Dennis Dotson Dotson Iron Castings Mankato, Minnesota January, 2012

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1 Dennis Dotson Dotson Iron Castings Mankato, Minnesota January, 2012 The Saugus Iron Works was the first successful manufacturing plant in the New World and the Saugus Pot is recognized as the first commercial casting made in America. Our Saugus2 project takes its name with the expectation that we will redefine the foundry industry in the same way that the Saugus Iron Works defined American manufacturing in I have been in the foundry industry for 40 years and I am very discouraged by the lack of recapitalization that is taking place. Fewer than 5% of the iron foundries are spending any significant sums on replacing equipment or adding capacity. Given the decline of the industry it is time do something very bold. The Saugus2 vision is just that!

2 The American Foundry Society reports that the number and total capacity of foundries have been decreasing for decades. When my grandfather started in the industry there were over 20,000 iron foundries. 6,000 when my father started. 2,000 when I started. And, when Jean Bye took over as Dotson Iron Casting s CEO there were about 400 iron foundries. This industry demand and capacity data was presented at the 11/10/11 Casting Industry Supplier Association. There are some capacity changes between 2011 and 2013; however capacity is held at 2013 levels for 2015 and In 2015 when Saugus2 is in full production, gray iron demand is projected to be 115% of capacity and ductile iron demand is 139% of capacity. Dotson Iron Casting produces 11,500 tons of finished capacity. It will take 107 foundries the size of Dotson to make up the 2015 shortfall.

3 The global numbers show an even greater shortfall percentage for both gray iron and ductile iron. Cast parts are essential to support the growth of the U.S. Manufacturing sector. The continued decline of the foundry industry will limit U.S. manufacturing and defense capabilities.

4 In conversations with customers, suppliers and foundry managers it was obvious that a plan for the industry transformation needed to be game changing if the U.S. foundry industry is to compete in a world economy. These 13 strategies are fundamental to the Saugus2 vision. The lead for the project is Dotson Iron Castings. The suppliers are investing to be a part of Saugus2 through Saugus21 and because Saugus2 is a catalyst for recapitalizing the foundry industry. The customers are making a strategic investment in their supply chain. The customer will have an agile and competitive parts manufacturing facility with strategic idle capacity for growth.

5 Without a strong sustainability approach it would be difficult to build and permit the plant, we would not have customers and most certainly we would not be able to attract the best of the next generation employees. The energy savings from Saugus2 will provide electricity and heating for 10,000 homes. The velocity of product flow is important for the economic justification for Saugus2. The 105 day current state time line for this casting is very representative of product that Dotson Iron Castings ships with this specification. By combining all of the operations in a single facility and keeping the product flowing on the power and free conveyors, the lead time will be reduced to 5 days.

6 Single piece flow (no cost or setup penalties for low quantity runs) is a major game changing philosophy for Saugus2. There are no foundries in the world that have a continuous conveyor line from casting to machining to heat treating to painting to shipping. Lighter, stronger and longer lasting parts! Rapid prototypes with metal parts (not plastic or paper) for design iterations.

7 Taking the movement tasks out of labor also improves consistency by narrowing the process variations. Our data flow goal is very simple to present information to the right person at the right time from any point within the system. By sharing Saugus2 also learns and has continual improvement in its operations.

8 The majority of Saugus2 workers will have spent time in their careers giving to others volunteering or being part of an organization that meets a social good: military, Peace Corps, teaching, AmeriCorps, missionary, or a place where they are part of a team. The majority of the Saugus plants will be built in the U.S. To support a key customer, a Saugus plant could be built any place in the world. Phase I of the Saugus2 implementation has just been completed. This was the 30,000 foot level to determine the need and capabilities.

9 This Turkish foundry was opened during When asked for their best decision it was quickly answered as the installation of their power and free conveyer line. At Saugus2 we will use this technology and add RFID tags to the hangers so that we have positive control of the product as it moves through the facility. Zanardi is world class company that has integrated engineering design, foundry, heat treating, machining and painting into their parts manufacturing facility. This Thailand foundry has been pouring iron for two years yet it looks as if it was opened this week. They clearly set the world standard on what a game changing foundry should look like. They also have not had a lost time injury since the plant was opened. Particularly unique in the foundry was putting the molding line on the second floor so that there are no pits in the foundry.

10 Saugus2 will be built in two stages with the first molding line handling castings from 100 to 280 pound each. This size range a critical capacity need in the U.S. The second line could be the same or a line that handles the 35 to 100 pound castings. Having two lines in the same facility allows for a more efficient melting operation. The public private partnership begins with suppliers, customers and the government committing engineering time and dollars to complete Phase II of the Saugus vision. We are starting the rebuilding of the U.S. foundry industry!