CBI Industries, Inc.

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CBI Industries, Inc.

800 Jorie Boulevard
Oak Brook, Illinois 60522-7001
U.S.A.
(708) 572-7000 Fax: (708) 572-7405

Public Company
Incorporated: 1889 as Chicago Bridge & Iron Company
Employees: 12,950
Sales: $1.67 billion
Stock Exchanges: New York
SICs: 3443 Fabricated Plate Work—Boiler Shops; 2813 Industrial Gases; 1629 Heavy Construction Nec; 6719 Holding Companies Nec

CBI Industries, Inc. is the world’s leading manufacturer of vessels for oil, gas, and water storage and, through its Liquid Carbonic subsidiary, the largest producer of industrial gases. Principally involved in the energy supply and municipal projects businesses, CBI operates in hundreds of countries throughout the world.

The Chicago Bridge & Iron Company, forerunner to CBI Industries, was established in 1889 through the merger of two companies. One of these companies was a Minneapolis-based engineering concern run by Horace Ebenezer Horton, who had distinguished himself by building some the country’s first metallic span bridges over the Mississippi River. The other was the Kansas City Bridge and Iron Company, operated by George Wheelock and A.M. Blodgett. In the three years before the merger, this company built more than 500 structures across the United States.

The new company relocated to Washington Heights, Illinois, a suburb of Chicago, which provided easy rail transportation to the foundries and steel mills in the area. Though it took several months to relocate machinery from Kansas City, Chicago Bridge & Iron immediately began accepting jobs to build bridges.

In 1890 Chicago Bridge & Iron absorbed the operations of the Des Moines-based George E. King Bridge Company. King was an established bridge builder in Iowa, a market that Horton and his new partners had been unable to crack. Meanwhile, King was attracted to an interest in his new partners’ reliable metal fabricating facility.

The demand for bridges at this time was extraordinary. In the decades after the Civil War, railroads helped to establish burgeoning rural communities. As commerce grew, demands on transportation followed. Between so many points, there were rivers, streams and gulleys, and each route required its own span.

Until that time, wooden bridges were the order of the day. But while these were sturdy, they were susceptible to rot and structural failure. The answer was in iron bridges, which few foundries were equipped to design or manufacture. With demand high, Chicago Bridge & Iron won contracts to build several hundred bridges by 1893. Other structures they were contracted to build included the first metallic water towers and standpipes and a Horse Exchange Amphitheatre for the Chicago stockyards.

That year, however, irregularities in railroad financing, shoddy banking practices, and the failure of agricultural crops caused a severe four-year economic depression that nearly closed Chicago Bridge & Iron. Then, in 1897, a devastating fire destroyed nearly the entire operation. Faced with the tremendous task of rebuilding, King opted to leave the corporation to concentrate on his more profitable banking and agricultural interests. While it took Horton nearly six years to pay King off, he did emerge as the company’s sole shareholder.

As the Washington Heights plant was rebuilt, work under contract was gradually brought back from other factories working under subcontract. Also, the company’s water towers became extremely popular after Horton’s son George Horton perfected a hemispherical tank bottom that eliminated the need for a complex tank deck. This business helped the company weather an extremely difficult period in which all sales offices outside of Chicago were closed.

By the turn of the century the company was once again on its feet and taking on its first ventures in Canada. But a covert trade dispute waged by Canadian firms and the government convinced Horton to abandon Canada and never again do business there. His son George, however, succeeded in winning several important contacts on his own, purchasing the materials from his father’s company.

The company entered 1907 on strong growth, with contracts for several hundred water tanks, hundreds of bridges, and miscellaneous structures. Later that year a second financial panic sent the American economy into a tailspin. Public funds, which municipalities used to purchase water tanks and bridges, evaporated almost over night. Contracts were canceled and, once again, Chicago Bridge & Iron was forced into retrenchment.

These conditions were made more difficult by the fact that all steel products at this time were subject to artificial shipping costs from Pittsburgh, regardless of where they were made. This prevented Chicago Bridge & Iron from competing effectively in the East. In an effort to open this new market, the company established a second facility in 1911 at Greenville, Pennsylvania, outside Pittsburgh.

Horton died on July 28, 1912, leaving the business to his wife and five children. The eldest son George later emerged as leader of the company. Unencumbered by his father’s anti-Canadian prejudice, George Horton quickly merged his own Canadian operations with Chicago Bridge & Iron, establishing a new factory at Bridgeburg, Ontario, near Niagara Falls. Other business arose in Cuba, where the demand was for molasses, water, and, later, oil tanks. Soon afterward the company was asked to build water tanks in the shapes of a milk bottle, a pineapple, and a “peachoid.” Diversifying further, Chicago Bridge & Iron was asked to build water pumping facilities for the City of Chicago.

By 1914, as the war in Europe began to heat up, the belligerents began to purchase more and more war material from American manufacturers. This energized the American economy and drastically assisted Chicago Bridge & Iron’s growth. Only three years later, after the United States entered the war and many of the company’s employees left for the army, Chicago Bridge & Iron received hundreds of war-related orders, including one to build 150 5,000-ton barges.

At the close of the war in 1919, George Horton decided not to involve his company in the reconstruction of Europe. Governments there, he was told, were not as credit worthy as Central and South American governments. This decision paid off when Chicago Bridge & Iron began taking large orders for huge oil storage tanks, first in the United States and then in Cuba, Venezuela, Aruba, and Mexico. Additional orders later came from the Dutch East Indies, Malaya, India, and China. The tremendous tank business also prompted Horton to phase out the company’s bridge building business in favor of plate steel structures.

Horton made an important discovery during this time. Noting how his engineers spent so much time boring rivet holes with templates, Horton conceived of a 12-hole rivet punch, capable of boring a dozen perfectly placed rivet holes at once. This “Chibridge Spacer” shortened production schedules, enabling the company to secure more business. Later, Horton abandoned rivets altogether, favoring leak-proof welded seams.

Meanwhile, the company experienced a brief labor strike in October 1919 when, soon after organizing, workers walked out. Queried as to why they went on strike, workers replied that their union was seeking a closed shop and better benefits. The strike was resolved after 18 days.

In 1922 Chicago Bridge & Iron purchased the rights to a “floating roof” storage system patented by a Bureau of Mines engineer named John H. Wiggins. The design allowed the tank’s roof to float on the stored product, trapping the contents within and preventing losses to leakage or evaporation. Another major product for the oil industry, intended for natural gas storage, was the Hortonsphere, a spherical steel vessel capable of holding gas under great pressure.

In December of 1923 the Horton Steel Works in Bridgeburg suffered a debilitating fire. During reconstruction of this plant, Chicago Bridge & Iron merged the Horton plant with another Canadian firm, Des Moines Steel. In 1929, on the strength of its tank business, Chicago Bridge & Iron absorbed the large Reeves Brothers plant in Birmingham, Alabama. Later that year, however, a stock market crash plunged the world into the Great Depression. Once again, Chicago Bridge & Iron’s orders were either deferred or canceled, profits took a nosedive, and employees were laid off.

But, surviving on a trickle of work from the oil industry—namely, in the Middle East, the Dutch East Indies, and Italy—Chicago Bridge & Iron forged ahead with plans to incorporate new electric arc welding technology into its products. This new process allowed entire structures, rather than just tank bottoms and roofs, to be welded. This greatly reduced the weight of the structures, resulting in more efficient designs.

The company once again faced labor trouble in 1930 when new labor laws lifted certain restrictions on union organization of workers. But when the matter came up before unrepresented workers at Chicago Bridge & Iron, the employees rejected outside labor representatives and established their own independent union. Still, the company’s nomadic tank builders were left unrepresented. Local Boilermakers unions incited battles with the company’s “tankees,” and killed many during gun fights. The Boilermakers later agreed to negotiations which led to the establishment of an associated union for transient tank builders.

Chicago Bridge & Iron entered several new fields during the 1930s. While the Canadian plant began building heat exchangers and welded ships, the repeal in 1933 of Prohibition led to massive brewery contracts for the American plants. Once again public works projects, including work on the San Francisco Bay Bridge and the Tennessee Valley Authority, provided much needed income. Layoffs were reversed in 1934 and in the following year the company began taking on new hires. Later work included barge building and work on chemical and infant nuclear plants.

The outbreak of war in December of 1941 put Chicago Bridge & Iron on a war footing. By agreement with the government the company was assigned to build drydocks and ships, for which it purchased land in Morgan City, Louisiana. In January of 1942 Chicago Bridge & Iron took control of a Pacific yard at Eureka, California, and later established facilities in Newburgh, New York, and Seneca, Illinois. As construction commenced at these sights, entire families were relocated from the company’s other locations. Employment ballooned from 4,000 employees in 1941 to 20,000 the following year.

The company’s first contract was for 40 Landing Ship Tanks, or LSTs, which were designed to deliver heavy mobile machinery from ships to beachheads. Construction began on LSTs immediately. In fact, ships were built as the yard was built, and few of the employees were trained shipbuilders. Many learned their jobs as they went. The company also built drydocks, capable of lifting 100,000-ton ships out of the water for repairs, and underground fuel storage facilities at Pearl Harbor and, near the end of the war, in Subic Bay in the Philippines.

As the war drew to a close, Chicago Bridge & Iron was highly regarded for its excellent production schedule and cost control. After building 157 LSTs, George Horton reminded employees in February of 1945 that war production was ending and that, “a contractor without contracts does not amount to much.” A month later, Horton was killed in a car accident. The company’s directors, eager to prevent ruinous disorganization, elected George Horton’s younger brother Horace president of the company, and career engineer Merle Trees chairman of the board.

Later that year, John Wiggins announced that he was terminating his design and consulting agreements with Chicago Bridge & Iron and going to work for a rival, the General American Transportation Corporation. This threatened to knock the company out of its most profitable peacetime line at precisely the wrong moment. Trees issued a challenge to his engineers to develop an improved floating roof technology free of Wiggins’ patent. Operating under a short deadline, the engineers succeeded in designing an original Horton model.

The company entered the postwar period in very solid financial condition, holding no bank loans. Market conditions were favorable for strong growth, owing to pent-up demand for public works and industrial projects. Chicago Bridge & Iron received orders for a variety of its standard products—water and oil tanks—but also was asked to construct pressure and containment vessels for the emerging nuclear testing and power industries.

But the company faced two serious impediments to postwar business. First, few companies could find enough skilled draftsmen to design these products. While some talent could be hired away from competitors, the company’s design offices still couldn’t keep up. There also was a shortage of experienced construction engineers. And, secondly, CB&I, as it had become known, was faced with recurrent shortages of steel, which was still being rationed in monthly allocations. During the war, however, the Geneva steel mill that had been established at Salt Lake City lacked a large local customer base. Seeing it as the perfect supplier, the company immediately began construction of a full scale fabricating plant at that sight.

By March 1946, the company encountered a boat glut. The company’s shipbuilding unit, which employed 12,000 workers during the war, was now down to 12 employees. But growth in overseas markets more than made up for this loss. With tax incentives to invest in Latin America, as part of the Roosevelt Administration’s “Good Neighbor Policy,” CB&I established subsidiaries in Venezuela and Brazil. Later, the company decided to aggressively pursue foreign licensing to boost sales and protect patent rights. Licensees were established throughout the world, including France, Germany, Japan, and Australia.

In 1948, the first year of postwar profitability, CB&I won a contract to modernize U.S. Steel’s massive South Chicago Works. A few years later the company was invited to build an enormous tank farm in Aden for British Petroleum, which later led to the establishment of a British subsidiary.

Employees ran on nine-hour days and six-day work weeks. As the job backlog lightened up, this was scaled back to eight hours and five days, avoiding layoffs. By 1953, however, the backlog had disappeared, forcing the company to institute layoffs and a “necessary absence” plan.

By 1954 CB&I had become involved in cryogenics, hydroelectric and nuclear power, liquified natural gas, and, later, built wind tunnels and vessels for the space program. Returning to bridge work after nearly 40 years, the company built caissons for the Mackinac Straights Bridge in Michigan.

Also in 1954, Merle Trees died. He was replaced as chairman by Horace B. Horton, who was himself replaced as president by E. E. Michaels. Michaels was well suited to lead the company at that time. He was an experienced corporate diplomat, capable of maintaining a balance between two opposing ownership forces within the company. He was also, however, a good manager, unafraid to assert his own views.

With the discovery of oil in Western Canada, CB&I established a facility in North Lethbridge, Alberta, where it manufactured vessels for the oil, gas, pulp, and fertilizer industries. In 1957 the company became involved in sewage projects. In 1958, as international expansion continued, the company established an Argentine subsidiary, Cometarsa, which failed to perform well and was sold nine years later. Still, massive water desalinization projects, particularly one in Kuwait, were undertaken in partnership with G. & J. Weir Ltd. of Glasgow. Building on its aeronautical business, CB&I acquired an interest in the Minneapolis-based FluiDyne Engineering Corporation.

In September 1959 Horace B. Horton died and was succeeded as chairman by his son Arthur. Later, in 1962, E. E. Michaels resigned to run, unsuccessfully, as a Republican for the U.S. House of Representatives. He was replaced by Josh Clarke.

In 1960 the company established subsidiaries in Germany and Holland and, later, in Mexico. The company also restructured its Australian interests, forming Chicago Bridge Lennox with its Australian licensee, but later dissolved it in favor of a wholly owned company called CBI Constructors. Additional operations were later established in the Philippines, Italy, and Japan. Back home, in 1961, CB&I broke ground on a new headquarters building in Oak Brook, Illinois. Two years later, recognizing the tremendous growth the company had experienced, the Board of Directors decided to take the company public.

In 1963 CB&I won a contract to build major sections of the large Mangla Dam in Pakistan. This successful project led to work on a second, the Tarbela Dam, in 1971. In 1964 CB&I acquired three engineering companies, Rebikoff Oceanics, Copeland Process, a specialist in industrial waste disposal, and Walker Process, which built equipment for water and sewage plants. And, to keep up with the growing volume of nuclear plant projects, CB&I opened a new facility specifically for supplying nuclear reactors in Memphis. The company continued to bolster its engineering ranks in 1967, when it set up a new research lab at Plainfield, Illinois and staffed it with some of the best engineers in the world.

During the 1960s, the liquified natural gas (LNG) business began to take off. As a pioneer in engineering these projects, CB&I became the industry leader in vessel manufacturing, both for land storage and on ships. In 1969 the company formed a gas transportation subsidiary called American LNG. That year CB&I also built an enormous oil storage and loading device designed to sit on the seafloor. This project, Khazzan Dubai, was built for the Gulf Sheikdom of Dubai, and was nominated for honors by the National Society of Professional Engineers. Unfortunately the project’s competitors were the Apollo space program and the Boeing 747.

John Horton, son of Horace B. Horton, who succeeded Josh Clarke as president in 1968, stepped down after only 11 months in office to pursue personal interests. He was replaced as president by Marvin Mitchell, a career CB&I engineer. Early in 1973 Arthur Horton, who had been inflicted with polio as a boy, died after a long illness. Mitchell succeeded him as chairman of the company.

The Arab oil embargo of 1973-1974 was a tremendous boon to the company. Oil consumers, used to frequent oil deliveries, had little storage capacity for oil, which now was available only when you could get it. With sales up 80 percent in 1973, CB&I was again awash in a backlog of orders. The energy crisis caused by the embargo set into motion plans to exploit huge oil reserves in Alaska. Here, too, CB&I was asked to supply equipment and storage tanks for the Alyeska Pipeline Company between Barrow and Valdez. The company also opened a new facility at Prairieville, Louisiana, to service projects in the Gulf of Mexico and train underwater welders.

But, after the embargo ended, Mitchell grew weary of the cyclical and unpredictable nature of the energy business. He moved to diversify the company and in 1975 purchased Virginia-based Fairmac Corporation, a real estate developer. In 1977, however, CB&I unveiled a more economical process of extracting carbon dioxide from LNG, called Cryex. This patented process only helped to push CB&I further into the energy business. In 1979 CB&I took control of Circle Bar, an oil drilling company based in New Orleans.

Management affected a corporate reorganization in 1979, creating a holding company called CBI Industries, which took ownership of Chicago Bridge & Iron. The name change was deemed necessary because the company was no longer based in Chicago, did not build bridges, and hadn’t used iron for decades.

CBI won new contracts for large petroleum projects in the North Sea and in Abu Dhabi and, in 1983, once again tried to diversify. Its search ended in 1984 when the company purchased Liquid Carbonic, the world’s leading supplier of carbon dioxide. Liquid Carbonic was founded in 1888 to supply carbon dioxide gas to soda fountains and soft drink bottlers. In 1926 the company began commercial sales of solid carbon dioxide, or “dry ice.” After World War II, Liquid Carbonic branched into frozen food technologies and commercial sales of oxygen, nitrogen, and argon which, unlike carbon dioxide, are extracted from the atmosphere.

Marvin Mitchell resigned as chairman of the company upon turning 65 in 1981 and was replaced by Bill Pogue. Pogue served as chairman until 1989 when he, too, turned 65. Pogue was succeeded by John Jones, a former vice-chairman and chief operating officer.

After a difficult period of adjustment during the mid-1980s, caused primarily by cyclical retrenchment in the energy construction business, CBI entered the 1990s with a stronger, revitalized organization built on more than 100 years of successful projects. While Liquid Carbonic has helped to insulate CBI from the ups and downs of energy development, it remains to be seen whether the company will continue to pursue additional businesses that are equally stable.