George Schafer is the founder and president of Eastern Catalytic (Eastern Manufacturing Inc.) in Langhorne, Pa. Schafer started the company in 1979 and continues to manage it as its chief executive. Over the years, George and his two brothers, Ken and Bill Schafer, also managing partners, have successfully grown the company to become a major player in the converter business and made Eastern one of the fastest-growing catalytic converter manufacturers in North America. One interesting side note, Schafer’s entry into the converter business came shortly after graduating from college, while working part time at his father’s muffler pipe shop while training for a spot on the U.S. Olympic Rowing Team. When the United States elected to boycott the Moscow Olympic Games, Schafer put away his oars and concentrated his efforts full-time on the catalytic converter business.
In addition to managing Eastern, Schafer also focuses on innovation, new product development and new venues for the company. He recently expanded the company’s overall capabilities and physical capacity to meet the increasing demand for new catalytic converter products not only in the automotive market, but also in other engine markets as well. Schafer also participates in various business and industry associations and committees.
In today’s interview, Schafer talks about the company’s recent facilities expansion in Langhorne, Pa., as well as the various factors that are contributing to the company’s growth both domestically and in export markets.
Congratulations on the recent news of your expansion in Langhorne, Pa., with the addition of a new 103,000-square-foot finished goods inventory and shipping center. Tell us about the unique system Eastern is using to create seamless workflow between the current manufacturing operations on-site and the new shipping center.
Thank you. There are many changes taking place at Eastern that will allow our growth to continue and will aid in the transition to the newly expanded facilities. We just refurbished the office space of the new building and expect to move in some key management, customer service and R&D pre-production teams before the team heads out to Vegas for AAPEX next month. Simultaneously, we are preparing the warehouse with racking, conveyer systems, bar coding equipment and a complete WiFi-enabled system that encompasses both facilities. One of the keys to the process will be a special conveyer system that will not only enable parts to travel from our production facility to our warehouse but also will be sophisticated enough to separate the finished goods that are slated for shipping from those that are being inventoried. We are currently working with one of the largest overnight carriers to assist in the design and implementation of a system that is similar to those already in use around the world at some of the most advanced shipping centers. And, to make sure that all of this works smoothly, we are launching a new ERP system that will manage all aspects of our business from production, planning, inventory, finance and CRM to HR. This will greatly change how we function internally and will give our customers the added benefits of real time inventory feeds, EDI channels, and paperless shipping and billing.
You noted in the announcement that this expansion comes as a result of strong growth for Eastern Catalytic over the past few years. To what do you attribute the recent growth in your market segment – is this a direct result of the increased emissions regulations for new vehicles?
As a company, we are very fortunate to have a very even distribution of business between our product types and customers. So, our large growth is actually a compilation of a few key factors. In the U.S., we lead the industry in application coverage for direct fit catalytic converters, and the development of new products is the vital factor here.
With the burden of parts proliferation among OE vehicles continually rising, we will need to maintain our focus on development in order to sustain our growth, and that is a very tough challenge for a private aftermarket company. Ever-increasing emissions legislation for new vehicles is forcing OEMs to engineer new emission control strategies to meet these emission requirements and still deliver fuel mileage goals. Unfortunately most, if not all of these strategies are proprietary to the OEM, so we have to keep our development process at a top priority to ensure we stay on top of these engineering changes. When we offer a new catalytic converter, we are telling our customer we guarantee our product will fit and function properly, while meeting the government emission standards for five years/50,000 miles. We wouldn’t still be growing in this business after 30-plus years if we didn’t make a product that delivers that promise.
Is this growth seen primarily in the U.S. or in the export market as well?
Our export business has also seen record growth in countries around the globe. We work with manufacturers in other countries to meet emission control legislation in their part of the world. Our years of tooling investment in various sizes of converter bodies and catalyst technology allows us to produce products that meet both cost and engineering challenges for basically any vehicle or emissions target. We have made it a priority to stay on top of legislation changes and be sure our products are certified by the regulatory agencies in specific countries so we can remain competitive. Additionally, we have been growing our OE business and now supply product to OEMs in both Egypt and Ecuador.
Tell us about the ‘ripple effect’ you are seeing in the industry as a result of increased converter service requirements and warranty claims.
As new vehicle engine control technology becomes increasingly complex, any shift in parameters outside the norm can have an impact on the exhaust stream and thereby the catalytic converter. So, as other components fail on the vehicle, their failure can damage or destroy the catalyst downstream. At times, misdiagnosis can point to the catalytic converter as the root failure when actually it was an upstream component that caused the problem.
Without identifying the real reason for the first converter failure, you are now putting the new replacement system at jeopardy as well. While the chemistry and catalytic reactions inside the catalytic converter may be very complex, the actual construction of the unit and potential to fail under improper operating conditions is rather simple. A catalytic converter has no moving parts, and in the most simplistic terms it changes one air gas into another air gas. An aftermarket converter that has obtained proper EPA approval or CA exemption, fits the intended vehicle application, is installed correctly, and is subject to a properly tuned and operating engine, will by law, meet a minimum of 25,000 or 50,000 miles or five years of proper operation.
We understand that Eastern Catalytic has embarked on a new education and training campaign as a result of the service issues that are created by this situation. What will the education and training program entail?
Eastern Catalytic and its fellow manufacturers in the aftermarket converter industry have been promoting the need for proper diagnosis prior to installing a replacement catalytic converter. Over the past few years, we have increased our training schedule and emission control seminars in an effort to assist shops around the country in learning not only the ins and outs of our products but also how they are affected by some of the other components and products used on the vehicle.
One of the most dreadful terms in our industry is the “PO420 Code.” What this OBDII code means is that there is a catalyst inefficiency reading on one of the banks of the exhaust. The reason for this “could” be the catalytic converter or literally thousands of other items. Too many times, we have seen shops simply read this code, remove the OE converter, replace it with an aftermarket converter, clear the code and allow the customer to drive away.
We can only hope that in a situation like this that the shop does NOT install our converter. Why? Because nine times out of 10, this vehicle will be back in the shop with the same code because the root cause of the problem has not been fixed. After the additional diagnosis is done and the problem is eventually corrected, someone is stuck with a damaged new aftermarket converter that neither the consumer, the shop, the parts store, nor the warehouse is willing to pay for.
So as the manufacturer, we are now put in the tough spot of either standing our ground or explaining to our customer that the shop did not diagnose the vehicle properly or process a warranty credit and lose out on the entire price of the unit. As an industry, we need to concentrate on educating the shops to diagnose the vehicle issue up front and service it properly.
In the end, this will help eliminate comebacks from the same problem and lead to a happier consumer as well as drive additional sales to all product levels.
