Nordson Corporation - Company Profile, Information, Business Description, History, Background Information on Nordson Corporation

28601 Clemens Road
Westlake, Ohio 44145

History of Nordson Corporation

Nordson Corporation is a leading manufacturer of machines that apply liquid and powder coatings, adhesives, and sealants to a wide variety of consumer and industrial products during the manufacturing process. Nordson-built machines impact daily life around the world by making possible such products as pressure-sensitive labels, gender-specific diapers, sturdy cartons and boxes, and noncorrosive food and beverage cans. Nordson systems also bond together and apply finishes to automotive, appliance, furniture, and computer components. The company not only manufactures the machinery and equipment, but also develops the software and related control technologies needed to synthesize its equipment and systems with customers' operations. Nearly 60 percent of the company's annual sales come from exports through its 29 subsidiaries outside the United States, which market Nordson products to virtually every country in the world.

The firm traces its history to 1909 and the founding of U.S. Automatic Company in Amherst, Ohio, near Cleveland. The predecessor firm manufactured high-volume, low-cost screw machine parts for the emerging automobile industry. When the company went bankrupt in 1929, Walter G. Nord acquired control and in 1935 reorganized it as U.S. Automatic Corporation, shifting production emphasis to lower-volume precision parts, which proved vital to the U.S. army forces during World War II. In the years following the war, Walter and his sons, Eric Nord and Evan Nord, acquired patents for the "hot airless" method of applying paint, coatings, and adhesives, in which machines sprayed materials through tiny openings at high pressure.

Walter's sons, Eric, who joined the firm in 1939 after earning a degree in mechanical engineering from Case Institute of Technology, and Evan, formed the Nordson Division of U.S. Automatic in 1954 to produce and market airless spray equipment. Evan ran the operations of the businesses, while Eric searched for the proprietary technology of the airless spray equipment, which became the basis of the new Nordson Division.

The Nordson Division expanded into thermoplastic adhesion in the early 1960s. Machines developed during this period applied hot glue for such packaging as cartons and boxes as well as product assembly. Nordson soon emerged as a leader in this industry, which eventually became one of its primary businesses. The subsidiary grew quickly during the early years of the decade, establishing European marketing branches and absorbing parent U.S. Automatic in 1966. Walter G. Nord died the following year, leaving a legacy of beneficence in the Nordson Foundation, which was endowed with five percent of the corporation's pretax earnings.

Eric Nord advanced to the company's presidency, a position he occupied for 20 years. Eric Nord later was to be credited with guiding the company's growth and providing an example of innovative thinking; before he retired, Nord was granted more than 25 patents for inventions. One noteworthy Nordson innovation of the late 1960s was a device that recovered and recycled over-sprayed powder coatings, thereby eliminating solid waste and pollutants while simultaneously saving customers' money.

Nordson established a foothold in the burgeoning Japanese manufacturing market with the founding of Nordson K.K. in 1969 to distribute American-made machinery. Over the course of the 1970s, the corporation also increased its domestic packaging operations through the purchase of Domain Industries Inc., a manufacturer of packaging machinery, and the acquisition of a controlling interest in American Packaging Corporation, producer of Ampak brand flexible film and die-cutting equipment. Technological advances in hot melt adhesives and other thermoplastic compounds expanded Nordson's client base during the late 1970s and early 1980s. Soon the company's devices were modified for many applications within the automotive, off-road equipment, appliance, and woodworking industries for joining, caulking, and sealing.

Not all of Nordson's ventures were successful, however. In 1978, the company began manufacturing industrial robots. These spray-painting machines, which were less costly than human labor and could work in hazardous environments, were expected to become a high-growth venture. However, after six years of intense marketing, including a 1982 agreement with two Japanese firms, the program was dropped due to the industry's high rate of obsolescence.

A shift in management in the early 1980s brought public speculation that Nordson was a candidate for takeover. In 1982, James E. Taylor advanced to the presidency and chief executive office, while Eric Nord retired from day-to-day operations, retaining his seat at the head of the board of directors. Taylor divested two non-core businesses to focus corporate energies on what had become Nordson's most significant and promising businesses--packaging and assembly equipment to apply adhesives, sealants, caulking, and other thermoplastic substances, and liquid and powder coating technology. By 1984, the company had over $30 million in cash and had reportedly been plied with several takeover and/or merger proposals. Although the majority of Nordson's stock was very closely held--the Nord family owned 40 percent, the Nordson Foundation retained ten percent, and current and former managers held another ten percent&mdash⁄areholders instituted anti-takeover measures.

Speculation increased in 1985, when Taylor resigned, bringing Eric Nord back to the offices of president and CEO. Taylor and Nordson cited "philosophical differences" for the departure; while Taylor preferred a centralized management scheme, Nord and the board of directors feared that tight controls would stifle the creativity necessary for the company to maintain its technological lead. Sales flattened out at $140 million in 1984 and 1985, while profits declined during the last year of Taylor's tenure from $11.3 million to $9.7 million.

After a six-month search, Nordson offered the top positions to William P. Madar, a 47-year-old executive of Standard Oil Co. (later renamed B.P. America, Inc.). Leaving a 20-year career at Standard Oil to capitalize on Nordson's untapped potential, Madar brought a new management style to the company, which he characterized as "professorial," that encouraged problem-solving through the Socratic method: Madar preferred not to give specific instructions, but to ask questions that would allow employees to arrive at their own conclusions. This corporate culture gave employees--over half of whom lived outside North America--freedom to customize the company's systems to accommodate local clients' needs.

Madar also moved immediately to revitalize his new employer, commissioning a 3-R (resource review and reallocation) study. The restructuring recommended in the review included decentralization through the creation of four geographical sales and service divisions for North America, Japan, Pacific/South America (including Brazil, China, and India), and Europe. A core manufacturing and product development division retained responsibility for product lines. Madar removed redundant management tiers and formed a business-opportunity group to seek out new applications for existing technologies.

In 1987, the company built a new, $9 million laboratory for product engineering and development near its Amherst headquarters and committed an average of five percent of sales annually to research and development. The investments kept Nordson ahead of its competition and marketplace needs through technology developments. Edward B. Keaney, an analyst with Newhard, Cook & Co. of St. Louis, told the Cleveland Plain Dealer in May 1988 that Nordson "tends to be the technology leader." This edge proved critical to the company's financial survival; had Nordson rested on its laurels, it would have quickly lost business. An estimated 20 percent of annual sales came from three- to four-year-old products, and by the late 1980s, Nordson employees held over 1,000 patents and patent applications worldwide.

In interviews, Madar often uses a "leap frog" analogy to describe Nordson's development of new products, likening the application of existing technologies to new, but closely related markets to "a frog leaping from one lily pad to the next." New markets, or lily pads, in turn, become the foundation from which to make another technological leap. For example, the company adapted an electrostatic powder painting technique, commonly used on household appliances and other metal parts, to the strategic application of a superabsorbent polymer powder to gender-specific disposable diapers. Similarly, with different technology, Nordson applies high-speed liquid-paint spraying techniques, generally used to spray adhesives on food cans, to computer circuit boards. The precisely applied coatings protect hundreds of delicate circuits from moisture and dirt each minute. By making such incremental leaps, Nordson augments its knowledge and technology while keeping financial risks in check.

In 1987, the company introduced a new adhesive process that impregnated a standard adhesive with an inert gas to make a sealant that foamed as it was applied. The compound reduced the amount of glue needed and thereby lessened manufacturing costs. Nordson customers who purchased the new machines could expect to recover their costs within two years.

The results of Madar's restructuring were virtually immediate: his first annual report, in 1986, registered a new sales record of $168.7 million, a 20 percent increase from 1985. Operating profit increased 44 percent, and Nordson's average annual return on equity of 29 percent was double that of the overall capital goods industry. Exports increased even faster than domestic sales, contributing 66 percent of total sales by the early 1990s, with noteworthy growth in Australia, Canada, Europe, the Far East, and South America. Nordson's 1993 decision to obtain ISO 9000 certification from the International Organization of Standardization in Switzerland promised increased global competitiveness as well. By that time, the company had established a manufacturing facility in its European market to better serve that geographic region and had invested in an international communications network.

Value Line responded to the improved results by giving the company's stock its highest recommendation. Annual sales tripled from 1986 to 1993 under Madar's direction, from $140 million to $461 million. Profits jumped 79 percent in fiscal 1987 alone, to $24.7 million, and peaked at $46.6 million in 1994. Nordson recorded its 31st consecutive year of increases in the cash dividend, and noted that "more than 70% of employees are shareholders" in the 1994 annual report. Analyst Timothy P. Burns, of First Boston Corp. in Chicago, ascribed most of Nordson's success during the period to "management's well-crafted strategy, long-term investments, and the ability to find new ways to apply new glues, adhesives and other advanced materials." External factors, including rising automobile and appliance sales, as well as a weak dollar, also contributed to Nordson's early 1990s earnings boom.

Nordson's corporate trademark encouraged prospective clients to "expect more." In 1994, company spokespersons indicated that they would expect more from themselves as well, predicting that earnings would more than double by the turn of the 21st century to over $1 billion. CEO Madar and Chairperson Nord prepared for this growth by setting up a "logical succession of leadership" and creating a new layer of management. Moreover, Nordson established the position of executive vice-president and chief operating officer, which was filled by Edward P. Campbell. Analyst Maureen P. Lentz, of Roulson Research Corp. in Cleveland, told the Cleveland Plain Dealer that Nordson's plans to double sales in five years were "do-able ... because of the recovery in overseas markets." The company also implemented a formal employee empowerment training program in an effort to maintain its innovative edge.

Principal Subsidiaries: Nordson Application Equipment, Inc. (Hong Kong); Nordson Australia Pty., Limited (Australia); Nordson Belgium N.V. (Belgium); Nordson do Brasil Industria y Comercio Ltda.; Nordson Canada, Limited; Nordson Corporation Representative Office (Peoples Republic of China); Nordson Corporation South Asia Regional Office (India); Nordson CS, spol.s.r.o (Czech Republic); Nordson Danmark A⁄S; Nordson Deutschland GmbH; Nordson Deutschland GmbH Representative Office (Russia); Nordson Engineering GmsbH (Germany); Nordson Finland Oy; Nordson France S.A.; Nordson GesmbH (Austria); Nordson Iberica, S.A. (Spain); Nordson Italia SpA; Nordson K.K. (Japan); Nordson (Malaysia) Sdn. Bhd.; Nordson de Mexico, S.A. de C.V.; Nordson Nederland B.V. (Holland); Nordson Norge A⁄S (Norway); Nordson Polska Sp.z.o.o.; Nordson Portugal Equipamento Industrial Lda.; Nordson Sang San Limited (South Korea); Nordson S.E. Asia (Pte.) Limited (Singapore); Nordson (Schweiz) AG (Switzerland); Nordson Sverige AB (Sweden); Nordson (U.K.) Limited; Mountaingate Engineering, Inc.; Slautterback Corporation; Electrostatic Technologies, Inc.

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Further Reference

Banks, Howard, "The World's Most Competitive Economy," Forbes, March 30, 1992, p. 84.Benson, Tracy E., "Empowered Employees Sharpen the Edge," Industry Week, February 19, 1990, pp. 12--20."Eric Nord Is Retiring Today; Inventor, Founder of Firm," Cleveland Plain Dealer, October 30, 1983, p. 11E.Fuller, John, "Production of Robots Spells a New Future for Two Ohio Firms," Cleveland Plain Dealer, October 7, 1980, pp. D1, D7.Gleisser, Marcus, "Nordson Fires 95 in Restructuring," Cleveland Plain Dealer, November 13, 1986, p. 1C.Gerdel, Thomas W., "Nordson's Search Ends in Board Room," Cleveland Plain Dealer, February 11, 1986, p. 4D; "Firm Applies Know-How to New, Related Markets," Cleveland Plain Dealer, May 7, 1988, 1E, 4-E; "Nordson Adopts Poison Pill Plan," Cleveland Plain Dealer, August 27, 1988, p. 1D; "Nordson Emphasizes Creativity," Cleveland Plain Dealer, July 11, 1989; "Ten Best in Ohio: Nordson," Cleveland Plain Dealer, June 1, 1992, p. 12F; "Nordson Takes Aim at $1 Billion in Sales," Cleveland Plain Dealer, March 11, 1994, p. 1C.Henry, Fran, "William Madar," Cleveland Plain Dealer, November 29, 1992, p. 30S.Karle, Delinda, "No Sale, Nordson Exec Says," Cleveland Plain Dealer, July 16, 1985, pp. 1E, 3E; "Nordson to Use Technology to Keep Profits Growing," Cleveland Plain Dealer, March 3, 1988, p. 3D."Nordson Expects Climb in Fiscal 1984 Results, Says Orders Are Strong," The Wall Street Journal, June 7, 1984, p. 55.Robinson, Duncan, "Exporter Knows When to Hedge," Journal of Commerce and Commercial, April 26, 1991, p. 1A, 5A.Teresko, John, "Running His Own Show," Industry Week, May 4, 1987, pp. 47--48.

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