Molex Incorporated - Company Profile, Information, Business Description, History, Background Information on Molex Incorporated

2222 Wellington Court
Lisle, Illinois 60532

History of Molex Incorporated

The second largest electronic connector company in the world, Molex Incorporated manufactures electrical and fiber optic interconnections systems, ribbon cable, switches, and application tooling. Through 41 plants in 19 countries, Molex manufactures more than 40,000 products sold primarily to manufacturers involved in the automotive, computer, business equipment, telecommunications, and home appliance/home entertainment industries. In the mid-1990s, the company derived more than 70 percent of its revenues from products manufactured and sold outside the United States.

The history of Molex is largely the story of the Krehbiel family, who had emigrated from their native Switzerland to Germany and then relocated again in the United States in the 1820s, in pursuit of a country that would honor the pacifist ideals set forth by their Mennonite religion. They settled in Newton, Kansas, where the patriarch of the family, John Jacob Krehbiel, built a wagon- and carriage-making business and became one of the founders and chairman of Bethel College. His son, Frederick Augustus Krehbiel, would become the first of four generations of Krehbiels who would be responsible for creating and building one of the largest electronic connector companies in the world.

After growing up in Newton, Frederick Krehbiel attended Cleveland's Armour Institute and then Cornell University. He moved back to Chicago, where he took a job with the Arnold Engineering Company before establishing his own business, Krehbiel Engineering. By the turn of the century, he had designed and built power plants for several large cities, including Cincinnati and Kansas City, earning, through the course of his work, the esteem of his peers and clients. His reputation grew as the years passed by, elevating Krehbiel to a position of prominence in his field and drawing the attention of federal officials, who, as America prepared to enter World War I, desperately required the skills he possessed.

The U.S. government asked Krehbiel to design a refinishing plant to generate toluol, a byproduct of coal that was intrinsic to the production of TNT. Previously, the United States had purchased TNT from Germany, but now, as the country prepared to battle its supplier, it found itself without the production facilities required to meet its mounting needs. Krehbiel complied with the government's request, and a refinishing plant was designed and constructed in Terra Haute, Indiana, that immediately began processing coal to meet the nation's demand for TNT. It was while observing his plant in action that Krehbiel first began to develop ideas about the product that would eventually give Molex Incorporated its name and launch the Krehbiel family toward tremendous success.

Like many others who worked near the refinishing plant, Krehbiel observed piles of coal tar pitch, a waste product left over after the coal was refined and heated to produce the toluol vapors. Giant piles of the black waste material surrounded the plant, and Krehbiel made a note of it. Several years later in Canada, while helping to build superstructures of asbestos mines, Krehbiel noticed an equally worthless material gathered in giant piles: the fine, little strands of asbestos known as asbestos tailings. Krehbiel realized that if he used the coal tar pitch as a binder and the asbestos tailings as a filler, then combined them with limestone, which would serve as a reinforcing agent, he could create a new material--a plastic--that could be produced at a nominal cost. He dubbed the new material Molex, a low-cost product with good moisture resistance and properties that made it an excellent electrical insulator. In 1938, Krehbiel, then in his late 60s, formed a new company with the same name as the product he created. Later he enlisted his two sons as partners, and then began using Molex as a material to make casings for underground cables.

Seven years earlier, Krehbiel's son John had started his own business, the J. H. Krehbiel Company. John Krehbiel, then 26 years old, had created the company to fulfill a contract he had been awarded to manufacture fireproofing material for Commonwealth Edison stipulating that Edison would purchase 100,000 bags of the compound per year. Krehbiel borrowed the money to build a plant expressly for producing the material, then set out to satisfy the annual quota of the contract. However, the Depression, then reaching its greatest intensity, curtailed Edison's anticipated rate of consumption, and it took the company three years instead of one to use the first 100,000 bags of the fireproofing material. Forced to diversify into another business to offset the financial loss resulting from Edison's reduced fireproofing needs, John Krehbiel began manufacturing insulating material for underground and overhead high voltage cable, selling the material to various utility companies such as Commonwealth Edison, Public Service of North Indiana, Cleveland Electric Company, and Philadelphia Electric Company.

Due to this diversification, John Krehbiel was able to save his company from financial ruin and keep it growing. He next started another company, Illinois Manufacturing Chemists. His partners were his Hinsdale neighbors, the Regnery family. They produced nitrocellulose, an explosive made by treating cotton, a form of cellulose, with a mixture of nitric and sulfuric acids. Nitrocellulose was a highly flammable product, and it demonstrated its volatility on two separate occasions, blowing up the Illinois Manufacturing Chemists' factory twice in a five-year span. By the time the nitrocellulose factory exploded the second time, Frederick Krehbiel was urging John to assume a more active role in the family business, then roughly three years old and being run by Frederick and another son, Edwin Krehbiel.

With the outbreak of World War II, the U.S. War Production Board placed all established molding materials on restricted lists, forbidding their use in the manufacture of products deemed nonessential to the war effort and limiting their use for commercial purposes according to a government priority system. Virtually unknown, Molex appeared on no such lists, enabling the Krehbiels--Frederick, John, and Edwin&mdashø use their patented material to manufacture whatever they wished. They worked first with the government to try and establish a use for the material in the military, but it was not of interest to the government. The potential uses for Molex were virtually unknown to the Krehbiels as well, leaving the three partners with a material and no obvious market in which to sell it. Since none of the established plastics were available for the production of nonessential, consumer products, the Krehbiels moved in that direction, attempting to fill the void created by the restriction of Bakelite, polystyrene, and other plastic substances that manufacturers had relied on before the war.

During this time, Molex Inc. began manufacturing toys. For those familiar with the Krehbiel family, the decision to manufacture toys represented an incongruous leap from the generating stations designed by Frederick Krehbiel and the nitrocellulose and electrical insulating material manufactured by John Krehbiel. Initially, Molex made toy submarines and toy pistols, then began making flower pots, salt dispensers for the Morton Salt Co., and clock casings manufactured for Hanson Manufacturing Co. These projects generated enough income for the fledgling company and the new plastic to survive the war years and also gave the Krehbiels the opportunity to explore the potential applications for Molex plastic. An important alteration was made in the production of Molex immediately after the war, when the limestone used to reinforce the material was replaced by fiberglass. The substitution of fiberglass greatly improved the product's strength and flexibility, and when Bakelite and polystyrene were taken off the government's restricted list and once again became available, they proved no match for the malleability and low cost of Molex, still essentially fabricated from scrap materials.

John Krehbiel by this time had assumed control of the company, as his brother Edwin, trained as an artist, preferred to spend his time designing the molds and equipment required to manufacture the products. His father, then nearing his 80s, was easing into retirement. The former manufacturer of electrical insulating material and nitrocellulose decided that Molex was best suited for electrical insulation, a pivotal decision that steered the company and the plastic toward the appliance market. The first product tooled and marketed with Molex was a molded terminal block for General Electric's Hotpoint range. Other, similar products followed, manufactured for companies such as Whirlpool and Westinghouse. The decision to enter the appliance market proved sound, giving Molex its first viable, vast market.

Nevertheless, possessing a wide range of talents and interests, the Krehbiels frequently shifted the focus of their company. Shortly after marketing Molex as an electrical insulator and entering the appliance market, John Krehbiel steered the company in a new direction, realizing, through his contacts with appliance manufacturers, that a more lucrative future lay in the production of connectors used to link electronic components. The move propelled the company into the consumer electronics industry and dramatically transformed Molex from a materials company into a connector company, a decision that signalled the end of Molex, the material, and engendered the rebirth of Molex, the company.

Molex began manufacturing pin and socket connectors, designed by John Kriehbiel, to link electronic components in color television sets, a new product during the 1950s that, like the market in which it was sold, was headed toward enormous growth. By manufacturing connectors for companies such as Zenith, RCA, and Magnavox, Molex realized rapid growth, generating $1.06 million in annual sales in 1962, the first year the company eclipsed the $1 million mark. It had taken nearly a quarter of a century for Molex to reach the $1 million plateau, and now, with the exponential expansion of the consumer electronics industry fueling its growth, the company surpassed the $2 million mark three years later, garnering $2.4 million in 1965 and adding another million dollars to its sales volume the following year.

Although John Krehbiel was delighted with Molex's growth, his brother Edwin, a 40 percent owner of the company, was not. Edwin Krehbiel had no desire to build Molex into a larger company and already felt swamped by the number of projects the company was involved in, as his brother continued to canvass manufacturers in the electronics industry and broaden Molex's scope. By 1965, Edwin Krehbiel wanted to retire and began looking for investors to purchase his stake in Molex. One year later, he found some interested investors, a group of businessmen backed by A.G. Becker, a Chicago investment banking firm. John Krehbiel, however, was staunchly opposed to selling the company. With Edwin and John each owning 40 percent of the company, the deciding vote was cast by Marie Manette. She voted not to sell. Edwin went ahead and sold his share and retired. Marie Manette had worked with Fred Krehbiel as his secretary after graduating from high school. She remained at the Krehbiel Engineering Co. and then moved to Molex as Treasurer, retiring after a combined 50 years of service. Upon her death, she willed most of her stock to John Krehbiel's sons John Jr. and Frederick to ensure continued family control.

A.G. Becker held its share in Molex until 1972, when it was instrumental in Molex becoming a public company. Molex was taken public by William Blair & Co. In the intervening six years, developments had occurred that positioned Molex for even greater growth than the pace recorded during the early and mid-1960s. John H. Krehbiel, Jr., joined the company in 1959, and his brother Fred joined in 1967.

John Jr. had begun as Pricing Manager and then moved on to the position of Sales Manager. Looking for a place for his younger son, John Krehbiel Sr. suggested that Fred explore potential business opportunities for Molex overseas. The decision to send Frederick Krehbiel II overseas represented more of a solution to the uncertainty of the young graduate's future position within the company than a strategic decision to expand overseas. Nevertheless, its ramifications on the future of Molex were significant.

Given $25,000, from which he was expected to draw his salary, Frederick Krehbiel was charged with expanding Molex's business overseas. That year, he went to Japan and approached potential customers of Molex connectors, fortuitously entering the Japanese electronics industry at a time of rapid growth. Krehbiel encountered a country that was producing a tremendous number of electronic products, particularly television sets, which eventually would set the standard worldwide. Initially, he received several small orders from Matsushita Company and some orders from Europe, reporting a grand total of $54,000 in his first year of overseas business. With considerable advice from an outside consultant, Ed Frume, Fred continued to build on the modest beginning. The focus on local supply in Japan, however, demanded that Molex manufacture its products in Japan, where Japanese manufacturers could monitor the production of Molex connectors. Accordingly, the company's first plant outside the United States was constructed in Yamato City, Japan, opening in 1970. By the end of the year, Molex realized $776,000 in international sales, compared to the $8.9 million generated domestically.

During the early 1970s, the U.S. home entertainment industry started to experience strong competition from Japan, and, seeing this, John H. Krehbiel, Jr. determined that the U.S. company needed to find applications other than home entertainment and appliances. He saw the rapid gains in business machines and the emergence of computers and worked to build a position for Molex in these markets. This resulted in Molex gaining a share of these markets, and today Molex sells far more to these markets than to its customers in its traditional areas.

During this period, sales generated from international business continued to grow rapidly. An additional overseas plant was constructed in Ireland in 1971, paving the way for the prodigious geographic expansion that would take place during the decade. As Molex grew, a distinctive style of overseas management emerged, a style that largely developed from the company's unconventional direction of expansion. Typically, when a U.S. company began to establish operations outside the country's borders, it first went to Canada, then to Europe, and then, perhaps, to Asia. Molex, however, selected Japan as its initial proving ground, and this trial-by-fire in the world's most demanding market taught the company a great deal about how to meet the needs of demanding customers. Fred Krehbiel and others in the company's international division learned the merits of "being local" and adjusting to the culture of the region in order to meet the needs of the local customer, a lesson they would employ in expansion throughout Europe, South America, and Asia.

By 1979, domestic sales at Molex totaled $44.6 million, while its international sales reached $53.4 million, representing the first year the company's business overseas surpassed the total recorded domestically. The following year, Molex was the tenth largest connector company in the world, its growth fueled by the company's international expansion and its moving into the fast growing computer, computer peripheral, and business equipment markets. The 1980s would witness the rise of personal computers, and Molex would share in the billions of dollars garnered by the computer industry during the decade through the production of connectors used to link the electronic components of personal computers, as well as connectors for peripheral devices such as terminals, printers, and modems. Driven by the nearly insatiable demand for electronic connectors by computer and other electronics manufacturers during the decade, Molex prospered, recording $253 million in sales by 1985.

By 1991, Molex had become a genuine multinational company, a global company that was beating its competition by virtue of its early and aggressive expansion overseas and by sustaining the entrepreneurial spirit that originally had engendered its creation. Molex continued to expand its markets, moving into automotive electronics, telecommunications, and other markets such as instrumentation and medical electronics.

By the early 1990s, Molex was the second largest connector company in the world, ranking behind Amp, Inc., based in Harrisburg, Pennsylvania. With more than 40 manufacturing facilities operating in 19 countries, Molex derived 71 percent of its revenues from products manufactured and sold outside the United States. Nearly half the company's total sales volume was generated by its manufacturing and sales offices in the Far East, the fastest growing economic sector in the world during the early and mid-1990s. With this solid and broad geographic presence serving as the company's foundation for future growth, Molex anticipated eclipsing the $1 billion sales plateau by 1995, an objective that appeared well within the company's expansive grasp.

Principal Subsidiaries: Molex S.A. de C.V. (South America); Molex Far East Management Ltd. (Hong Kong); Molex Japan Co. Ltd.; Molex Singapore Pte., Ltd.; Molex Taiwan Ltd.; Molex B.V. (Netherlands); Molex Hong Kong Ltd.; Molex Electronics Ltd. (Canada); Molex Illinois S.A. (Switzerland); Molex Electronics Ltd. (U.K.); Molex Italia S.p.A. (96%); Molex Sweden; Molex, ETC. Inc. (90%); Molex Industrial Interfaces Inc.; Molex Caribe Inc.; Molex Ireland Ltd.; Molex Elektronik GmbH (Germany); Molex France SARL; Molex Nanco Ltd. (Hong Kong) (90%); Molex US Inc.; Molex Export Inc.; Molex International, Inc.; Molex Overseas Inc.

Additional Details

Further Reference

Knight, Robert M., "How Molex Inc. Connected in World Markets," Chicago Enterprise, July/August 1994, p. 24.Linn, Ed, and John H. Krehbiel Sr., A Great Connection, Chicago: Regnery Gateway, Inc., 1988, 229 p.Yates, Ronald E., "From Electronic Connectors to Global Connections: Molex Incorporated," Hemispheres, April 1994, p. 39.Yates, Ronald E., "Molex Puts Itself on the Map," Chicago Tribune, February 6, 1994.

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