Masland Corporation

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Masland Corporation

50 Spring Road
Carlisle, Pennsylvania 17013
U.S.A.
(717) 249-1866
Fax: (717) 386-1833

Wholly Owned Subsidiary of Lear Corporation
Incorporated: 1991
Employees: 3,100Sales: $496.6 million (1995)
Stock Exchanges: NASDAQ

SICs: 2273 Carpets & Rugs; 2396 Automotive & Apparel Trimmings; 6719 Holding Companies, Not Elsewhere Classified

A leading North American designer and manufacturer of car-interior components, Masland Corporation operates ten manufacturing facilities in the United States, Canada, and Mexico. Founded as a yarn dye business in 1866, Masland entered the automotive industry in 1922 when it first sold woven carpet to Ford Motor Company. From that year forward, the company derived much of its business from supplying car manufacturers with floor materials and then diversified into the design and manufacture of other car-interior components. In 1996, Masland was purchased by Lear Corporation, a $5-billion-a-year company involved in the production of a full range of car-interior components.

Though Masland’s business was fully entrenched in the automotive industry during the 1990s, the company’s historical roots stretch back decades before the first “horseless carriages” began motoring about the nation’s cities, towns, and countryside. More than a half century would pass after Masland’s establishment before it would enter the business and industry that would predicate the company’s existence for much of the 20th century, a span of time that represented one era in Masland’s evolution from a 19th century textile business into a 20th century automotive parts business. The transformation did not occur overnight; instead a series of milestone moments in the company’s history steered Masland toward the business areas that would ultimately describe the company at the end of the 20th century. Often, these definitive junctures in the course of the company’s development were separated by decades. The result was a corporate history that befitted a more-than-a-century-old company, a story that charted the growth of a business born not long after the American Civil War and its transformation into a leading manufacturer in the automotive industry poised for the 21st century.

19th Century Origins

The long, winding road that led to the Carlisle, Pennsylvania home of Masland during the 1990s originated more than a century earlier in Philadelphia. There, in 1866, one year after Union and Confederate soldiers ended their four-year, epic struggle against one another, a young Charles H. Masland, fresh out of military uniform, founded a business that would outlive his great-great-grandchildren and capture headlines during the 1990s. In Philadelphia, Masland opened a yarn dye house, hoping to share in the explosive growth of the city’s textile industry. It was a prudent and financially rewarding decision, one that enabled his fledgling enterprise to take root in Philadelphia and enjoy sufficient prosperity to finance the acquisition of a carpet mill near Philadelphia 20 years later, in 1886.

The move into carpet manufacturing would prove to be one of the most significant developments in the company’s history, guiding the Masland venture into the business area that would fuel its growth during the 20th century. Nearly all of the financial and physical growth that resulted from the acquisition of the carpet mill, however, occurred after the company’s headquarters were moved from Philadelphia to Carlisle in 1919, three short years before the most pivotal moment in the company’s history would occur. Although C.H. Masland & Sons, as the company was known at the time, had already moved past its 50th year of business when it relocated to Carlisle, in many respects the history of the Masland business was just beginning.

Entry into the Automotive Sector in 1922

By the time of the move to Carlisle, Masland had been involved in carpet manufacture for more than four decades, relying on the production of flooring material to grow into a modestly sized firm with more than half a century of business experience. By all accounts the company was a success, but in 1922 Masland made a move that would forever change the magnitude and scope of its business. That year, Frank Masland, a descendant of Charles H. Masland and one of the reasons the company operated under the name “C.H. Masland & Sons,” sold his first shipment of woven carpet to Ford Motor Company. The C.H. Masland & Sons carpet was first used in Ford’s Model T, but Masland-manufactured carpeting would find its way into countless Ford automobiles, as well as the sundry models manufactured by other car manufacturers, becoming one of the most widely used types of automobile floor material during the ensuing decades.

Frank Masland’s first step into the automobile industry in 1922 steered C.H. Masland & Sons toward a business area that would serve as the foundation for the company in the future and it introduced the company to its most important customer. Seventy years later, Ford ranked as Masland’s largest customer by far, accounting for more than 60 percent of the sales collected by the Carlisle-based manufacturer. Once Ford began purchasing Masland-made woven carpet, other car manufacturers quickly followed suit. General Motors was the next manufacturer to look to C.H. Masland & Sons for floor material and then, as Masland’s presence in the automobile industry matured, a full range of domestic and foreign car manufacturers turned to Masland for automobile floor carpeting.

During the decades following the first foray into the automobile industry, Masland refined its products and deepened its involvement in the automotive sector, building a reputation that was strengthened with each innovation the company brought to market. Among the highlights of the company’s rise during the 20th century was its development of molded auto-carpet pieces in 1955. The molded, multipiece floor systems did away with the old “cut-and-sew” technique and C.H. Masland & Sons’ limited role as a manufacturer and marketer of rolls of carpet. From the 1950s forward, the company’s design contributions to car floor systems picked up pace, placing a greater emphasis on the expertise C.H. Masland & Sons’ employees were rapidly developing. During the 1960s, the first one-piece molded floor systems went into production, engendering the introduction in 1968 of a carpet system that covered both the frontseat and the backseat areas inside automobiles. The 1970s, in turn, brought their own innovations, including the creation of floor systems that possessed noise- and vibration-abatement features. By the 1980s, the company’s legacy of offering a consistent supply of new and improved floor systems had earned the respect of the world’s largest car manufacturers, who demonstrated their faith in C.H. Masland & Sons by awarding product design and engineering responsibilities to the Carlisle-based company during the middle years of the decade.

1986 Acquisition by Burlington Industries

By this point, as Masland entered its 120th year of business, the company was collecting nearly $200 million per year in sales and nearly $7 million per year in earnings, displaying sufficient financial health to attract an eager suitor in 1986. The company intent on acquiring C.H. Masland & Sons was Burlington Industries, Inc., a $2.8 billion-in-sales company that offered $68 a share, or roughly $109 million, for the Carlisle-based carpet and rug manufacturer. Less than a week after the offer, Masland’s board of directors met to discuss the deal and unanimously voted to reject the offer, calling the $68-a-share cash tender offer “inadequate.” Beryl C. Gardner, Masland’s president and chief executive officer at the time, reiterated the rejection of the Burlington bid, telling business reporters, ’ ’In our view, Masland is positioned to continue achieving meaningful growth in its earnings and revenues,” financial objectives he and the rest of Masland’s executives clearly wished to pursue as an independent company. Burlington, however, was not to be denied. Rebuffed and perhaps angered by Masland’s quick decision, Frank S. Greenberg, Burlington’s president and chief operating officer, responded to the refusal by saying, “We regret that the Masland board has seen fit to reject our offer without even meeting with us or discussing it with us.”

Burlington’s executives vowed to continue their pursuit of Masland after it had brushed their first offer aside, intent on bringing the carpet and rug manufacturer into their fold despite the objections of the Masland board of directors. The chase did not take long, ending just a few weeks after Masland’s board of directors unanimously voted against the acquisition. In June 1986, Masland agreed to Burlington’s $73-a-share bid, ending 120 years of independence for the carpet and rug manufacturer. Gardner, who had staunchly opposed the merger, tried to put a positive spin on the outcome, but his words betrayed a halfhearted acceptance of the deal.“Change is sometimes hard,” Gardner said, “but it is often necessary and positive.”

Company Perspectives:

Masland’s business strategy is to retain market share in core business with primary customers; to increase market share through further market penetration; to expand into complementary product areas; and to expand geographically.

Masland’s acquisition by Burlington marked the beginning of a new era in the company’s history, and, for a time, it appeared that the effect of Burlington’s control of the company would be to completely wipe away a more-than-a-century-old business. In early 1988, Burlington put Masland Automotive, the automotive products division of C.H. Masland & Sons, up for sale. Masland Automotive, the source for $200 million of C.H. Masland & Sons’ total annual sales volume, represented the heart of the company, ranking as one of the country’s major suppliers of molded floor carpets, trunk liners, and interior trim parts to car and truck manufacturers in North America. Not long after the announcement that Masland’s automotive products division was slated for divestiture, Burlington announced it was putting Masland’s residential carpet division, Masland Floorcovering, on the block. As it turned out, however, only Masland Floorcovering, a manufacturer of high-fashion, high-quality carpet and area rugs for designer, residential, and commercial markets, was actually sold, stripping the company of $70 million in annual sales and leaving it wholly focused on the design and manufacture of car-interior systems.

Meanwhile, as these events were unfolding, Burlington was struggling to contend with problems of its own. A 1987 leveraged buyout of the company had financially weighed it down, causing the massive company to take staggering steps as it entered the 1990s. In addition to the financial problems associated with the 1987 leveraged buyout, Burlington’s condition was made more precarious by a series of financial losses stemming from its anemic textile business and high interest costs. In trouble, Burlington struggled to effect a turnaround, and it cut loose its ties to Masland in 1991 as part of its recovery program.

Slightly more than five years after its affiliation with Burlington had begun, the relationship was over, ending formally in August 1991, when a group of investors and Masland’s management purchased the business of C.H. Masland & Sons from Burlington and created Masland Corporation and its chief operating subsidiary, Masland Industries. Once again on its own, Masland moved forward with its focus entirely on the design, manufacture, and supply of automotive components.

As the company pushed ahead with its new-found freedom, it was coming off of two decades devoted to making Masland products for a range of car interior parts. The company’s entry into the automotive sector in 1922 had begun with the manufacture of carpet, and for several decades Masland confined itself to producing only flooring materials. Beginning in the 1970s, however, the company began to make other products for other car-interior components. The departure of the residential carpet and area rug division in 1988 had intensified the company’s concentration on car interiors, giving Masland one objective to purse in the future. In 1992, the company bolstered its car-interior component business by acquiring K.W. Muth Company, a. manufacturer of automotive dash insulators, vinyl floor systems, and various other acoustic products.

On the heels of this acquisition, Masland converted to public ownership, making its initial public offering of stock in 1993. By the end of the year, sales totaled $353.5 million and net income amounted to $13 million. The next year sales rose solidly to $429.8 million, but on the financial front the most dramatic gain was the remarkable 61 percent leap in net income, which soared to $21 million.

1996 Acquisition by Lear Corporation

During the mid-1990s, the big news for Masland was the arrival of another company intent on acquiring the Carlisle-based designer and manufacturer. This time, ten years after Burlington had offered its first bid for Masland, Lear Corporation made an offer for Masland midway through the company’s 130th anniversary year of business. Lear, a $4.7 billion-in-sales supplier of car seats and car parts, was involved in an ambitious expansion program that was focused on enabling the company to furnish car manufacturers with complete interior systems, or, as Lear’s chairman phrased it, to offer “one-stop shopping for interiors.” For Lear, the addition of Masland represented an important piece to the total package it was striving to assemble. Masland controlled 40 percent of the floor systems market in North America in 1996 and operated facilities devoted to the production of interior trim and luggage compartments and acoustical systems.

The union of Lear and Masland was announced in May 1996, then completed for $384 million two months later in July, leaving Lear in pursuit of only one more piece to complete its total package: an instrument panel manufacturer. With Lear expecting to supply its first complete interior system by the beginning of the 21st century, Masland headed into the late 1990s operating as the Masland Division and striving to help its parent company reach its objective.