Cincinnati Milacron Inc.

views updated

Cincinnati Milacron Inc.

4701 Marburg Ave.
Cincinnati, Ohio 45209
U.S.A.
(513) 841-8100
Fax: (513) 841-8008

Public Company
Incorporated: 1884 as Cincinnati Screw and Tap Co.
Employees: 7,885
Sales: $1.02 billion
Stock Exchanges: New York
SICs: 3541 Machine Tools, Metal Cutting Types; 3559
Special Industry Machinery, Not Elsewhere Classified;
3823 Process Control Instruments; 3291 Abrasive Products

With the acquisition of German-based Krupp Widia GmbH in late November 1994, Cincinnati Milacron, Inc. became the third-largest player in the metal-cutting tool market. Commenting on the Widia acquisition in The Cincinnati Enquirer, Milacron chairperson and CEO Daniel J. Meyer expressed his expectation that Cincinnati Milacron would become “a premier global player in the market for industrial consumable products,” which, he asserted, would become the company’s primary focus. Milacron’s industrial products were expected to make up 40 percent of its forecasted 1995 revenue of $1.5 billion. In 1994, industrial products accounted for 31 percent of revenue, while Milacron’s other core businesses, plastics machinery and machine tools, accounted for 35 percent and 34 percent, respectively.

Cincinnati Milacron traces its roots to 1874, when George Mueller inherited his father’s machine shop on Vine Street in Cincinnati and asked his friend, Fred Holz, to be his partner. Initially, the men maintained the elder Mueller’s focus on manufacturing parts for sewing machines and repairing small machines. Gradually, however, they began building specialized machinery, including a device that produced screws and the taps and dies that cut threads for them. By 1876, the business was largely centered on manufacturing the screw machine, and Mueller and Holz renamed their business The Cincinnati Screw and Tap Company.

Around 1878, when the small company needed a new milling machine for the tap making business and could not afford one, Holz put his machinist background to work and built one with an improved basic design. Soon, other shops began requesting machines, and by 1882, Cincinnati Screw and Tap found itself adding milling machines to its product line. In 1884, the company became incorporated to raise the capital it needed to produce the more costly machines and to finance a move to a larger facility near the Ohio riverfront.

In 1887, Frederick A. Geier, while doing business with the Cincinnati Screw and Tap Co., became excited about this innovative company’s potential. Within three months, Geier, then 21 years old, had bought interest in the company. While Holz concentrated on the technology side of the business, Geier focused his energy in the areas of organization and sales. Believing that a company should focus primarily on one product, Geier favored the production of the milling machine over the company’s screw and tap business. In early 1889, the stockholders approved the sale of the screw and tap business to a group of employees. Holz, Mueller, and Geier all stayed with the milling machine business, which became the Cincinnati Milling Machine Company, or the Mill, as employees would come to call it. Two years later, co-founder Mueller would sell his one-third interest in the company and retire.

Although the milling machine industry had long been controlled by companies in the eastern United States, the Mill found its niche by emphasizing quality. In 1889, Holz built a cutter grinder that would help shops and factories save money by sharpening cutting tools so they would last much longer. This gave the company a new product to sell with its millers and helped to build the Mill’s machine tooling reputation with its customers.

As early as the next year, the Mill had its first export order to a Swedish company. This was the beginning of an export business that would continue to grow and would, in fact, help keep the company afloat during times when the U.S. economy was troubled.

One of those troubling times occurred in 1893, when a sharp recession hit, and factories and machine shops stopped placing orders for new equipment. Sales were almost nonexistent, credit was unavailable, and, moreover, the Mill had its capital tied up in building a new plant on Spring Grove Avenue. Nevertheless, the company worked its way out from the slump by taking a chance. When an order for a dozen milling machines came in from a bicycle maker in Indianapolis, who was short of cash and would need nine months to pay, Geier called the employees together and asked them what they wanted to do. The employees decided to take the order; the bicycle maker received his 12 machines and paid for them. The Mill survived and by 1895 was again prosperous. Reportedly, throughout the 1890s, bicycle makers purchased almost half the machine tools made by the company.

During the early 1900s, Holz sold his common stock to Geier and retired from the company. Geier, who had already held controlling interest in the company, was looking to move the company again, this time to a site where the Mill could be as self-reliant as possible with its own foundry and power plant. By 1907, land had been purchased in the nearby community of Oakley, financing had been secured for the move, and work on the foundry was begun. The foundry and power plant were completed in 1908, and, by 1911, the new complex was complete and operational. The new plant had more than six acres of floor space and was the world’s largest milling machine factory. Geier’s timing had been perfect. The motor car was just becoming popular, and the Mill was ready to provide the tools that the industrial world needed.

The onset of World War I in 1914 brought with it an initially sluggish market for the Mill. However, once the Allies realized the war was going to last for a while, they began to turn to America for machine tools to gear up for war production. In 1916, the U.S. government began their own war-readiness program, which put even heavier demands on American industry, particularly on the machine tool makers. Sales for the Mill were $1.4 million in 1914, and grew to $7 million in 1917, while its work force increased from 310 to 1,270.

By the time the armistice was signed in November 1918 and the postwar return to “normalcy” had begun, however, government contracts were being cancelled, and the Mill found itself with a sudden excess capacity. In 1919, in an attempt to temper the cyclical nature of the business, Geier announced a plan to build a warehouse for storing the milling machines produced by the company until a time when orders exceeded capacity. As Geier sought to keep his employees in work year-round, and for the highest possible wages (a strategy known as “work-spreading”), Mill employees remained generally disinterested in forming unions or becoming involved in strikes during the labor union wars of the early 1920s.

Still, the economic climate during this time remained ominous, and, early in 1921, Geier announced to his workers that the company had out-produced sales by 66 percent. Specifically, the Mill had 561 machines on hand, unsold. The policy of paying employees to make machines that weren’t selling did not make business sense, and changes had to be made. Management salaries were cut, and a 15 percent wage reduction was initiated. Employment fell from an average of 1,004 in 1920 to 250 in 1921.

In the midst of this economic downswing, Geier’s son, Frederick V. Geier, convinced management that the company should branch out into the production of centertype grinding machines, devices that used wheels to grind metal into round or cylindrical precision parts, such as pistons, valve stems, and bearings. This move, the younger Geier contended, would help absorb overhead and more fully utilize plant capacity. In September 1921, the company bought controlling interest in the Cincinnati Grinder Co. and the following year moved production of the grinding machine to Oakley. In addition, the Mill obtained the rights to key patents on centerless grinding, and formed a subsidiary, Cincinnati Grinders, Inc. With the success of these machines, in 1926, Cincinnati Milling became the nation’s largest machine tool company.

When the Great Depression hit, the Mill was able to rely on its export trade to carry it through. Exports, one-fifth of all sales in 1929, grew to represent one-third of sales in 1932. During this time, the Mill continued to “spread” work, keeping as many employees on the payroll as possible. Management also worked closely with the Mutual Aid Committee, which was founded in 1916 as an employee insurance association and used as a relief organization for those hardest hit during the Depression.

Changes occurred at the Mill during this era. Traditionally, the company had used agents and distributors to sell machines to customers. In 1931, after providing sales training for graduates of its co-op program with the University of Cincinnati, the Mill put some of its own sales staff in the field and began direct selling. The company formed a wholly owned sales subsidiary and opened offices in Detroit, Chicago, and Cleveland.

Moreover, instead of guarding its resources and waiting for better days, the Mill continued to invest in research and development. During this time, the company introduced hydraulicpowered machines, broaching machines, able to make finer and more precise cuts, and the Dial Type milling machine, which, with its power speed and feed change features, became the industry standard. In 1932, the Mill agreed with Heald Machine Co. of Worcester, Massachusetts, to share engineering, research, and patents. Although both companies produced grinding machines, their machines were used in different applications and therefore complemented one another. A little over 20 years later, after years of working together, the Mill would purchase Heald outright.

In 1934, Frederick A. Geier died of a heart attack. A month later, his son, Frederick V. Geier, was elected president of the company. One of the younger Geier’s first projects was to establish a subsidiary in Great Britain to make machines for world markets. In fact, as World War II began, Britain became one of the Mill’s major customers, buying $16.5 million worth of machines in 1940.

Because of the increased number of military orders before the war, the machine tool industry was prepared to meet demand once the United States began mobilizing forces. With forethought, the Mill had decided to expand the company’s capacity in 1938 and had also began a formal three-stage training program for workers. This training program became invaluable, as the Mill’s work force escalated to a wartime peak of 8,561 employees.

Throughout the war, the Mill continued its emphasis on research and development. It began exploring the physics of met-alcutting as well as ways to increase tool life. Out of this research, came the Mill’s first synthetic cutting fluid, called Cimcool.

In 1943, Geier began meeting regularly with four other key executives in an effort to identify strategies for postwar growth. According the official company history, Cincinnati Milacron 1884-1984: Finding Better Ways, the four goals the committee agreed upon were: “to extend overseas manufacturing; to broaden machinery product lines; to enter the industrial consumables market; and to develop new technologies.” These goals for growth and diversification brought with them the task of finding a way to finance new company endeavors. In February 1946, the Mill raised $3.8 million in new capital when it issued its first public stock offering.

The next ten years brought a variety of acquisitions and the development of new product ideas. Some of these new products included: grinding wheels, cutting fluids, and lathes. In 1955, the Mill expanded its move into chemicals, acquiring a company that, among other things, made additives for plastic. By 1957, the Mill was working with glass reinforced plastic components and had formed the Cimastra division to oversee production and sales of the materials. This division began selling molded plastics to different companies, including manufacturers of children’s sleds, seats for bowling alleys, and cases for movie projectors.

The 1950s also bore witness to the Mill’s expansion in Europe. The company increased its holdings in England by acquiring and expanding plants and foundries in Birmingham and nearby Cannock. In 1952, the Mill began building a machine tool factory in the Netherlands that was completed in 1954.

The electronic era at the Mill began in the late 1950s, as the company became involved with a new technology called numerical control. Using numerically coded instructions on punch cards, the technology allowed computers to control the movements of machine tools and thus had great potential in automating American industry. In 1955, the Mill received a contract from the U.S. Air Force for numerically controlled machines that could produce intricate aircraft parts at high speed. The company continued to improve on its use of the technology, and in, 1966, the Mill introduced a new generation of controls for its machines using miniaturized integrated circuits, rather than the cumbersome vacuum tubes and mechanical relays it had relied on. Using its expertise in both plastics and electronics, the company also began producing plastic circuit boards that were used in TV sets, radios, and eventually computers.

As the 1960s came to a close, Cincinnati Milling found it had become a far more diverse company than its name indicated. In May 1970, the stockholders approved a new name. Cincinnati Milacron capitalized on the continued use of Cincinnati—a name linked with machine tools—while also introducing a new word, Milacron, the roots of which meant “highest precision.” Thus, despite the name change, company employees could logically continue to refer to their company as the Mill.

The 1970s became a time of streamlining and redirection for the Mill. Frederick V. Geier retired from his position as chair of the executive committee in 1976 and was given the honorary title of director emeritus. His cousin, Philip O. Geier, Jr., who had served as the Mill’s president and then chairperson, also retired during this time, leaving James A.D. Geier in charge as chairperson. Under Jim Geier, the company began focusing its machine tool efforts on computer-controlled equipment, and perhaps more importantly, a corporate research department was set up to look into non-machine tool products. As an outgrowth of this research, the Mill moved into the plastics machinery business. With expertise in injection molding and extrusion, the Mill worked with E.I. du Pont Co. to perfect a reheat blow molding machine that would revolutionize the way soft drinks were packaged. A fourth molding process called reaction injection molding was also introduced by the Mill. By 1977, the Mill was the largest U.S. maker of plastics machinery.

Also in the 1970s, the Mill intensified its focus on electronically operated machines, venturing into the markets for minicomputers and semiconductors. While its efforts to manufacture and market minicomputers proved disappointing and short-lived, the company had more success with semiconductors, specifically in the development and manufacture of the silicon wafers on which semiconductors were built. Demand for the Mill’s silicon epitaxial wafer prompted the company to provide its semiconductor materials division with its own facility in 1979, and, by 1984, the Mill had become the world’s largest supplier of this type of wafer. Also during the late 1970s, the Mill unveiled the first commercially available CNC industrial robot, which became integral to assembly lines at such companies as Ford, General Electric, and Volvo, among others.

In 1980, the Mill sold its profitable specialty chemical operations to the Thiokol Corporation, in order to focus more closely on its three more closely allied divisions: machine tools, plastics machinery, and industrial specialty products. During the 1980s, the company felt the effects of a severe economic recession that became second only to the Great Depression in terms of loss in the capital goods markets. In addition, the Japanese were giving U.S. machine tool builders some severe competition. The Mill began cost cutting measures including plant consolidations and early retirement plans. Worldwide employment fell by one-third, and, in 1983, the company reported its first annual loss.

In fact, the Mill reported losses in five of the next ten years. Increasingly tough competition and misdirected business turns took their toll on the Mill. Nevertheless, in 1986, in the Mill’s plastic division, a campaign began that would help fine tune the company for the 1990s. Called Project Wolfpack, this product redevelopment effort utilized the teamwork of employees from different disciplines to cut product development cycles and cost. According to an April 1992 article in The Cincinnati Enquirer, each team was charged with improving the quality of Milacron’s machines while removing up to 40 percent of the cost and 40 percent of the components. The teams worked together to consider the market needs, feasibility of design concepts to operate machines of the size range being considered, and the availability of the latest technology to perform functions required. Harold Faig, vice-president of the U.S. Plastics Machinery Division said in The Cincinnati Post in May 1991, “Our single goal is to offer the best quality, American-made machines with the widest range of features at a competitive price.”

The success of the Wolfpack, as well as moves to abandon or sell several money-losing businesses such as robots and semiconductors, helped the Mill return to profitability in 1992. Aligned with the Wolfpack’s goals, the Mill committed itself to simpler, lower-priced, globally competitive tools. In 1993, excess capacity in machine tool facilities caused the Mill to consolidate operations. In October 1994, the Mill’s plastic machinery plants in Ohio were named among the Industry Week magazine’s ranking of the ten best plants in America for their performance, production, and customer satisfaction.

With the Wolfpack as its foundation, Cincinnati Milacron became a secure player in the world market. Its acquisitions in the 1990s set the pace so that almost half its revenue was expected to come from outside the United States in 1995. Its divisions each roughly represented one-third of the business, which evened out the cyclical nature of the business identified so long ago. Due to a continued emphasis on research and development, more than 75 percent of the Mill’s 1993 machinery sales consisted of products not sold five years ago. In 1993’s report to shareholders, Daniel J. Meyer, chairperson and CEO, and Raymond E. Ross, president and COO, stated, “For the longer term we believe that improved efficiencies in our U.S. machine tool operations … and in our European plastics machinery marketing organization, will help Milacron achieve good profit growth throughout the rest of the 1990s.”

Principal Subsidiaries

Cincinnati Milacron-Holdings Mexico SA de CV; Cincinnati Milacron-Mexican Sales SA de CV; Cincinnati Milacron Marketing Co.; Cincinnati Milacron Commercial Corp.; Cincinnati Milacron International Marketing Co.; COGE A.G.; Cincinnati Milacron Holding Gesellschaft GmbH; Cincinnati Milacron Austria Gesellschaft GmbH; Cincinnati Milacron Kunststoffmaschinen Europa GmbH; Ferromatik Milacron Maschinenbau GmbH; Cincinnati Milacron U.K. Holdings Co.; Cincinnati Milacron U.K. Ltd.; Cincinnati Milacron-Korea Corp.; Mandelli/Cincinnati Milacron Aerospace SRL (50%); Cincinnati Milacron Assurance Ltd.; Cincinnati Milacron BV; Cimcool Europe BV; Cimcool Industrial Products BV; Cincinnati Milacron-Canada Ltd.; Cincinnati Milacron-Herald Corp.; Cincinnati Milacron Resin Abrasives Inc.; Cincinnati Milacron SRL; Factory Power Co. (82.2%); Cincinnati Milacron-Sano Inc.; Valenite Inc.; Valenite-Modco International Inc.; Nippon Valenite-Modco KK; Valenite Modco PTE. Ltd.; Valenite-Modco SARL; Valenite-Modco (U.K.) Ltd.; Valenite-Modco SRL; Valenite-Modco GmbH; Valenite-Modco Ltd.; Valenite de Mexico SA de CV; Valenite-Modco Industria E Comercio Ltda.