A friend of mine who was going to Dayton did us a favor by visiting the plant last week:
Landstar Plant Visit
Dayton Ohio
27 May 1999
On 27 May 1999, I was able to visit the Landstar facility in Dayton, Ohio. Michael Pinch gave me a tour of the facility and answered questions for about 3 hours.
Short Term Goal
The short-term goal of the company is to complete a small production facility. This facility will then be used to show potential customers that Landstar can provide a good product of consistent quality. It is also to be used to provide real evidence that the production process is capable of providing the necessary amount of processed material for a consistent supply thus proving that they are capable of being a long-term supplier.
Plant and Equipment
As of 27 May, only some of the equipment needed was at the plant. The following is a list of the equipment needed for the production process as well as its location:
In Dayton Plant
1. Tensile Tester
2. 50 ton press (vulcanizer)
3. Pelletizer
4. 8 ton scale
5. 150 Liter Henchel mixer (spelling on brand name?)
With Equipment Supplier in Akron
1. 500 Liter cooler
2. 4 foot Lab mill
3. Augers
4. Bagging machine
5. 3000 lb. Hopper
6. Feeding and dispersing equipment
7. Rheometer
Also in inventory in Dayton as of 27 May:
1. Approximately 10 barrels of the chemical mixture, imported from China. (Enough to process 30 tons of rubber.)
2. 25 tons of powdered rubber processed in China and imported from there.
3. One electric forklift with battery and charger.
Process
The entire production process is very simple and is designed to be a continuous flow. The following are the steps in the production process:
Materials required:
1. Tires ground into small pieces.
2. The special chemical mixture that “reactivates” the rubber.
a) Currently, they have enough chemical mixture to begin production.
b) They will be producing the chemical mixture in Dayton.
c) Mike is one of the few people who know the exact formula of the chemical mixture.
Production Steps:
1. The ground tires are placed into a hopper.
2. The chemical mixture is placed into a feeding machine.
3. The hopper and feeding machine transfer the material in measured amounts to the mixer.
4. The material is thoroughly mixed at high temperatures for 5 minutes and is then feed via augers to a cooler. (When the material leaves the mixer it is a state similar to a “mud” form.)
5. After the material is cooled it is in a powder state and is fed to a bagging machine.
6. The bagging machine then places the material in 50 lb. bags for storage or shipment.
Byproducts of the Production Process
The only byproduct of the production process is water that is slightly acidic. Apparently, Landstar will be able to dump the water into the city sewage system without having to clean or treat it.
Production Levels
In reviewing my notes, Mike Pinch gave me two different production levels with the initial amount of equipment. At one point he said they expect to have a production capacity of 700 lbs./hr, and at another point he mentioned 10 tons per day. 700 lbs./hr on an 8 hour shift is equal to about 2.5 tons per day. I would need to contact Mike again to clarify the difference.
Financial Aspects
1. The amount of investment the company is making to make the plant functional at a demonstration level (as described above in goals) is US$250,000 to US$300,000. (In my opinion, this amount of money would be consistent with the equipment they have acquired.)
2. Landstar expects to sell the Activated Modified Rubber at about US$0.35 per lbs. or US$700 per ton.
3. At the 2.5 ton per day level this would amount to about sales of US$1,750 per day. That being said, the current level of production is solely to prove to potential customers that the system and product work. With only the purchase of a 500 L mixer, Landstar could triple production per shift and if they ran two shifts they could increase by 6 times the amount of product they could produce in that one building with out changing any of the other equipment. This would mean production of US$10,500 worth of product per day (or about US$3 million per year). (All of this is assuming that they do not get any of the really big rubber users interested. All of the sales calculations are my own and were not discussed during the visit.)
Dayton Personnel
Landstar feels that they will be able to run the Dayton plant with only 4 people.
1 Plant manager (they say they have an add in the paper already for this person)
1 Accounting/administrative person
2 Plant personnel to handle the process
In the future they will need to add a chemist and others depending on growth.
License
Landstar owns an exclusive license to produce and sell in North America. They own the license outright, and made a single, lump-sum payment for this license. They do not owe any future royalties to the Chinese for their production or sale of this technology. The contract does not have an expiry date on it, so the Chinese cannot fail to renew their contract because it does not expire.
Mike feels that Landstar will need to continue working closely with the Chinese as they continue perfecting and improving the processes and products. Apparently, Landstar is keeping in very close contact with the Chinese developers of the product.
Potential Customers
According to Mike, Landstar has had contact with many different companies concerning their product, but Landstar has not had any contact with any of the tire companies. There are two companies that are located in Dayton with whom Landstar has had many discussions and these companies are interested in seeing production and product in the US and not China. One of these companies could use 50 tons per day of the AMR (US$35,000 per day). Mike would not say who they were but he did say that the largest user of rubber in the world is the automobile industry.
Mike believes that contact with the tire industry would come only after significant production in the US. He feels that with all of the safety concerns the tire industry will want to extensively test the product before using it.
Testing and Use
As mentioned elsewhere, the AMR processed in China has been tested in the Akron Rubber Development Lab. Currently, the production in China is small scale but it has been used as raw material for some tires among other things. The production in China has been using ground Chinese tires and the AMR from those tires has been used for making new Chinese specification tires. The Chinese specification tires are bias-ply, and have been made with between 10% and 35% AMR.
Landstar has shipped ground North American specification radials to China and have processed the material. Apparently, the results of this testing were positive. Mike also believes that there is no reason why AMR could not be used in the manufacture of North American specification radials.
Mike also said that any product that uses rubber could use AMR in the production process. One product he mentioned specifically was the back of car floor mats.
Observations
1. Mike seemed to be a down-to-earth honest guy.
2. Mike seems to honestly have learned a lot about the product and does not “put on a show”.
3. Mike really believes in the potential of this product.
4. Mike is staying in a decent but budgeted hotel and he eats at special hotel functions. In other words he is not out spending a lot of money put up by unsuspecting shareholders.
5. Mike believes that within four or five years a different company will develop a similar process and so Landstar will need to continue working with the Chinese in perfecting and improving the product and process. This shows that Mike is not just dreaming but has a sense of reality in the limitations of the market. It also shows that he is looking to the future.
Conclusion
From the current state of the plant in Dayton it was not possible to conclusively say that Landstar can produce Activated Modified Rubber on site. Without seeing any of the test results on AMR it is not possible for me to state that it will do what Landstar says that it will do. I believe that Mike Pinch is a sincere person who is working very hard to get Landstar going. Mike has no doubts that AMR will be a product that will have a large market. It will be a large market even if the tire companies do not become customers.
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