20 QUESTIONS

NORM JOHNSTON | NNY BUSINESS A HOMEGROWN LEADER ew York Air boasts a storied history in Northern New York, at n Michael J. Hawthorne, new NYAB one point employing thousands to manufacture train and truck . president, committed to growth, success Today the firm remains a vital part Nof the region’s economic landscape. On July 1, ing Paul make both the tactical introductions to the way a manufacturing facility down in North Carolina near 18-year NYAB veteran Michael J. Hawthorne, a the business runs and teach me why we are structured Charlotte. I’d say all of those have helped build the Harrisville native, assumed the job of president. the way we are and then the personal introductions to portfolio of products from the footprint in New York Air the broader business elements because of our board of Brake. We are in this incredibly cyclical market and We sat down with Mr. Hawthorne for his first in- directors and our shareholders. when the industry starts to decline, people don’t build depth interview since he moved into the top post. [train] cars. Then the manufacturing floor here starts to NNYB: How does a young man from Harrisville lose its work, so all the other products have now come wind up on the path that you’ve taken and leading a NNYB: How has the company transitioned from the in to help to smooth out and bolster the capability of major company? leadership of J. Paul Morgan, who was president for the company. We also know, and this is with all the more than 20 years, to a new leader? How does HAWTHORNE: I would say most of my interest in humility I can muster, we have the best products. And that happen? 2technology came when I started high school. We had when you look at our products against our competitors, 1HAWTHORNE: The thing I always say in any of these a very capable chemistry and physics teacher who got we have superior products, superior technology. And discussions is that Paul did an amazing job. I grew up a bunch of us interested in computers and at that point we’ve invested a lot in the engineering piece.

in the area, so I can remember back when I was starting to find my engineering legs and decided NNYB: So of all these locations, how do you play was dominant on the landscape and really sort of split Clarkson was a good place. Leadership to me is really these subordinate locations into this facility? away and at the time that Paul took over, I can remem- irrelevant of discipline. I found that in every opportunity ber coming in looking for a footprint in the market, I’ve taken up the role of trying to organize and lead. HAWTHORNE: We have two LLCs. ABL in Kings- bringing in the products and we were just a licensee of Going into the technical realm helps satisfy my inner ton, Ont., is just a stand-alone business, but they sup- need to be designing things and building things and 4ply us. And Anchor Brake Shoe in West Chicago is our competitor. So, he got the company back on good footing and slowly turned it to where it became profit- then as you get the opportunity to lead people, organi- an LLC. So we can consolidate their financials into able, and I think the man has made at least a black zations, taking that same design need and then building ours, but those are two businesses that operate with zero for the entire time he has worked here, which is a way that the organization is structured in the business shared services from Watertown. The others are con- incredible given that he had to transition from old and and trying to make it so it can stand on its own. solidated into the New York Air Brake portfolio. All

tired to new and modern. I spent the first part of my of these report up through our organization to me. NNYB: From your perspective from inside the ranks career working in engineering with only peripheral ac- More than 800 employees. growing into the position you’re in now, how has the cess to Paul. We bought assets of a company down in Air Brake been able to manage itself through the lean NNYB: With all of these outposts in various locations, Fort Worth called Train Dynamic Systems, so I became economic times while also growing its staff and main- you must travel a lot? involved with them to cut the directorship, which was 3 taining profitability? HAWTHORNE: Too much. I just got back from China the business lead, and that’s when I started to interact more regularly with Paul. That became my opportunity HAWTHORNE: When I was part of some of the merg- 5on Saturday. One of the things that most people prob- to learn from him and his behavior. As I got closer to ers and acquisitions teams, we took some very strategic ably don’t understand is that Knorr businesses are really this role, we moved me into operations lead to get a positions to add companies. So, “New York Air Brake” built around a center of competency and content. So better understanding of our manufacturing floors and people think of as Watertown, but we have a manufac- we have products that nobody else makes. We build, all our responsibilities here and he brought me to the turing site in Chicago that does brake shoes; we have a design and control those products, but we transfer them board meetings, to the world meetings, to the different repair center in Kansas City that does both to our sister companies. So, we have a plant in China, elements because Knorr-Bremse is a very big company, and freight repair; Kingston, Ont., has the manufactur- a plant in Australia, plants in South Africa and Brazil, it’s a €4.5 billion-a-year business, and New York Air ing site of our locomotive brakes system; Train Dynam- all of which build other products, but they build our Brake will be over $300 million this year. We’re big ics Systems, that’s now in Irving, Texas, does mostly products as well. Not only do we benefit from having but they’re giant. And, the transition was really hav- software for on-board control systems. And we have this expanded portfolio of product development

40 | NNY Business | September 2012 20 QUESTIONS

just by acquisition, but we also enjoy the marketing and sales channels from a global perspective. Again, Knorr, they have a giant footprint, so we export a lot. That’s been one of the big benefits, as you’ve mentioned, how we sustained ourselves through tough economic times. China boomed when the U.S. was starting to slide, and that helped us tremendously.

NNYB: It’s not a big secret that New York, especially since Andrew Cuomo became governor, is working to sharpen its edge and become more business-friendly. With respect to doing business in New York, are there 6 any challenges you find particularly rough? HAWTHORNE: New York is not the best business en- vironment. That said, Watertown has done a lot to keep New York Air Brake here, and I think New York gen- erally does what they can. The biggest challenge we face is trying to convince and attract talent. Watertown has produced some fine people, but when you go to Clarkson and you start to query fresh-outs, there’s not a lot of kids that want to say “Hey, I’m staying above the Thruway” and “Watertown is a great place to meet my wife.” When I talk to our engineering teams, our proj- NORM JOHNSTON | NNY BUSINESS ects are a lot of fun to work on, but it can be difficult to New York Air Brake President Michael J. Hawthorne discusses goals for his firm in his Watertown office. attract enough talent and to sustain a level of growth. I met with Patty Ritchie and she asked the same question: to their job fairs and recruit, so we’re finding more “Is there anything we can do to bring more talent into talent to draw from but I think it is going to become the area that’s going to help sustain the business here?” a standard problem. The Michael J. Hawthorne file

Some of the sites we have, say in Texas, we have a lot JOB: President, New York Air Brake. NNYB: That said, what has kept New York Air Brake of technology there. We ultimately want to be able to in Watertown for as long as it’s been, over 100 years? AGE: 44. flex demand into different locations, and that’s just to continue the growth purge. HAWTHORNE: I think some of it is tradition; momen- FAMILY: Wife, Kimberlee, cosmetologist; son, tum keeps things where they are, unless you find rea- Thomas, 20, a junior at the State University at Buf- NNYB: Any frustrations or things that you feel New 9 falo studying accounting; daughter, Christen, 18, sons to move them. If I look at what we’re really good York could do to improve, with respect to fostering at, our expertise, we built up a capability in Watertown a nursing student at Le Moyne College, Syracuse. more job creation? for manufacturing, again in credit to the labor force HOMETOWN: Harrisville native. HAWTHORNE: The tax structure is a little bit difficult. for being as good as they are. Our engineers have EDUCATION: Bachelor’s degree, Clarkson 7If we had a better tax structure, we’d be able to con- understood the historic part well, and that’s not some- vince more investment. Certainly, we have a very ca- University, Potsdam; master’s degree, Rensselaer thing that’s easily moved. That is a reason to be here. Polytechnic Institute, Troy; master’s degree in busi- pable work force and we don’t take that for granted. The difficult part is if we get into some of the technolo- ness administration, Syracuse University. We know we spent a lot to train them and many people gies. We make freight valves. The valve of tomorrow invest their careers to become capable. Union struc- is unlikely to be the valve of today, so you end up with PROFESSIONAL: 18 years at New York Air tures are often more difficult to manage than nonunion a mechanical marvel that’s a hundred years old. It’s Brake; previously worked at Raytheon, Boston. structures. So, New York is not a right-to-work state and incredible. Tomorrow, it’s computers and actuators and RECOMMENDED READ: “Good to Great: we respect that but it is a more difficult challenge. I sensors. I happen to be able to say I can get the right Why Some Companies Make the Leap … and would say as any business is faced with the challenges talent and resources and have them work here. Again, Others Don’t” by Jim Collins. of where do you manufacture, we are always defend- I come back to the resourcing issue, if I had the right ing that we can do it here better and cost-competitively resources; Watertown is a wonderful place to do busi- just was not useful. Since they put American Airlines ser- and that is a consideration of how we source our labor. ness. If I don’t find the right resources, I’ve got a chal- vice from Watertown to Chicago, I’ve probably flown Infrastructure is always a challenge, and if you were lenge; I’ve got to be able to stay modern. 15 to 18 times in the last year. It’s great. If anybody is to put a geographic center of our customer base, even looking at this as a reason to keep that flight. We use it, in North America, you wouldn’t find it in Watertown. NNYB: This is a company people want to work for. and we use it a lot. They can’t reverse it. Boston is not Every one of our suppliers has to ship in, then we manu- How do you foster that climate? useful for us. Everybody goes to Chicago. I can’t speak facture and produce the product, then we have to ship HAWTHORNE: I’ve gone to other manufacturing for other businesses but if I have friends or colleagues out to the customer base. A weighted average would places, even some of our manufacturing places in that travel and there are lots of jokes about spending be much more Chicago, Kansas City or even Dallas, 10other sites. Depending on what you build, it’s rela- time in O’Hare, you always go through O’Hare. Flying as those places are more central to both supply base tively easy to maintain a level of cleanliness, safety, there from Watertown, it’s beautiful. and customer. That’s important that even we’re not geo- wages and benefits. Knorr-Bremse is a company graphically advantaged in that way, we really need aware of what it means to have a social conscience. NNYB: Your overseas customers helped carry you to have infrastructure that allows material to flow very It does a good job saying that the benefit package through the recession here in the U.S. The economy easily and very capably. has to be competitive but we have good health ben- in Europe has been shaky as of late. Have you felt NNYB: How difficult is staff recruiting and what types efits, we pay a good hourly wage, the floor is clean any impact? and we have a modern manufacturing facility and 12HAWTHORNE: We haven’t had a huge impact, of jobs are in most demand? capabilities. We are absolutely focused on safety. mostly because of the business segments we serve. HAWTHORNE: A labor force is generally not so If you start to compare that environment to an en- Knorr-Bremse has two big legs, one is commercial hard. We find good talent. People who are willing to 8 vironment that I grew up in where paper mills were vehicles, which is trucks and buses, and the other is come in, the hourly wages are good and attractive, where everyone’s dad worked, they were not a bad rail. We’re clearly on the rail side. In rail you have so when we have a job fair we typically have a long business but they were dirtier, dangerous and more two big legs, passenger and freight. And we are in line and we have a good pool to draw from. Engi- difficult to sustain. I think we have a much more at- freight. If you look at freight, we are typically consid- neering talent becomes a challenge, and in some lev- tractive work environment here. I’ve talked to folks ered more heavy hauling. Trains in North America are el of business becomes a challenge. What keeps me about what it’s like to be here and that seems to be big, long, heavy and hard to run; they don’t go that up at night is engineering. I need more engineers, the prevalent reason. fast. Europe typically has small freight trains and their more design engineers and more of the technologies brake systems are closer to what we would consider NNYB: like software and electronics. I need those, and I’m Has the Watertown Airport been a benefit for a passenger brake. Because NYAB is on the freight having a difficult time finding them. So we’re doing your business? side, we aren’t necessarily impacted. Knorr-Bremse everything we can. Lockheed Martin just laid off be- HAWTHORNE: I’m a fairly heavy traveler and I flew has felt the economic blows in Europe. But NYAB has tween 50 to 100 folks, some engineers. So we go 11out of Watertown maybe twice in 17 years because it not, not so far. We benefit from the commodities September 2012 | NNY Business | 41 20 QUESTIONS booms. The reason we went to Australia was because really benefits us because our technology product lends where our headquarters are, into the local community. they are slowly exporting their country. Iron ore has itself to that strategic approach. The people that live in the area are always willing to gone out of there ship upon ship and the railroads are open their hearts to get help when they need help. NNYB: Are you in a position where you see growth the means to move that. That hasn’t been immune but in the future? NNYB: How did an engineering background pre- hasn’t had the impact that the European economies pare you to lead in management? have felt. HAWTHORNE: It’s going to be a balance. We are intending on our clients calling for investment and see- HAWTHORNE: I find in engineering we are especially NNYB: As gas and diesel prices increase, does that 15ing staff up for new products and services. I have strong good at analysis. You are learning how to take a prob- affect the demand for things being moved by rail rath- goals for growing salaried staff, but engineering is the 17lem, analyze, make a set of solutions and determine er than by truck? bottle neck. Hourly labor force will flex in and out. We what solve the problem best. When you move into the HAWTHORNE: We see that. We feel it indirectly be- do everything we can to sustain people but we will fol- business realm, I find there are a lot of similarities. Tak- 13cause when you start to look at energy prices for trans- low the economic cycles. We are doing well and we ing a business, like Train Dynamic Systems for example, portation, the more traffic that was marginal on a truck hopefully will see sustained level of demand, but it is you have to have a concept so you understand the becomes attractive for rail. There is more and more starting to soften. We will have more people working on problem and develop the concepts, do the analysis and demand and if you look at a railroad’s financial state- new developments to bring products and services for- gauge which solves it best and inevitably in that you ments, they’re taking advantage of it. Oil and gas and ward. Manufacturing will probably wane a bit but will find you’re wrong, turn the loop and try and improve on pick back up when the next cycle is on the upswing. exploration and delivery has produced a lot of demand it. The engineering concept of a design from concept to reality is very much the same as a business. for rail. We shed a tear when we go to the pump, but NNYB: The north country community is very chari- we know the higher energy prices are the more attrac- table. What kinds of philanthropic efforts is Air Brake NNYB: What makes for a great leader today? tive rail looks and more in demand our products are. involved in? HAWTHORNE: We have had a lot of discussions NNYB: Is the rail infrastructure in the U.S. in fairly 16HAWTHORNE: We are big supporters of the United lately on what makes a great leader. A great leader good shape? Way. We take an active role to support them directly needs a vision and needs to be able to communicate through the business and in the work force. We at least 18and articulate that vision. If you can’t ask the teams to HAWTHORNE: There are a lot of studies done, what I would get behind is the growth patterns and rates we’re are aware of the opportunity and we do a lot of match- do something specific, you don’t have a chance. You 14seeing with the expectation of what rail could be. They ing. We have an open policy for employees that have have to have the vision and a way to communicate it will not be able to build enough tracks to manage the charitable causes we have to screen them, of course, and subordinate yourself. I found ascending into dif- capacity demands they expect. In lieu of having more but they make a contribution, we match it. We try to ferent leadership roles that your job becomes less and infrastructure, they’re investing in technology to move encourage charitable behaviors that we think are im- less solving the problem and more eliminating barriers trains safety. Safely move the trains closer together, get portant in the community. We typically try to have some that are limiting other people from solving the problem. braking distances down, which is a big role, we will participation on boards and pay back to the commu- You have to hold the organization up and you have to have more capacity in the same infrastructure. It’s dif- nity. The gentleman that owns the company is a very be critical and do the bad stuff; you have to tell people ficult to get permissions to build more tracks, double generous man. He recognizes that his success in any they aren’t doing a good job. You have to hold it up and triple tracks areas are where they find permission community around the world is tied to how the business and say ‘This is where we want to be and why we to do that, but the corridors are somewhat fixed. What is perceived. Trying to pull cash and profits out of a want to be there. I’m going to do everything I can do to you’re going to find is railroads will say, ‘How do we community is not a sustainable strategy. I am always make you successful and get barriers out of your way get more trains in the same territories and safely?’ That impressed by how much support we get out of Munich, and make sure you have the right funding and assets.’ I think a leader’s role then becomes subordinated to making sure the rest of the plan is being met.

NNYB: What do you do to unwind? HAWTHORNE: There are a couple of things I really en- joy. My kids, aside from being teenagers, they do offer some level of relief. They’re both great kids. I like weight 19training, I run a bit and martial arts. I do things that I build. I have gotten back into reading. Now with the iPad I don’t have to carry around tons of books. Unwind- ing for me is letting go of the day and doing something else. I think it’s an important part of being healthy to sever from work. It’s not a criticism of the team here, they are more than capable of operating without me. But it’s my need to cover all the bases. I think part of it is being new to the job. Some of it is just my drive. I have my iPhone or Blackberry far too often. I don’t necessarily want to disconnect entirely. But I do recommend time to pull back and get yourself out of that mindset.

NNYB: If you had a wish list at this point of improve- ments or where you’d like to be five years from now in this organization, what would be on it? HAWTHORNE: We need to keep growing and I’d 20like to find the ability to design products, manufacture products and deliver services to be better and more flex- ible. As we develop next-generation product, where do we take it? Where do we move it? How do we get it online? I want to find that we’re a more agile organi- zation, going faster to market and move the product forward. I think every leader wants that. We have good plans to increase our velocity. In five years I’d like to see the $300 million a year grow by 50 percent. We will have to sell different things. We want to leverage every aspect of our business. We want to grow the job base here; we want to find the NYAB is a premier employer in manufacturing direct line and salaried staff. I would love to see that NYAB footprint grow in the Watertown area. — Interview by Ken Eysaman. Edited for length and clarity.

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