100 Gando Drive
Transpro, Inc. is a leading manufacturer and distributor of Aftermarket and Original Equipment Manufacturer (OEM) heat transfer and temperature control products for automotive, truck and industrial applications.
TransPro, Inc. manufactures and distributes heat transfer and temperature control products for automobiles, light- and heavy-duty trucks, as well as industrial applications, with the business divided between two business groups. The Automotive and Light Truck Strategic Business Group manufactures aftermarket automotive heating, cooling, and air-conditioning products sold to auto parts retailers (such as AutoZone and Pep Boys), wholesalers, and radiator shops. Brands include Ready-Aire Heater Cores, Ready-Rad Radiators, and a complete line of Ready-Aire Temperature Control Products. The Heavy Duty Strategic Business Group sells aftermarket products--complete truck radiators, radiator cores, engine cooling systems, and charge air coolers--for on-highway, off-highway, and industrial applications. Until 2005 the group also manufactured original equipment, but TransPro sold this aspect of the group to concentrate on the aftermarket. In a related deal, TransPro padded its aftermarket business, adding locomotive and military equipment as new markets, and gained international scope by adding plants in Mexico and Europe. Domestically, the company operates production facilities in Connecticut, New York, and Texas, and regional facilities in California, Colorado, Connecticut, Florida, Georgia, Illinois, Ohio, Texas, and Washington. TransPro maintains its headquarters in New Haven, Connecticut, and its stock trades on the American Stock Exchange.
Roots Reaching Back to the 1920s
Although TransPro was launched in 1995 as a spinoff from The Allen Group Inc., its heritage dates to the 1928 incorporation of Allen Electric & Equipment Company. Over the next four decades Allen picked up dozens of unrelated assets, transforming itself into an unwieldy conglomerate. Subsidiaries manufactured portable steel buildings, car-wash equipment, hydraulic activators for submarines, chain conveyor belts for factories, military electronics, and aftermarket automobile test equipment. In 1968, Walter B. Kissinger joined the board of the Chicago-based company and proceeded to bring some order to Allen's chaotic affairs. Now overshadowed by his world-famous older brother, diplomat Henry Kissinger, at the time Walter, an accomplished corporate turnaround artist, was actually better known.
In 1938, when he was just 14 years old, Walter and his family fled Nazi Germany to England and then the United States, settling in New York City, where he and his brother attended high school. Both brothers joined the U.S. military during World War II, with Henry assigned to the European theater and Walter to the Pacific. Henry, who had been studying accounting before the war, became involved with Army intelligence, the first step in his diplomatic career. Ironically, Walter aspired to become a diplomat and ended up a businessman. After his stint in the military he enrolled at Princeton's Woodrow Wilson School of Public and International Affairs. In another stroke of irony, his 1951 senior thesis broached the possibility of Detente between the United States and China, an idea his brother would introduce to the Nixon White House two decades later. But the mood of Washington during the early 1950s, characterized by the Communist witch hunts and rise of Senator Eugene McCarthy, disillusioned Walter Kissinger about government service. Instead, he opted to enter Harvard Business School. After becoming quickly disenchanted with a job at a large corporation, Kissinger in 1957 took over a failed small electronics company, Advanced Vacuum Products. He built up the business, sold it to a larger company, and at the age of 38 was wealthy enough to retire. Instead he took on a new challenge in the 1960s, turning around an auto parts maker, Jervis Corp. He successfully narrowed its focus to car mirrors and again walked away with a sizable sum of money. His next stop was the Allen Group board.
Because of Kissinger's intervention, Allen dismissed the investment bankers who were responsible for many of the company's misguided acquisitions, and pulled the plug on an R&D project, a diagnostic computer for auto engines intended to be sold to repair shops. Kissinger recognized it as a concept far ahead of the market, one that was draining cash with no hope of a return. Kissinger's efforts in sorting out Allen's tangled business affairs were appreciated by his fellow board members, who convinced him to take over as chief executive officer. He agreed, but only if certain directors were axed and Allen's headquarters were relocated to Long Island, where he resided along with his stable of prized Arabian horses.
Once in charge of Allen, Kissinger cleaned house, casting off 40 operations that accounted for $190 million in annual sales, opting instead to concentrate on some of the assets relating to the automotive industry. His primary goal was to be the number one or number two company in whatever business Allen elected to stay in. He kept Crown Steel Products Co., which performed pickup truck conversions and installed specialized interiors in utility trucks and vans for fleets, as well as making metal parts for light trucks. He also kept the money-losing automobile test-equipment division, dumped its management team, and turned it around. Kissinger added to the automotive assets in 1970, acquiring G&O Manufacturing Company, a New Haven, Connecticut-based radiator maker. G&O was founded in 1915 by Charles Oppe and Frederick Gargiulio. It started out making custom-built automobile radiators, but as car manufacturing moved increasingly to Detroit the company turned its attention to truck radiators and, later, airplane radiators.
Another venture Kissinger kept was the car wash equipment company, but in the wake of the energy crisis in the early 1970s, he exited this business as well. Many service stations had been offering free car washes as a way to boost gas sales, but with drivers now lining up for blocks for a chance to fill their tanks, there was little need for such incentives. Another unit sold auto accessories, ranging from mag wheels to Snoopy key rings, a successful area for Allen until the early 1980s when cheap competition from the Far East destroyed the market. Allen also operated a Mobile Communications division, producing antennas for two-way radio communication, used by truckers and the police. With the citizens band (CB) craze of the mid-1970s, this unit experienced a splash of success before the market dried up. After a few years of losses, the unit began to rebound in the 1980s with the rise of cellular mobile telecommunications, which unlike CB radios proved to be a long-term growth area.
Allen achieved record profits in 1985, and then suffered through two money-losing years. Despite the losses, Allen continued to invest a great deal of money on research and development, a strategy that paid off in the long run but in the short term cost Kissinger his job in 1988. Two of the successful sectors were replacement automobile radiators and the mobile communications division. In the early 1990s, Allen moved its headquarters to Cleveland and began focusing on these two areas. Taking advantage of its car telephone antenna business, Allen expanded further into the quickly growing cellular communications field, offering products such as antennas, filters, repeaters, and power amplifiers that allowed cellular providers to cut back on the number of stations needed to service a territory. On the automotive side, in 1990 Allen established GO/DAN Industries (GDI), a joint venture that manufactured aftermarket automotive heat transfer products.
In March 1995 the Federal Communications Commission sold 99 licenses for the development of wireless communications networks, an event that was a boon to Allen and its two mobile communications subsidiaries. One of them, Comsearch, offered software that the license holders needed to develop a frequency and determine the location of transmission stations when designing a system. The other subsidiary, Allen Telecom Group, also expected higher demand for its antennas, filters, and amplifiers. Already, the wireless communications business was contributing about 64 percent of Allen's $330 million in annual revenues. It was not surprising, therefore, that management decided it was in the best interest of both businesses to split and go their separate ways.
Allen Group's Spinoff of TransPro in 1995
In June 1995 Allen announced that it would spin off its automotive and truck product units in order to concentrate on the growing wireless communication business. The new company, taking the name of TransPro, Inc., was incorporated in Delaware in July 1995. It was composed of three Allen businesses: the Crown metal fabrication unit (which in addition to its automotive work would continue to fabricate cabinets for the telecommunications industry); G&O Manufacturing Company, maker of heat transfer products for trucks; and GDI, whose joint venture partner Allen bought out before spinning off TransPro. Pro forma sales for these businesses in 1995 totaled $247.3 million.
TransPro established its headquarters in New Haven, Connecticut, where GDI was based, and GDI's CEO, Henry P. McHale, took charge of the newly independent company. The first major step in growing TransPro was the 1996 $5.2 million purchase of Los Angeles-based Rahn Industries Inc., a deal that added aftermarket automotive air-conditioning components, such as condensers and evaporators, to TransPro's product offerings. Rahn also produced tube and fin heat exchangers for industrial applications. Next, in December 1997 TransPro paid $1 million for Vehicle Management Systems Inc. (VMS), a Canadian company that specialized in utility van conversions. TransPro added to its automotive air-conditioning parts business with the 1998 acquisition of Evap Inc., an Arlington, Texas-based manufacturer of the Ready Aire line of aftermarket automotive temperature control products. Several months later, in February 1999, TransPro paid $2.25 million to pick up another Arlington company, A/C Plus, Inc., a remanufacturer of air-conditioning compressors.
In 1997 TransPro recorded revenues of $288.9 million and net income of $7.9 million. While Rahn, VMS, and Evap made a significant contribution to the balance sheet in 1998, it was not enough to offset the loss of a major contract with Ford to perform cab conversions. As a result, sales in 1998 declined 17 percent to $240.1 million, and net income dropped to $1.6 million. TransPro took steps in 1999 to devote more resources to the automotive aftermarket, in particular air-conditioning parts. It began the development of a 223,000-square-foot state-of-the-art plant in the Dallas area to remanufacture car air-conditioning compressors, and also hired an investment bank, Minneapolis-based Goldsmith Agio Helms, to help it sell off the Crown and G&O units. The proceeds were earmarked to pay down debt, thus allowing TransPro to borrow additional funds for further strategic acquisitions. In 1999 TransPro also closed a pair of plants located in Philadelphia, Pennsylvania, and Atlanta, Georgia, moving their condenser manufacturing operations to a new manufacturing line in Mexico. For the year, TransPro regained much of the losses suffered in 1998, increasing sales 9 percent to $261.6 million, resulting in a profit of $6.8 million.
Divesting the Crown Division in 2000
TransPro found a buyer for Crown in April 2000 when Legett & Platt Inc. agreed to pay $28.6 million in cash and assume $8.9 million of debt to acquire the unit. On other fronts, however, TransPro was not faring as well in 2000. During the first half of the year sales of aftermarket heating and cooling products dropped off, the result according to the company of moderate weather in the Northeast and upper Midwest and customers' high inventory levels. A few weeks after reporting disappointing second quarter numbers, TransPro announced that it would not meet estimates for the rest of the year and was suspending its quarterly cash dividend. Subsequently, McHale resigned as president and CEO, leaving the board as well, to "pursue other opportunities," his departure slated for the end of the year. The company immediately began a search for his replacement. In February 2001, concurrent with the announcement of the company's 2000 results, McHale's successor was named, 54-year-old Charles E. Johnson, a former Allen Group executive with extensive experience in the automotive aftermarket. Johnson had served as president of the Equion Corporation, maker of aftermarket and OEM heating and cooling systems, and prior to taking over at TransPro had been CEO of Canadian General Tower, which made polymer films and composite materials to the automotive and other markets.
Johnson took over at a time when a softening economy and mild weather combined to hinder TransPro's efforts to improve its balance sheet. Nevertheless, he took a number of steps to help turn around the company. He divided the business into three strategic business units: the automotive and light truck aftermarket; heavy-duty products; and air-conditioning replacement parts. This organization would be later refined, resulting in the current pair of business units. The company also implemented more stringent controls on inventory levels, aided by the installation of uniform inventory information systems; began manufacturing some parts it had outsourced; closed a California condenser plant and transferred most of the production to the less expensive Mexico operation; and established a new hub-and-spoke distribution system that allowed the company to close down two branches while lowering costs and improving service.
Following the divestiture of Crown, Transpro reported sales of $203.3 million in 2000 and 2001, and net losses of $9.2 million and $20.8 million, respectively. The changes Johnson initiated began to bear fruit in 2002, as TransPro increased revenues by 13.4 percent to $230.6 million and returned to profitability, netting nearly $2 million. The company was strong enough that at the end of the year it was able to acquire the assets of Fedco Automotive Components Company, a Buffalo, New York-based company that manufactured OEM and aftermarket automotive and truck heaters. To finance the deal, TransPro relied on its newly restructured and increased line of credit that afforded greater latitude in the way management grew the company.
On the balance sheet, TransPro took a step back in 2003, with revenues dropping slightly to $228.7 million, the result of the company phasing out some OEM customer programs, mild weather, and a soft industrial market that adversely impacted the heavy-duty aftermarket unit. As a result the company lost $4.5 million. The heavy-duty unit bounced back in 2004, adding more than $20 million in sales over the previous year and leading the way to an overall 17.2 percent gain in revenues to $268.1 million, coupled with net income of nearly $5.2 million.
Still facing challenging conditions--rising interest rates, increasing fuel and raw material costs, and stiff competition resulting in lower prices and tight margins--TransPro elected to focus its efforts on the aftermarket. In the fall of 2004 it agreed to acquire the aftermarket business of Wisconsin-based Modine Manufacturing Company, to be spun off from Modine and then merged with TransPro. The deal brought with it manufacturing and distribution operations in Europe and Mexico. At the same time, TransPro sold to Modine its heavy-duty OEM business for $17 million. The transaction closed in 2005, a year in which TransPro continued to tweak its operations, opening a new distribution facility in Southaven, Mississippi, while closing an acquired Fedco plant in Buffalo and moving heater production to Mexico. Whether these changes would have the desired effect remained an unanswered question.
Principal Subsidiaries: G&O Manufacturing Company, Inc.; GO/DAN Industries, Inc.; TransPro, Inc. de Mexico, S.A. de C.V.; Radiadores GDI, S.A. de C.V.; Ready Aires, Inc.
Principal Competitors: Delphi Corporation; Lennox International Inc.; Standard Motor Products, Inc.