National Standard Co. Business Information, Profile, and History

History of National Standard Co.

National Standard Co. has been one of the leading manufacturers of wire products in North America for almost 100 years. The company's wire has been used in a huge variety of products ranging from tires to harpsichords. After a period of extensive diversification and growth in the 1970s and 1980s, during which the company produced everything from telephone wire to lithography equipment to medical equipment, the company retreated to its roots as a manufacturer of metal wire products. National Standard is now the major supplier of filters for automobile air bag inflators.

National Standard was founded in 1907 when William Harrah and Charles Anderson, two lifelong friends, decided to take the small wire cloth company they managed in Niles, Michigan, and turn it into a manufacturer of lightning rods. Incorporated as the National Cable & Manufacturing Co., the company assumed its present name in 1913 when it acquired Cook Standard Tool Co. and merged the names of the companies along with their operations. In 1911, after much debate and discussion between the two partners, the small company took what was arguably the most important step in its history when it commissioned a special machine for manufacturing a new kind of wire braid to be used in the budding rubber tire industry. This "bead wire" was needed by automobile tire manufacturers to keep rubber tires from flying off the wheel under centrifugal force. In one form or another, this application would remain the mainstay of National Standard's business for the next 70 years.

In 1926, during the height of the 1920s stock market boom, National Standard went public with an IPO of 110,000 shares. By this time the company was manufacturing not only wire braid and steel cables but such large machinery as wrecking cranes and jacks at their plants in Niles, Michigan, and Akron, Ohio. National Standard had also opened National Standard Co. of Canada, a wholly owned subsidiary based in Guelph, Ontario, in order to serve the growing Canadian tire industry.

The company continued to enjoy domestic and foreign expansion during the 1930s in spite of the Great Depression. A new plant was opened in Los Angeles and a new subsidiary was founded in Worcester County, England. The first major period of diversification and growth for National Standard occurred in the late 1930s when the firm acquired three companies whose products would remain important in the company's business for some 50 years. The acquisition of Worcester Wire Works expanded the company's wire manufacturing to include high grade specialty drawn wire for fine applications such as musical instruments and bobby pins. The Athenia Steel Co. of Clifton, New Jersey, provided flat rolled steel, originally for such diverse uses as razor blades, corsets, and watch springs, then later for manufacturing equipment. Finally, the Wagner Litho Machinery Co. of Hoboken, New Jersey, contributed sales of additional large machinery to be used in the metal lithography that decorated the plethora of tin cans, biscuit boxes, and metal toys that characterized the material culture of that era. Sales soared as a result of the acquisitions, reaching $15 million by 1945.

Sales and earnings continued to grow at a steady rate through the 1940s and 1950s. National Standard assumed the role of a dependable, conservative, American corporation. Annual dividends were paid regularly from 1915 on and--with the exception of an occasional acquisition--National Standard stayed out of the corporate limelight. Annual sales at National Standard, which had increased the number of workers it employed to almost 2,000, reached $52 million by 1960, more than double the figure of a decade earlier.

The 1960s and early 1970s marked the second period of major expansion for National Standard. Over the course of this period the company would acquire eight manufacturing companies and found five foreign subsidiaries and six foreign affiliates. Some of these acquisitions were related to the company's core wire business, but others involved marked departures from the wire industry.

Since its inception, National Standard had maintained strong ties to the rubber industry as a result of its sales of bead wire for the reinforcement of automobile tires. The company had also become one of the leading producers of hose reinforcing wire over the years, further strengthening its relationship to the rubber industry. Although wire remained the cornerstone of National Standard's business, the company began to gear the machinery production that had been a component of the business since 1913 towards the rubber industry as well.

In 1966 the company acquired Rawls Brothers Co. of Lima, Ohio, a manufacturer of machinery used for retreading tires. In 1971 this component of the company's business was strengthened by the acquisition of Fasco Tire Equipment Co., a maker of tire recapping equipment. National Standard's own machinery division in Niles, Michigan, also entered the tire machinery industry. It designed and manufactured equipment used to build the steel belted radial tires that were being aggressively promoted in the early 1970s and for which National Standard was already providing steel cord.

In addition to acquisitions that provided diversification for the growing company, National Standard also built on its core wire business through acquisitions and the development of new products. One important product contribution to come out of the company's research and development department in the early 1960s was Copperply wire, a copper-coated steel wire for the telephone transmission market. Because of Copperply's strength and resiliency, transmission poles could be spaced much farther apart than before, significantly reducing installation costs. With the tremendous growth in communications in the 1960s and 1970s, Copperply proved to be a significant portion of National Standard's non-tire-related wire sales during this period.

National Standard further expanded its involvement in the wire products industry with the acquisition of Cheney Bigelow Wire Works in 1962. Cheney Bigelow produced fourdrinier wire, a specialized wire used in papermaking equipment. Cheney Bigelow's fourdrinier wire accounted for an impressive 15 percent of total sales for the company by 1965. In the early 1970s, however, metallic fourdrinier wire was increasingly replaced in papermaking by synthetic alternatives. This development forced National Standard to close the main Cheney Bigelow plant in 1974.

In the non-wire field, National Standard's established businesses prospered in the 1960s and 1970s. The company's Wagner division, which produced lithography machinery used in decorating tin and aluminum products, was a major factor in the company's continued growth. Although the decorated tin biscuit boxes and toys that had formed the original end product of the Wagner's machinery were no longer fashionable, the 1960s explosion in metal soft drink and beer cans more than compensated for this decline. Not only was this machinery in increasing demand, but the cost of the equipment used to decorate the thin tinplate used for beverage cans was twice as much as the cost of traditional pressed tin. As America's leading producer of this equipment, National Standard's Wagner division thrived.

International sales made up an increasingly large part of National Standard's revenues during the 1960s. The company frequently looked to the overseas market when American sales lagged. National Standard's British subsidiary expanded through acquisitions and new plant openings. By 1970 the company had four divisions in the United Kingdom, each producing products mainly for the European tire industry. The company also opened a South African subsidiary in the late 1950s, and affiliates in India and Australia in the 1960s, through National Standard of England.

National Standard also formed a partnership with FAN of West Germany, a company that operated wire plants in West Germany, Belgium, and Luxembourg to service the European tire industry. These FAN affiliates struggled for profitability from the start. National Standard's 1974 withdrawal from these partnerships would mark the beginning of a period of extensive retraction for the company.

National Standard's sales continued to grow steadily in the 1970s. By 1979 annual sales had reached $331 million, more than double the $116 million in sales that the company had posted in 1969. Earnings were more variable during this period, but after reaching a peak of near $12 million in 1974, net income levelled off in the late 1970s to a respectable $8-$9 million. In a 1980 article in Industry Week, National Standard's newly appointed president, Gerald H. Frieling, predicted a 15 percent annual growth rate through the 1980s and speculated that National Standard could be a $1 billion company by 1990. Few corporate predictions have been so devastatingly inaccurate.

When Frieling was appointed to head National Standard it was already apparent that all was not well with the 70-year-old firm. Although sales had reached record levels in 1979, sales for the first three quarters of 1980 were down, and by the end of the fiscal year earnings would be only half those of the previous year. The rubber tire industry, a market on which the company depended heavily, was in a period of stagnant growth. Frieling felt that the company needed to look for new markets while also rationalizing its current operations.

National Standard had responded to industry needs on a case by case basis in the past, producing new products when the need arose. Frieling wanted to create a body of technology that would differentiate the company's products and carve out a distinct segment of the wire market. "Before," Frieling noted in the interview with Industry Week, "we looked at each plant as a collection of machines. We'd make a little piece of this and another of that just to keep them busy.... [Now] instead of reacting to the market, we're going to go after the market segments in an aggressive way by developing new technologies."

The sheer size of National Standard made an overhaul of the business a daunting proposition. With 22 domestic operations and four foreign concerns involved in the manufacture of a huge variety of products, it was sometimes difficult to determine which products were making money and which were dead weight. Moreover, each facility had its own processes and management techniques, which made quality control and long-term planning difficult. Frieling, however, was determined to create a set of long-range goals for the entire company. In addition to heavy investment in research and development, he planned to sell marginal operations, acquire companies that could provide new technologies, and rationalize the production at existing plants.

In keeping with Frieling's goals, over the course of 1981 and 1982 the number of production facilities producing bead and hose wire was reduced from eight to three, while the number of weld wire plants fell from five to two. The National Standard plant in Mount Joy, Pennsylvania was remodelled to accommodate production of a broad range of products from other facilities that were closed down. Included in these plant closings were facilities in Los Angeles and Worcester, Massachusetts, that had been in operation since the early part of the century. In addition, the Cheney Bigelow and Rawls divisions were sold and foreign operations in Wales and Scotland were closed. National Standard's machinery operations, including Wagner Lithography, Bartell stranding equipment, and the National Standard tire building machinery, had previously been dispersed in a number of divisions across the country. Under the company reorganization they were consolidated into one division, with all production and development transferred to a plant in Rome, New York.

Although Frieling's long-term plans may have been justifiable, the timing of this restructuring could not have been worse. The early 1980s were a period of serious recession for the American automobile industry on which National Standard depended for much of its business. Reduced sales, increased research and development costs, and the reorganization of facilities combined to lower net earnings in 1981 to only $1.2 million, a dramatic decrease from the almost $13 million the company had netted only two years earlier. By 1982 the situation had worsened; the company posted a net loss of $11.5 million. For the first time since going public in 1926, the company failed to pay a dividend. Although much of this loss could be attributed to non-recurring charges resulting from plant closings, sales were also down by 20 percent. The tire industry on which National Standard depended so heavily was going through extremely tough times, buffeted by longer lasting radial tires and foreign competition that permanently changed the structure of that industry. It was clear that National Standard had to find new markets and new products, but investments in research and development would not bear fruit for a number of years. It would be difficult for the company to keep investor confidence up in the meantime.

During the mid-1980s, as the automobile and tire industry experienced a mild upswing, it began to look as if National Standard's restructuring program might have worked. Income returned to around the $8 million mark and sales were up, but by the following year it became apparent that National Standard could no longer depend on rebounding with the car tire industry. Although sales volume increased, foreign competition made it impossible to raise prices to keep up with higher raw material and production costs of traditional National Standard products.

The company knew that its financial woes were not at an end. Research and development was investigating promising new products, including Fibrex (a woven fiber used for battery filters), Archon II (a patented arc-weld process control system), and a line of new medical products developed in the company's new Medical Products facility in Gainesville, Florida, but none of these new products could accumulate large sales quickly. By 1987 National Standard was once again in the red, with a net loss of over $11 million. In addition, the company's early success in keeping long-term debt relatively low during the reorganization had waned. Increased losses resulted in a rise in debt, which further damaged shareholder equity.

By 1989, with net losses of over $12 million, it became clear that National Standard's troubles were more than the temporary result of restructuring. The company had not paid a dividend in three years and debt continued to grow. Gerald Frieling resigned his position with the company in July 1989 and Michael B. Savitske was appointed to replace him.

In the early 1990s, faced with ten years of dismal performances and ever increasing losses, National Standard was forced into a position of major retraction. Although the restructuring of the 1980s had involved the divestment of unprofitable or marginal companies, the company now began to divest itself of all but its core business in order to raise cash. The once revolutionary Copperply product line and the newly developed Archon II weld monitoring system were both sold to competitors in 1989, and the huge "City Complex" facility in Niles was closed. This was quickly followed by divestiture of almost all the company's non-wire related divisions, including the Medical Products Group and specialty steel and wire divisions. In 1991 the entire National Standard Machinery Systems Division was sold, putting an end to what had been a major product line for the company since 1916. This divestiture also extended to foreign subsidiaries, including National Standard South Africa and the Telford and Taydor divisions of National Standard England. The only new product line that was spared was the development of woven wire filters to be used in automotive air bag inflators. This new technology was the one bright point in the company's outlook, for many car makers were making air bags standard equipment in the 1990s. A joint venture with Toyota Tsusho America, Inc., and other Japanese wire makers ensured both a supply of the wire cloth needed for these filters and an entry into the Japanese auto parts industry.

By 1995, the company that at its height had owned 22 manufacturing divisions and four foreign subsidiaries and had employed over 5,000 workers, was reduced to only two major product lines--wire products and air bag filters--and 1,000 employees across the country. In spite of this dramatic reduction, National Standard's troubles were still not over. The company's sales of welding wire increased in the mid-1990s, but other core wire products struggled. A bitter, year-long strike at the company's Columbiana, Alabama, plant caused buyers to look elsewhere for the hose wire produced there. This development eventually forced National Standard to close the facility and end hose wire production in North America. To make matters worse, the closure of this and other manufacturing facilities embroiled National Standard in a series of environmental clean-up operations that would cost the company over $10 million.

In 1993 National Standard incurred a devastating loss of $53 million. The Value Line Investment Survey, which had always followed the company, quietly dropped the floundering firm, stating that its "high-risk issue should be of little interest to most investors." Although increased sales of welding wire and air bag filters helped a struggling National Standard to reduce losses in 1994 and return to profitability in 1995, the company's financial position had been so weakened by the mid-1990s that a quick or extensive recovery seemed improbable.

Principal Subsidiaries: National Standard Export Co.; National Standard Co. Ltd., England; National Standard of Canada Ltd., Canada.