CORPORATIONS: Aluminum Bright Spot

Reading his newspaper one morning recently, Lawrence A. Harvey, 48, chairman of the West Coast’s Harvey Aluminum Inc. noticed a story that a competitor was about to make a big sale of aluminum to a new customer. With only 2% of U.S. aluminum output, Lawrence Harvey has to scramble fast to compete against the giants. He grabbed his telephone, learned the contract had indeed been agreed upon, but was not yet signed. He summoned a family conference in the company’s executive suite: Father Leo M. Harvey, 75, company president; Uncle Herbert Harvey, 65, engineering vice president; and Brother Homer M. Harvey, 36, administrative vice president. Together they quickly decided what price they could offer the buyer. By that afternoon the deal was signed—with Harvey Aluminum, not the competitor.

Such tactics, backstopped by one of the most efficient aluminum plants in the world, have made Harvey Aluminum the bright spot this year in a generally tarnished-profit industry. Aluminum’s Big Three (Alcoa, Kaiser and Reynolds) are operating at an average of 83% capacity, and profits are down in the cost-price squeeze. Harvey has been operating at 100% capacity all year, this week reported record profits of $5,000,000 for the fiscal year ending Sept. 30, despite the fact that sales slipped 1.1% to $59.7 million.

The Family Went Along. Harvey Aluminum is an outgrowth of the Harvey Machine Co., which was founded by Leo Harvey in Los Angeles in 1914. At the start, it made everything from corsage pins to racing cars. Later it turned to making special machinery, and by World War II was the biggest such manufacturer on the West Coast. Young Lawrence had learned metalworking on vacations in his father’s shop, had rushed through the University of Southern California, the California bar exams and Harvard Business School by the time he was 22. In 1946 he cut loose from the family circle to buy a war-surplus aluminum-extrusion plant in Torrance, Calif. He soon persuaded the rest of the family to go along, and the Harvey Machine Co.’s equipment was sold at public auction to finance refurbishing of the Torrance plant.

The young company’s biggest problem was assuring a steady flow of raw aluminum for its fabricating plant. In 1955 that problem was solved when the Government, which wanted to increase aluminum capacity outside the Big Three, guaranteed a $40 million bank loan to Harvey. To assure Harvey a market, the Government also agreed to buy up to 54,000 tons a year for five years, beginning in 1959, of Harvey’s primary aluminum output for U.S. strategic stockpiles. Since the reduction plant’s capacity is only 60,000 tons a year, this was a healthy demand-cushion for Harvey. In 1959 the company asked the U.S. to buy only 19,500 tons, this year will offer only 12,000 tons.

The Small Asset. Like other aluminum companies, Harvey prods manufacturers into finding new uses for aluminum. When a truck manufacturer scoffed at the idea of aluminum truck beds, Harvey helped build some to prove the point. Today 85% of all truck beds and semitrailers are aluminum, v. the 85% once made of steel. To show railroad skeptics, Harvey recently had built an all-aluminum 85-ft. railroad car, now has constant requests for its use, hopes orders will follow.

Because it is comparatively small, the company is able to shift production easily, concentrate on producing the aluminum products most in demand. Though Harvey has thus made an asset of its smallness, it does not intend to stay small. Last summer it sold its first public stock issue of 750,000 shares of Class A common (some 4,000,000 shares of Class B stock are held by the Harvey family), raised $15 million to help expand its reduction capacity by 25% and double its fabricating capacity to 60,000 tons.