it can stand on its own.
3
NNYB: From your perspective from inside the ranks
growing into the position you’re in now, how has the
Air Brake been able to manage itself through the lean
economic times while also growing its staff and maintaining profitability?
HAWTHORNE: When I was part of some of the mergers and acquisitions teams, we took some very strategic
positions to add companies. So, “New York Air Brake”
people think of as Watertown, but we have a manufacturing site in Chicago that does brake shoes; we have a
repair center in Kansas City that does both locomotive
and freight repair; Kingston, Ont., has the manufacturing site of our locomotive brakes system; Train Dynamics Systems, that’s now in Irving, Texas, does mostly
software for on-board control systems. And we have
a manufacturing facility down in North Carolina near
Charlotte. I’d say all of those have helped build the
portfolio of products from the footprint in New York Air
Brake. We are in this incredibly cyclical market and
when the industry starts to decline, people don’t build
[train] cars. Then the manufacturing floor here starts to
lose its work, so all the other products have now come
in to help to smooth out and bolster the capability of
the company. We also know, and this is with all the
humility I can muster, we have the best products. And
when you look at our products against our competitors,
we have superior products, superior technology. And
we’ve invested a lot in the engineering piece.
4
NNYB: So of all these locations, how do you play
these subordinate locations into this facility?
HAWTHORNE: We have two LLCs. ABL in Kingston, Ont., is just a stand-alone business, but they supply us. And Anchor Brake Shoe in West Chicago is
an LLC. So we can consolidate their financials into
ours, but those are two businesses that operate with
shared services from Watertown. The others are consolidated into the New York Air Brake portfolio. All
of these report up through our organization to me.
More than 800 employees.
5
NNYB: With all of these outposts in various locations,
you must travel a lot?
HAWTHORNE: Too much. I just got back from China
on Saturday. One of the things that most people probably don’t understand is that Knorr businesses are really
built around a center of competency and content. So
we have products that nobody else makes. We build,
design and control those products, but we transfer them
to our sister companies. So, we have a plant in China,
a plant in Australia, plants in South Africa and Brazil,
all of which build other products, but they build our
products as well. Not only do we benefit from having
this expanded portfolio of product development
20 QUESTIONS
just by acquisition, but we also enjoy the marketing and
sales channels from a global perspective. Again, Knorr,
they have a giant footprint, so we export a lot. That’s
been one of the big benefits, as you’ve mentioned, how
we sustained ourselves through tough economic times.
China boomed when the U.S. was starting to slide, and
that helped us tremendously.
6
NNYB: It’s not a big secret that New York, especially
since Andrew Cuomo became governor, is working to
sharpen its edge and become more business-friendly.
With respect to doing business in New York, are there
any challenges you find particularly rough?
HAWTHORNE: New York is not the best business environment. That said, Watertown has done a lot to keep
New York Air Brake here, and I think New York generally does what they can. The biggest challenge we
face is trying to convince and attract talent. Watertown
has produced some fine people, but when you go to
Clarkson and you start to query fresh-outs, there’s not a
lot of kids that want to say “Hey, I’m staying above the
Thruway” and “Watertown is a great place to meet my
wife.” When I talk to our engineering teams, our projects are a lot of fun to work on, but it can be difficult to
attract enough talent and to sustain a level of growth. I
met with Patty Ritchie and she asked the same question:
“Is there anything we can do to bring more talent into
the area that’s going to help sustain the business here?”
Some of the sites we have, say in Texas, we have a lot
of technology there. We ultimately want to be able to
flex demand into different locations, and that’s just to
continue the growth purge.
7
NNYB: Any frustrations or things that you feel New
York could do to improve, with respect to fostering
more job creation?
HAWTHORNE: The tax structure is a little bit difficult.
If we had a better tax structure, we’d be able to convince more investment. Certainly, we have a very capable work force and we don’t take that for granted.
We know we spent a lot to train them and many people
invest their careers to become capable. Union structures are often more difficult to manage than nonunion
structures. So, New York is not a right-to-work state and
we respect that but it is a more difficult challenge. I
would say as any business is faced with the challenges
of where do you manufacture, we are always defending that we can do it here better and cost-competitively
and that is a consideration of how we source our labor.
Infrastructure is always a challenge, and if you were
to put a geographic center of our customer base, even
in North America, you wouldn’t find it in Watertown.
Every one of our suppliers has to ship in, then we manufacture and produce the product, then we have to ship
out to the customer base. A weighted average would
be much more Chicago, Kansas City or even Dallas,
as those places are more central to both supply base
and customer. That’s important that even we’re not geographically advantaged in that way, we really need
to have infrastructure that allows material to flow very
easily and very capably.
8
NNYB: How difficult is staff recruiting and what types
of jobs are in most demand?
HAWTHORNE: A labor force is generally not so
hard. We find good talent. People who are willing to
come in, the hourly wages are good and attractive,
so when we have a job fair we typically have a long
line and we have a good pool to draw from. Engineering talent becomes a challenge, and in some level of business becomes a challenge. What keeps me
up at night is engineering. I need more engineers,
more design engineers and more of the technologies
like software and electronics. I need those, and I’m
having a difficult time finding them. So we’re doing
everything we can. Lockheed Martin just laid off between 50 to 100 folks, some engineers. So we go
NORM JOHNSTON | NNY BUSINESS
New York Air Brake President Michael J. Hawthorne discusses goals for his firm in his Watertown office.
to their job fairs and recruit, so we’re finding more
talent to draw from but I think it is going to become
a standard problem.
The Michael J. Hawthorne file
NNYB: That said, what has kept New York Air Brake
in Watertown for as long as it’s been, over 100 years?
AGE: 44.
9
HAWTHORNE: I think some of it is tradition; momentum keeps things where they are, unless you find reasons to move them. If I look at what we’re really good
at, our expertise, we built up a capability in Watertown
for manufacturing, again in credit to the labor force
for being as good as they are. Our engineers have
understood the historic part well, and that’s not something that’s easily moved. That is a reason to be here.
The difficult part is if we get into some of the technologies. We make freight valves. The valve of tomorrow
is unlikely to be the valve of today, so you end up with
a mechanical marvel that’s a hundred years old. It’s
incredible. Tomorrow, it’s computers and actuators and
sensors. I happen to be able to say I can get the right
talent and resources and have them work here. Again,
I come back to the resourcing issue, if I had the right
resources; Watertown is a wonderful place to do business. If I don’t find the right resources, I’ve got a challenge; I’ve got to be able to stay modern.
10
NNYB: This is a company people want to work for.
How do you foster that climate?
HAWTHORNE: I’ve gone to other manufacturing
places, even some of our manufacturing places in
other sites. Depending on what you build, it’s relatively easy to maintain a level of cleanliness, safety,
wages and benefits. Knorr-Bremse is a company
aware of what it means to have a social conscience.
It does a good job saying that the benefit package
has to be competitive but we have good health benefits, we pay a good hourly wage, the floor is clean
and we have a modern manufacturing facility and
capabilities. We are absolutely focused on safety.
If you start to compare that environment to an environment that I grew up in where paper mills were
where everyone’s dad worked, they were not a bad
business but they were dirtier, dangerous and more
difficult to sustain. I think we have a much more attractive work environment here. I’ve talked to folks
about what it’s like to be here and that seems to be
the prevalent reason.
11
NNYB: Has the Watertown Airport been a benefit for
your business?
HAWTHORNE: I’m a fairly heavy traveler and I flew
out of Watertown maybe twice in 17 years because it
JOB: President, New York Air Brake.
FAMILY: Wife, Kimberlee, cosmetologist; son,
Thomas, 20, a junior at the State University at Buffalo studying accounting; daughter, Christen, 18,
a nursing student at Le Moyne College, Syracuse.
HOMETOWN: Harrisville native.
EDUCATION: Bachelor’s degree, Clarkson
University, Potsdam; master’s degree, Rensselaer
Polytechnic Institute, Troy; master’s degree in business administration, Syracuse University.
PROFESSIONAL: 18 years at New York Air
Brake; previously worked at Raytheon, Boston.
RECOMMENDED READ: “Good to Great:
Why Some Companies Make the Leap … and
Others Don’t” by Jim Collins.
just was not useful. Since they put American Airlines service from Watertown to Chicago, I’ve probably flown
15 to 18 times in the last year. It’s great. If anybody is
looking at this as a reason to keep that flight. We use it,
and we use it a lot. They can’t reverse it. Boston is not
useful for us. Everybody goes to Chicago. I can’t speak
for other businesses but if I have friends or colleagues
that travel and there are lots of jokes about spending
time in O’Hare, you always go through O’Hare. Flying
there from Watertown, it’s beautiful.
12
NNYB: Your overseas customers helped carry you
through the recession here in the U.S. The economy
in Europe has been shaky as of late. Have you felt
any impact?
HAWTHORNE: We haven’t had a huge impact,
mostly because of the business segments we serve.
Knorr-Bremse has two big legs, one is commercial
vehicles, which is trucks and buses, and the other is
rail. We’re clearly on the rail side. In rail you have
two big legs, passenger and freight. And we are in
freight. If you look at freight, we are typically considered more heavy hauling. Trains in North America are
big, long, heavy and hard to run; they don’t go that
fast. Europe typically has small freight trains and their
brake systems are closer to what we would consider
a passenger brake. Because NYAB is on the freight
side, we aren’t necessarily impacted. Knorr-Bremse
has felt the economic blows in Europe. But NYAB has
not, not so far. We benefit from the commodities
September 2012 | NNY Business
| 41
20 QUESTIONS
booms. The reason we went to Australia was because
they are slowly exporting their country. Iron ore has
gone out of there ship upon ship and the railroads are
the means to move that. That hasn’t been immune but
hasn’t had the impact that the European economies
have felt.
13
NNYB: As gas and diesel prices increase, does that
affect the demand for things being moved by rail rather than by truck?
HAWTHORNE: We see that. We feel it indirectly because when you start to look at energy prices for transportation, the more traffic that was marginal on a truck
becomes attractive for rail. There is more and more
demand and if you look at a railroad’s financial statements, they’re taking advantage of it. Oil and gas and
exploration and delivery has produced a lot of demand
for rail. We shed a tear when we go to the pump, but
we know the higher energy prices are the more attractive rail looks and more in demand our products are.
14
NNYB: Is the rail infrastructure in the U.S. in fairly
good shape?
HAWTHORNE: There are a lot of studies done, what I
would get behind is the growth patterns and rates we’re
seeing with the expectation of what rail could be. They
will not be able to build enough tracks to manage the
capacity demands they expect. In lieu of having more
infrastructure, they’re investing in technology to move
trains safety. Safely move the trains closer together, get
braking distances down, which is a big role, we will
have more capacity in the same infrastructure. It’s difficult to get permissions to build more tracks, double
and triple tracks areas are where they find permission
to do that, but the corridors are somewhat fixed. What
you’re going to find is railroads will say, ‘How do we
get more trains in the same territories and safely?’ That
really benefits us because our technology product lends
itself to that strategic approach.
where our headquarters are, into the local community.
The people that live in the area are always willing to
open their hearts to get help when they need help.
15
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18
NNYB: Are you in a position where you see growth
in the future?
HAWTHORNE: It’s going to be a balance. We are
intending on our clients calling for investment and seeing staff up for new products and services. I have strong
goals for growing salaried staff, but engineering is the
bottle neck. Hourly labor force will flex in and out. We
do everything we can to sustain people but we will follow the economic cycles. We are doing well and we
hopefully will see sustained level of demand, but it is
starting to soften. We will have more people working on
new developments to bring products and services forward. Manufacturing will probably wane a bit but will
pick back up when the next cycle is on the upswing.
NNYB: The north country community is very charitable. What kinds of philanthropic efforts is Air Brake
involved in?
HAWTHORNE: We are big supporters of the United
Way. We take an active role to support them directly
through the business and in the work force. We at least
are aware of the opportunity and we do a lot of matching. We have an open policy for employees that have
charitable causes we have to screen them, of course,
but they make a contribution, we match it. We try to
encourage charitable behaviors that we think are important in the community. We typically try to have some
participation on boards and pay back to the community. The gentleman that owns the company is a very
generous man. He recognizes that his success in any
community around the world is tied to how the business
is perceived. Trying to pull cash and profits out of a
community is not a sustainable strategy. I am always
impressed by how much support we get out of Munich,
NNYB: How did an engineering background prepare you to lead in management?
HAWTHORNE: I find in engineering we are especially
good at analysis. You are learning how to take a problem, analyze, make a set of solutions and determine
what solve the problem best. When you move into the
business realm, I find there are a lot of similarities. Taking a business, like Train Dynamic Systems for example,
you have to have a concept so you understand the
problem and develop the concepts, do the analysis and
gauge which solves it best and inevitably in that you
find you’re wrong, turn the loop and try and improve on
it. The engineering concept of a design from concept to
reality is very much the same as a business.
NNYB: What makes for a great leader today?
HAWTHORNE: We have had a lot of discussions
lately on what makes a great leader. A great leader
needs a vision and needs to be able to communicate
and articulate that vision. If you can’t ask the teams to
do something specific, you don’t have a chance. You
have to have the vision and a way to communicate it
and subordinate yourself. I found ascending into different leadership roles that your job becomes less and
less solving the problem and more eliminating barriers
that are limiting other people from solving the problem.
You have to hold the organization up and you have to
be critical and do the bad stuff; you have to tell people
they aren’t doing a good job. You have to hold it up
and say ‘This is where we want to be and why we
want to be there. I’m going to do everything I can do to
make you successful and get barriers out of your way
and make sure you have the right funding and assets.’
I think a leader’s role then becomes subordinated to
making sure the rest of the plan is being met.
19
NNYB: What do you do to unwind?
HAWTHORNE: There are a couple of things I really enjoy. My kids, aside from being teenagers, they do offer
some level of relief. They’re both great kids. I like weight
training, I run a bit and martial arts. I do things that I
build. I have gotten back into reading. Now with the
iPad I don’t have to carry around tons of books. Unwinding for me is letting go of the day and doing something
else. I think it’s an important part of being healthy to
sever from work. It’s not a criticism of the team here, they
are more than capable of operating without me. But it’s
my need to cover all the bases. I think part of it is being
new to the job. Some of it is just my drive. I have my
iPhone or Blackberry far too often. I don’t necessarily
want to disconnect entirely. But I do recommend time to
pull back and get yourself out of that mindset.
20
NNYB: If you had a wish list at this point of improvements or where you’d like to be five years from now in
this organization, what would be on it?
HAWTHORNE: We need to keep growing and I’d
like to find the ability to design products, manufacture
products and deliver services to be better and more flexible. As we develop next-generation product, where do
we take it? Where do we move it? How do we get it
online? I want to find that we’re a more agile organization, going faster to market and move the product
forward. I think every leader wants that. We have good
plans to increase our velocity. In five years I’d like to see
the $300 million a year grow by 50 percent. We will
have to sell different things. We want to leverage every
aspect of our business. We want to grow the job base
here; we want to find the NYAB is a premier employer in
manufacturing direct line and salaried staff. I would love
to see that NYAB footprint grow in the Watertown area.
— Interview by Ken Eysaman. Edited for length
and clarity.
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NNY Business | September 2012