Phelps Dodge Corporation Business Information, Profile, and History
Phoenix, Arizona 85004
We are committed to providing superior quality products, produced at internationally competitive costs, to customers around the globe. We seek to prosper by forging partnerships with our customers and suppli ers.
Our mission in conducting business is to create and enhance long-term value for our shareholders and our employees, and to do so in an env ironmentally responsible manner as good citizens of the communities i n which we live and work.
History of Phelps Dodge Corporation
One of the largest copper mining concerns in the world, Phelps Dodge Corporation operates several manufacturing businesses to insulate the company from the cyclicality of copper prices. Phelps Dodge's copper business is conducted through the company's Phelps Dodge Mining Comp any subsidiary, which also produces silver, gold, and other minerals as a byproduct of its copper operations. Its Climax Molybdenum Co. un it is the world's largest molybdenum producer. The manufacturing side of the company's business operates through a division called Phelps Dodge Industries, which has expanded aggressively during the 1990s. T he manufacturing businesses include Columbian Chemicals Company, one of the world's largest producers of carbon black (used in inks and ti res); Phelps Dodge Wire & Cable; and Phelps Dodge High Performanc e Conductors, which manufactures specialty conductors used by the aut omotive, computer, and aerospace industries.
In 1834 founder Anson Phelps, a New York entrepreneur thoroughly expe rienced in the import-export trade and well-connected in his targeted British market, formed Phelps, Dodge & Co. Along with his junior partners, sons-in-law William Dodge and Daniel James, Phelps supplie d his English customers with cotton, replacing it on the homeward jou rney with tin, tin plate, iron, and copper, for sale to government, t rade, and individual consumers in the United States. Before long, Phe lps started a manufacturing company in Connecticut called the Ansonia Brass and Battery Company, and in 1845 he helped organize the Ansoni a Manufacturing Company, which produced kettles, lamps, rivets, butto ns, and other metal items.
Phelps steered his fledgling empire grimly through a seven-year panic that began during 1837. His reward came during the following 14 year s of national prosperity, when large numbers of his products went wes t with new settlers, accompanied travelers on the rapidly expanding r ailroads, and provided a modicum of comfort for miners at the recentl y discovered Sierra Nevada gold deposits in California. Even broader markets came from such inventions as the McCormick reaper and the ele ctric telegraph, whose need for cable wire would swell Phelps Dodge c offers well into the next century. By 1849 the company was capitalize d at almost $1 million, and its profits were almost 30 percent.
Phelps's death in 1853 gave his son and each of his two sons-in-law a 25 percent interest in the business, with 15 percent going to a youn ger son-in-law. This second partnership was scarcely five years old w hen Anson Phelps, Jr., died. On January 1, 1859, the partnership was revised again, to increase the firm's capitalization to $1.5 mill ion and to give William Dodge and Daniel James each a 28 percent shar e. With reorganization complete, the company turned its attention to developing industries such as mining.
An interest in timber had begun in the mid-1830s, when Phelps, Dodge accepted timberlands in Pennsylvania in lieu of payment for a debt. L ater it built the world's largest lumber mill there, establishing a t imber agency in Baltimore, Maryland, to send its products to domestic and foreign customers.
Despite these diversifications, the principal interests of the compan y were still mercantile. However, through the advice of James Douglas , a mining engineer and chemical geologist, Phelps, Dodge was persuad ed to take a large block of stock in the Morenci copper mine in what was then the Arizona Territory. Morenci was owned by the Detroit Copp er Company, which exchanged the stock for a $30,000 loan. Douglas was also enthusiastic about prospects for another claim called Atlan ta, situated in Arizona's Bisbee district, about 200 miles southwest of Morenci. In 1881 the company bought the Atlanta claim for $40, 000.
Two years later Phelps, Dodge had a chance to purchase the adjoining Copper Queen mine, which was then producing about 300 tons of ore mon thly. The partnership decided to buy Copper Queen when Douglas hit th e main Atlanta lode in 1884, at almost the same time that a Copper Qu een tunnel penetrated the lode from a different spot. Arizona mining operations at the time stuck strictly to the "rule of the apex," acco rding to which a claim owner could follow a vein of ore onto another claim, if the deposit had come closest to the surface on his land. Th is had occurred with Copper Queen, and Phelps, Dodge, rather than ris k losing this strike to the Copper Queen owners, purchased the Copper Queen mine, merging it with the Atlanta claim.
In August 1885 Phelps, Dodge & Co. decided to streamline its oper ations by incorporating the subsidiary Copper Queen Consolidated Mini ng Company in New York, with James Douglas as president. Cautiously, Douglas made no major acquisitions for ten years. Then, he bought the Moctezuma Copper Company in Sonora, Mexico, from the Guggenheim fami ly. Two years later he purchased the Detroit Copper Company.
20th Century: A Focus on Copper
A large increase in domestic iron production during the 1890s plus a two cents tariff on each pound of imported tin plate instituted in 18 90 combined to make profitable metal markets hard to find. These fact ors and the fast growth of the company's mining interests forced it t o withdraw from most ventures other than copper mining and selling by 1906.
Phelps, Dodge still retained its Ansonia Brass and Copper Company, ho wever, which had become one of the largest U.S. manufacturers of copp er wire for the new telephone industry. Other products included brass wire, sheet copper, and rolled brass.
The shift to mining interests led to a need for another reorganizatio n. In 1908 the old Phelps, Dodge & Co. partnership was dissolved, to be replaced by a corporation called Phelps, Dodge & Co., Inc. Capitalized at $50 million, the new concern consolidated all the various Phelps, Dodge mining interests: Copper Queen Consolidated Mi ning Company; Moctezuma Copper Company; Detroit Copper Mining Company ; and Stag Cañon Fuel Company, a subsidiary consisting of coal and timber properties near Dawson, New Mexico, purchased in 1905 to supply the mines and smelters with fuel.
By this time there were 10,000 employees working in the mines, the sm elters, the company railroads, and other ventures. There was also com petition from other mining companies, which were able to mine copper, but lacked smelting facilities for processing. To provide these comp etitors with more efficient service while handling the smelting for i ts own copper mines, Phelps, Dodge abandoned its old Bisbee smelter a nd erected a new one some 23 miles away.
Following the 1917 entry of the United States into World War I, deman d for copper for munitions and communications exploded. The company s melters turned out 600 to 700 tons daily. Also in 1917, Phelps, Dodge & Co., Inc. transferred its assets and subsidiaries to Copper Qu een Consolidated Mining Company. Copper Queen became the operating co mpany and changed its name to Phelps Dodge Corporation.
With all enterprises operating at capacity, the Bisbee miners went on strike in July 1917. One factor was the powerlessness of mine manage rs to make policy decisions on behalf of top management in New York. Another was the shrinking supply of experienced workers, who were goi ng into the military or being lured away by higher salaries and bette r working conditions.
The International Workers of the World (Wobblies) easily caught the a ttention of the miners working for Phelps Dodge. At issue were better working conditions, a wage increase to $6 per day, and abolition of the unpopular physical examination to which all applicants were s ubjected before obtaining a job. Many suspected the exam was a filter to exclude prospective miners with undesired political affiliations.
When the strike was two weeks old, Phelps Dodge Director Walter Dougl as instructed an employee of the El Paso & Southwestern Railroad to transport about 1,200 strikers to Columbus, New Mexico, where they were to be turned loose. After the commander of a nearby army camp r efused permission to unload the cars, the workers were released in a small Mexican town called Hermanas, where they lived at starvation le vel until two carloads of food arrived from the U.S. Army base at nea rby El Paso, Texas. Though 25 participants in the Bisbee deportation were indicted, no particular blame was attached to any individual and the matter petered out.
The end of World War I brought a need for downscaling of all operatio ns. Government warehouses were packed with more than 800 million poun ds of copper, and more was coming in from Chilean mines at low cost. To counter these new challenges, Phelps Dodge and other large U.S. co pper mining companies cut production and formed the Copper and Brass Research Association to seek out and promote new uses for copper. At the same time, the companies founded the Copper Export Association, p ooling 400 pounds of copper for exclusive sale in foreign markets.
Suffering acutely from the postwar slump in demand was the Arizona Co pper Company, with holdings adjoining the Phelps Dodge Morenci proper ties. Part of this company's assets was a huge deposit of low-grade o re that it could not afford to develop. Phelps Dodge bought Arizona C opper and merged it with its Morenci holdings in 1921 in exchange for 50,000 shares of capital stock.
By 1925 business expansion was demanding record amounts of copper. In that year almost 1.75 billion pounds of refined copper were produced all over the country. Arizona's contribution to this total was more than 800 million pounds, a quarter of which came from Phelps Dodge mi nes. The stock market crash in 1929 brought the bonanza to an end, ho wever. Demand for copper dwindled everywhere, the price falling to 18 cents per pound from a high of 23 cents. Effects of the crash were f elt immediately. Sales, which had been $46.1 million in 1928, wer e down to $38.7 million in 1929, though net earnings were $4 million, up from $2.6 million the year before.
In April 1930 Walter Douglas resigned as chief executive of Phelps Do dge. In his stead came Louis S. Cates. Cates's first priority was to integrate the Phelps Dodge operations and to cut costs and allow for the Arizona tax of two cents on every pound of copper processed. Cate s then, also in 1930, acquired the Nichols Copper Company, which had an electrolytic refinery on Long Island, New York.
In another important 1930 acquisition, Phelps Dodge bought National E lectric Products Corporation, a large manufacturer of copper products for electrical and building purposes, with an annual capacity of mor e than 200,000 pounds of fabricated copper products and 150,000 pound s of steel. National Electric brought the company eight plants and a major interest in the Habirshaw Cable and Wire Corporation.
Cates reorganized all subsidiaries into two efficient organizations. The first, the National Electric Products Corporation, consisted only of the National Metal Molding division. This division's main interes t was steel products, and it eventually reverted to its original owne rs by an exchange of stock. The second division was headed by a new s ubsidiary called the Phelps Dodge Copper Corporation. This division w as charged with operating all the fabricating divisions including Hab irshaw Cable and Wire.
Cates's next challenge was the long-operative Copper Queen mine, whos e high-grade ore was becoming inaccessible and too expensive to mine. Phelps Dodge acquired the Calumet & Arizona Mining Company, a lo ngstanding rival with Bisbee acreage adjoining Copper Queen. Overridi ng the objections of Calumet President Gordon Campbell, who resigned in April 1931, the purchase became final in September, giving Phelps Dodge title to a low-cost New Cornelia mine 150 miles away at Ajo, Ar izona. Phelps Dodge consolidated the Calumet & Arizona and Copper Queen operations to reap economies of scale.
The Depression continued, however; the end of 1932 showed sales of ju st under $22 million, as opposed to $50.3 million in 1931. In an effort to pare costs and keep pace with lower demand, Cates cut p roduction at the Copper Queen. He also suspended all operations at Ne w Cornelia, and closed both the Stag Canyon coal operations and Moren ci.
Nevertheless, Phelps Dodge bought the United Verde Copper Company des pite a steep price of $20.8 million. With about 6,100 acres of cl aims in Arizona, United Verde proved its worth in 1937, when reserves of 6.9 millions tons of ore were produced. In 1937 the company went ahead with long-held plans to expand operations at Morenci, where a c lay ore-body was prepared for open-pit copper mining, refining, and s melting, at a cost of $32.6 million.
By 1939 the Depression years were part of the company's history. Sale s reached $75.5 million, yielding total income of $15.5 milli on, and the number of employees, recorded in mid-1938, reached about 9,000.
World War II once again found plants operating at maximum capacity. S tepping in for employees on military service, women and Navajo Indian s ran the Morenci mine, smelting facilities, and refining plant. Typi cal of pay rates was the wage for rock-shoveling: 64 cents per hour.
Once again operating at full capacity, Phelps Dodge supplied condense r tubes for the navy and cables for communications and electric power . Other orders were harder to fill, notably a specialized lead pipe i n 50-mile lengths, which was laid under the English Channel to supply Britain's troops with gasoline for the Normandy invasion.
Already looking towards the war's end in 1944, the company began to b uild the Horseshoe Dam on the Verde River, about 55 miles northeast o f Phoenix, Arizona, to allow for water conservation while filling the needs of its Morenci operations. Year-end 1944 sales figures of $ ;168.1 million more than doubled the $80 million figure for 1940.
Post-World War II Expansion
By 1950 Phelps Dodge was the second largest domestic copper producer, contributing 30 percent of the country's output. It was also one of the world's top three, its position as a purely domestic supplier mad e even more secure by a two cents per pound import duty. Characterist ic of the 1950s was government activism in the industry, partly as a result of the Korean War. At the end of 1950, the government institut ed price controls for copper, placing a cap of 24.5 cents per pound. Other moves came as a result of a 1947 Federal Trade Commission study , emphasizing the surprisingly low level of competition in the indust ry, and intimating the power was concentrated in the hands of too few groups.
Though not specified by the report, there was also a belief that copp er resources could be exhausted, because copper companies were doing little to find additional reserves, and that this situation should be remedied. Negotiations between the government and the mining compani es followed. Over the next two years, the country's copper-mining cap abilities increased by 25 percent, thanks to seven new mines.
Phelps Dodge's contribution to this effort was the Lavender Pit mine, opened in 1954 to develop an extension of the Bisbee operations know n as the Bisbee East orebody. As was the case with most of the compan ies, terms of the agreement were that the open-pit mine should be dev eloped and equipped with a smelter at a cost of $25 million, enti rely corporate-sponsored. In return, the company asked for a guarante e that the government would buy its copper at protected prices. By 19 56 Lavender Pit produced 80.3 million pounds of copper.
Another important development was the Peruvian Project, a joint ventu re between Phelps Dodge and three other mining companies intended to provide ownership of three southern Peru mines, together containing a n estimated one billion tons of low-grade ore. Phelps Dodge's 16 perc ent share of the costs was $24.3 million. The peak sales year of the 1950s was 1956, when sales reached $540.3 million, yielding a total income of $153.9 million.
At the end of the 1950s, the company spread its wings beyond its Cana dian subsidiaries, venturing into several developing countries. A 51 percent interest in a 1957 enterprise called the Phelps Dodge Copper Products Corporation of the Philippines gave it a new source of insul ated wire and cable for electrical use. Another venture blossomed in 1960, when the United States Underseas Cable Corporation was establis hed jointly with several U.S. companies and a West German company. Th ere was also a San Salvador affiliation called the Phelps Dodge Produ cts de Centro America S.A., which manufactured electrical wire and ca bles for the Central American market.
Despite these overseas connections, however, Phelps Dodge kept its ma in activities in the United States. This policy protected its copper from politically inspired import tariffs, as well as from taxation, s trike activity, and fluctuating prices found in foreign bases includi ng Chile. By the end of 1963, this policy yielded $327 million in sales, from annual production reaching 261,400 tons.
Another advantage of domestic concentration was vertical integration. Now one of the country's three largest copper producers, Phelps Dodg e through its fabricating subsidiaries provided outlets for its coppe r. This hedge against price swings also gave it immunity against purc hasing at high prices to make sure that fabricating subsidiaries had an adequate copper supply.
By 1965 the price of copper rose from 34 cents to 36 cents per pound. Plastics, lead, aluminum, and zinc had advanced far enough to threat en long-term copper markets. Phelps Dodge President Robert Page felt it desirable to keep copper prices moderate enough to maintain demand for the metal.
Still, the new opportunities aluminum offered could not be ignored. I n 1963 the company formed the Phelps Dodge Aluminum Products Corporat ion, producing aluminum wire and cable to complement the copper line. Though the aluminum enterprise produced 17 fabrication plants by 197 0, the company foresaw little long-term profit in it, and therefore m erged its company with the Consolidated Aluminum Corporation in 1971.
In July 1967 an industrywide strike began that lasted until the end o f March 1968. The Phelps Dodge operations most affected were the More nci, Ajo, and Bisbee mines, as well as the El Paso refinery. Run by a coalition of 14 unions led by the United Steelworkers of America, th e strike called for companywide bargaining for all operations, regard less of competitive and geographic differences. Eventually, an averag e increase of $1.13 per hour in wages and benefits sent workers b ack to their jobs after the administration of President Lyndon B. Joh nson intervened. Post-strike operations recommenced without raw-coppe r shortages, since most refiners were able to reuse scrap copper to a ugment their reserves.
Company Chairman Robert Page handed the helm to George Munroe in 1969 . Still holding the presidency (the office of chairman was abolished) , Munroe oversaw the establishment of a new mine at Tyrone, New Mexic o. Formerly known as Burro Mountain, this was a low-grade ore deposit that previously had been too expensive to work. New technology made the mine economically feasible, boosting total capacity by 20 percent annually. The expansion brought its reward; the decade ended with sa les of $672.1 million.
In 1969 Phelps Dodge swapped 800,000 of its own shares for a 26 perce nt interest in Denver, Colorado-based Western Nuclear, Inc., a compan y concerned with uranium mining, milling, and exploration. Initially, an open-pit uranium mine and mill were erected near Spokane, Washing ton. Three years later, Western Nuclear became a wholly owned subsidi ary, undergoing a $71 million expansion and modernization program to improve its production capacity at other facilities in Wyoming.
With the Clean Air Act of 1970, environmental concerns came to the fo re. The most critical problem Phelps Dodge faced was at Douglas, Ariz ona, where its smelter regularly processed 7 percent of the nation's annual copper production. By 1973 Arizona anti-pollution laws require d $17 million worth of emission-control adaptations to this smelt er, although the Environmental Protection Agency (EPA) was still unde cided about its requirements. This left a strong possibility of confl ict between state and federal regulations. Fears of a clash were disp elled when federal standards proved to be lower than those of Arizona ; state regulators were still dissatisfied, despite the money spent o n emission control equipment. Phelps Dodge officials protested, claim ing that these expensive standards would force the company to shut th e smelter down, putting almost 2,000 people out of work.
Because of sluggish demand and foreign competition, production cutbac ks followed at a new mine called Metcalf, and at Morenci, Ajo, and Ty rone. The shift showed up in net income figures: $121.7 million f or 1974, $46.3 million by the following year, and $17.9 milli on by 1977. The smelters kept operating 24 hours a day, however, to c ope with the large amount of ore that had accumulated during the shut down for the installation of pollution controls.
By 1978 there were voluble industry complaints that piecemeal EPA reg ulations made long-term antipollution planning impossible. The $2 billion initially spent plus frequent updating added about ten cents per pound to production costs, bringing the consumer's price for cop per up to about 75 cents per pound.
Coupled with cheaper foreign competition and sluggish demand, this br ought a business-cycle trough to the industry. Company executives bla med the crisis on the waning uranium market (Western Nuclear had lost its biggest customer, the Washington Public Power Supply System), th e demand slump caused by the slowdowns in the automobile and housing industries, and environmental protection woes. Many outsiders thought it was time to expand Phelps Dodge interests beyond copper.
In the first quarter of 1982 the company revenues showed a $19.1 million deficit. In April Munroe laid off 3,800 workers and closed al l four mines and three out of four smelters. He also instituted salar y cuts at all levels, and reluctantly took on short-term debt to cove r operating costs.
The following year the United Steelworkers instituted an industrywide strike. Kennecott Corporation, the country's top copper producer, se ttled quickly, exchanging a three-year wage freeze for a cost-of-livi ng allowance reaching $1.87 per hour at 6 percent inflation. Usin g this settlement as a model, the strikers then approached Phelps Dod ge management. The company counteroffered abolition of the cost-of-li ving allowance, a three-year wage freeze, and lower wages for new wor kers.
By the end of August 1983 the stalemate had led many workers to cross picket lines, despite sharp harassment from hard-line strikers. At M orenci, the company called in the National Guard, fomenting more rese ntment. The strike ended uneasily the following fall, with the compan y refusing to budge on its position, and the miners voting to decerti fy the 13 unions that had long been present at the mines and the smel ters.
Now, management turned its attention to reorganization. First on the agenda was a strategy to reduce production costs to less than 65 cent s per pound, and lessen dependence on copper. The economy drive began with the 1982 move of company headquarters to Phoenix. At the same t ime, the Morenci, Ajo, and Douglas smelters were closed and replaced by a $92 million solvent extracting-electrowinning plant at Moren ci that produced 100 million pounds of copper annually by mid-1987. E lectrowinning is a process of recovering metals from a solution throu gh electrolysis.
Electrowinning capacity grew further in 1986, when the company built a $55 million plant after buying a two-thirds interest in New Mex ico-based Chino Mines Company from Kennecott (the remaining third was acquired in 2003). In the same year, the company sold a 15 percent i nterest in the Morenci mine for $75 million. Also sold was the ur anium-mining business.
1980s-90s: Diversification into Manufacturing
The 1986 purchase of Columbian Chemicals Company for $240 million diversified Phelps Dodge interests to include the manufacture of car bon blacks, used to strengthen tires and to make toner for copiers. A lso providing profitable diversification was Accuride Corporation, a manufacturer of steel wheels and rims for trucks and trailers, which merged with the company in 1988 at a cost of $273 million. That s ame year, all operations were divided into two new operating division s, headed by the Phelps Dodge Mining Company and Phelps Dodge Industr ies.
By the end of 1989, the company had an income of $267 million, on sales of $2.7 billion. A year later, net income leaped to $4 54.9 million, on sales of $2.6 billion, partly with the help of a joint venture between Phelps Dodge and Sumitomo Electric Industries, to sell magnet wire in the United States.
Although Phelps Dodge continued to expand its copper activities durin g the 1990s, particularly overseas, an emphasis was placed on develop ing the manufacturing side of the company's business during the decad e. The acquisitions of Accuride, Columbian Chemicals, and Hudson Inte rnational during the latter half of the 1980s were important forays i nto new fields, creating a foundation the company would build on duri ng the 1990s as the manufacturing division, operated under the contro l of Phelps Dodge Industries, took shape. The largest segment of the company's manufacturing business was wire and cable production, gover ned by Phelps Dodge Magnet Wire Co., the largest magnet wire producer in the world. Expansion of this business was achieved through acquis ition and expansion, beginning in 1992 with the purchase of three Ven ezuelan wire and cable manufacturers and the establishment of a wire and cable plant in Thailand. Two years later, two magnet wire product ion facilities were acquired, one in El Paso, Texas, and the other in Laurinburg, North Carolina, to serve regional demand not met by the company's Hopkinsville, Kentucky plant, the largest magnet wire plant in the world. Capacity at the El Paso plant was doubled in 1996, fol lowed by a commensurate increase in production at the Laurinburg faci lity in 1997.
The investment in the Phelps Dodge Industries division paid off hands omely in 1995, as the company's carbon black, truck wheel and rim, an d wire and cable businesses each registered a record high in sales. F or the year, record financial and production totals led to what Phelp s Dodge Chairman, CEO, and President Douglas C. Yearley described as "the best year in the 162-year history of our company." The progress achieved within the Phelps Dodge Industries division played an import ant part in engendering the banner year, but the company could not cl aim such a victory without realizing significant gains in its copper business, upon which it was heavily dependent. The average price of c opper in 1995 surged to $1.35 per pound, 28 cents higher than the previous year, and Phelps Dodge reaped the benefits, registering rec ord production totals at its Morenci, Candelaria, Chino, and Hidalgo mining facilities. On the heels of this resounding success, the compa ny planned to focus its exploration efforts in South America, Africa, and the Far East, intending to increase its annual copper production total to two billion pounds during the ensuing five years.
In 1996, Phelps Dodge's manufacturing businesses continued to perform admirably, with the exception of Accuride Corporation, which suffere d from weak demand for heavy wheels. Phelps Dodge's wire and cable bu siness rallied forward, its progress highlighted by the company's fir st entry into the People's Republic of China through a joint venture called Phelps Dodge Yantai Cable Company that allowed Phelps Dodge to acquire, expand, and operate the power cable manufacturing facility in Yantai in the Shandong province. As this historic project began, t he company initiated a three-year expansion program aimed at increasi ng Columbian Chemical's carbon black production capacity by 25 percen t. Another notable development during the year was the acquisition of Nesor Alloy Corporation, which was combined with Hudson Internationa l Conductors to form Phelps Dodge High Performance Conductors, organi zed as the newest addition to the Phelps Dodge Industries division.
The late 1990s saw copper prices sag from 1995's level, but the compa ny recorded meaningful progress in its manufacturing operations, help ing to offset troubling developments in its mining activities. An unc ertain regulatory environment concerning mining and exploration promp ted Phelps Dodge to close its U.S. exploration offices. Falling coppe r prices forced the company to close a mine in Chile and another mine acquired in a $105 million hostile takeover of Cobre Mining Co. in 1998. Along with these closures, Phelps Dodge also sold 90 percent of Accuride to Kohlberg Kravis Roberts in 1998, gaining $480 mil lion from the sale. On the positive side, Phelps Dodge opened a new w ire magnet plant in Monterrey, Mexico, in 1998 and purchased the carb on black assets belonging to Brazil-based Copebras for $220 milli on, as well as an 85 percent holding in the carbon black operations o f Kumho Group of South Korea.
Ups and Downs in the New Millennium
The company's use of technology was evolving as it entered the new mi llennium. GPS, first introduced at the Morenci mine in the mid-1990s as a surveying tool, was adapted to new applications such as guiding machinery for bulldozers, electric shovels, and drills.
Copper prices hit unfamiliar lows in 1999, due to the lingering effec ts of the Asian financial crisis. According to Barron's, while copper was selling for just 61 cents per pound (after a decade of av eraging more than $1), the company needed another few cents per p ound to break even. However, there was a bright side to the crisis in that the company was able to stake its claim on future leadership of the industry. In the ensuing round of consolidation, Phelps Dodge ac quired Cyprus Amax Minerals Company, which had been preparing to merg e with ASARCO. However, Grupo México SA de CV bested Phelps Do dge's $700 million bid for ASARCO (which soon stumbled into bankr uptcy). The $1.8 billion Cyprus Amax purchase made Phelps Dodge t he world's second largest copper producer after Codelco of Chile, and the largest producer of molybdenum. It ended the year with revenues of $3.1 billion.
Douglas C. Yearley retired as chairman in May 2000 and was succeeded by J. Steven Whisler. According to American Metal Market, Year ley had been a big advocate of industry consolidation and earning a r eturn on capital. Yearley's hand-picked successor, Whisler, had begun working at a subsidiary in 1978 and had been Phelps Dodge president and CEO since 1995.
In late 2000, as copper prices showed signs of improvement, the compa ny proposed selling off Columbian Chemicals and PD Wire. These busine sses presented their own management challenges. "Wire and cable alway s had problems because they're in developing countries," Yearley told American Metal Market. Of the turbulence-free mid-1990s, he s aid, "It all looked too good--and it was."
In spite of a number of economic difficulties in Asia and South Ameri ca, the sale of the manufacturing businesses would be called off by m id-2001. The improvement in copper prices stalled. In addition, skyro cketing energy prices and the threat of shortages prompted Phelps Dod ge to scale back copper production and cut the workforce at three min es in the western United States.
Company headquarters was relocated from Tempe to ten floors in the ne w 20-story, $78 million Phelps Dodge Tower in downtown Phoenix in November 2001. The company consolidated other local offices there an d eventually employed 400 at the site. It had 13,000 employees worldw ide. The company's operations at the Candelaria mine in Chile, in whi ch it owned an 80 percent share, employed 950 people. About half of t hese workers went on strike in 2003.
Phelps Dodge Corporation had revenues exceeding $7 billion in 200 4. Phelps Dodge Mining Company accounted for more than three-quarters of the total. While copper was trading above $1 again, thanks in large part to demand from China's booming economy, energy costs rema ined a concern. Phelps Dodge announced an $850 million expansion to a Peruvian mine in October 2004.
In 2005, the company was planning to add a new copper processing plan t at its Morenci, Arizona, mine. There was a moderate shortage of ref ined copper, fueled by demand from China's construction and consumer goods industries, Whisler told Reuters. Copper prices were reaching l evels not seen since the 1980s, prompting Dodge Phelps to increase pr oduction and hand out dividends to shareholders and bonuses to employ ees. Short of help, Dodge Phelps was mining the Arizona workforce for talent to fill a slew of positions. The company had about 5,000 empl oyees in Arizona.
Principal Subsidiaries: Ajo Improvement Company; Alambres y Ca bles de Panama, S.A. (78.1%); Alambres y Cables Venezolanos, C.A. (Venezuela); Arizona Community Investment Corporation; Cables Electr icos Ecuatorianos, C.A. (Ecuador; 67.1%); Cahosa, S.A. (Panama; 7 8.1%); Chino Acquisition Inc.; Cobre Cerrillos S.A. (Chile); Colu mbian Chemicals Company; CONDUCEN, S.A. (Costa Rica; 73.4%); Cypr us Amax Minerals Company; Dodge & James Insurance Company, Ltd. ( Bermuda); Electroconductores de Honduras, S.A. de C.V. (59.4%); H abirshaw Cable and Wire Corporation; James Douglas Insurance Company, Ltd. (Bermuda); PD Candelaria, Inc.; PD Cobre, Inc.; PD Ojos del Sal ado, Inc.; Phelps Dodge Africa Cable Corporation; Phelps Dodge China Corporation (USA); Phelps Dodge Chino, Inc.; Phelps Dodge Corporation of Canada, Limited (USA); Phelps Dodge Development Corporation; Phel ps Dodge Dublin (Ireland); Phelps Dodge Energy Services, LLC; Phelps Dodge Exploration Corporation; Phelps Dodge Hidalgo, Inc.; Phelps Dod ge High Performance Conductors of SC & GA, Inc.; Phelps Dodge Ind ustries, Inc.; Phelps Dodge Mercantile Company; Phelps Dodge Mining S ervices, Inc.; Phelps Dodge Molybdenum Corporation; Phelps Dodge More nci, Inc.; Phelps Dodge Overseas Capital Corporation; Phelps Dodge Re fining Corporation; Phelps Dodge Safford, Inc.; Phelps Dodge Sales Co mpany, Incorporated; Phelps Dodge Suzhou Holdings, Inc. (Cayman Islan ds); Phelps Dodge Thailand Limited (75.5%); Phelps Dodge Wire and Cable Holding de Mexico, SA de CV (99%); Savanna Development Co. , Ltd.; Soner, Inc.; The Morenci Water & Electric Company; Tyrone Mining, LLC.
Principal Divisions: Phelps Dodge Mining Co.; Phelps Dodge Ind ustries.
Principal Operating Units: Phelps Dodge Mining Co.; Phelps Dod ge Wire and Cable; Climax Molybdenum Co.; Climax Engineered Materials ; Columbia Chemicals Co.
Principal Competitors: BHP Billiton; Corporación del Co bre de Chile (Codelco); Rio Tinto PLC.
- Key Dates:
- 1834: Phelps, Dodge & Co. trading company is formed as a p artnership.
- 1885: Phelps, Dodge incorporates Copper Queen Consolidated Min ing Company.
- 1908: Copper Queen and other companies consolidate into Phelps , Dodge & Co., Inc.
- 1917: Phelps, Dodge transfers assets to Copper Queen, which is renamed Phelps Dodge Corporation.
- 1930: Nichols Copper Company and National Electric Products Co rporation are acquired.
- 1931: Calumet & Arizona Mining Company is acquired.
- 1932: United Verde Copper Company is acquired.
- 1944: Company begins building the Horseshoe Dam on Arizona's V erde River.
- 1950: Phelps Dodge is second largest copper producer in the Un ited States.
- 1963: Phelps Dodge Aluminum Products Corporation is formed.
- 1969: Phelps Dodge begins acquiring interest in Denver's Color ado-based Western Nuclear, Inc. uranium mining company.
- 1971: Aluminum business is merged with Consolidated Aluminum.
- 1982: Headquarters relocates from New York City to Phoenix.
- 1986: Uranium mining business is sold; carbon black producer C olumbian Chemicals Company is acquired.
- 1988: Wheel producer Accuride Corporation is acquired.
- 1995: New manufacturing subsidiaries help give company record earnings.
- 1998: Phelps Dodge closes some mines while building manufactur ing capacity abroad; most of Accuride is sold.
- 1999: Cyprus Amax Minerals Company is acquired for $1.8 bi llion.
- 2001: Hundreds are laid off as low copper prices, high energy bills hammer high-cost U.S. operations.
- 2005: Company increases production, pays dividends and bonuses as copper prices approach $2.
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