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Air Industries, growing through deals, seeks ‘culture shift’

Air Industries Group CEO Daniel R. Godin, left,

Air Industries Group CEO Daniel R. Godin, left, and chairman Michael Taglich on June 21, 2016, during a tour through the air intakes that the Hauppauge-based company produces for Blackhawk helicopters. Credit: Newsday / John Paraskevas

Daniel R. Godin, chief executive of Hauppauge-based aerospace contractor Air Industries Group for a year and a half, is trying to weld eight subsidiaries at six domestic operating sites into a company that is more than the sum of its parts.

“We’re not mom and pop anymore,” Godin, 54, said in a recent interview. “We’re institutionalizing the businesses.”

The defense contractor’s roughly 400 employees supply advanced welding services, turbine engine components, aerostructure assemblies, air-to-air refueling systems and landing gear for aircraft including the F-16 Fighting Falcon, the carrier-based F-18 Hornet, the F-15 Eagle and the E2D Hawkeye.

Air Industries is growing by buying up family-owned aerospace companies on Long Island — often run by Grumman veterans approaching retirement age — and stitching them together into a single, more cohesive company.

The publicly traded company posted a 25 percent increase in revenue in 2015, to $80.4 million. It estimates 2016 revenue at $85 million to $90 million and has set a goal of breaking $200 million by 2019.

Some of the companies Air Industries has bought include: Hauppauge-based Welding Metallurgy, a maker of structural and welded assemblies acquired in 2007; West Babylon-based Nassau Tool Works, a maker of landing gear acquired in 2012, and Barkhamsted, Connecticut-based Sterling Engineering, a maker of components for jet- and ground-turbine engines acquired in 2015.

Godin’s efforts to overlay a unified corporate culture on the company’s disparate operating units sometimes spark resistance among employees accustomed to more casual ways.

“There’s a bit of, ‘Are you kidding me? You want me to fill out this spreadsheet, too?’ ” said Godin, a 21-year veteran of United Technologies’ Pratt & Whitney aircraft engines division. The company’s operating units are “not used to being formal in their approach and being rolled up into a bigger organization,” he said.

The company is also seeking additional government assistance in cutting its electricity costs. The company’s chairman and largest investor, Michael Taglich, won’t rule out the possibility of moving some manufacturing operations, or even the company’s headquarters, off Long Island. The company’s talks with officials on Long Island and out of state are ongoing.

Installing a new corporate culture in a company where operating units were accustomed to autonomy can be challenging, said Jamie Moore, chairman and president of ADDAPT, a regional manufacturing advocacy group.

“I think Dan is doing the right thing. It’s a painful process, but in the long run, you have a stronger entity,” Moore said.

The number of aerospace jobs on Long Island has shrunk since the Reagan administration’s defense buildup in the 1980s, when Long Island’s defense industry boomed. Bethpage-based Grumman Corp. employed 25,000 people on Long Island at its peak in 1986, and the industry overall employed as many as 80,000 people.

In 1994, defense cutbacks forced the industry to consolidate nationwide, and Northrop Corp. bought Grumman for $2.2 billion.

But while Grumman faded, many of its veteran employees created their own businesses. The region now has about 450 aerospace and defense companies that employ about 20,000 people, according to ADDAPT. Most of those firms, ADDAPT estimates, employ fewer than 100 people.

Air Industries Machining was launched in 1979 when Louis Peragallo and Nicholas Kemeny joined their parts businesses and located the combined company in Deer Park and then Bay Shore. The company was part of an ecosystem of small companies that supplied prime contractors such as Grumman, and Sikorsky Aircraft, in Stratford, Connecticut.

Air Industries’ ambitions grew with the arrival in December 1994 of Godin’s predecessor, Peter Rettaliata, who had risen from summer college worker to become Grumman’s senior procurement officer. Rettaliata bought out Kemeny’s stake in Air Industries within about six months of arriving, and began trying to shift the company from making basic structural parts, such as landing gear pistons and housings, to more complex products like complete landing gears.

In 2005, Rettaliata took Air Industries public. Access to public capital markets provided fuel for Rettaliata’s effort to grow the business by rolling up smaller private companies.

One of the first acquisitions was Welding Metallurgy. That transaction set a pattern for future deals because the owner was a former Grumman employee who was nearing retirement age and wanted to sell.

A string of similar acquisitions followed.

Rettaliata, who remains a board member, said that the company got into a financial bind when the stock market went into a tailspin in 2008 and the U.S. economy slumped into a recession.

In 2008, the company swung to a net loss of $10.5 million, including write-offs related to the acquisitions, after posting a $233,800 profit the prior year.

On Sept. 22, 2008, the board appointed Taglich as chairman. He is chief executive of Taglich Brothers, a Manhattan brokerage with an affiliated private equity arm. He invested capital and pushed to refocus the company, which abandoned an effort to buy Blair-HSM and sold Sigma Metals, a recent acquisition, back to its original owners.

Taglich, 50, now owns 8.8 percent of the company’s common stock, according to a July 8 government filing.

Rettaliata continued as president and chief executive. But in 2013, Rettaliata said, he told the board of directors that it was time he was replaced with a manager who came from a culture that relied on “metrics,” or data-based measurements intended to improve corporate performance.

Rettaliata retired as president and chief executive on Dec. 31, 2014, and Godin joined Air Industries as president and CEO Jan. 1, 2015.

Now Godin said he is pushing for a “shift in culture.” He and his business development team are working to drum up new customers — a change for some of the companies that once relied on a single customer such as Northrop Grumman.

“A lot of our companies would just wait for the phone to ring,” Godin said.

Godin sees strong growth in turbines and engines, which account for less than 20 percent of revenue, and in aerostructures and complex machining.

Landing gear, particularly those on carrier-based aircraft, are constantly in demand, Godin said.

“Think about it,” he said. “The F-18 [makes] a controlled crash-landing. This thing slams on the deck.”

The company took a step into the global market in June when it announced an agreement to locate an advanced welding facility within a new plant built for Cincinnati-based Meyer Tool Inc. in Kalisz, Poland.

Godin sees further opportunity in allied nations that buy U.S. warplanes. The company earlier this month attended the Farnborough International Airshow outside London for the first time, to meet potential customers.

“There’s 140 F-18s in Australia,” Godin said. “Why aren’t we selling parts in Australia?”

Although the company continues to sift through potential Long Island acquisitions, it also has an eye on southern states to save on electricity and rent and to get closer to production facilities of customers such as GE, Boeing and Northrop Grumman.

Godin said that ideally the company could scale up employment on Long Island, while also adding new production facilities in Florida, Georgia or South Carolina. Godin said he has held talks with government officials from all three states.

Air Industries receives 650 kilowatts of blended hydro and market-rate electricity under a seven-year contract that started in 2012 through the state’s Recharge New York program, a New York Power Authority spokesman said.

Still, Taglich said the company remains at “competitive disadvantage” because the marginal cost of industrial-rate electricity in South Carolina is about one-third the price on Long Island.

The Northport High School graduate said he loves Long Island, but would not hesitate to make moves.

“Some jobs will ultimately be moved off Long Island if we don’t get cheaper electricity,” he said.

Taglich said that the corporate headquarters would remain on Long Island “for the time being,” but nothing is etched in stone.

“Long Island is just a place in America,” he said.

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