YSD INDUSTRIES New owner makes changes toward greater efficiency

The new owner expects to add at least $5 million in annual sales to YSD.
BY DON SHILLING
VINDICATOR BUSINESS EDITOR
AUSTINTOWN -- The Canadian company that bought YSD Industries thinks it has the formula for success for the troubled plant -- better work flow, fewer workers and new health insurance.
Mike Kohut, president of Global Railway Industries, said the Henricks Road plant was weighed down by several problems that are being resolved as his company takes over operations. Cost savings amount to $3.2 million a year.
First, the plant had a poorly designed work flow for its production of rail car parts, he said.
"The work flow zigzagged, and things were picked up 15 different times during the day," he said.
That has been changed to be a continuous assembly line operation, he said.
Second, the number of workers has been reduced.
The plant had been staffed for sales of $40 million a year, which is what the company did four years ago, Kohut said. More recently, YSD has had $15 million a year in sales.
Under Global Railway, the plant has 85 workers, including 67 hourly workers represented by United Steelworkers of America Local 2310. Kohut said Global Railway has accepted an existing contract with the union.
Last year, YSD had 230 workers, though that number had been cut to 120 by March, when Global Railway announced it was interested in the plant.
Insurance changes
The third major change is related to health-care insurance. One reason YSD was struggling financially was that its health-care costs had nearly tripled over the past couple of years, Kohut said.
YSD had been self-insured and had been required to pay some large bills. Global Railway has changed to a traditional third-party insurer. YSD now has a set monthly amount that it pays for health care, which has lowered costs and will improve its budgeting process, Kohut said.
In announcing Tuesday that it had acquired YSD assets for $2 million, Global Railway said that it will make YSD profitable and that YSD operations will add to its earnings in three to six months. YSD said in January that it was suffering substantial losses and might close.
Kohut said that new competition in the industry will prevent YSD from reaching $40 million in annual sales in the near future, but that he thinks it can reach sales of $20 million to $25 million.
"We are going to apply money. We are going to apply people. We are going to apply processes to get YSD back to where it should be," he said.
Seeking tax abatement
Global Railway officials are working on a tax abatement for undetermined investments in new equipment for the plant, said Walter Good, manager of business attraction for the Youngstown/Warren Regional Chamber. They also have applied to the state for a grant to cover worker training, he said.
Kohut said YSD will be a key part of the company's expansion in the U.S. market for rail car parts. About 75 percent of the Global Railway's $33 million in annual sales comes from U.S. companies, but Global Railway needs another plant to increase those sales, he said.
The Calgary-based company has four plants that make rail car parts -- three in Canada and one in Berwick, Pa. -- but they don't have the capacity for additional business, he said.
Global Railway had 180 employees before this acquisition. YSD will operate as a wholly owned subsidiary of Global Railway.
The key product for YSD are plug doors, which are doors for boxcars that seal to protect contents from bad weather. It also will be producing other types of sliding doors and roofs for rail cars.
Industry improving
The timing is right for the purchase because the rail car industry is improving, Kohut said. Carriers had cut spending in recent years because of the slow economy, but now they are increasing spending on new cars, he said.
Global Railway estimates that 35,000 to 40,000 new rail cars will be built this year, compared with 18,000 last year.
Kohut said the senior management team, which bought YSD from an investment company in 1988, is no longer part of the company but each member has a one-year consulting contract and will be called as needed. Jerry Hines, a past president of a rail welding company in New Jersey, will begin Monday as president of YSD.
shilling@vindy.com