The Budd Company Business Information, Profile, and History

History of The Budd Company

The Budd Company is the leading automotive stamping manufacturer and one of the top automotive suppliers in the United States. With over 20 manufacturing and assembly facilities, Budd produces components for approximately half of the passenger cars and trucks made in North America. Widely acknowledged as a pioneer in the field of transportation, Budd has contributed many industry advancements, particularly in materials technology for automobile and rail car design. For over eight decades, the company has successfully weathered the numerous fluctuations of the transportation industry by alternately diversifying and consolidating its operations to capitalize on market trends. Budd's tenacity and innovative spirit are reflected in the company's slogan "Budd On the Move."

Budd was founded in Philadelphia in 1912 by Edward Budd as The Edward G. Budd Manufacturing Company. Budd established his business with a single press and thirteen former coworkers from Hale & Kilburn Company, a metal stamping and die-making manufacturer, seeking to realize his dream of building an all-steel automobile body. Auto and truck bodies of the early 1900s were comprised primarily of wood. The process of varnishing the wood to make it resilient enough to be used in automobiles was costly and time consuming. Budd's all-steel design resulted in car bodies that were less expensive to manufacture, required considerably less production time, and were stronger than wood-steel composites. Budd presented his idea to the Hupp Motor Company in 1912 and earned his first contract for steel body panels from Hupp prior to leaving Hale & Kilburn. News of Budd's innovation spread quickly and within a year, the company had truck body orders for Packard and Peerless and auto body contracts with Garford Motors and Oakland Motor Company.

Budd's first big break came in 1914, when the Dodge brothers ordered 5,000 steel bodies for their new touring model. The sedan was so successful that Dodge placed a second order for 50,000 additional auto bodies and was thereafter Budd's largest customer until its acquisition in 1925 by Chrysler Corporation. Encouraged by this early success, Budd founded the Budd Wheel Company in 1916 to manufacture wire wheels, another move to eliminate wood from cars and trucks. During that time, Budd also entered into a joint effort with Michelin Company of France to market steel disc wheels in the United States. Budd's customer base increased steadily and by 1917, the company could boast such additional clients as Ford, Buick, Willys-Overland, and Studebaker.

In 1923, Budd registered another industry first by building an all-steel enclosed car body. Budd's design rejected the standard box-like appearance of current models in favor of a more rounded style, which was adopted by Dodge in 1925 and later by other automakers as well. That year, Budd expanded its business to the auto capital of North America by purchasing a manufacturing plant in Detroit from Liberty Motor Car Company. To further broaden its potential client base, Budd entered the European market.

The 1930s were years of experimentation, expansion, and hardship for Budd as the company struggled during the Great Depression. In 1930, Budd International Corporation was created to handle the company's limited European ventures. Budd's overseas endeavors were less than successful, however, and Budd International posted financial losses between 1930 and 1935. Faced with declining sales of its auto components as the auto industry suffered as a whole during the Depression, Budd diversified its interests and began to develop products for other transportation markets. Company engineers explored the potential large-scale uses for stainless steel, a lightweight, rust resistant metal used predominantly in hand-held tools. In 1931, the company manufactured the first stainless steel airplane, which was successfully test-piloted for 1,000 hours of flight time. Although the company gained recognition for its latest design, Budd did not pursue business in the airline industry until World War II.

While working at Hale & Kilburn, Edward Budd had also gained experience in rail car construction. During the early 1930s, Budd utilized that knowledge to design and manufacture passenger rail cars. In 1934, Budd produced the first streamlined stainless steel passenger rail car. Called the Pioneer Zephyr, the car was touted for its high speed and light weight; three Zephyrs weighed approximately the same as a single Pullman-Standard passenger car. The Zephyr was also the first rail car to be diesel powered. Although the company lost money on the initial venture, Budd later relied on its growing rail car sales to supplement company revenues when its auto components business slowed. For over two decades, Budd designed and built various passenger car lines, including Rockets, Silver Meteors, and Champions, among others. In conjunction with the new rail cars, Budd also pioneered the railway disc brake, which appeared on the market just prior to World War II. Budd railway disc brakes offered superior braking capabilities to the standard wheel tread system and were soon widely accepted by the railroad industry.

In 1940, Budd added to its list of industry breakthroughs by unitizing auto bodies, a manufacturing process in which the multi-part chassis frame was replaced with a one-piece component comprising the roof, sides, and underbody. The Nash Motors Company was the first to contract Budd to build the new auto bodies, and Budd's 1940 sales reached $69 million, a substantial return on the $100,000 in capital Edward Budd used to found his company in 1912.

With the advent of World War II, Budd became a supplier for the U.S. government. In 1942, Budd turned out a stainless steel cargo plane called the Conestoga RB-1, which was aptly nicknamed a "flying box-car." The navy purchased the contract for the planes and 17 Conestogas were manufactured to transport heavy military cargo. For decades after the war, Budd's Conestogas were among the fleet of one of the world's largest cargo companies. Edward Budd died shortly after the war, and his son, Edward G. Budd, Jr., assumed control of the company.

The Second World War enabled Budd to recoup its losses from the Depression and by 1950, company sales reached $290 million with record net earnings of $18.3 million. However, in 1951 and 1952 strikes by the oil industry and steel worker labor unions forced Budd to lay off 4,500 production workers. These strikes also adversely affected Budd's largest customer, Chrysler Corporation, which was forced to idle as many as 25,000 workers at different times. In response to these events as well as internal problems at Budd that slowed delivery of its components, Chrysler moved a large portion of its auto parts production in-house. Other auto makers soon followed suit, and Budd's net profits for 1954 were only one-third those of 1950. With the auto stamping and components division at the company losing ground, Budd again diversified, acquiring an airplane parts manufacturer and creating divisions in nuclear energy, aerospace, defense, and electronics. In 1954, the company introduced the first all-plastic bodied automobile for Studebaker. The following year, Ford contracted Budd to build the bodies for its new Thunderbird. The Thunderbird was a huge success, and Budd's auto stamping sales began to rebound.

During the 1960s, Budd again expanded and reorganized. Returning to the international market, the company acquired interests in industrial and transportation businesses in several European countries, extending into South America, Australia, and Mexico as well. At home, Budd concentrated its efforts on strengthening its auto industry sales. Toward the end of the decade, the company invested $125 million to upgrade its auto components and plastics operations. In addition, Budd acquired Gindy Manufacturing, a truck trailer producer, and Duralastic Products Company, a polyester and fiberglass manufacturer. Budd also established Budd Automotive Company of Canada Limited in Kitchener, Ontario. In 1972, the company further cemented its ties to the auto industry by moving its headquarters from Philadelphia to Troy, Michigan, a suburb of Detroit. At that time, auto products sales accounted for over 90 percent of company profits. Budd's move to Detroit and renewed commitment to the industry paid off.

While Budd's auto sales rebounded, the railroad industry began fading in the late 1950s as consumers displayed an increasing preference for automobile and air travel. Budd's rail car sales had almost ground to a halt until the early 1960s when Budd was awarded contracts by the Pennsylvania and Long Island railroads for its newest high-speed, Metroliner rail cars. In addition, Budd penetrated the subway commuter market in 1963, underbidding competitors for a contract with the New York City Transit Authority for 600 stainless steel subway cars--a $68 million project. While Budd continued to compete in the market and maintained a position as a leading rail and subway car producer, the Railway Division posted losses of over $27 million between 1967 and 1970. Aside from the general decline in rail travel, Budd's Metroliner cars were plagued with problems, many of which were the result of faulty supplier components. The company's reputation suffered, and Budd considered selling its rail car operations in 1970. Budd decided to hold on to the division, however, restructuring it in 1974 in hopes of capturing the market for replacement cars, as many railroads were looking to retire aging models. Budd reentered the market in the late 1970s with the SPV-2000, a new line of self-propelled cars. The cars were costly, however, and the company was repeatedly underbid by competitors including Nissho-Iwai American Corporation, a Japanese-American firm that beat out Budd for two sizable contracts. Although Budd was able to generate some business, including a $150 million contract from Amtrak in 1980, the Railway Division was not consistently profitable and was eventually eliminated.

Budd's auto group sales reached new heights in 1976 and 1977, and sales in the Plastics Division more than doubled between 1972 and 1976. By 1977, the company employed approximately 19,000 workers and had sales of $1.3 billion. Budd's success did not last, however, as two major oil crises and a national recession resulted in a substantial decline in automobile sales. The company was bought in 1978 by Thyssen AG, a German steelmaker and auto components manufacturer. The terms of the acquisition stipulated that Budd would remain fairly autonomous, though rumors abounded that the new parent company would step in to control day-to-day operations. Thyssen did not, however, and instead provided extensive financial resources for Budd.

Soon after the acquisition, Budd decided to concentrate solely on the auto industry, a decision that led to major changes throughout the company during the 1980s. New standards were established in quality and cost control, and production and administrative activities were reviewed. Most of the non-automotive subsidiaries were eliminated, and the company focused on streamlining its primary divisions: Stamping and Frame, Wheel and Brake, Foundry Products, and Plastics. Although Budd was now operating with only half the employee base, the company achieved the same level of sales in 1987 as it had in 1979.

The large cash flow provided by Thyssen enabled Budd to upgrade its manufacturing and technical facilities. The Plastics Division, which had steadily expanded during the 1970s, received particular attention as the amount of plastics used in cars increased drastically. The Budd Plastics Research Development Center, opened in the 1970s, afforded state-of-the-art equipment that enabled company engineers to develop advanced technical processes in producing plastic compounds and sheet moldings for use in several products including cars and trucks, textiles, appliances, farming equipment, typewriters, and computers. In the late 1970s, the Plastics Division began research on developing a sheet molding compound (SMC) that could be formed as quickly as steel is stamped. The company's first effort resulted in Flex 2000, a strong plastic SMC that was used in auto components. The Plastics Division continued its research into SMCs in the 1980s. Eight years of research culminated in 1986 with the introduction of the Budd System 59, a process through which plastic materials could be molded into parts at the "assembly line speed" of only 59 seconds per part. Budd System 59 more than doubled plastic components output at the company and was a viable alternative to the galvanized sheet metal traditionally used by automakers.

Budd's long-term relations with parent Thyssen have proven advantageous for both companies during the 1980s and 1990s. Chair and CEO, Siegfried Buschmann, commented in Automotive Industries on Budd's successful interactions with Thyssen: "Thyssen gives Budd technological assistance on some of our North American programs, and we give Thyssen the benefit of Budd's knowledge on some of theirs in Europe." Budd's commitment to industry advancement is reflected in its intensive employee training programs, teamwork philosophy, and quality control incentives. Deemed a top-quality components supplier by the automotive industry, the company seems well positioned for continued success.

Principal Subsidiaries: Budd Canada Limited; Connelly Skis, Inc.; Greening Donald Company Ltd.; Milford Fabricating Company; Philips-Temro Group; Waupaca Foundry, Inc.