OmniSource Corp.: Fort Wayne firm finds nearly $2 billion in scrap metal, making it the state's second-largest private company.

Author:Hromadka, Erik
Position:INDIANA BUSINESS 100 THE TOP PUBLIC & PRIVATE COMPANIES - Cover story - Company overview
 
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THERE ISN'T ANY GOLD in a strip of industrial land that stretches almost a mile along the railroad tracks in Fort Wayne. But there is lots of scrap steel, aluminum, copper and other metals at the site where OmniSource has its main operations. And thanks to soaring commodity prices, those metals are a precious resource that has helped the closely held family business become the nation's top recycler of scrap metals.

Last year OmniSource generated nearly $2 billion in sales processing some 7 million tons of iron and steel and another 700 million pounds of nonferrous metals. The company has 1,750 employees who collect and process those metals at 45 facilities in seven states and Ontario. That puts the company on the top of Recycling Today magazine's lists of the 20 largest ferrous and nonferrous scrap processors in the U.S.

As economic growth around the world in the past year increases the demand for limited supplies of such metals, prices have jumped. For example, copper that was selling for 85 cents per pound in 2003 recently hit a record $4 per pound. Likewise, aluminum prices topped $3,000 per ton for the first time since 1988. The result is that OmniSource is having a very busy year.

The company's copper wire recycling operations are a good example of that. They run 18 hours per day and process truckloads of scrap wire in all length and sizes. Some of the wire is left over from new construction projects while other sources include old wiring that has been replaced and damaged or flawed copper wiring rejected by manufacturers.

All the scrap wiring is fed into a series of giant machines that chop it up into increasingly smaller and smaller pieces. Then the chopped wiring is carried across conveyor belts to machines that shake it, causing the heavier bits of copper to separate out from the plastic coating and other materials. The process is repeated until the final output is millions of tiny bits of copper that flow into 4-foot-square boxes, each holding 4,000 pounds of the shiny metal ready for new manufacturing.

Copper wiring is just one source of metal for the OmniSource production lines. Other metals arrive in various forms, including old cars, appliances, aluminum siding and excess scrap metal from manufacturing plants. Then workers chop, cut, shred, and sometimes melt the metal before it is repackaged into a variety of raw materials that can reenter the production cycle. OmniSource thinks of its scrap-processing facilities as mines located above ground, rich with resources that are recycled to preserve the environment at a fraction of the cost to extract and refine metals from virgin ores.

"Our basic function is to collect and process metallic byproduct into feedstock for manufacturing," says Leonard Rifkin, whose father started the family company that is now run by him and his three sons. "At the same time we keep the country clean."

BUILDING A FAMILY BUSINESS

The OmniSource story began in the wartime years of the 1940s, when more than 30 scrap dealers in Fort Wayne were competing for business from such large military suppliers as International Harvester, General Electric and Magnavox.

"It started with my father, who was a Russian immigrant and had a tremendous entrepreneurial drive to get ahead and be successful," Rifkin recalls.

Irving Rifkin arrived in New York in 1920 with almost no money and unable to speak English. After working a series of odd jobs, he learned the language, moved to Ohio, saved enough money to buy a truck and begin buying and selling scrap metal, rags, bottles and newspapers. In 1943, he moved to Fort Wayne, where he bought a small scrap yard and named it Superior Iron & Metal.

From then on, the Rifkin family was in the metal recycling business. After graduating from college and completing military service, Leonard started working with his father in 1956. He helped the company navigate some difficult times when sales were down and the company almost went out of business. By building relationships with banks and customers, the Rifkins managed to save the company and by the 1970s, it was expanding again.

In fact, during the 30-year period from 1974 to 2004, the company made 24 acquisitions, buying scrap processors in Indiana, Ohio and Michigan and even expanding into the Southeast with investments in Georgia, the Carolinas and Florida.

At the same time, the Rifkin family was growing and Leonard welcomed his three sons into the business. All three had worked in the scrap yards while they were growing up and all joined the company after completing college.

Danny, who currently serves as the company's president, joined the company in 1977. His brother Ricky joined a year later, and Marty followed after completing law school in 1985. Today they both serve as executive vice presidents.

"What made it successful was the four of us were like one," Leonard Rifkin says. "That's what kept the business together and that has been the source of growth for the company"

"We all want the same things, so there are no real jealousies and we don't need to check up on each other," agrees Ricky.

Although the family enjoyed building the company, there were some difficult times in the 1980s. Founder Irving Rifkin and Leonard's wife Norma both died within weeks of each other. In addition, the metal recycling business is closely tied to economic cycles, and a recession in the industrial Midwest caused the scrap business to falter around the same time. The company was forced to reduce its number of employees and cut the salaries of those who remained. But the Rifkin family was determined to continue the business.

"We certainly have had out share of tough times over the years," recalls Marty Rifkin. But he says everyone worked together to overcome the problems and move the company forward.

EXPANDING OPERATIONS

The company name was changed to OmniSource in 1983 as it consolidated ferrous scrap brokerage and nonferrous metal trading operations. By 1990, those efforts had paid off and OmniSource was a large regional scrap processor with annual sales of $300 million.

One of the key factors in the company's growth was a strategy of locating operations on the sites of customers who had manufacturing operations. Such a partnership with Chrysler allowed OmniSource to set up a baling facility at the automaker's plants, managing the collection, processing and marketing of scrap metal right from the source. That scrap management has been expanded and the company now has similar operations with 200 industrial companies across the United States.

The family also worked to develop new markets for their products. They played a key...

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