Goodrich Corporation

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Goodrich Corporation

Four Coliseum Centre
2730 West Tyvola Road
Charlotte, North Carolina 23217-4578
U.S.A.
Telephone: (704) 423-7000
Fax: (704) 423-7100
Web site: http://www.goodrich.com

Public Company
Incorporated: 1870 as Goodrich, Tew & Company
Employees: 22,136
Sales: $4.1 billion (2001)
Stock Exchanges: New York
Ticker Symbol: GR
NAIC: 336412 Aircraft Engine and Engine Parts Manufacturing; 332912 Fluid Power Valve and Hose Fitting Manufacturing; 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing

Goodrich Corporation—formerly known as The BFGoodrich Company—underwent a series of strategic changes during the 1980s and 1990s to emerge as a leading aerospace systems supplier. The company exited the performance materials market in 2001 to focus on its aircraft parts and engineered industrial products businesses. After making key acquisitions throughout the 1990s, Goodrich became the leading supplier of landing gear systems and services that are used by commercial, regional, business, and military aircraft.

Throughout most of its history Goodrich built its business on rubber production, gaining a reputation among U.S. tire makers as a leader in product development and innovation. In the early twentieth century, Goodrich used its experience in the rubber industry to diversify into chemicals and plastics, and it spearheaded the development of synthetic rubber technology during World War II. The company prospered during the postwar era but faced difficulties when the U.S. auto industry’s decline in the 1970s curtailed the demand for tires. Convinced that its future lay in chemicals and plastics, the company’s directors embarked on a long and often difficult restructuring plan. Goodrich finally divested itself of its tire business in 1987, emerging as a leaner, more profitable company.

Company Origins

Benjamin Franklin Goodrich followed a circuitous route into the rubber industry. Born in Ripley, New York, in 1841, Goodrich pursued an education in medicine and served as an assistant surgeon in the Union Army during the Civil War. After the war Goodrich pursued a career in business and entered into a real estate partnership with John P. Morris of New York City. In 1869, the partners found themselves investors in a small operation called the Hudson River Rubber Company. They soon acquired full ownership of the company, and Goodrich took over as its president.

Goodrich was not impressed with the company’s prospects in New York and he considered moving it west, where a growing population and economy offered plenty of opportunities for expansion. After listening to a stranger praise a canal town in Ohio called Akron, he investigated it for himself. Akron’s citizens were as anxious to attract business as Goodrich was to develop it. After his visit, a group of 19 potential investors sent George T. Perkins back to New York with Goodrich to examine his operations there. The group received a favorable report, and it loaned Goodrich the money he needed to move west. On December 31, 1870, Goodrich formed the partnership of Goodrich, Tew & Company with his brother-in-law Harvey W. Tew and the Akron investors. After completing a two-story factory on the banks of the Ohio Canal, Goodrich was in business as the first rubber company west of the Allegheny Mountains.

Goodrich experienced a shaky start during its first decade. The company’s first product was a cotton-covered fire-hose designed to withstand the high pressures and low temperatures that often caused leather hoses to burst. While the fire-hose was a welcome innovation among the nation’s firefighters, poor financing led to several reorganizations within the company. George W. Crouse, one of the original Akron investors, finally stabilized the company’s finances with an additional loan in 1880, and it was incorporated in the state of Ohio as The B.F. Goodrich Company.

Goodrich died in 1888, just a few years before the bicycle craze of the 1890s revolutionized his company and the rubber industry. Among the company’s early products had been the solid-band tire used on bicycles of the 1880s. The invention of the pneumatic tire in 1890 greatly increased the comfort of bicycle riding, and Goodrich began turning out bicycle tires to keep pace with the popularity of this recreation. The introduction of cord tires, which increased the speed of bicycles, and the adaptation of pneumatic tires to horse-drawn buggies, expanded the nation’s rubber markets further. Goodrich increased its capacity with each addition to its tire demand, and company engineers cooperated with independent inventors to find new applications for company products.

The most important of these joint efforts was a contribution Goodrich made to the nation’s infant automobile industry. In 1897, Alexander Winton of Cleveland, Ohio, organized the Winton Motor Car Company to market his horseless carriages. He asked Goodrich to develop a pneumatic tire strong enough to handle its high speeds and heavier loads. Goodrich responded with the first pneumatic tires for automobiles, beginning a long partnership with the auto industry that became the foundation for the company’s profits for the next 70 years.

Early Commitment to Research and Development

From very early in its history Goodrich committed itself to research and development in rubber technology. Under the aegis of Goodrich’s son, Charles Cross Goodrich, the company opened the rubber industry’s first experimental research laboratory in 1895. Arthur H. Marks, one of Goodrich’s engineers, was responsible for several breakthroughs in the processing of crude rubber. In its natural form, crude rubber is very sensitive to changes in temperature, becoming hard and brittle when cooled, and soft and tacky when heated. Vulcanization, a process first discovered by Charles Goodyear in 1839, mixes crude rubber with sulfur and heat to convert it to a durable material unaffected by changes in climate. At the turn of the century, Arthur Marks pioneered a procedure for de-vulcanizing vulcanized rubber, thus enabling producers to reclaim crude rubber from manufactured goods for re-use. Marks also developed methods for speeding vulcanization by adding certain organic chemical accelerators to the process. The use of such compounds reduced the time necessary for vulcanization by as much as 75 percent.

Goodrich continued to apply the latest technology to its tire production. In 1910, it introduced the first cord tire for use on U.S. automobiles. This tire, which reduced fuel consumption and increased the comfort of the ride, was developed in Silver-town, England, and marketed there as the Palmer Cord. Good rich purchased the patent rights for it in the United States and sold it to U.S. consumers as the Silvertown Cord. Other innovations in Goodrich’s tire manufacturing included the use of other organic compounds to resist deterioration by heat, oxidation, and flexing, and the inclusion in its manufacturing process of carbon black, a coloring pigment that improved the tires’ resistance to abrasion.

World War I and Product Diversification

Goodrich’s success in its tire business led it into product diversification. By the time of World War I, it was producing rubber for consumer goods such as shoes, boots, tennis balls, and waterproof clothing, as well as for industrial goods such as belting for power transmission and mechanical conveyors. Goodrich also expanded into chemical production. One of its first products in this field was Vulcalock, an adhesive capable of bonding rubber to metal and used to protect pipes and storage tanks from the corrosive materials they often contained. In 1926, a Goodrich engineer developed a method for plasticizing polyvinyl chloride (PVC), turning this waste chemical compound into the material recognized today as vinyl. Goodrich marketed its PVC products under the brand names Geon and Koroseal, applying them to such varied uses as floor tiles, garden hoses, and electrical insulation. Goodrich also grew with the nation’s aviation industry, producing airplane tires and the first airplane de-icers, important devices used in the achievement of all-weather flying.

The automobile and aviation industries, along with the rubber demand created by World War I, powered Goodrich’s expansion through the first 30 years of the 20th century. In 1912, Goodrich re-incorporated as a New York company and increased its production capacity by acquiring the Diamond Rubber Company, which owned plants adjacent to Goodrich’s in Akron.

Great Depression Setbacks

On the eve of the Great Depression, Goodrich acquired two more rubber companies, the Hood Rubber Company of Water-town, Massachusetts, and the Miller Rubber Company of Akron. The depression, however, brought the company its first setbacks since the 1870s. The slowed U.S. economy reduced rubber demand, and Goodrich incurred over $24 million in net losses between 1930 and 1933. The depression also affected the company’s labor relations with its 15,000 employees in Akron. The United Rubber Workers union (URW) was formed in 1934, and in 1936 national labor leader John Lewis came to Akron to rally union support. His visit sparked a five-week strike at the plants of Goodrich, Goodyear, and Firestone, temporarily shutting down the nation’s three largest rubber producers.

Company Perspectives:

Our vision is to create value through excellence in people, quality, and innovation. It sounds simple, but we believe it embodies everything we need to do and he to reach our goal as a premier company that consistently delivers strong performance.

World War II and Recovery

Recovery for Goodrich came with the nation’s preparations for World War II. At the time of the war’s outbreak in Europe, the United States was importing 97 percent of its crude rubber from Southeast Asia. Japanese expansion in the Pacific threatened this supply, while German advances in Europe and Africa interrupted supply routes through the Suez Canal and the Mediterranean Sea. In cooperation with the nation’s rubber companies, the U.S. government began an intensive stockpiling and conservation effort. It also committed itself to developing synthetic rubber technology.

The rubber industry had known how to make synthetic rubber since the late 1930s. In 1937, Goodrich opened a pilot plant for producing butadiene-copolymer synthetic rubber, and within two years it was using synthetic rubber in some of its commercial products. As long as crude rubber supplies were cheap and plentiful, however, synthetic rubber remained an expensive alternative. In 1939, John L. Collyer took over as Goodrich’s president after having spent ten years working for a British rubber company. Collyer returned to the United States convinced of its need to develop synthetic rubber production before it was drawn into the European conflict. Under his direction Goodrich introduced in June 1940 the first passenger-car tire in the United States to contain synthetic rubber. Called Ameripol for its use of a polymer of American materials, this tire was more expensive than one made of natural rubber, but it gained rapid consumer acceptance because it outlasted conventional tires. After Collyer’s appearance before a Senate Military Affairs Committee hearing on national preparedness, the federal government announced plans to build its own synthetic rubber plants. Goodrich cooperated with this effort, building and operating three such plants for wartime production in Port Neches and Borger, Texas, and in Louisville, Kentucky. These plants had a combined capacity of 165,000 tons per year, making Goodrich the nation’s leading synthetic rubber manufacturer by the war’s end.

Postwar Return to the Consumer Market

Goodrich avoided any postwar interruptions in its growth by quickly converting to meet consumer demand. The U.S. auto industry’s return to peacetime production kept the demand for tires high, and Goodrich met this demand by introducing the first 100 percent synthetic rubber tire in 1945. Two years later it developed the tubeless puncture-sealing tire that increased motorists’ protection from blow-outs. The company’s LifeSaver and Safetyliner tubeless tires gained wide popularity in the early 1950s, and by 1955 tubeless tires became standard equipment on new cars. Ten years later Goodrich brought another innovation to U.S. drivers, the first radial tires for passenger cars. The radial dramatically changed the U.S. tire industry by increasing tire life by up to 50 percent, and, like its tubeless predecessor, it ultimately became standard equipment on U.S. cars.

Goodrich further diversified its production in the postwar era. Continuing a long tradition of research and development, it opened a new research center in Brecksville, Ohio, in 1948. B.F. Goodrich Chemical Company, a subsidiary founded in 1943, took over the company’s wartime plants and built new ones in Marietta and Avon Lake, Ohio, and in Calvert City, Kentucky. Production of Goodrich’s Geon and Koroseal plastic products expanded into overseas markets with joint ventures in Britain and Japan. By 1955, Goodrich was manufacturing goods in five different areas, including tires, chemicals and plastics, footwear and flooring, industrial products, and sponge rubber goods. It had operations in 21 nations on six continents, and in 1966 its sales reached a record $1 billion.

Key Dates:

1870:: Benjamin Franklin Goodrich forms the partnership Goodrich, Tew & Company with brother-in-law Harvey W. Tew and a group of Akron, Ohio-based investors.
1880:: The firm is incorporated in Ohio as the B.F. Goodrich Company.
1895:: The company establishes the rubber industry’s first experimental research laboratory.
1897:: B.F. Goodrich begins manufacturing pneumatic tires for the Winton Motor Car Company.
1910:: The first cord tire for automobiles is introduced.
1930:: The firm experiences losses due to a decrease in rubber demand brought on by the Depression.
1940:: B.F. Goodrich introduces the first passenger-car tire in the U.S. to contain synthetic rubber.
1945:: The firm develops the first 100 percent synthetic rubber tire.
1955:: Tubeless tires become standard equipment on new cars.
1965:: The company introduces the first radial tires for passenger cars.
1976:: The firm’s name is changed to the BFGoodrich Company.
1986:: BFGoodrich’s tire division is merged with Uniroyal.
1987:: The company sells its interest in the Uniroyal venture and exits the tire industry.
1993:: The PVC business is sold; Cleveland Pneumatic Co. and Rosemount Aerospace are purchased.
1999:: BFGoodrich merges with Coltec Industries Inc. and moves its company headquarters to Charlotte, North Carolina.
2001:: The firm changes its name to Goodrich Corporation and sells its performance materials business.

Challenges of the 1960s and 1970s

Goodrich’s fortunes declined, however, when a 1967 strike began a decade of rocky labor relations and interrupted production. In April 1967, the URW walked off of jobs at Goodrich, Firestone, and Uniroyal, and the resulting strike stalled rubber production in Akron for 86 days. That strike, along with a six-month work stoppage at one of the company’s chemical plants, cost Goodrich a 27.6 percent decrease in its profits from the previous year. Three years later Goodrich was once again facing serious losses because of strikes in the rubber and related industries. The URW walked out on Goodrich plants for five weeks, while strikes by the Teamsters Union and General Motors workers also hurt the nation’s tire markets. Goodrich’s net income in 1970 dropped by $22 million. Continued hard times in the nation’s auto and rubber industries brought Goodrich back to the bargaining table in 1976. A 141-day URW strike stopped production in all of Goodrich’s domestic tire plants and finally required the intercession of U.S. Labor Secretary W.J. Usery, Jr., to settle it. These crippling experiences with labor disputes and the stagnation of the U.S. auto industry convinced Goodrich that its future was not in tires. In 1971, Goodrich’s net income had fallen to $1.7 million from a high of $48.6 million in 1966.

Plastics and Aerospace Instead of Tires

Ready for a drastic change, the company handed its reins to a rubber industry outsider in 1972. O. Pendleton Thomas, a former oil executive with the Atlantic Richfield Company, shook up Goodrich by having chemicals and plastics replace tires as the foundation of the company’s business. At the time Thomas took over, Goodrich’s position among U.S. tiremakers had fallen to a weak fourth, and the industry showed no signs of improving. The success of radials had cut consumer demand for replacement tires, while the oil crisis had lessened the U.S. taste for new cars. Thomas streamlined Goodrich’s tire operations by closing unprofitable plants and retail outlets and concentrating on certain product niches, such as high-performance replacement tires. By maximizing profits in its tire business, he developed the capital necessary to increase the capacity of Goodrich’s chemical and plastics production. In 1976, Thomas changed The B.F. Goodrich Company’s name to The BFGoodrich Company.

Thomas’s program of retrenchment and redeployment allowed his successor, John D. Ong, to develop Goodrich’s chemicals business in the 1980s. Goodrich had long been the nation’s number-one producer of PVC, the versatile plastic used primarily in the construction industry, as well as a producer of specialty chemicals used in products ranging from cosmetics to floor polishes. Like its tire division, Goodrich’s chemical production had been hurt by the petroleum shortages and sluggish national economy of the 1970s, but when Ong took over in 1979, he maintained the course set by Thomas. The acquisition in 1979 of Tremco Inc., a producer of roofing products and construction sealants, strengthened Goodrich’s position in specialty chemicals markets. Ong also announced plans to double Goodrich’s PVC production by the mid-1980s, and he sank millions into the development of a plant in Convent, Louisiana. This project backfired, however, when the nation’s housing industry went into its worst slump in 36 years and PVC demand plummeted. Goodrich suddenly found itself plagued by an overcapacity in its chemical production, and the company ended 1982 with a $32.8 million loss.

Goodrich’s tailspin in the early 1980s led to the most dramatic changes in its history. Taking a record loss of $354.6 million in 1985, the company sold off the Louisiana plant into which it had sunk so much capital. In 1986, Ong merged Goodrich’s tire division with Uniroyal, which had just fought a costly takeover battle with corporate raider Carl Icahn. The jointly owned Uniroyal-Goodrich Tire Company looked good on paper for both companies, combining Goodrich’s replacement tire business with Uniroyal’s original equipment market to make it the nation’s second largest tire producer. Unfortunately, the relationship faltered, and in December 1987 Goodrich sold its interest in the venture for $225 million to an investment group that had already bought out Uniroyal. Shortly thereafter, Goodrich sold off its 38-acre factory complex in Akron, ending its nearly century-long association with the U.S. tire industry. In 1988, Goodrich acquired Tramco Incorporated, a provider of maintenance and repair services for commercial aircraft.

Strategic Moves in the 1990s

With the full divestiture of its tire business, Goodrich became a company devoted solely to the production of chemicals, plastics, and aerospace goods. The recovery of its PVC business and the wise investment of capital gained from its tire division sale had in the early 1990s stabilized the company. In 1993, however, chief executive John D. Ong sold off the PVC business, to the concern of investors, in favor of emphasizing the company’s other chemical businesses.

Some analysts were skeptical of these strategic turns. Writer Zachary Schiller of Business Week, for example, noted that “the company has produced an average annual return on equity of just 1.4 percent since Ong became CEO in 1979, compared with an average of 14.4 percent for the companies in the Standard & Poors Industrials index.” Moreover, the companies in the S&P index posted a 5.4 percent annual gain, but Goodrich’s sales fell an average of 3.5 percent per year, Schiller observed. Stock lagged at $44, not even close to its 1989 height of $69.

Ong, however, noted for his willingness to change course, pushed into aerospace, although the industry had been sluggish for more than a decade. He built on Goodrich’s aircraft parts and servicing business. Using proceeds from the sale of PVC, BFGoodrich acquired in 1993 Cleveland Pneumatic Co., a landing gear maker that complemented Goodrich’s wheel-and-brake business, and Rosemount Aerospace, which made sensors that measure flight and data (speed and temperature, for example). That same year also marked the additions of the Landing Gear Division and Landing Gear Services Division and of Sanncor Industries.

Ong persisted with his current business mix, pointing out that the company was now positioned for growth opportunities. By 1994, the specialty chemical business started to show improvement, and the aerospace business held promise. The aircraft wheel-and-brake business gradually grew into aircraft parts and servicing. The following year BFGoodrich acquired QSI, Inc. in Greenville, South Carolina. In 1995, purchases included Hoskins Aviation and de-icing product lines and associated technology from Lucas Aerospace.

By 1996, BFGoodrich reported that earnings in 1996 were significantly higher than in the past three years. For the second year in a row, BFGoodrich Aerospace and BFGoodrich Specialty Chemical set records for sales and operating income. The growing demand for replacement products and service proved advantageous to the aerospace division, which also benefited from the upturn in new commercial aircraft production. BFGoodrich Specialty Chemicals acquired five businesses and increased manufacturing capacity at existing facilities. Moreover, three new plants were seen as the base for further expansion in Europe and Asia.

In the mid-1990s, Ong reflected on the last decade that took BFGoodrich from a struggling company that manufactured commodity products and sold them in highly cyclical markets to a streamlined organization focused on specialty businesses. He noted that the company’s inclination for risk-taking lay within the BFGoodrich structure rather than outside. By late 1996, BFGoodrich shares reached “historic, 126-year highs” and traded at levels once thought unlikely, Ong said. He added that after challenges rocked corporate America in the 1980s and 1990s, BFGoodrich started reaching goals. Ong noted that market capitalization at the end of 1996 had increased by about 100 percent from the time the new BFGoodrich came into being at the end of 1993.

As Ong was slated to retire in 1997, David L. Burner was tapped to succeed him. Meanwhile, BFGoodrich remained focused on growth and improved returns as an aerospace and specialty chemicals company. Acquisitions that complemented and strengthened its current businesses remained at the forefront. Businesses not central to the strategy were ripe for divestment, as in the 1996 sale of Tremco to RPM, Inc., with the proceeds invested in the expansion of aerospace and specialty chemicals.

Burner continued to reshape the company through the latter half of the 1990s. As part of its aerospace strategy, the firm purchased Rohr Inc. in 1997 for $1.2 billion. The deal significantly increased the company’s reach in the aircraft systems market, and by that time nearly 56 percent of BFGoodrich’s revenues stemmed from its aerospace operations. That year the company also acquired Gulton Data Systems, an aerospace data acquisitions firm, and several other companies with interests in the specialty chemicals industry.

The firm continued its acquisition spree in the following year. Its most substantial purchase of 1999 was that of Coltec Industries Inc., a manufacturer of engineered products for aerospace and other industrial markets. The $2.2 billion deal signaled the firm’s commitment to its aircraft-related businesses; upon completion of the purchase, company headquarters were moved to Coltec’s home town of Charlotte, North Carolina. The acquisition of Coltec strengthened BFGoodrich’s hold in the landing gear segment of the aerospace market and created a multi-billion company with interests in various industries, including aerospace, performance chemicals, and engineered industrial products.

A New Name for the New Millennium

BFGoodrich entered the new millennium a stronger, more focused business entity. By the end of 2000, its aerospace division accounted for 84 percent of total sales and was ranked among the top five in the United States. That year, the firm decided to divest its performance chemicals operations in order to focus on its two other business segments. It continued to make acquisitions to bolster those segments, including Barnes Engineering, IBP Aerospace, Engineering Products Company, ACI Advanced Creations Inc., Coming’s Electro-Optical Instrumentation Business, Raytheon Optical Systems, and OEA Aerospace.

Changes continued into 2001, when the company announced a new name and a new corporate logo. Adopting Goodrich Corporation as its official title, the firm hoped to distance itself from its former tire-making image, promoting itself instead as a global supplier of aerospace and industrial products. Taking the transformation one step further, the company announced a possible future spin off of its engineered industrial products division. If completed, the new business would be headquartered in Charlotte and secure annual sales of approximately $800 million.

While the company continued to plan for additional growth through acquisition, factors beyond its control began to affect some of its largest aerospace customers. The terrorist attacks of September 11, 2001 initiated a major downturn in the commercial airline industry, which Goodrich served by manufacturing parts for such companies as The Boeing Company and Lockheed Martin Corp. As a result, Goodrich was forced to lower revenue expectations for the year and make employee cutbacks. Nevertheless, Goodrich management held strong to its focus on innovation, growth, and new product development. Having undergone dramatic restructuring through the past two decades, Goodrich appeared to be well positioned for future success.

Principal Subsidiaries

Goodrich Aerospace Aircraft Evacuation Systems Private Limited (India); Goodrich Aerospace Asia-Pacific, Limited (Hong Kong; 51%); Goodrich Aerospace Component Overhaul & Repair, Inc.; Goodrich Aerospace MRO Group, Inc.; Goodrich Aerospace Pte. Ltd. (Singapore); Goodrich Avionics Systems, Inc.; Goodrich China, Inc.; Goodrich Company of Japan, Ltd.; Goodrich de Mexico, S.A. de C.V.; FCC Acquisition Corporation; Goodrich FlightSystems, Inc.; Coltec Industries Inc.; Garlock Bearings Inc.; Goodrich Aerospace Europe S.A (France); Goodrich Aerospace Services S.A. (France); Goodrich Aerospace UK Limited; Rohr Aero Services Limited (United Kingdom); Rosemount Aerospace Limited (United Kingdom); Goodrich Holding Corporation; International Goodrich Technology Corporation; Rohr, Inc.; The IBP Aerospace Group, Inc.; Ithaco Space Systems Inc.