Eagle-Picher is an industrial products company. As such, the company is subject to the volatility of the markets it serves. To help protect itself from market fluctuations and business cycle pressures, the strategy of Eagle-Picher has been to diversify its product lines. This strategy has served the company well in the past, and all indications suggest it will serve the company well in the future.
With over 150 years of manufacturing experience, Eagle-Picher Industries, Inc., dominates numerous niche markets with its industrial products. Primarily supplying machinery and parts to companies around the world, Eagle-Picher manufactures hundreds of different products for the automotive, aerospace, defense, construction, and other industries. The company survived the demise of several of the industries it operated in, managing to diversify without bringing on disaster, as many other conglomerates have done in similar circumstances. Following a deluge of lawsuits related to asbestos in its insulation products, Eagle-Picher managed to withstand bankruptcy proceedings begun in 1991 and was reorganized and acquired by the Dutch conglomerate Granaria Holdings in 1998.
The earliest predecessor of Eagle-Picher was established as a partnership in Cincinnati in 1842. Two brothers, Edgar and Stephen Conkling, set up a small operation to produce white lead, a by-product of corrosion that was especially useful as a durable paint when mixed with linseed oil. In 1847, the Conkling brothers went into partnership with William Wood, who later took over the company when Edgar Conkling joined the Texas West Railroad Company. With new partners, Wood moved the company to a new location in 1858 and changed the name of the firm to the Eagle White Lead Works.
Great instability came to the metals market after the Civil War. Overcapacity, a lack of commodity price controls, and strong competition from the ready-mix paint industry pushed Eagle and several other white lead manufacturers to the brink of bankruptcy. By 1887, a consortium of eastern lead companies formed a powerful association called the Lead Trust. The Trust tried and failed on numerous occasions to include Eagle in its collaborations. William Christie Wood, who succeeded his father as president of Eagle in 1883, led the fight to keep Eagle independent. He initiated strong financial controls and attempted to branch the company into related businesses. Wood left in 1887, and was replaced by G. W. Boyce, who stayed for six months and was then succeeded by Benjamin H. Cox.
Unable to sustain the company in light of the actions of the powerful 31 Lead Trust firms (which merged to form the National Lead Company in 1891), Cox hired three managers away from his Cincinnati rival, the Eckstein White Lead Company. These managers, led by John B. Swift, reorganized Eagle in an effort to fend off National Lead. The company had a strong customer base and a solid reputation for quality.
Certain that he could not succeed indefinitely, Swift attempted to vertically integrate the company, as Rockefeller's Standard Oil Co. had done. Several years passed when, finally, in 1903, Eagle and several other independents secured a stake in the American Metal Company, a mining and smelting house. Meanwhile, Eagle diversified the product line to include lead pipe and plumbing supplies.
In December 1905, after receiving an invitation to join National Lead, Eagle received an inquiry from the Picher Lead Company, a mining outfit in Joplin, Missouri, proposing a buyout. With a steady supply of lead from Picher, Eagle would be free of National Lead's ability to influence market prices. The transaction was completed on April 5, 1906.
Eagle, which had expanded its operations, provided Picher with capital to expand its facilities and fund further exploration in the mineral-rich tri-state region of Missouri, Oklahoma, and Kansas. Picher tried unsuccessfully for several years to locate new mineral deposits on the Quapaw Indian lands of the tri-state area. Fearing that the region had been depleted, Picher began wildcat drilling, again without success.
Late in 1913 a Picher drill rig became stuck in five feet of mud while being shipped during a thunderstorm. Picher suggested drilling in place before ordering the rig dismantled. To everyone's surprise, the chance drilling yielded an extremely rich lead-zinc ore concentrate that led to 20 more strikes by 1915 and the establishment of a huge zinc smelter at Henryetta, Oklahoma. The following year, Eagle and Picher formally merged into a single company.
However, management failed to address the problem of merging separate business cultures, an issue that engendered considerable internal turmoil for many years. Many Picher employees held a strong grudge against Eagle, which they felt didn't fully appreciate the work they did in the tri-state. Oliver S. Picher, who became president of the new company, chose Chicago as the neutral site on which to establish a new headquarters. In 1919 he ordered the decentralization enterprise, forming an organization similar to General Electric, General Motors, and DuPont, in which specific divisions enjoyed operating autonomy.
Zinc Operations Successful in Early 20th Century
Under Oliver Picher, Eagle-Picher became the nation's leading zinc manufacturer, as well as one of its largest lead producers. Growth in the zinc market was augmented by World War I, in which demand for zinc in brass artillery and other weapons increased dramatically. Seeking to enter the finished zinc products markets, Picher acquired a zinc oxide plant at Hillsboro, Illinois.
Clearly set on a strong path, Eagle-Picher lost some momentum the following year when Oliver Picher died suddenly. The board appointed Swift to succeed Picher as president. Swift continued Picher's diversification strategy by purchasing the Midland Chemical Company's lithopone plant at Argo, Illinois. From its origins in lead, Eagle-Picher had become one of the nation's only integrated mine-to-market zinc companies.
Swift ordered the company's research department, established in 1915 by Picher, to develop new uses for zinc. This led to several partnerships with battery companies in 1922 and the development of highly efficient lead batteries. Thus, with the advent of automobiles, a promising new market was created as demand for white lead pigment had begun to trail off.
Buoyed by the newly founded productivity of the tri-state deposits, Eagle-Picher began buying large tracts of land in the region adjacent to its existing mines, organizing them under a new subsidiary, the Consolidated Lead and Zinc Company. Eagle-Picher expanded its production capacity in 1925 by taking control of the Ontario Smelting Company of Hockerville, Oklahoma. This enabled the company to squeeze additional ores out of mines that were thought to have been depleted.
Declines in the Late 1920s
Now listed on the Cincinnati Stock Exchange, Eagle-Picher entered a difficult period in 1927 when yields from the tri-state mines began to decline. Arthur Bendelari succeeded Swift as president of the company in February 1928 and eventually moved the company's headquarters back to Cincinnati.
Serious economic declines occurred in the months following the stock market crash in 1929. To improve managerial efficiency, Bendelari reorganized all the company's production interests into a new subsidiary, Eagle-Picher Mining and Smelting. The subsidiary also shielded the parent company from potential liabilities in its field operations. As the Great Depression set in, lead and zinc prices continued to plummet. Eagle-Picher remained solvent mainly from the use of cash reserves accumulated during the boom years of the 1920s.
During this time, George Washington Potter, a veteran of the tri-state mines, recommended the establishment of a central smelting facility to replace the more than 200 smaller smelters located in the area. Potter won government permission to centralize production, as well as the right to operate Eagle-Picher locomotives on railroads in the region. The Central mill opened in October 1932. During this time, the company also began producing slag wool, an insulation product made from smelter wastes. This stable, fire-proof material proved highly successful, bolstering the company's product line.
Union Busting in the 1930s
In 1933, Eagle-Picher faced a serious threat from the International Union of Mine, Mill and Smelter Workers, which had begun to organize workers in the tri-state region. Eagle-Picher and the Ore Producers Association to which it belonged refused to recognize the union, which called a strike for representation in May 1935. Subsequently, Eagle-Picher helped to establish a rival company-sponsored union called the Blue Card Union. Using gangs of thugs, the local sheriff, and even the National Guard, the Blue Card succeeded in breaking the strike and seriously disrupting the union's activity in the area.
The union filed suits against Eagle-Picher and other companies with the National Labor Relations Board, charging interference in the administration of a labor union. The union prevailed, and Eagle-Picher gained a proven reputation for opposing union activity and being uncompromising and difficult in negotiations. Despite its legal victory, however, the union had little success in the tri-state.
Fearing that Eagle-Picher was losing control of its operations, the company's board asked Joel M. Bowlby, a Chicago accountant, to perform an analysis of the company. In January 1937, Bowlby recommended further decentralization of the enterprise, creating fully autonomous divisions. Bendelari resigned shortly thereafter due to ill health and was replaced by Joseph Hummel, Jr. During this time, Potter approached management with a plan to acquire the Commerce Mining and Royalty Company, which held extensive ore reserves and several mills in the tri-state area, in addition to the Northeast Oklahoma Railroad. The $10 million deal was finalized in 1938, and Commerce was added to Eagle-Picher as a separate division, following Bowlby's recommendations.
The Commerce acquisition did little more than extend the life of a dying industry in the tri-state region. However, during this time, the Germans invaded Poland and war began in Europe, creating a huge demand for war industry minerals, including Eagle-Picher's lead and zinc. Production capacity was expanded to meet the new demand, and in late 1941 the company even took over a zinc operation in Taxco, Mexico. To cope with the new demand, Eagle-Picher enlisted the Robert Heller consulting firm to present its own set of recommendations. Heller advised elevating Bowlby to the presidency and shuffling Hummel off to head the board.
Bowlby's ascension to the presidency was well timed. As a bookish accountant who possessed tremendous knowledge of the company, Bowlby was perfectly suited for the job. A fact that became evident after Pearl Harbor, when the company came under the direction of the War Production Board.
Eagle-Picher held several advantages over other wartime industries. Unlike Singer, which converted from sewing machines to machine guns, and Ford, which went from automobiles to bombers, Eagle-Picher already produced what the war effort needed: slab zinc, paint pigments, lead and zinc oxides, bearing metals, antimonial leads, solders, and insulation products.
The war brought a production boom back to the tri-state area. But even so, Eagle-Picher had difficulty operating its mines at capacity with a work force depleted by conscription, despite increased mechanization and the addition of another mine near Tucson. Furthermore, the company's profits from war production were strictly controlled by the government. Meanwhile, Potter, who had given so much to the company, became seriously disillusioned with Eagle-Picher under Bowlby, who used wartime profits to move Eagle-Picher out of mining and into manufacturing. Potter resigned in protest in 1944.
The war brought Eagle-Picher into several new markets, particularly production of germanium, the first semiconducting material, essential to the invention of the transistor in 1947 as well as to the development of solid state electronics. The company also emerged from the war with highly-advanced battery systems which held tremendous commercial potential. Commercialization of these products required no conversion back to the civilian economy.
Having dropped the name "Lead" from its name in 1945, Eagle-Picher purchased smelters and fabricating plants in Dallas and East Chicago in 1946, and the Alston-Lucas paint company two years later. Hoping to build on the postwar housing boom, the company also purchased the Orange Screen Company, a manufacturer of screen doors and windows.
In the attempt to diversify, Eagle-Picher purchased a diatomaceous earth plant, which produced filtration products, in Clark, Nevada. Abandoning an effort to exit the metallic products business, Eagle-Picher later purchased the Kansas City Smelting and Refining Company, the Cleveland Lead Works, and parts of the Southern Lead Company.
Bowlby resigned in 1948 due to a family illness and was replaced by T. Spencer Shore, a company director and partner with Goldman-Sachs. Shore set new, more meaningful corporate performance goals based on earnings per share. He also limited Eagle-Picher's acquisitions to closely held companies serving specialized industrial markets. Shore understood that Eagle-Picher could not run these companies as well as their original management. He added the condition that acquisitions require the management of these companies to remain after being taken over by Eagle-Picher. Other emerging conglomerates of the day, including Textron, Ling Electronics (later LTV), and ITT, did not understand the importance of this and succeeded in destroying many of the companies they took over.
Eagle-Picher saw a second defense-related increase in demand during the Korean War, when American forces again became engaged in combat and the military began massive stockpiling efforts in the event of a wider war with communist countries. Still, with the decline of the tri-state area, the need for the Mining and Smelting subsidiary disappeared. These operations were converted back into an operating division of Eagle-Picher. Back on the acquisition trail in 1952, Eagle-Picher took over the Ohio Rubber Company of Willoughby, Ohio, making it a division of the company.
In 1954, Shore liquidated Eagle-Picher's Paint and Varnish and Metallic Product divisions, which were only marginally profitable, and used the proceeds to acquire the Fabricon Products division of Fisher Body for $9.9 million. Fabricon manufactured plastic products for the automotive, food, and packaging industries. Eagle-Picher later acquired another plastics company, Wilson and Hoppe, which it merged with Fabricon.
After divesting its Mexican operations for $1.4 million in 1956, Eagle-Picher purchased the Chicago Vitreous Corporation, a porcelain enameling company, and the Gora-Lee Corporation, a Connecticut-based rubber molds manufacturer. The company's divisional structure made these acquisitions all the easier to metabolize.
During the early 1950s, Bell Labs, RCA, Texas Instruments, Raytheon, Sylvania, and General Electric provided strong markets for Eagle-Picher germanium, which was used to develop even more advanced transistor products. By 1955, Eagle-Picher held 95 percent of the market. This market dried up quickly, however, after Texas Instruments developed a silicon transistor made essentially from sand. Eagle-Picher failed to develop its own silicon business winding up that operation in 1960.
Continued Expansion in the 1960s
Nevertheless, Eagle-Picher continued to benefit from its leading research in silver-zinc battery technologies, which gained new importance with the development of rocket and missile programs during the 1950s. The "couples" battery, named for its dual chamber construction, led Eagle-Picher's product line in a zero defects quality program. The battery program ultimately drew Eagle-Picher into the prestigious and profitable aerospace and defense business, as well as into space exploration. Eventually, Shore combined the germanium and battery operations into a new electronics division.
During the early 1960s, Eagle-Picher continued to diversify by taking over several other companies, including the Akron-based Standard Mold tire products company, Davis Wire, a steel fence and net manufacturer in Los Angeles, and the Premier Rubber Manufacturing Company in Dayton. In 1966, to emphasize its increasingly diverse nature, the company changed its name from the Eagle-Picher Company to Eagle-Picher Industries. Shore maintained his strict acquisition policy and, because Eagle-Picher remained in closely related markets, came to hate the description of the company as a "conglomerate."
Under Shore, who retired in favor of William D. Atterbury in 1967, Eagle-Picher fell short of establishing dominant horizontal or vertical monopolies yet remained too closely tied to specific industrial markets to be considered typically diversified. Acquisitions continued that year, with the Detroit-based gasket maker, Wolverine Fabricating and Manufacturing, and the Markey Bronze Corporation. The following year Eagle-Picher took over Cincinnati Cleaning and Finishing, a manufacturer of cleaning solvents, and Union Steel, which produced welded wire and sheet metal. In 1969, Eagle-Picher acquired the Ross Pattern and Foundry company, a manufacturer of aluminum castings for the automotive, electronics, and aerospace industries.
With lowered growth from divestitures and operating profit, Atterbury attempted to raise investment capital by emphasizing the synergy of Eagle-Picher's various divisions. The profit-center approach to these divisions served the cause well. The company raised sufficient capital to purchase the A. D. Weiss Lithograph Company and the Hillsdale Tool company. Meanwhile, in March 1972, Eagle-Picher spun off Davis Wire to a group led by the division's management for $23.5 million.
In 1973, Eagle-Picher acquired the Johnson Manufacturing Company, Faulkner Concrete Pipe, and Plas Chem, an anti-corrosion chemical company. These were followed in 1976 with the purchase of Elmac, a mining supply company, and Pritchett Engineering, a precision machining company serving the petroleum industry.
Legal Challenges in the 1980s and 1990s
Many of Eagle-Picher's industrial markets were adversely affected by a serious recession in 1979 that bottomed out in 1982. This caused numerous operational reverses at Eagle-Picher and placed the company on shaky ground for its next challenge, a spate of lawsuits related to the use of asbestos in Eagle-Picher's insulation products.
Thomas Petry, appointed president in March 1981 to ensure an orderly transition as Atterbury approached retirement age, was forced to take action in 1984 when more than 19,000 asbestos injury claims had been filed. The wave of litigation meant easy money for lawyers, whose actions led several other manufacturers, including Johns-Manville, into bankruptcy.
Petry, however, elected to ride out the litigation by funding settlements with money from a special reserve that was replenished with operating income. To lessen the effect of the suits, Eagle-Picher concentrated on expansion from its other operations. This strategy succeeded in keeping the company out of bankruptcy but still seriously damaged earnings. Petry succeeded Atterbury as chairperson in 1989 and was replaced as president by John W. Painter.
As the volume of settlements increased, Eagle-Picher was forced to divest several operations, including the Akron Standard and flight operations divisions, to maintain the fund. By 1991, however, the company could not keep up and was forced to file for reorganization under bankruptcy laws. Ironically, this had the positive effect of halting all injury settlements.
In March 1992, Painter retired, and his duties were assumed again by Thomas Petry. The company remained under court protection, as the number of property damage claims reached 1,000, and personal injury claims escalated to more than 160,000. Thus, while operations remained strong, the asbestos litigation continued to vex the company.
Although it remained diversified within related industrial markets, Eagle-Picher began to move toward greater centralized control, made necessary by the asbestos litigation. The company remained organized in three main divisions: an industrial group, a machinery group, and an automotive group.
Bankruptcy Reorganization Successful
As bankruptcy proceedings dragged on, the company attempted to continue operations undisturbed. As a testament to its success, almost no customers, suppliers, or vendors abandoned the company during this time. In fact, sales rose substantially during the reorganization, from $599 million in 1991 to $891 million in 1996, the last full year before the reorganization was complete. Earnings rose even more dramatically, from $19 million in 1991 to $62 million in 1996.
Eagle-Picher also continued to develop its new markets during that time. In 1995 the company created a new technologies division by combining its electronics division with its specialty materials division. By combining the former divisions' expertise in making batteries for space satellites and silicon wafers for solar cells, the new division directed its attention to creating power systems for space satellites.
Eagle-Picher emerged from court protection in early 1997, having achieved its primary objective in filing for bankruptcy: protecting itself from being destroyed by injury claims. The reorganization settlement included a permanent court injunction against current or future asbestos or lead-related injury claims against the company. In return for this protection, Eagle-Picher financed the Eagle-Picher Industries Personal Injury Settlement Trust with ten million shares of newly issued stock, $250 million in ten-year debentures, $69 million in notes for tax refunds, $50 million in cash, and $18 million in three-year notes. The trust was to use these funds to settle all the asbestos and lead-related injury claims. Claims from injury claimants and trade creditors would be paid approximately 37 cents on the dollar. Shareholders, however, were left with nothing, having been given no stake in the newly reorganized company.
Once out of bankruptcy reorganization, Eagle-Picher had optimistic plans for the future. Andries Ruijssenaars, president of Eagle-Picher since 1994 and slated to become chief executive officer, said in 1996 that he thought a rise in revenues to $3 billion in the next five to ten years was possible. The company planned to focus on expanding international business, aiming for an even split of $1 billion in revenues in each of the company's three main territories: the United States, Europe, and the Pacific Rim.
In early 1998 Eagle-Picher was acquired by Granaria Holdings B.V., a Dutch investment firm, for more than $700 million. Joel P. Wyler, chair of the privately held Dutch company, became chair of Eagle-Picher when the transaction was completed. As part of the deal, the management of Eagle-Picher became part owners of the company.
Principal Subsidiaries: Michigan Automotive Research Corporation; Eagle-Picher-Boge L.L.C.; Eagle-Picher Fluid Systems, Inc.; Eagle-Picher Minerals, Inc.; Transicoil Inc.; Eagle-Picher Industries Europe GmbH (Netherlands); Eagle-Picher Far East, Inc. (Japan).
Principal Divisions: Hillsdale Tool and Manufacturing; Ross Aluminum Foundries; Rubber Molding; Wolverine Gasket; Trim; Cincinnati Industrial Machinery; Construction Equipment; Technologies; Fabricon Products; Plastics; Suspension Systems.