Letter to Shareholder regarding difficulty of obtaining NAVAIR cert
To refresh the memory of longs and also for the benefit of the new investors, here is a repost of Bill's email to an investor back in July (Post # 36030).
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I think it is important for shareholders to understand what it takes to obtain qualification approval. There are multi-billion dollar bearing companies that do not have this approval. Companies like Schaeffler (FAG), Timken and NSK do not have the approval. The cost to develop the technology is too high. In fact, we have been approached by one major bearing manufacturer to be their source of supply for self-lubricating bearings, because while they would like to get into the airframe bearing business directly, the cost of entry is too high.
When people say that we should have gotten much further along in the process after five years and $4 million, it is clear that they don't have an understanding of either aerospace or the development and qualification process for these seemingly mundane parts. We are designing and making a part that has a small Teflon-like liner in it and subjecting it to brutal test conditions. As an example, the bearing used for primary testing is subjected to a load of approximately 8,250 lbs and then the ball is rotated 25,000 cycles. The load is placed directly on a very small portion of the bearing liner surface. At the end of this test, the liner must show wear of less than 0.0045" (about the thickness of a human hair). This test is repeated on other bearings, but is done in varying conditions including high and low temperatures and after being exposed to harsh contaminants such jet fuel and de-icing fluid. These tests assure superior quality products and aircraft safety. So when someone says they could have done it cheaper or quicker, they either don't have an understanding of the process or a total disregard for human safety.
I can give you dozens of examples of very large companies who have tried to qualify, spending millions of dollars and taking years and years and still not qualifying or even producing parts that are presentable for qualification. Most companies look at the spec and understand what it takes to qualify and simply elect not to because of the cost and difficulty. I know one Chinese company that told me that they have spent in excess of $10 million and 13 years attempting to qualify and they still have no products that they could even submit for testing. I know another company in the USA that told me that they have spent $7 million and now at least 11 years attempting to qualify without positive results. So for us to do this in 5 years and $4 million is nothing short of a miracle. But in reality we did not start assembling parts for testing until January 2011 and received approval in September 2013. So from first assembly until approval we actually took a little less than 3 years. Nevertheless I will accept the 5 year number. It is still a significant accomplishment.
Some of the steps that must be taken prior to ever making a component or a part for full production include the following:
Designing parts and preparing blueprints for the components and assemblies;
Designing tooling and preparing blueprints to make components and assemblies
Developing planning to fabricate tooling, components and assemblies
Developing, manufacturing and testing a liner system that works (this is where most failure occurs)
Manufacturing prototype tooling and components
Analyzing tooling and component design post-manufacturing
Correcting any issues in these designs
Producing and testing prototype parts
Correcting issues with prototypes and/or the tooling
Obtaining business licenses in China
Setting up a factory to produce parts
Making production parts and testing them
Making adjustments to parts based on test results
Making production parts for NAVAIR qualification testing
Obtaining NAVAIR approval
There are many other steps involved, but suffice to say, even under the best of conditions, all of this takes time and money, and a lot of both. So while people may complain of too long and too costly, I will stand by our accomplishments to date.
As I have said many times, we will continue to push forward, concentrating on the core business of the company. We will continue to maintain our focus and do what is best for the company and its shareholders.
Regards,
Bill
