Rockwell Automation

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Rockwell Automation

777 East Wisconsin Avenue
Suite 1400
Milwaukee, Wisconsin 53202
U.S.A.
Telephone: (414) 212-5200
Fax: (414) 212-5201
Web site:http://www.rockwell.com

Public Company
Incorporated: 1928 as North American Aviation
Employees: 23,500
Sales: $4.42 billion (2000)
Stock Exchanges: New York Pacific London
Ticker Symbol: ROK
NAIC: 335314 Relay and Industrial Control Manufacturing; 334419 Other Electronic Component Manufacturing; 334290 Other Communications Equipment Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing; 332991 Ball and Roller Bearing Manufacturing; 333612 Speed Changer, Industrial High-Speed Drive, and Gear Manufacturing; 334513 Instruments and Related Product Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 335312 Motor and Generator Manufacturing

Rockwell Automation, known until mid-2001 as Rockwell International Corporation, specializes in industrial automation products, software, systems, and services. Among the company’s offerings are controllers, input/output (I/O) systems, sensors, power transmission components, and network monitoring devices. Main brand names include Rockwell Automation, Allen-Bradley, Rockwell Software, Dodge, and Reliance Electric. Rockwell Automation serves a wide range of industries through a network of 5,600 distributors and agents in 80 countries. The company emerged in the early 21st century as the successor of Rockwell International—which was best known as a major defense and aerospace firm—after the latter made a series of strategic divestments starting in the mid-1990s.

Early History of North American Aviation

Charles Lindbergh’s flight across the Atlantic in 1927 Generaled such interest in aviation that suddenly even small aviation companies were deluged with money from investors. So much capital was made available by investors (almost $1 billion by 1929) that holding companies created hundreds of airlines and airplane manufacturers. Three companies in particular emerged in the late 1920s as the largest aeronautic concerns: the Aviation Corporation of the Americas (Avco), run by Averell Harriman and the Lehman Brothers investment firm; the Boeing/Rentschler consortium known as United Aircraft and Transportation; and North American Aviation, the predecessor of Rockwell International, organized by a New York financier named Clement Keys.

Once the engine manufacturer Pratt & Whitney had secured two airplane manufacturers and a major airline, the United Aircraft consortium, as exclusive customers, Clement Keys recognized that his company needed a similar affiliation if it was to survive. He finalized an arrangement wherein the Wright Engine Company became the exclusive supplier of engines for North American Aviation.

North American’s major airline, National Air Transport, was one of 45 aviation companies operated by Keys; the list also included the Curtiss Aeroplane & Motor Company and Wright Engine. Curtiss was a successful manufacturer of such airplanes as the Condor, and Wright manufactured some of the highest quality aircraft engines of the day. North American also owned Eastern Air Lines, the pioneer of air service along the eastern coast of the United States, and Transcontinental Air Transport. These subsidiaries made the parent company’s stock even more attractive. Money continued to flow into North American from investor groups, making the original stockholders (Keys among them) extremely wealthy.

The bright future of the aviation companies came to an abrupt end on October 24, 1929, when a financial disaster hit Wall Street. Virtually all stocks were inflated in value and backed only with borrowed funds. When investors realized that the market could no longer support the inflated values of their stock, they flooded brokerage houses with orders to sell. The large number of claims led people, banks, and companies into bankruptcy. The resulting stock market crash brought about a ten-year world depression. In 1930, North American lost its majority control of National Air Transport to the United Aircraft company. The buyout provided temporary relief to financially troubled North American, which was purchased by General Motors four years later. General Motors was one of the few companies with capital available to refinance a business that held such promise for the future. General Motors acquired North American in an attempt to diversify, since its own product was not selling well during the Great Depression.

Keys retired from business in 1932 because of ill health, and James Howard Kindelberger, who was with Donald Douglas during development of the DC-1 and DC-2, was made president of North American in 1935. He was trained as an engineer but knew the automotive business so well that his managerial acumen overshadowed his engineering skills.

General Motors, which held a substantial amount of stock in Trans World Airlines, sold its holdings in that company in 1936. In the same year, North American (still a subsidiary of General Motors) sold its Eastern Air Lines unit to the airline’s director, Eddie Rickenbacker. The divestiture of airline companies from airplane manufacturers was forced upon the three largest aeronautic conglomerates by Senator Hugo Black, who also advocated the breakup of numerous other monopolies. North American Aviation was no longer an airline company but merely a manufacturer of airplanes and airplane parts.

During World War II, North American manufactured thousands of P-51 Mustangs for the U.S. Army Air Corps. The P-51, one of the last mass-produced piston engine airplanes, saw action in every theater during the war. The company also built the B-25 Mitchell bomber and T-6 Texan trainer. The company built more airplanes for the U.S. military than any other company during the war years. The rapid expansion of the company was financed mostly by the government, which was North American’s largest customer.

Defense and Aerospace Contracting in the Postwar Era

When the war ended, North American’s military contracts also ended. Like Grumman Corporation, North American opted to avoid entering the competitive commercial airliner market. Instead, the company focused its resources on the development of the next generation of military aircraft, namely, jets. Working from designs and prototypes of jet aircraft captured from the Germans after the war, North American built its first fighter jet, called the F-86 Sabre. Because the Sabre’s supersonic wings were developed from German designs, the company saved millions of dollars in research and development costs.

In the years after the war, North American attempted to enter the private airplane market, with a small four-passenger plane called the Navion. However, poor sales of the Navion convinced company management of the futility of entering the private market. In 1947 the design and production rights to the Navion were sold to Ryan Aeronautical.

North American continued to develop new equipment for the military. The company built a number of fighters and trainers for the Navy’s aircraft carriers, in addition to a new jet called the F-100 Super Sabre. North American also constructed the first experimental supersonic aircraft, the rocket-powered X-15 and X-70.

When General Motors sold its share of the company in 1948, North American diversified its product line, becoming involved in the development of rockets, guidance systems, and atomic energy. It created Rocketdyne, Autonetics, and Atomics International as new divisions to pursue research in those individual fields. Here again, Rocketdyne was assisted by the Germans; much of its rocket and missile technology was acquired from captured German data.

Kindelberger, who had been promoted to chairperson, and the company’s new president, J.L. Atwood, planned the company’s diversification before the war ended. They both knew that in order for the company to survive the postwar environment, they would have to prove the company’s worth to the government by leading the development of the newest defense systems. The government could then justifiably be asked to fund much of the costly development of any new systems.

The company’s greatest success was in its Rocketdyne division, which produced the Thor, Jupiter, Redstone, and Atlas rockets. The research and development of an atomic-powered missile was abandoned when the system was declared impractical and unworkable. Research from the ambitious but ill-fated project was converted for use in the development of nuclear reactors.

When the Soviet Union put Yuri Gagarin into space in 1961, the U.S. space program was jolted into action. North American’s Redstone rocket was used to launch Alan Shepard and Virgil Grissom into space during the Mercury space program in 1961. Later, John Glenn was launched into orbit aboard a Mercury spacecraft perched atop an Atlas rocket. North American Aviation enabled the United States to recover its technological edge in the space race with the Soviet Union.

Company Perspectives:

Through our people and our technology partners, we deliver automation solutions in every industry, on every continent, in most countries of the world.

As the world continues to move from the industrial age into the information age, there is a great need for bridges between the two. Rockwell Automation provides those bridges, offering “smart” automation products that bring together industrial machines with “information” technology for more efficient, flexible, less expensive, and higher quality manufacturing and processing.

In order to meet President John F. Kennedy’s challenge to land a man on the moon before 1970, the National Aeronautics and Space Administration (NASA) contracted North American to build the three-passenger Apollo I space capsule. On January 27,1967, a flash fire swept through the manned capsule during a ground test. Killed in the accident were Virgil “Gus” Grissom, Edward White II, and Roger Chaffee. The astronauts’ widows each received $350,000 in a legal settlement, but North American was still harshly criticized. Despite the fact that most of its business involved government contracts, the company suffered severe financial reverses that threatened it with bankruptcy. Within two months of the accident, North American Aviation was a prime candidate for a takeover.

Late 1960s and 1970s: Emergence of Rockwell International

Rockwell-Standard made a $922 million bid for North American Aviation in March 1967. Rockwell-Standard was established in Wisconsin in 1919 as a manufacturer of truck axles and was initially known as Wisconsin Parts Company. Willard Rockwell was the company founder. Rockwell later took over Timken Detroit Axle and Standard Steel Spring Company, the latter based in Coraopolis, Pennsylvania. In 1953 Rockwell merged these three companies to form Rockwell Spring and Axle Company, which was renamed Rockwell-Standard in 1958. By 1967 Rockwell-Standard was the world’s leading producer of mechanical automotive parts, including parts for both light and heavy vehicles, in addition to being a manufacturer of industrial machinery.

Under the terms of the merger, J.L. Atwood, president and chief executive officer of North American, would assume the same duties at the new company, while Colonel Willard Rockwell, of Rockwell-Standard, would serve as chairperson. The merger was delayed for a few months by the Justice Department, which argued that the merger would be anticompetitive. The problems were finally resolved and the smaller Rockwell, with sales of $636 million, took over North American, with sales of $2.37 billion.

Atwood said the merger was “in furtherance of North American’s previously announced objective to diversify its activities into the commercial and industrial sector.” What the company management really wanted was to improve its public image. Its association with the Apollo space capsule tragedy was never forgotten. The merger with the Rockwell company would recover the reputation of integrity that management thought North American deserved. It was clear that Colonel Rockwell would be firmly in charge of the new company, which was called North American Rockwell.

Rockwell’s role in the U.S. space program continued, but the company maintained a low profile. It spent much of its first years after the merger manufacturing car and truck parts, printing presses (following the 1969 acquisition of Miehle-Goss-Dexter), tools, industrial sewing machines, and electronic instruments for flight and navigation. The company devoted much of its resources to the development of space systems, including the enormous Saturn V rocket engines, which launched subsequent Apollo missions to the moon. Later, the company was chosen as the primary contractor for NASA’s space shuttles. During this time, it also became NASA’s largest contractor, a position it continued to hold into the 1990s.

In 1973 the company acquired Collins Radio Company, which had been founded in 1930 and began selling amateur radio transmitters in 1933. The company developed the first modem in 1955, which was as large as a refrigerator and weighed 700 pounds. Collins became the cornerstone of Rockwell’s avionics and communications operations. North American Rockwell also merged in 1973 with the Rockwell Manufacturing Company, a separate company created by Willard Rockwell, Jr. Following this merger, the company changed its name to Rockwell International.

Willard Rockwell, Jr., who took over from his father in 1967, retired in 1979, and Robert Anderson assumed the position of chairperson. Anderson had joined Rockwell in 1968 after he left the Chrysler Corporation. He was named president of Rockwell in 1970 and chief executive officer in 1974. Anderson’s background in the automotive business made him a conservative and cautious manager. Generally regarded as an engineer more than as a financial manager, he had a strategy for the company’s growth and expansion that was markedly different from that of his predecessor. Anderson himself later remarked, “it’s fair to say that we disagreed on the direction of the company altogether.”

Key Dates:

1903:: Lynde Bradley and Dr. Stanton Allen create the Compression Rheostat Company.
1904:: Lincoln Electric Manufacturing Company, forerunner of Reliance Electric, is founded.
1910:: Compression Rheostat is renamed Allen-Bradley Company.
1919:: Willard Rockwell founds Wisconsin Parts Company.
1928:: North American Aviation is established and soon becomes one of the three largest aeronautic concerns in the country.
1930:: Collins Radio Company is founded to build and sell radio transmitters.
1948:: North American Aviation begins diversification into rockets, guidance systems, and atomic energy.
1953:: Rockwell merges Wisconsin Parts and two other firms to form Rockwell Spring and Axle Company.
1958:: Rockwell Spring is renamed Rockwell-Standard.
1967:: Rockwell-Standard merges with North American Aviation to form North American Rockwell.
1973:: North American Rockwell acquires Collins Radio. Following merger with Rockwell Manufacturing, the company is renamed Rockwell International.
1985:: Rockwell acquires Allen-Bradley Company of Milwaukee, thereby entering the industrial automation sector.
1995:: Rockwell acquires Reliance Electric.
1996:: Graphic systems and defense and aerospace businesses are sold off.
1997:: Automotive business is spun off to shareholders as Meritor Automotive Inc.
1998:: Company spins off its semiconductor operations to shareholders as Conexant Systems, Inc.
1999:: Rockwell relocates to Milwaukee.
2001:: Rockwell Collins is spun off to shareholders; Rockwell International changes its name to Rockwell Automation.

Under the junior Rockwell, the company made some risky acquisitions, stretching its balance sheet to an uncomfortable degree. At one point the company was reportedly losing a million dollars a day. Rockwell was trying to establish the firm’s business in high profile consumer markets, such as Admiral television, which Anderson sold in 1974.

Anderson, who was originally hired to smooth the transition of management and resources during the 1967 merger, had little tolerance for the waste usually associated with defense contracts. He introduced the General Motors policy, which required all company divisions to submit profit goals for various production periods. As a result of Anderson’s strict management, Rockwell’s debt-equity ratio (the company’s debt divided by its net worth) fell from 99 percent in 1974 to 50 percent in 1977 and to 9 percent in 1983.

Addition of Industrial Automation in the 1980s

Rockwell had initially planned to build the B-1 bomber, but in 1977 the administration of President Jimmy Carter canceled the program, favoring instead the development of Northrop’s stealth bomber. By 1983, however, the Reagan administration had reactivated the B-1 project as part of its ambitious military program. Production of the B-1 bomber was expected to Generale a profit of approximately $2 billion a year for Rockwell, but subsequent orders for more of the bombers ceased. Once again, Rockwell and its B-1 were summarily excluded from consideration for the production of the next U.S. strategic bomber. The company still had other defense contracts, however: the MX “Peacekeeper” missile (designed to replace the nation’s stock of aging minuteman missiles), five space shuttles, and a navigation satellite called Navstar.

Willard Rockwell, Jr., resigned as a consultant to Rockwell in 1984 because of a conflict of interest between the company and a separate concern he founded in 1979 called Astrotech. Astrotech was negotiating to purchase one or more of NASA’s space shuttles in the belief that only private enterprise could make shuttle flights profitable.

That venture was indefinitely postponed by the explosion of the space shuttle Challenger in January 1986. An investigation of the accident later revealed that one of the booster rockets malfunctioned and caused the rocket to collide with the huge external fuel tank. The resulting explosion decimated the orbiter and killed all seven of its astronauts. A few months later President Ronald Reagan announced the order for a new shuttle from Rockwell to replace the Challenger.

Shortly before the accident Rockwell was implicated in a government investigation into illegal overcharges on various government contracts. The company was banned from further contract awards until Anderson himself convinced Air Force Secretary Vernon Orr to reinstate the company in December 1985. Anderson promised to fire senior managers involved in any illegal activities.

In 1985 Anderson oversaw the first major acquisition of his career at Rockwell with the $1.7 billion purchase of the Allen-Bradley Company of Milwaukee. Rockwell was suffering from a decrease in business after the cancellation of the B-1 bomber and the completion of the space shuttles. Allen-Bradley provided Rockwell with steady profits from its operations and helped to reduce the company’s dependence on government contracts. Allen-Bradley, a successful manufacturer of industrial automation systems, traced its origins back to 1903, when Lynde Bradley and Dr. Stanton Allen created the Compression Rheostat Company, which adopted the Allen-Bradley name in 1910. A key introduction came in 1920: the “Bradleystat,” a rheostat (a resistor that regulates a current) designed for automotive dashboards and radios; sales of the Bradleystat exceeded $1.1 million by 1924. By 1985, Allen-Bradley was the number one maker of industrial automation equipment in North America, with revenues of more than $1 billion.

Robert Anderson retired in 1988, relinquishing control of the company to its president, Donald R. Beall, who had been priming himself for Rockwell’s leadership position for a decade. Ten years earlier, in 1978, when Beall was president of Rockwell’s electronic division in Dallas, he reportedly spent one evening composing some 14 pages of notes delineating what he would do if given control of Rockwell. He was finally given that opportunity and immediately set himself the task of redefining the company’s future.

A principal component of Beall’s strategy was to reduce Rockwell’s dependence on federal defense contracts and increase its presence in the electronics market. Specifically, this meant an expansion of Rockwell’s telecommunications operations and a more significant role for the company’s Allen-Bradley subsidiary, which Beall had encouraged Anderson to acquire. To make the company more responsive to customers, Beall granted company managers nearly autonomous control of their operations and then sharply reduced the bureaucratic layers of management that had accumulated over the years. Seven management levels were compressed into three, the company’s headquarters staff was cut by more than half, and Rockwell’s various businesses were reorganized into four major categories: electronics products, automotive products, a graphics unit (which manufactured highspeed newspaper presses), and aerospace.

Transformative 1990s

In the early 1990s, before Beall could complete his transformation of Rockwell, however, economic conditions soured, sending the national economy into a tailspin and shrouding Beall’s efforts to create a more diversified, commercially oriented company. Despite the economic downturn, Beall funneled more than $250 million into Allen-Bradley to create a new generation of factory automation products, which, coupled with the company’s commanding presence in the market for high-speed modems (a product of Rockwell’s 1973 acquisition of Collins Radio), provided two stable, commercially oriented legs for the company to stand on once economic conditions improved.

When conditions did improve, the fruits of Beall’s strategy were unveiled. Government-funded business, which in 1988 had accounted for 50 percent of Rockwell’s revenues, contributed only 23 percent to the company’s sales total in 1993, a span during which 40,000 government-funded jobs within the company had been eliminated. Conversely, Rockwell’s commercial business had grown substantially, fueled by Beall’s efforts to expand the company’s telecommunication business and bolster Allen-Bradley’s market position. By 1994, Rockwell’s telecommunications unit was manufacturing 80 percent of all modems in computers and fax machines sold throughout the world, while the company’s investment in Allen-Bradley began paying dividends, buoyed by a more favorable economic picture. In early 1994, Allen-Bradley was recording $8.1 million in sales per day, the greatest amount in the company’s history and cause for much optimism for Rockwell’s future as a more dynamic player in the commercial electronics market.

Rockwell solidified its move into industrial automation in January 1995 with the acquisition of Reliance Electric Co. for $1.6 billion, outbidding General Signal Corporation in a several-months-long takeover battle. The addition of Reliance made industrial automation Rockwell’s largest business, accounting for 28 percent of overall revenues in fiscal 1995. Reliance was a producer of electric motors and drives used in factories, making for a strategic fit with Allen-Bradley’s factory automation systems. Reliance traced its roots back to the founding in 1904 in Cleveland, Ohio, of Lincoln Electric Manufacturing Company, whose first product was the Type AS DC motor. In 1967 Reliance acquired Dodge Mechanical Company, a firm specializing in gear reducers, mounted bearings, and power transmission components.

In mid-1995 Don H. Davis was named president, with Beall remaining chairman and CEO. Shortly thereafter, Rockwell began a series of moves that dramatically changed the nature of the company. Seeking to focus the company on the potentially higher growth areas of electronics and communications, Beall and Davis began divesting operations outside of these areas. In 1996 Rockwell sold off its graphic systems business to Stonington Partners Inc. for $600 million. Then late in 1996 the company sold its defense and aerospace businesses—its best-known operations—to Boeing for $3.2 billion, one part of an ongoing consolidation of the U.S. defense industry. Following the latter sale, business with the Defense Department and NASA accounted for only 6 percent of Rockwell revenues. A further concentration on core areas came in September 1997 when Rockwell spun off its automotive business to shareholders as Meritor Automotive, Inc.

The divestments left Rockwell with three core businesses: automation, avionics and communications (known as Rockwell Collins), and semiconductors. Rockwell Collins was beefed up in December 1997 through the purchase of the in-flight entertainment business of Hughes-Avicom International, Inc. In early 1998 Beall retired and Davis took over as chairman and CEO.

Davis quickly left his own mark on the company with yet another spinoff. Facing a sluggish and potentially volatile market for semiconductors, Rockwell in December 1998 spun off its semiconductor operations to shareholders as Conexant Systems, Inc. This move also precipitated a shifting of the company headquarters in 1999 from California to Milwaukee, where its industrial automation business was located. Meantime, the company launched a sweeping restructuring of its automation operations in mid-1998 that included the layoff of about 3,000 of the unit’s 27,000 employees, the closure of factories and the exit from certain product lines, and special charges of nearly $600 million. Consequently, for the fiscal year ending in September 1998, Rockwell posted a net loss of $437 million on sales of $6.75 billion.

Early 21st Century: Emergence of Rockwell Automation

In the final chapter of the dramatic transformation of Rockwell International, the company spun off Rockwell Collins to shareholders in June 2001. Other than both being in the general field of electronics, the two remaining legs of Rockwell International had little in common, giving impetus to the breakup. Davis remained chairman and CEO of the automation firm, which began operating under the name Rockwell Automation. Just prior to the completion of the spinoff, Rockwell announced plans to cut 1,000 jobs and close one factory in an effort to trim expenses by $100 million in the face of a stagnating U.S. economy. The newly incarnated Rockwell Automation thus began on rather shaky ground, but Davis was confident that his company’s business would rebound when the general U.S. industrial sector entered a new period of growth.