Bendix Corporation

views updated

Bendix Corporation

Incorporated: April 13, 1929 as the Bendix Aviation
Corporation
Absorbed by the Allied-Signal Corporation
Allied-Signal, Inc.
Columbia Road and Park Avenue
Morristown, New Jersey 07960
U.S.A.
(201) 455-2000

The Bendix Corporation ceased to exist in 1983 after its failure to succeed with an acquisition attempt. Bendix was purchased by the Allied Corporation (later Allied-Signal) and subsequently dissolved. While certain former Bendix divisions continue to use the Bendix brand name and “blue banana” logo, the company has been completely assimilated into Allied-Signal.

The corporation bears the name of its founder, Vincent Bendix, an automotive engineer who perfected a method of mass-production for triple thread screws essential for the application of electric starters to automobiles. In 1913 Bendix licensed his method to the Eclipse Machine Company, a bicycle parts manufacturer. The following year, Eclipse began selling integrated starter drives to major automobile manufacturers.

By 1919 substantial production royalties enabled Bendix to purchase the Winkler-Grimm Wagon Company, a manufacturer of large utility vehicles, located in South Bend, Indiana. It was later rumored that the Studebaker Company (also in South Bend) persuaded the city council in 1920 to purchase its fire engines from a source other than Bendix, fearing that the company had the potential to become a rival.

While visiting Europe early in 1923, Vincent Bendix met the French engineer Henri Perrot, who needed a more efficient braking system for his line of taxicabs. Bendix developed a four-wheel braking system, and the two men formalized their business relationship in November 1923 by establishing the Perrot Brake Company in South Bend. The following year the company’s name was changed to the Bendix Corporation, and shares of stock were sold to the public.

In 1928 Bendix acquired a majority interest in the Eclipse Machine Company. General Motors, Eclipse’s largest customer for starter drives, offered to help finance the transaction by accepting $6.8 million in notes. That year Bendix held approximately 25% of the available market for brakes.

Although he did not like to fly, Vincent Bendix maintained a strong interest in aviation. His company developed and manufactured a number of products for the aviation industry and later sponsored transcontinental air races. Even though only eight percent of company sales were derived from aviation products, the company’s name was changed to the Bendix Aviation Corporation in 1929.

One of several companies acquired by Bendix in 1929 was the Stromberg Carburetor Company, which was subsequently moved from Chicago to South Bend. Bendix Aviation experienced very strong growth in the five years after its incorporation. Its stock, purchased for $26 in 1924, sold for $420 in 1929. The company had successfully diversified into a variety of automotive and aeronautic systems and thereby controlled a substantial share of the market. In October 1929, however, confidence in the American stock market collapsed, precipitating a severe economic depression.

Bendix, like many American industrial companies, did not suddenly “crash”, rather, it deteriorated slowly over a period of years. In 1932 Bendix was forced to discontinue share dividends, and the following year stock that had been purchased for $104 at the end of 1929 was worth only $4.37. But throughout the slump, the company continued to develop new automotive systems, including power brakes and power steering, and made significant improvements in its existing product lines. By 1935 business had recovered enough to permit the reinstatement of dividends.

During the mid-1930’s the Hydraulic Brake Company, a Bendix subsidiary, permitted two young engineers to use a Bendix machine shop to refine a new washing machine they had developed. Officials at Hydraulic Brake later persuaded Vincent Bendix to lend his name to the product in return for a 25% share of the washing machine company, incorporated in 1936 as Bendix Home Appliances. Aside from producing a few parts, however, Bendix had almost nothing to do with the popular washer. The company disposed of its share of Bendix Home Appliances in 1940.

Unsatisfactory business conditions during 1937 led General Motors, which by this time held a 25% share of Bendix, to install two board members and initiate a reorganization of the company; operations were streamlined, management centralized, and costs reduced. Bendix subsidiaries were made into divisions, transforming Bendix from a type of holding company into an operating company.

While Bendix Aviation experienced its most profitable year in 1939, Vincent Bendix was forced to declare bankruptcy, having speculated badly in real estate over a number of years. In the spring of 1942, Vincent Bendix resigned as president and chairman of Bendix Aviation, and two years later he formed a new company, Bendix Helicopters, Inc., as part of an attempt to develop a fourseater helicopter for families. He died on March 27, 1945.

Ernest R. Breech, a board member installed by General Motors, was elected president upon Vincent Bendix’s resignation. The following year, Bendix headquarters were relocated to Detroit, the home of General Motors. The company’s early years in Detroit were lucrative ones.

During World War II Bendix received a substantial number of military contracts. By 1944 the company controlled over $100 million worth of government facilities and employed 70,000 workers.

A few months before the end of the war government contracts worth one billion dollars were cancelled and the company faced a financial crisis. Ernest Breech left Bendix to become an executive vice president of the Ford Motor Company, and Malcolm P. Ferguson was elected to return Bendix to profitable peacetime operation. A $12 million operating loss in 1946 was followed by a return to profitability the following year, largely on the strength of Bendix’s automotive products.

In the second half of the 1940’s Bendix developed a number of new systems for the defense industry, including the TALOS surface-to-air missile. Bendix outgrew its facilities at South Bend and in 1951 established a second, larger plant in the nearby city of Mishawaka. That same year it re-entered military production schemes at the outbreak of the Korean War. But this time, Bendix managed its war supply operations as strictly temporary enterprises.

While Bendix continued to manufacture products for the aviation industry, it remained heavily involved with manufacturing products and equipment for use in a wide variety of industries. For this reason, it was decided in 1960 to drop the word “Aviation” from the company’s name; once again it became known as the Bendix Corporation.

The level of unemployment in South Bend rose dramatically in 1967 when Studebaker merged with the Worthington Corporation and halted its local manufacturing operations; thousands of employees lost their jobs; many also lost their pensions. Bendix reaffirmed its commitment to the community and helped to preserve the local economy.

During the early 1960’s Bendix conducted nearly 80% of its business with the government, primarily in the area of defense systems. The company also continued its policy of growth through the acquisition of profitable subsidiaries, including the Fram Corporation, a manufacturer of air and oil parts for automobiles. But at the same time, Bendix followed a policy of diversification and successfully reduced its dependence on the progressively less stable automotive and defense-related businesses.

Bendix headquarters were again relocated in 1971, this time to nearby Southfield, Michigan. On November 30, 1973 Bendix acquired the Autolite spark plug operation from the Ford Motor Company for $27 million. Ford had been ordered to sell Autolite as part of a Supreme Court ruling, which also required Ford to purchase most of its spark plugs from Bendix until 1983.

In 1976 William (Bill) A. Agee became chairman of Bendix, replacing W. Michael Blumenthal who was appointed treasury secretary in the Carter Administration. Agee, a 38-year-old director who left Boise Cascade for Bendix in 1972, had a reputation as a headstrong businessman overly concerned with short-term financial performance. He was, however, an excellent portfolio manager and invested company funds in businesses which were later sold at a great profit.

When Blumenthal was dismissed by President Carter in 1979, Agee prevented him from returning to Bendix and blocked his readmittance to the board. Blumenthal joined the Burroughs Corporation, where he was reportedly being prepared to succeed Paul Mirabito as chief executive officer. Agee raised eyebrows by trying to persuade the Burroughs board to elect himself and offering to serve concurrently as head of both companies. His proposal was rejected.

During 1978 and 1979 Agee engineered the acquisition of two metals processing companies, ASARCO and Bass & Company. In 1981 he initiated a large-scale divestiture of Bendix assets, including the $425 million sale of Bendix Forest Products Corporation, the $336 million sale of AS ARCO, and the sales of Bass and the United Geophysical Corporation for $28.8 million and $80 million, respectively. Proceeds from the sales were invested in government securities, suggesting to industry analysts that Agee was preparing to acquire a large company.

Bill Agee came under strong criticism during 1980 for his relationship with Mary Cunningham, a graduate of the Harvard Business School, whom he had hired as his executive assistant in 1979. Cunningham quickly became involved in decisions of the highest importance, causing alienation between Agee and many of his executives. Jerome Jacobson, executive vice president for strategic planning, resigned, and Agee promptly hired Mary Cunningham to replace him. When Bendix president William Panny confronted Agee about Cunningham, Panny was asked to resign. Although he refused to do so, Agee announced Panny’s resignation anyway. Amid rumors that Agee was romantically involved with Cunningham, Agee was suddenly divorced in August of 1980. Executives in the company attributed Cunningham’s rapid promotions to her relationship with their chairman. Agee called a meeting the following month to address Cunningham’s position within the company and did such a poor job presenting his case that Mary Cunningham was forced to resign.

Early in 1981 Bill Agee announced to the board that Bendix had an opportunity to purchase a major high-technology firm. This acquisition, he said, would require the resignation of several board members who were based in Detroit and who, because they were also board members of Burroughs, faced a possible conflict of interest. Agee upset several more board members by refusing to name the company he intended to purchase. By August it became apparent to board member Robert Purcell that Agee was bluffing in order to purge board members thought to be too closely associated with Michael Blumenthal and Burroughs. Purcell resigned in protest.

Before Mary Cunningham left Bendix she prepared a list of takeover targets that Bendix could acquire by utilizing its $500 million cash reserve. In March 1982 Bendix announced that it had acquired a 7.2% share of the RCA Corporation for $100 million. RCA management immediately took measures which prevented Bendix from gaining a larger share, commenting that Agee had “not demonstrated the ability to manage his own affairs, let alone someone else’s.”

Bendix announced in August of the same year that it would attempt to acquire the Martin Marietta Corporation for $1.5 billion. At the same time, Martin Marietta’s price per share of stock was undervalued because of weak performances by its aluminum and cement divisions. Martin Marietta, intent on remaining independent, responded on August 30 by announcing that it intended to acquire Bendix for $1.8 billion.

With the two companies heading for a deadlock, Martin Marietta chairman Thomas Pownall enlisted the help of United Technologies chairman Harry Gray, a personal friend of his, whom the New York Times described as “an acquisition hunter operating at several orders of magnitude beyond Mr. Agee” On September 7, 1982 United Technologies pledged to match Marietta’s bid for Bendix and to divide Bendix between itself and Marietta in the event that either company eventually acquired Bendix.

Matters were further complicated on September 20 when Bendix announced that it had acquired a 70% share of Martin Marietta. Martin Marietta later revealed that it had acquired a 45% share of Bendix and was completing the purchase of an additional 6%. At that point it would have been possible for Martin Marietta and Bendix to control each other, an arrangement certain to invite judicial intervention. Bill Agee may have assumed that because his tender offer would precede Marietta’s by five days, Bendix would have no trouble gaining control of that company. Martin Marieta, however, was incorporated in Maryland where state law requires ten days before a shareholder’s meeting can be called to dissolve the board. But Bendix, incorporated in Delaware, could be taken over by a majority shareholder immediately. In effect, Martin Marietta could take control of Bendix five days before Bendix could take control of Martin Marietta.

On September 22 the Bendix board hastily agreed to consider an alternative takeover by the Allied Corporation for $85 per share, or $1.9 billion. Two days later, an Allied-Bendix agreement was concluded in which Bendix would be absorbed by Allied and Martin Marietta would remain independent. Martin Marietta would surrender its Bendix shares to Allied, and Allied would retain a 39% share of Martin Marietta until Marietta could repurchase its own stock.

Without much effort the Allied Corporation, whose chairman Edward L. Hennessy used to work for Harry Gray, acquired Bendix at comparatively little cost. But the arrangement left Martin Marietta heavily in debt, and United Technologies lost an opportunity to acquire the Bendix automotive and industrial divisions.

The 60-year-old Bendix Corporation ceased to exist after an ill-conceived 31-day takeover attempt planned and executed almost entirely by Bill Agee. Mary Cunningham, whom Agee married in June 1981, served as an executive consultant to Agee during this period and reportedly undermined Agee’s effectiveness in meetings with Pownall and others. While Hennessy later appointed Agee president of Allied, former Bendix president Alonzo McDonald and 4000 Bendix employees lost their jobs. On February 8, 1983 it was announced that Bill Agee would resign from Allied after having been eliminated from consideration for the post of chief operating officer.

Bendix was operated as a subsidiary of Allied (later Allied-Signal) until September 1985 when its operations were assimilated into the divisional structure of Allied-Signal. Many of the former Bendix enterprises became part of the Allied-Signal Industrial Group, which was sold in 1986. The former Bendix automotive, aerospace, and electronics operations, however, have remained with Allied-Signal. The company continues to use the Bendix name for purposes of brand identification in its Automotive Group.