120 Long Ridge Road
Olin Corporation is a Fortune 200 company whose businesses are concentrated in chemicals, materials and metals, defense, sporting ammunition, and aerospace. Olin Corporation has been a protean organization throughout its history, with a product list ranging from cigarette papers and cellophane to snow skis and home-building material.
Olin Industries was founded in 1892 as the Western Powder Company by a former baseball player named Franklin Olin. The Du Pont family and their Gunpowder Trust acquired 49 percent of Olin's company in 1909, and they nearly replaced Olin, who scrambled for the remaining 51 percent and retained control.
Western's first acquisition after the incident, Winchester Arms, was a defensive move against Du Pont, which might have purchased the company to deprive Western of a customer for its gunpowder. The Winchester plants, famous for "the guns that won the West," acquitted themselves admirably during the two world wars; for example, they put an important new gun, the M1 Carbine, into production in just 13 days. Besides the gunpowder and munitions factories, Western Powder also operated a brass works at that time.
When Franklin Olin retired, he kept most of the Western Powder Company's stock for himself and divided the rest between his two sons, Spencer and John. They consolidated Western's properties and renamed the new enterprise Olin Industries. Soon Olin Industries began to diversify into paper, fuel, petrochemicals, cellophane, and lumber. The company was managed by John and Spencer Olin along with Bill Hanes. All three were in their sixties, and the lack of a suitable candidate to succeed John, who was president, was the major concern of a company that was otherwise in excellent shape.
The lack of a logical successor was an important factor in John Olin's proposal to Tom Nicholls, the 44-year-old president of Mathieson Chemical Company, which manufactured ammonia and caustic soda, to merge their companies. Starting in 1947 Nicholls, with the help of his friend John Leppart, had transformed Mathieson, a small regional chemical company that concentrated on a few commodity chemicals, into a company with $366 million in sales--a 600 percent increase over Mathieson's performance before Nicholls took over. This dramatic turnaround was accomplished by a diversification into less cyclical products and the acquisition of companies with strong marketing organizations.
John Olin and Tom Nicholls were friends; in fact, they often went hunting together. The idea of a merger was first broached in 1951, but discarded because a satisfactory division of power did not seem possible. Nicholls headed a company almost equal to Olin in size, and neither he nor John Olin wanted to be subordinate to the other. Nevertheless, a merger remained tempting because it would further Olin's new expansion into chemicals and bring Mathieson closer to consumers. The companies had previously cooperated on a rocket fuels venture which proved they could work together.
During the initial discussions of a merger between the two corporations, Mathieson purchased Squibb, a well known manufacturer of pharmaceuticals that was only slightly smaller than itself. In 1953, while on a hunting trip, Olin finally convinced Nicholls that a merger was possible. Within a matter of days Bill Hanes had arrived at a satisfactory division of power. The new Olin-Mathieson would be run by a triumvirate of John Olin, Nicholls, and Hanes. Olin would be chairman, Nicholls president, and Hanes head of finance.
The press offered its congratulations in 1953 when the agreement took place. Many analysts remarked on the compatibility of the Olin and Mathieson operations and the apparent dovetailing of their strategic directions. Mathieson was moving from basic chemicals to consumer goods while Olin, a manufacturer of consumer goods, was moving into basic chemicals. The only indication of trouble came from inside the company. Said an Olin-Mathieson executive soon after the merger, "We'll have to keep Tommy (Nicholls) from expanding for the present; this is a time to digest."
However, the desire to diversify triumphed over prudence. Within 18 months of its incorporation the Olin Mathieson Chemical Company had purchased three new businesses: Marquardt Aircraft, Blockson Chemical, and the Brown Paper Mill Company. This last purchase alone cost $90 million. By 1958 Olin Mathieson was producing one of the widest assortments of products of any company in the United States, yet its strategy was not proving successful. Sales for that year were a disappointing $20 million, although Bill Hanes had said in 1956 that sales would soon be hitting $1 billion. The causes of Olin Mathieson's poor performance were manifold.
The August 1958 issue of Fortune magazine accused the company of allowing itself to be constantly sidetracked. Indeed, Olin Mathieson seemed to lack direction. Part of the problem lay in its strategy of diversification and part in the structure of the new company itself. Fortune called the management of Olin Mathieson "a loose confederation of tribal chieftains." This charge was borne out by a 1958 meeting where the 36 research chiefs met for the first time and two of them discovered that they had been doing identical research on a fuel additive.
The lack of communication and poor diversification strategy led to the 1957 purchase of an aluminum plant. The aluminum industry was an expensive one to enter and the purchase of the aluminum works put Olin Mathieson into debt. In addition, the timing of the purchase could not have been worse, as a soft market was imminent. The business community was surprised at the poor planning of the aluminum operation because Olin Mathieson had not secured a source of bauxite, a principal ingredient in aluminum manufacture and one that was frequently in short supply. For the next two decades Olin Mathieson would find its fortunes rising and falling with the profitability of aluminum.
Nicholls was soon promoted to the board, John Olin became chairman of the executive committee, and Stan Osborne became president. Osborne was a feisty but accessible administrator. He was also a Spanish history buff; in fact, he was engaged in writing a book on that very subject when he was promoted. Determined to avoid the corporate equivalent of the sinking of the Spanish Armada, he began to dispose of unprofitable and incompatible product lines and assure a supply of bauxite. Osborne undertook cost control measures, including a $20,000 cut in his own salary. The business press praised his damage control.
After the two bad years of 1957 and 1958 when sales declined, the balance sheet began to improve. In 1959 profits increased 17 percent over the previous year, but that rate of growth did not continue. Although Osborne's cost-cutting measures kept the company from disaster, he was clearly frustrated by the company's slow progress. He resigned in 1963 for a career in banking.
Throughout the 1960s Olin Mathieson continued to be plagued by the same problems that had come to light in 1958. In 1967 the new president, a man named Grand, initiated a program not unlike Osborne's recovery plan. Unprofitable divisions were ordered to show an eight percent yearly increase in profits. This was not an unattainable figure for most of the divisions. Even Squibb, which was responsible for a quarter of the company's sales, was producing a mediocre five percent return on assets. In 1967 Grand planned a program of expansion into recreation, housing, lumber, and chemicals. In 1969 the company adopted the name Olin Corporation.
In what was developing into a disheartening pattern, Olin celebrated the new decade with a decline in profits. A prolonged strike by American autoworkers decreased the market for aluminum. Furthermore, new environmental regulations were expensive. Two plants, one manufacturing DDT and the other soda ash, had to be shut down because they could not meet environmental protection standards. These closings resulted in a $26 million loss. The timing of Olin's new housing venture recalled its venture into aluminum, since the market went into a downslide soon after Olin entered it. Sporting goods, sold through the Winchester division, became one of the company's priorities. Olin ski equipment was marketed and sold successfully.
Grand died suddenly in 1971. In 1974 the next president of Olin, James Towey, was able to boast an 80 percent jump in earnings, largely due to the sale of the aluminum operations and polyester film factories which had been depressing earnings. The aluminum works had earned $19 million over a ten-year period and had lost $32 million. The chemicals division, always a company mainstay, performed well, and the agricultural products division prospered. Brass and paper, steady sources of income, held their ground. In 1975 the company continued to sell unprofitable product lines, such as a parka business it had bought a few years before.
In the late 1970s housing and Winchester Arms took on the role of the ill-fated aluminum works in suppressing profits. Winchester's operating profits plunged 37 percent in one year, despite the quality of its guns and their name recognition.
Forbes once referred to Olin as the world's longest-running garage sale. Indeed, the company had, and still has, a habit of buying unprofitable businesses and then selling them within a few years, often at a loss. In 1985 the profitable but slow-growing paper division was sold, along with the last of the home-building concerns. The company's most recent round of divestment caused shareholders' equity to drop by 25 percent, although its shares went up three points.
To reinvigorate the company, Olin looked to metal and chemical products, especially chemicals used by the electronics industry. This began with the expansion in electronics and aerospace during 1980. In 1985 Olin acquired Rockcor Inc., which produces rockets, gas generators, and data systems for battlefield intelligence, as well as devices to measure the strength of underground nuclear tests. In 1985 Olin lost twice as much money as it made the previous year.
The leaders of the company, John Johnstone, Jr., and chairman John Henske, cut back programs that cost the company a $330 million pretax charge in 1985, including car and boat flares, cellophane, skis, cigarette paper, and photographic chemicals. In 1991 Johnstone announced another round of streamlining, divesting several under-performing chemical lines and its European sporting ammunition business.
Olin vowed to focus on three core businesses: metals, chemicals and defense, and sporting ammunition. In 1992 the company established a new aliphatic diisocyanate (ADI) unit in Lake Charles, Louisiana, which prepared it for a major push into the area of performance urethanes, used in coatings for products on cars and appliances. The investment built on Olin's $450-million per year position in the urethane-based toluene diisocyanate (TDI) market. In order to expand its supply operations to the microelectronics industry, Olin built a new 211,000-square-foot plant in Mesa, Arizona, to produce a chemical used in the production of semiconductors, which was scheduled to open in the fourth quarter of 1995.
Strategic investments made over several years, combined with reductions in salaried personnel and other operating costs, enabled Olin to increase earnings as the economy strengthened. In early 1994 Olin acquired GenCorp's Aerojet medium caliber ammunition business, making Olin one of only two U.S. producers of medium caliber ammunition. Also during that year, the Brass, Electronic Materials, and Winchester divisions earned record operating profits, while Chlor-Alkali Products, biocides, pool chemicals, Ordnance, and Aerospace showed significant improvements. Under the leadership of Johnstone as chairman and CEO and Donald W. Griffin as president and COO, Olin posted record sales of $2.7 billion and earnings of $91 million, an important increase from 1993 sales of $2.4 billion and earnings of $40 million before a $132 million after tax-charge to income, which resulted in a net loss of $92 million that year.
As the company faced the new century, Olin planned to sharpen its cost-effectiveness, capitalize on global growth opportunities, fine-tune its business mix, and take actions needed to build on its strong market positions. For example, Olin Brass planned investments in 1995 and 1996 at its Indianapolis plant to modernize production equipment, improve efficiency, and broaden product capabilities for seamless copper alloy tubes used in specialized applications. Olin also focused on strengthening its position in pool chemical brands, including HTH, Pace, and Sock It brands. In 1994 Olin sold over 40 percent of its dry sanitizer pool chemical outside the United States as demand increased abroad. Olin's zinc Omadine biocide, used in antidandruff shampoos, held a leading position in the market for a long time, and the company exported a significant amount overseas to meet the increased demand for personal care products in the Far East.
Olin's letter to shareholders in its 1994 annual report stated: "While we were gratified by our progress, we're not at all satisfied with it. Our earnings may now be at respectable levels, but we're still a long way from where we want to be." Focusing on its core businesses and refining corporate objectives, the company continued to position itself for its next 100 years of business.
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