Some friends of mine in a small group
of (mostly) retirees were recently discussing the just-announced date
when the former headquarters of Bethlehem Steel will be demolished.
This led me to think about a number of companies that I have been
affiliated with who have failed (or seem to be following the same
path). For each of these companies I will explore the pertinent
company history, a personal story about each one, and some of the
apparent reasons for the failure.
Scovill Manufacturing
History – Scovill
Manufacturing Company began in 1802 as the Abel Porter Button Company
(*S1, *S2). They incorporated as Scovill Manufacturing Company in
1850 to reflect their expansion into such products (all brass based)
as lamps, munitions, artillery fuses, and even coin blanks for the US
Mint. In the 1930s and 1940s, they began diversifying, adding such
products as Schrader air valves (*S3), Hamilton Beach appliances
(*S4), Clinton sewing notions, and developing a line of fasteners –
the “Gripper (r)” zipper and snap fastener.
It was during this time that many of my
ancestors began working for them. I've previously detailed that,
including the downfall of the company (*S5), so will not repeat it
here. In 1976, facing union difficulties, Scovill threatened to shut
down the plant. The state of Connecticut intervened with $10 million
in loans and the mills were spun off to Century Brass. But that
turned out to be only a temporary solution.
In 1985, the brass mill was running
into financial difficulty again, having had 3 strikes in the prior 6
years. The company CEO asked workers for $4.8 million in wage and
benefit concessions to keep the troubled company open (*S6). While
the salaried workers agreed, the unionized workers rejected the
proposal by a 2-to-1 margin. Lacking such concessions, the company
closed and the 600 mill workers were immediately laid off, followed
by the remaining 1,100 workers a few weeks later.. This ended the
brass industry in Waterbury, the final nail in the coffin of an
industry which had employed over 20,000 workers just four decades
earlier during WWII.
Scovill itself continues as a much
smaller company, confining their output to the fastener line. They
have a single plant in Clarkesville, GA. This business were first
acquired by the Gores Group, but a few years ago they were sold yet
again to Morito, a Japanese company (*S7).
Personal Story – I've related
much of my Scovill connections in (*S5). But there is one story I'd
like to add. As noted above, Scovill has a plant in Clarkesville, GA
(*S8). This plant was built in 1957. In the 1964, my father needed to
go to Clarkesville for a week to help them with some aspect of the
plant production line (he was a tool designer in the fastener
division, which is what that plant was part of). Rather than fly
down, he elected to take the entire family on a camping trip, taking
a long weekend to drive down, then staying in a local campground for
a week while he went to the plant each day, then taking another
weekend to drive back to Connecticut.
When we got to Clarkesville, my father
met with the plant manager. The plant manager had a daughter about
the age of myself and my oldest sister who is just a year younger.
The three of us were young teenagers, about 14-15 (My younger
siblings were ages 6-9.) Clarkesville at the time was perhaps 1000
people, just a small town in northern GA. The following is from my
autobiography, My Life.
The year we
traveled to Clarkesville, GA, was my first exposure to the southern
part of the US. My sister and I were walking down the main street of
the town with the daughter of the plant manager and I saw something
on the other side of the street. I wanted to cross over, but she
stopped me because that was the “colored” part of town. I was
unused to this kind of treatment of race and it bothered me. There
were only a few colored folks in Wolcott. One was a good friend in
Boy Scouts, Shawn Moore. He lived all the way on the other end of
town and was awarded a scholarship to a private boarding school for
high school, so I no longer saw him after that. The other was a girl
from Waterbury whose parents paid the tuition to send her to Wolcott
schools which had a better reputation. Her name was Sandra Raleigh,
and since homeroom seating was alphabetical, I sat near her for our
high school years. As a result, color of skin was never significant
to me.
Cause of Failure – There are a
few themes here which will be repeated in the stories of the other
companies. First, there was a period of diversification into product
lines that, while they may be somewhat related to the core business
of the company, were not entirely in line. In the case of Scovill,
these included home appliances, air valves, and sewing notions, which
were acquired in the 1930s and 1940s, and were then sold off a few
decades later. Next, the “heavy manufacturing” part of the
business became unionized, like many such businesses. While there
were good reasons for this at the time, the unions became much too
powerful, and the strikes and other labor demands during the 1970s
and 1980s led to the eventual selling and later closing of this part
of the business.
Notes:
Uniroyal
History – In 1892, nine rubber
companies in Naugatuck, CT, merged under the name United States
Rubber Company (*U1). This consolidated company was large enough that
when the Dow Industrial Average of large US stocks was created in
1896, US Rubber was one of the 12 companies that were part of it.
Rubber remained the focus of the
company for the next several decades, although the types of products
were varied – including rubber tires and footwear (including the
first flexible rubber-sole, canvas top “sneaker” in 1917). Later
they added rubber v-belts, conveyor belts, and waterproof cloth –
which evolved into “Naugahyde” coated fabric. In 1904, due to an
increase in the price of sulfuric acid (used to reclaim used rubber),
they formed the Naugatuck Chemical Company – later named the
Uniroyal Chemical Company. They also expanded the number of chemicals
they produced, including aromatics (scents) and agricultural
chemicals (*U2).
In 1939, as part of the development of
skyscrapers in New York City, one of the buildings in the burgeoning
Rockefeller Center was the 23-story US Rubber Company Building (*U3).
This was later renamed the Uniroyal Building in 1967 and in 1976
became the Simon & Schuster Building (*U4).
I worked for Uniroyal three times. The
first was as a summer intern in 1968, when I wrote a production
scheduling program for their footwear division that spread weekly
planned production over the available inventory of “lasts” (the
metal foot-shaped forms over which footwear are constructed). The
second was the following summer when I wrote a corporate funding
model that projected sales and costs for each of their international
subsidiaries and minimized the flow of cash across country boundaries
as it was then subject to being taxed (this was in the days before
spreadsheets). Both of these summers I worked at the Eastern
Management Information Center (EMIC) in Naugatuck, a building that
had been made especially to house the corporation's IBM mainframes.
As was typical of those days, the computers were in a large interior
room with glass walls so you could show them off to visitors. For the
second summer, my clients were in the international headquarters,
located in the Uniroyal Building in NYC.
After finishing graduate school in
1971, jobs were very scarce in the country, so I ended up back
working for Uniroyal, this time at their new headquarters in
Middlebury, CT. I was in the MIS department of the CIP (Consumer,
Industrial, and Plastics) division, supporting not only the footwear
plant in Naugatuck, but a conveyor belt plant in Passaic, NJ and
another plant in Mishawaka, IN. I was there for 14 months, until I
received an invitation from Charlie Smith (the former MIS department
manager at Uniroyal who had retired and taken a new position as the
divisional director of MIS for Olin-Winchester).
When it opened in 1970, the Uniroyal
headquarters was designed to be the “latest and greatest” in
office concepts. There were three building in a campus-like setting
on a wooded hilltop. The office building was a 4-story building with
an all-glass exterior. Except for offices for VPs and above, a few
conference rooms, and the bathrooms, the entire floor had no interior
walls. Curved partitions covered with fabric, tall plants, and filing
cabinets were the only obstructions with winding corridors defined by
these elements. To prevent distractions from others, they piped in
white noise – which was very effective.
The second major building was a
research and development building. The third building was like a
small two-story hotel with rooms for overnight guests (since the
complex was in the country, any visitors to the corporate complex did
not have to drive to a nearby city to find lodging). There was also a
restaurant which served as the corporate cafeteria for lunch but
which was open to the public in the evening and was a world-class
restaurant. If the weather was nice, you could stroll outside between
the buildings or find a shady park bench to sit on, but in
cold/inclement weather, the three buildings were connected by
underground tunnels with multi-colored painted walls and tubes for
electrical wires, etc. suspended from the ceilings several feet above
you.
In the years since I left Uniroyal,
many things have happened (*U5). The tire business was sold off, many
of the other smaller businesses were either closed or sold off, and
the once ultra-modern corporate headquarters is only a shell of
itself – having first been sold to IBM, and eventually the R&D
facility taken over by Chemtura and the other buildings razed. In the
picture below, the green area in the upper left is the site of the
former administration building, the green area in the lower left is
the site of the former hotel/restaurant, and only the research
building still remains. The non-tire businesses in Naugatuck have
been sold/merged many times, and as of 2017 are the Chemtura
subsidiary of Lanxess (*U6). Of the 9500 people who used to work just
in the Naugatuck plants, only 50 remain.
Personal Story – I have two
stories from my time working with the Uniroyal plant in 1971-72. I
was helping to develop a computerized cost accounting system and was
meeting with the cost accounting manager in Passaic to go over the
specifications for the program. The “system” we were replacing
was a totally manual one and the individuals who did all the
calculations were using WWII-era comptometers (see the WM model in
*U7). The operators were all female and were part of an office union.
As we talked, the manager of the general accounting department (who
used the same antiquated equipment) called over to the cost
accounting manager and said, “we have a lot to do today, can you
help?” The cost accounting manager looked around and said, “Rosie
is not busy, you can borrow her for the day.” Rosie heard this, and
said, “well, if you don't need me today, then lay me off for the
day” (since by union regulations if she was “laid off”, even if
just for a day, then you could collect 80% of your pay while you sat
at home). Thus, Rosie got to go home (with 80% pay), and the general
accounting manager had to hire someone from a temp agency to help
him!
The second story was relayed to me by
one of my workmates and took place during the same 1971-72 time-frame
and at the same plant in Passaic. He was on the plant floor doing
some time/material studies for a project he was working on. He
noticed a fellow by one of the conveyor belt-making machines who
seemed to being doing very little and wondered to himself, “I
wonder how much that task pays?”. He walked over to a small desk
right near one of the support posts on which there was a red notebook
which contained a list of the company work-rates, and opened it to
the rates for that particular task. The individual he had been
observing saw him open the notebook and immediately called out, “that
notebook belongs to the union, you are not allowed to touch it!”
The following series of events then took place. First, the union
steward in the department was notified and he stopped work (for
everyone in the department) while they had a union meeting. They came
to the conclusion that since the contents of the notebook had been
developed by the company in conjunction with the union that my friend
was allowed to see the contents, but that the notebook itself
belonged to the union and he could not touch it. Finally, because of
the infraction of “union rules”, the senior man in the department
was given the rest of the day off (with full pay), and the second
most senior man in the department was assigned to “notebook duty”
so that if my friend wanted to see anything else in the notebook he
could ask that individual to turn the pages for him so that he could
read what was on that page (without touching it)!
Cause of Failure – Like
Scovill, Uniroyal diversified into several other business, some of
them rubber-related, others chemical-related. They also for many
years went on a buying spree around the world – the reason behind
the corporate funding model I developed for them in 1969. But all of
these ended up on the “chopping block” in later years. The plants
that had very restrictive unions (like the one in Passaic) were the
first ones to be eliminated. Finally, they also invested in a new
state-of-the-art corporate headquarters, only to see it sold off and
later reduced to dust just a few decades later.
Notes:
Olin –
Winchester Division
History – The Winchester
Repeating Arms Company began in 1866 when Oliver Winchester
reorganized the New Haven Arms Company (*W1). In 1931 it was acquired
by Olin Corporation (*W2). Olin had begun in 1892, and had formed the
Western Cartridge Company in 1898. In 1954 Olin merged with Mathieson
Chemical to become Olin Mathieson. In the 1950s and 1960s, the
company diversified, getting into chemicals, brass, skis, camping
equipment and homebuilding businesses. The ammunition business was
consolidated into a plant in IL in 1965. But then in the 1970s, like
the other companies in the blog, they began selling off many of these
non-core businesses – forest products, specialty chemicals, etc.
Following a machinists' strike in the late 1970s, in 1981 a group of
Winchester employees purchased the rights to manufacture
Winchester-brand firearms – the new company was called the U.S.
Repeating Arms Company. However, the new company would not last very
long, and after continued problems, the remaining business in New
Haven closed in 2006 when the final 186 workers were laid off.
At one time the plant in New Haven was
the largest employer in the city, employing some 19,000 workers
(*W3). Just one model that they produced, the level action model 94,
sold over 6 million units during 111 years of production (1895-2006)
(*W4). But the company finally closed, not with a bang, but a wimper
as the workers were asked not to return when they left on Wednesday
afternoon when they had expected to work through Friday. While one of
the last buildings at the corner of Winchester Avenue and Munson
Street still stands, it has now been converted to an office building
and the former surrounding building and labs have all been torn down
and replaced.
Personal Story – The
Winchester Division of Olin was always too diverse. Under that
umbrella we had the firearms business, the ammunition business, a
tent company (former Hetrick Tent Company in Statesville, NC who made
tents for several retail outlets, a camping products business which
made camp stoves, etc., a sleeping bag manufacturer, a ski
manufacturer, and a plant that made Ramset power tools. The product
differences and government requirements for some of these meant that
we had separate order entry and manufacturing systems for each line
of business. But the IT department was considered to be “overhead”,
so when business was good we hired and when it was bad we fired. I
had come in at the beginning of a growth cycle. But just three years
later when business was going down we were again laying off. But the
work did not go away when the people did. Because I knew so many of
the systems, they just kept asking me to take on more and more. I was
watching my fellow employees one-by-one being shown the door and I
was asked to just put more on my plate. I decided to leave on my own
before it became too much. When I told my boss that I was leaving, he
informed his boss who told me, “don't tell me it's final until I
get back to you.” That afternoon he approached the VP of finance
and negotiated a 20% raise for me it I would stay. But I told him
that I was not leaving for the money but because of how the
department and the people were being treated. It was nice to be so
valued, but I left anyway and never looked back.
Cause of Failure – Seems to be
getting repetitive, but the causes here again seem to be a
combination of over-diversification, subsequent selling off of those
same product lines, then the impact of union strikes.
Notes:
Bethlehem
Steel
History – The beginning of the
Bethlehem Steel Corporation is quite complicated and I won't try to
summarize here (*B1), except to say that the corporation was finally
begun with this name in 1904. Over the next nearly 100 years they
stayed pretty true to their mission with the only diversification
being into the source and use of their materials – coal mining,
ship-building, railroad car building, etc. During WWII their total
employment was about 300,000. One interesting side note is that
during the war, as their workers were drafted into the military they
were replaced with women – both in the offices and in the plants.
But when the war was over all these women were promptly fired.
After the war, with much production of
steel overseas having been destroyed, the US Steel industry operated
with little foreign competition. But eventually the foreign firms
were rebuilt with modern techniques such as continuous casting while
profitable US companies, including Bethlehem Steel resisted
modernization. Meanwhile the average age of their workforce was
increasing and the ratio of retirees to workers was rising. But the
former CEO had failed to adequately invest in the company's pension
plan during the good times, even failing to set aside money for
pension payments entirely during some of the company's good times.
In 1969, with the company still
profitable due to lack of foreign competition, the company began
building a new corporate headquarters, Martin Towers. The building
was designed in the shape of a cross, in order to create more corner-
and window-offices for executives and managers. The building featured
such amenities as doorknobs with the company logo, handwoven carpets,
and the like. During design, when the company discovered that it
would be slightly shorter than the PPL headquarters in nearby
Allentown, they added an extra floor to ensure that they would be the
tallest building in the area. As the then 14th largest
industrial corporation in America, they felt they needed a company
headquarters befitting their status.
But less than 10 years later, in the
early 1980s, the company was losing money, necessitating
restructuring and shutdowns. By the early 1990s, after 140 years of
metal production in Bethlehem, PA, steel-making ceased. Ship-building
stopped in 1997, the company filed for bankruptcy in 2001 and
dissolved in 2003, just 99 years after the corporation had been
founded.
The city of Bethlehem has just
announced that Martin Tower will be imploded this spring. While some
of the property that the company owned in South Bethlehem is now a
large casino, the tall symbol of what used to be a large corporation
will be reduced to dust.
Personal Story – When I came
to the Lehigh Valley in 1975, Martin Tower was just two years old and
the company was still in its glory days. I was frequently asked why I
had chosen to work for Air Products, a small, but quickly growing
company, when I could have entered “the loop” program at the
Steel where future managers were trained. I ignored these questions.
Little did those asking know that the handwriting was already on the
wall and that the once mighty Bethlehem Steel would be bankrupt
before I reached retirement age.
Cause of Failure –
Over-diversification was not a problem for Bethlehem Steel. The
causes of failure were many – from the failure to modernize to meet
the challenges of foreign steel manufacturers, to the demands from
unions that resulted in such generous pension benefits, to the
failure by management to put aside money during the “glory days”
to meet those eventual required pension benefits.
Notes:
Air Products
History – Air Products is a
much younger company than the other examples above, having only been
founded in 1940 (*A1). After WWII, the company moved to Emmaus, PA,
and they continued their growth as a Lehigh Valley company. In the
1960s, the company began the process of diversifying beyond
industrial gases when they acquired a chemical company. They reached
$100M in sales in 1962.
Continuing through the 1960s and 1970s,
the company continued growing, adding additional chemical business
and expanding their global footprint. I joined the company in 1975
during the height of this growth and saw the company reach $1B in
sales in 1978. This growth pattern continued through the 1980s, with
joint ventures established in places such as Korea, Japan, China,
Thailand, Mexico, and others as well as expansion into such business
lines as engineering and construction, environmental and energy
systems, and high purity electronic chemicals.
I retired in 2007, when the corporate
climate began changing and it was no longer fun to work there. The IT
department, which had been a key component of the company's growth,
was being outsourced. Since then a number of changes have been made –
starting with the company management (which had always been “grown”
from within) to a new CEO who was brought in by a venture capitalist
who specializes in purchasing a large percentage of a company and
forcing changes that enrich he and his investors.
Most of the non-core businesses (that
were key to keeping the company profitable because they were
anti-cyclical to the industrial gas business) have been sold off or
spun off. The centralization which was key to having consistent
processes and quality around the world have been reversed and each
country is now operating independently. Non-core functions, like IT,
have been outsourced for the most part.
The corporate campus, once the envy of
others, has been allowed to deteriorate and retirees are no longer
welcome to visit. And just recently, the CEO announced that the
company would be building a new single-building corporate
headquarters only a mile away since the total enployment of the
headquarters has shrunk from nearly 4000 to only half that.
Personal Story – Having worked
here for over 30 years, I, of course, have many stories, too many to
choose one or two for inclusion here.
Cause of Failure – Air
Products has not failed (yet!). But all the same indicators as in the
above examples are present – selling off the business that had
previous been acquired, caring more for profits than people, and now
building a new corporate headquarters. How long will it be before
this company is added to the ash heap of corporate failures, or
before it is sold off to become a subsidiary of another company,
quite possibly from overseas?
Notes:
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