United Technologies Corporation

Hartford, Connecticut 06101
U.S.A.
(203) 728-7000

Public Company
Incorporated: July 21, 1934
Employees: 205,500
Sales: $15.66 billion
Market value: $6.897 billion
Stock Index: New York

United Technologies is one of the largest conglomerates in what President Eisenhower first termed the American “military/industrial complex.” United Technologies, however, is rarely the first company to be mentioned when considering leaders in the aerospace industry. The company’s low-profile reputation is primarily the result of its diversified structure. United Technologies’ best known division, Pratt & Whitney, produces two-thirds of all the aircraft engines in the free world.

Pratt & Whitney was organized by Fred Rentschler in 1925 as one of the first companies to specialize in the manufacture of engines, or “power plants,” for airframe builders. Pratt & Whitney’s primary customers were two airplane manufacturers, Bill Boeing and Chance Vought. Rentschler was interested in securing a market for his company’s engines. He convinced Boeing and Vought to form a new company with him in 1929 called the United Aircraft and Transportation Company. The three gave exclusive priority to each other’s business.

United became so successful that it was soon able to purchase other important suppliers and competitors, establishing a stronger vertical and broader horizontal monopoly. The group grew to include Boeing, Pratt & Whitney and Vought, as well as Sikorsky, Stearman and Northrop (airframes); Hamilton Aero Manufacturing and Standard Steel Prop (propellers); and Stout Airlines, in addition to Boeing’s airline companies.

The men who led these individual divisions of United exchanged stock in their original companies for stock in United. The strong public interest in the larger company drove the value of United’s stock up in subsequent flotations. The original shareholders quickly became very wealthy. Rentschler himself turned a meager $253 cash investment into $35.5 million by 1929.

Postmaster William Folger Brown acknowledged that United was the largest airline network and the most stable equipment supplier in the country. Thus United was assured of winning the postal service’s lucrative airmail contracts before it applied for them. The company’s airmail business required the manufacturing division to devote all of its resources to expansion of the airline division. This meant that United wouldn’t be able to sell airplanes to other airline companies for several years. In this way United controlled nearly half of the nation’s airline and aircraft business. It was a classic example of an aeronautic monopoly.

In 1934 Senator Hugo Black (later a Supreme Court justice) instigated an investigation of fraud and improprieties in the aeronautics business; Bill Boeing was called to the witness stand. Black’s interrogation of Boeing exposed United’s monopolistic business practices, and eventually led to the break up of the huge aeronautic combine. Boeing was humiliated. He completely divorced himself from his company, sold all of his stock, and retired. In the reorganization of the corporation, all manufacturing interests west of the Mississippi went to Boeing Airplane in Seattle, everything east of the river went to Rentschler’s United Aircraft in Hartford, and the transport services became a third independent company under the name of United Air Lines which was based in Chicago.

Chance Vought died in 1930, but his company, as well as Pratt & Whitney, Sikorsky, Ham Standard and Northrop, became part of the new United Aircraft Company. Sikorsky became a principal manufacturer of helicopters, Pratt & Whitney continued to build engines, and Vought later produced a line of airplanes including the Corsair and Cutlass.

When World War II erupted, business increased at United’s Pratt & Whitney division. The company produced several hundred thousand engines for airplanes built by Boeing, Lockheed, McDonnell, Douglas, Grumman and Vought. Over half the engines in American planes were built by Pratt & Whitney. After the war, United Aircraft turned its attention to producing jet engines. Pratt & Whitney started late in the business because its customers were constantly demanding improvements in the company’s piston-driven Wasp engine. In the meantime, Pratt & Whitney’s competitors, General Electric and Westinghouse, were free to devote more of their capital to the research and development of jet engines. When airframe builders started looking for jet engine suppliers, they had no choice but to disregard Pratt & Whitney. Even United’s Vought division had to go to Westinghouse to find turbojets for its Cutlass.

The division recognized the gravity of the situation quite late, but nonetheless began an ambitious program to develop a line of advanced jet engines. When the Korean War began in 1950, Pratt & Whitney was again deluged with orders. The mobilization of forces gave the company the opportunity to re-establish its strong relationship with the Navy and conduct business with its newly-created Air Force.

In the early 1950’s United Aircraft experienced a conflict of interest between its airframe and engine manufacturing subsidiaries. Vought Aircraft’s alternate engine suppliers, Westinghouse and General Motors’ Allison division, were reluctant to do business with a company so closely associated with their competitor, Pratt & Whitney. On the other hand, Pratt & Whitney’s other customers, Grumman, McDonnell, and Douglas, were concerned that their airframe technology would find its way to Vought. As a result, both of United’s divisions were suffering. The members of the board decided that they had no choice but to eject Vought. In 1954 Vought was forced to resign from United Aircraft.

In 1959 Fred Rentschler, at the age of 68, died after a long illness. He was eulogized in The New York Times: “This nation’s air superiority is due in no small measure to Mr. Rentschler’s vision and talents.” Indeed, it was his concern over advances in engine technology in the Soviet Union, rather than at his competitors, which drove him to re-establish Pratt & Whitney’s leadership in the industry. Rentschler had served as United Aircraft’s chairman since 1935. He was succeeded by the company’s president, H. Mansfield (Jack) Horner. Under the leadership of Horner, United Aircraft grew significantly in size and importance.

Under Horner’s stewardship United Aircraft continued to manufacture engines and a variety of other aircraft accessories into the 1960’s. Much of its business came from Boeing, which had a number of Pentagon contracts and whose 700-series jets were capturing 60% of the commercial airliner market. Horner himself retired in 1968. He was succeeded by W. P. Gwinn, president of United since Rentschler’s death. The changes in personnel were of little consequence to the company, which was running smoothly. United was, however, about to enter a period of crisis.

There was considerable trouble with Pratt & Whitney’s engines for Boeing’s 747 jumbo jet. The problem, traced to a design flaw, cost Pratt & Whitney millions of dollars in research and re-development. It also cost millions of dollars for Boeing in service calls and lost sales. Commercial airline companies suffered lost revenue from cancelled flights and reduced passenger capacity.

By 1971 the performance of the Pratt & Whitney division had begun to depress company profits. The directors of United acted quickly by hiring a new president named Harry Gray, who was drafted away from Litton Industries. As the number three man at Litton, he was once invited to tour General Electric’s Evandale, Ohio facility. Litton was a trusted customer of General Electric, and consequently Gray was warmly welcomed. He was made privy to rather detailed information on GE’s long range plans. A few weeks later officials at GE read that Gray had accepted the presidency at their arch-competitor United Aircraft. The officials protested Gray’s actions but were casually reminded that Gray had asked not to be informed of any plans of a “proprietary” nature during his visit to the GE plant.

Harry Gray was born Harry Jack Grusin in 1919. He suffered the loss of his mother at age six and was later entrusted to the care of his sister when his father’s business was ruined in the Depression. He was raised in Chicago and in 1936 entered the University of Illinois at Urbana where he later earned a degree in journalism. During World War II he fought in Europe with General Patton’s Third Army infantry and artillery. After the war he returned to Urbana to receive a Master’s degree in journalism.

After moving to Chicago Harry Grusin went through a succession of jobs, working as a salesman of trucks and as a manager of a transport company. In 1951 he changed his name to Harry Gray, according to the court record, for “no reason.” He moved to California in 1954 to work for the Litton Industries conglomerate. He spent the next 17 years at Litton working his way up the corporate ladder. Hindered in promotion at Litton by superiors who weren’t due to retire for several years, Gray accepted the offer from United Aircraft.

One of his first acts at United was to order an investigation into and re-engineering of the Pratt & Whitney engines for Boeing’s 747. Gray then sought to reduce United’s dependence on the Pentagon. United Aircraft also began a purchasing program in an effort to diversify its business. In 1974 it acquired Essex International, a manufacturer of wire and cables. A year later the company purchased a majority interest in Otis Elevator for $276 million. In 1978 United added Dynell Electronics, a builder of radar systems. Next came Ambac Industries, which makes diesel power systems and fuel injection devices.

United Aircraft changed its name to United Technologies in 1975 in order to emphasize the diversification of the company’s business. The acquisitions didn’t stop. In 1981 United Technologies, or UTC, purchased Mostek, a maker of semiconductors, for $345 million. Two years later the company acquired the Carrier Corporation, a manufacturer of air conditioning systems. In addition, UTC purchased a number of smaller electronics, software, and computer firms.

It is reported that Harry Gray has been known to maintain a portfolio of the 50 companies he’d most like to purchase. Virtually all of his targets, including the ones he later acquired, have never wanted to become part of UTC. Some of the companies which successfully resisted Gray’s takeover attempts were ESB Ray-O-Vac (the battery maker), Signal (which builds Mack Trucks), and Babcock and Wilcox (a manufacturer of power generating equipment).

During the present time, United Technologies operates four principal divisions: Power Products, including aircraft engines and spare parts; Flight Systems, which manufactures helicopters, electronics, propellers, instruments and space-related products; Building Systems, encompassing the businesses of Otis and Carrier; and Industrial Products, which produces various automotive parts, electric sensors and motors, and wire and printing products. The company, through its divisions, builds aircraft engines for General Dynamic’s YF-16 and F-111 bomber, Grumman’s F-14 Tomcat, and McDonnell Douglas’ F-15 Eagle. In addition, it supplies Boeing with engines for its 700-series jetliners, AWACs, B-52 bombers, and other airplanes. McDonnell Douglas and Airbus also purchase Pratt & Whitney engines.

Gray, who aimed to provide a new direction for UTC away from aerospace and defense, has proven to be one of the most successful presidents the company has had. He learned the business of the company’s principal product, jet engines, in a very short time. A year after he joined the company he was made chief executive officer and soon thereafter chairman. In 15 years at UTC Gray has completely refashioned the company. When Harry Gray was appointed president of United Aircraft, sales for the year amounted to $2 billion. Today the company has recorded $16 billion in sales.

UTC’s directors did, however, have a difficult time convincing Gray to relinquish his power as his retirement drew near. Gray refused to name a successor. When a potential new leader appeared to be consolidating a base of power, Harry Gray would “destroy” him. About Gray it has been said, “For people who have been attuned to power, there is an awful fear of giving it up.” One former UTC executive said, “Harry equates his corporate position with his own mortality.”

Perhaps the only man who could have satisfied the stockholders, management, and Harry Gray as the new leader of UTC was Alexander Haig. However, Haig served on the board of UTC for less than a year after turning down a bid for the presidency of the U.S. in 1980. He left the company after being appointed Secretary of State in the Reagan administration. The members of the UTC board then created a special committee to persuade Gray to name a successor. Finally, in September of 1985, Robert Daniell (formerly head of the Sikorsky division) was appointed as chief executive officer. Yet Daniell was not the board’s first choice, and more to their chagrin, Gray remained as chairman.

In light of the poor performances posted by the company’s various divisions, some industry analysts were beginning to wonder if Harry Gray had lost his magical touch. His refusal to step aside threatened the stability of UTC. With the $424 million write-off of the failed Mostek unit, many analysts began talking of a general dissolution of UTC; the divisions were worth more individually than together. But the “critics” were silenced when Harry Gray announced in September of 1986 that he would retire and named Robert Daniell to take his place.

Even before the official departure of Harry Gray, however, Daniell moved quickly to dismantle the philosophy of “growth through acquisition.” Hundreds of middle-management positions were eliminated and there was speculation that some of the less promising divisions would be sold. Daniell told The Wall Street Journal, “This is a new era for United Technologies. Harry Gray was brought here to grow the company. But now the company is built, the blocks are in place and growth will be a secondary objective.” DanielFs challenge is to prove that neither Gray’s overstayed welcome nor his departure will have any ill effect on the company.

Principal Subsidiaries

Pratt & Whitney Canada, Inc. (Canada); United Technologies Automotive Holdings, Inc.; Carrier Corp.; UT Credit Corp.; Inmont Corp.; Essex Group, Inc.; Otis Elevator Co.; Otis Europe S.A. (France); Norden Systems, Inc.; United Technologies Building Systems Co.

Further Reading

Excess Profits: The Rise of United Technologies by Ronald Fernandez, Reading, Massachusetts, Addison-Wesley, Publishers, 1983.

United Technologies Corporation

United Technologies Building
Hartford, Connecticut 06101
U.S.A.
(203) 728-7000
Fax: (203) 728-7944

Public Company
Incorporated: 1934 as United Aircraft Company
Employees: 168,600
Sales: $20.74 billion
Stock Exchanges: New York London Paris Frankfurt Geneva Lausanne Basel Zurich Brussels Amsterdam
SICs: 3585 Refrigeration and Heating Equipment; 3534 Elevators and Moving Stairway; 3724 Aircraft Engines and Engine Parts; 3721 Aircraft; 3812 Search and Navigation Equipment; 3714 Motor Vehicle Parts and Accessories; 3764 Space Propulsion Units and Parts

United Technologies Corporation is one of the largest conglomerates in the U.S. military/industrial complex. The company’s reputation for keeping a low profile is primarily the result of its diversified holdings, which include Pratt & Whitney aircraft engines, Carrier Corp. air conditioners, the Otis Elevator Co., automotive parts for original equipment manufacturers, and Flight Systems helicopters and flight controls. Despite economic struggles in the early 1990s, United remained profitable, with its Pratt & Whitney engine division powering almost three-fourths of the world’s commercial aircraft.

United traces its origins to Fred Rentschler, who founded the Pratt & Whitney Aircraft Company in 1925 as one of the first companies to specialize in the manufacture of engines, or “power plants,” for airframe builders. Pratt & Whitney’s primary customers were two airplane manufacturers, Bill Boeing and Chance Vought. Interested in securing a market for his company’s engines, Rentschler convinced Boeing and Vought to join him in forming a new company called the United Aircraft and Transportation Company. The company was formed in 1929, and thereafter Pratt & Whitney, Boeing, and Vought gave exclusive priority to each other’s business.

Early in its history, United Aircraft became so successful that it was soon able to purchase other important suppliers and competitors, establishing a strong monopoly. The group grew to include ’Boeing, Pratt & Whitney, and Vought, as well as Sikorsky, Stearman, and Northrop (airframes); Hamilton Aero Manufacturing and Standard Steel Prop (propellers); and Stout Airlines, in addition to Boeing’s airline companies.

The men who led these individual divisions of United Aircraft exchanged stock in their original companies for stock in United. The strong public interest in the larger company drove the value of United Aircraft’s stock up in subsequent flotations. The original shareholders quickly became very wealthy; Rentschler himself had turned a meager $253 cash investment into $35.5 million by 1929.

During this time, U.S. Postmaster William Folger Brown cited United Aircraft as the largest airline network and the most stable equipment supplier in the country. Thus, the company was assured of winning the postal service’s lucrative airmail contracts before it applied for them. The company’s airmail business required the manufacturing division to devote all of its resources to expansion of the airline division. Soon United Aircraft controlled nearly half of the nation’s airline and aircraft business, becoming a classic example of an aeronautic monopoly.

In 1934, Senator Hugo Black initiated an investigation of fraud and improprieties in the aeronautics business. Bill Boeing was called to the witness stand, and subsequent interrogation exposed United Aircraft’s monopolistic business practices, eventually leading to the break-up of the huge aeronautic combine. Thereafter, Boeing sold all of his stock in his company and retired. In the reorganization of the corporation, all manufacturing interests west of the Mississippi went to Boeing Airplane in Seattle, everything east of the river went to Rentschler’s United Aircraft in Hartford, and the transport services became a third independent company under the name of United Air Lines which was based in Chicago.

Chance Vought died in 1930, and his company, along with Pratt & Whitney, Sikorsky, Ham Standard and Northrop, became part of the new United Aircraft Company. Sikorsky became a principal manufacturer of helicopters, Pratt & Whitney continued to build engines, and Vought later produced a line of airplanes including the Corsair and the Cutlass.

At the onset of World War II, business increased dramatically at United’s Pratt & Whitney division. The company produced several hundred thousand engines for airplanes built by Boeing, Lockheed, McDonnell Douglas, Grumman, and Vought. Over half the engines in American planes were built by Pratt & Whitney. After the war, United Aircraft turned its attention to producing jet engines. The Pratt & Whitney subsidiary’s entrance into the jet engine industry was hindered, however, as customers were constantly demanding improvements in the company’s piston-driven Wasp engine. In the meantime, Pratt & Whitney’s competitors, General Electric and Westinghouse, were free to devote more of their capital to the research and development of jet engines. Thus, when airframe builders started looking for jet engine suppliers, Pratt & Whitney was unprepared. Even United Aircraft’s Vought division had to purchase turbo jets for its Cutlass model from Westinghouse.

Recognizing the gravity of the situation, United Aircraft began an ambitious program to develop a line of advanced jet engines. When the Korean War began in 1950, Pratt & Whitney was again deluged with orders. The mobilization of forces gave the company the opportunity to re-establish its strong relationship with the Navy and conduct business with its newly created Air Force.

In the early 1950s, United Aircraft experienced a conflict of interest between its airframe and engine manufacturing subsidiaries, as Vought’s alternate engine suppliers—Westinghouse and General Motors’ Allison division—were reluctant to do business with a company so closely associated with their competitor, Pratt & Whitney. On the other hand, Pratt & Whitney’s other customers, Grumman, McDonnell, and Douglas, were concerned that their airframe technology would find its way to Vought. As a result, both of United Aircraft’s divisions were suffering, and, in 1954, the board of directors voted to dissolve Vought.

In 1959, Fred Rentschler died, following a long illness, at the age of 68. Commenting on Rentschler’s role in developing engine technology to keep pace with that of the Soviet Union, a reporter in the New York Times stated: “This nation’s air superiority is due in no small measure to Mr. Rentschler’s vision and talents.” Rentschler was succeeded as president of United Aircraft by W. P. Gwinn, while Jack Horner became chairman of the company’s subsidiary, Pratt & Whitney.

United Aircraft continued to manufacture engines and a variety of other aircraft accessories into the 1960s. Much of its business came from Boeing, which had several Pentagon contracts and whose 700-series jets were capturing 60 percent of the commercial airliner market. When Horner retired in 1968, he was succeeded by Gwinn. While this change in leadership was of little consequence to United Aircraft, which was running smoothly, Pratt & Whitney was about to enter a period of crisis.

First, there was considerable trouble with Pratt & Whitney’s engines for Boeing’s 747 jumbo jet. The problem, traced to a design flaw, cost Pratt & Whitney millions of dollars in research and redevelopment. Moreover, it also cost millions of dollars for Boeing in service calls and lost sales. Commercial airline companies suffered lost revenue from cancelled flights and reduced passenger capacity.

By 1971, the performance of the Pratt & Whitney division had begun to depress company profits. The directors of United Aircraft acted quickly by hiring a new president, Harry Gray, who was drafted away from Litton Industries. Harry Gray was born Harry Jack Grusin in 1919. He suffered the loss of his mother at age six and was entrusted to the care of his sister in Chicago, when his father’s business was ruined in the Depression. In 1936, he entered the University of Illinois at Urbana, earning a degree in journalism before serving in Europe with General Patton’s Third Army infantry and artillery during World War II. After the war, he returned to Urbana, where he received a Master’s degree in journalism. In Chicago, Grusin went through a succession of jobs, working as a truck salesperson and as a manager of a transport company. In 1951, he changed his name to Harry Gray, according to the court record, for “no reason.” He moved to California in 1954 to work for the Litton Industries conglomerate, and he spent the next 17 years at Litton working his way up the corporate ladder.

Hindered in promotion at Litton by superiors who weren’t due to retire for several years, Gray accepted an offer from United Aircraft. While at Litton, Gray had been invited to tour General Electric’s facility in Evandale, Ohio. Litton was a trusted customer of General Electric, and consequently Gray was warmly welcomed. He was made privy to rather detailed information on GE’s long range plans. A few weeks later, officials at GE read that Gray had accepted the presidency at their competitor United Aircraft. The officials protested Gray’s actions but were casually reminded that Gray had asked not to be informed of any plans of a “proprietary” nature during his visit to the GE plant.

One of Gray’s first acts at United Aircraft was to order an investigation into and re-engineering of the Pratt & Whitney engines for Boeing’s 747. He then sought to reduce United Aircraft’s dependence on the Pentagon and began a purchasing program in an effort to diversify the business. In 1974, United Aircraft acquired Essex International, a manufacturer of wire and cables. One year later, the company purchased a majority interest in Otis Elevator for $276 million, and, in 1978, Dynell Electronics, a builder of radar systems, was added to the company’s holdings. Next came Ambac Industries, which made diesel power systems and fuel injection devices.

United Aircraft changed its name to United Technologies (UTC) in 1975 in order to emphasize the diversification of tHe company’s business. Acquisitions continued, as UTC purchased Mostek, a maker of semiconductors, for $345 million in 1981. Two years later, the company acquired the Carrier Corporation, a manufacturer of air conditioning systems. In addition, UTC purchased several smaller electronics, software, and computer firms.

Gray was reportedly known to maintain a portfolio of the 50 companies he’d most like to purchase; virtually all of his targets, including the ones he later acquired, viewed Gray’s takeovers as hostile. Some of the companies which successfully resisted Gray’s takeover attempts were ESB Ray-O-Vac (the battery maker), Signal (which built Mack Trucks), and Babcock and Wilcox (a manufacturer of power generating equipment).

During the 1980s, UTC operated four principal divisions: Power Products, including aircraft engines and spare parts; Flight Systems, which manufactured helicopters, electronics, propellers, instruments and space-related products; Building Systems, encompassing the businesses of Otis and Carrier; and Industrial Products, which produced various automotive parts, electric sensors and motors, and wire and printing products. The company, through its divisions, built aircraft engines for General Dynamic’s YF-16 and F-lll bomber, Grumman’s F-14 Tomcat, and McDonnell Douglas’ F-15 Eagle. In addition, it supplied Boeing with engines for its 700-series jetliners, AWACs, B-52 bombers, and other airplanes. McDonnell Douglas and Airbus also purchased Pratt & Whitney engines.

Gray, who aimed to provide a new direction for UTC away from aerospace and defense, proved to be one of the company’s most successful presidents. He learned the business of the company’s principal product, jet engines, in a very short time; upon his appointment as president of United Aircraft, sales for the year amounted to $2 billion, and, by 1986, the company was recording $16 billion in sales. A year after he joined the company, Gray was named CEO, and soon thereafter he became chairman as well. In his 15 years at UTC, Gray completely refashioned the company. As Gray’s retirement drew near, however, UTC’s directors had a difficult time convincing him to relinquish power and name a successor. When a potential new leader appeared to be preparing for the role, Gray would allegedly subvert that person’s power. One former UTC executive commented, “Harry equates his corporate position with his own mortality.”

One welcome candidate to succeed Gray was Alexander Haig, who had served on UTC’s board. However, Haig left the company after being appointed Secretary of State in the Reagan administration. The members of the UTC board then created a special committee to persuade Gray to name a successor. Finally, in September 1985, Robert Daniell (formerly head of the Sikorsky division) was appointed to take over Gray’s responsibilities as CEO of UTC. Nevertheless, Gray remained chairman.

In light of the poor performances posted by the company’s various divisions, some industry analysts were beginning to question Gray’s leadership. His refusal to step aside threatened the stability of UTC. With the $424 million write-off of the failed Mostek unit, many analysts began talking of a general dissolution of UTC; the divisions were worth more individually than together. But these critics were silenced when Gray announced in September 1986 that he would retire and that Daniell to take his place.

Even before the official departure of Gray, Daniell had moved quickly to dismantle the company’s philosophy of “growth through acquisition.” Hundreds of middle-management positions were eliminated, and there was speculation that some of the less promising divisions would be sold. Daniell told The Wall Street Journal, ’ ’This is a new era for United Technologies. Harry Gray was brought here to grow the company. But now the company is built, the blocks are in place and growth will be a secondary objective.” Daniell then had to prove that neither Gray’s overstayed welcome nor his departure would affect the company adversely.

Daniell also had more pressing challenges. The USSR’s collapse in the late 1980s revealed that it had been a much weaker military foe than previously believed. As a result, the end of the Cold War brought Congressional and public pressure to cut domestic defense budgets. While some other leading defense companies moved to carve out niches in the shrinking market, UTC worked to strengthen its interests in more commercial industries.

UTC’s transition was not smooth, and Pratt & Whitney suffered the most. While in 1990 Pratt & Whitney had brought in one-third of UTC’s sales and an impressive two-thirds of operating profit, the subsidiary’s losses from 1991 to 1993 reached $1.3 billion. Pratt & Whitney was hampered not only by defense cuts, but also by the serious downturn in the commercial airline industry, intense global competition, and a worldwide recession. Moreover, saturation of the commercial real estate market during this time caused declines in demand for elevators and air conditioners, products manufactured by UTC’s Otis and Carrier subsidiaries. These companies also recorded losses for 1991. That year, UTC also faced six charges of illegal dumping against its Sikorsky Aircraft division. In the largest penalty levied under the Resource Conservation & Recovery Act up to that time, UTC agreed to pay $3 million in damages.

In 1992, Daniell brought George David, who had been instrumental in the revival of both the Otis and Carrier units, on board as UTC president. David, in turn, tapped Karl Krapek, who was called a “veteran turnaround artist” by Financial World, to lead the beleaguered Pratt & Whitney subsidiary. Krapek quickly reduced employment at the unit from a high of 50,000 to 40,000 by the beginning of 1993. The divisional reformation also focused on manufacturing, with the goals of shortening lead times, reducing capacity, and expedite processes. Overall employment at UTC was cut by 16,500 from 1991 to 1993.

By the end of 1993, Daniell was able to report positive results; UTC made $487 million on sales of $20.74 billion. In April 1994, after leading the, corporation for nearly a decade, Daniell appointed David as the company’s CEO, retaining his position as UTC’s chairman.

Principal Subsidiaries:

Pratt & Whitney; United Technologies Automotive Holdings, Inc.; Carrier Corp.; Otis Elevator Co.

Further Reading:

“EPA Levies Record RCRA, CWA Fines,” Environment Today, June 1991, p. 14.

Fernandez, Ronald, Excess Profits: The Rise of United Technologies, Reading, Massachusetts: Addison-Wesley, 1983.

Norman, James R., “Welcome to the Real World,” Forbes, February 15, 1993, pp. 46-47.

Smart, Tim, “UTC Gets a Lift From its Smaller Engines,” Business Week, December 20, 1993/pp. 109-10.

Velocci, Anthony L., Jr., “United Technologies Restructures in Bid to Boost Profitability, Competitiveness,” Aviation Week & Space Technology, January 27, 1992, p. 35.

—updated by April Dougal Gasbarre

United Technologies Corporation

One Financial Plaza
Hartford, Connecticut 06103
U.S.A.
Telephone: (860) 728-7000
Fax: (860) 728-7979
Web site: http://www.utc.com

Public Company
Incorporated: 1934 as United Aircraft Company
Employees: 148,000
Sales: $24.13 billion (1999)
Stock Exchanges: New York London Paris Brussels Switzerland
Ticker Symbol: UTX
NAIC: 54171 Research and Development in the Physical, Engineering, and Life Sciences; 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; 333921 Elevator and Moving Stairway Manufacturing; 336411 Aircraft Manufacturing; 336412 Aircraft Engine and Engine Parts Manufacturing

United Technologies Corporation (UTC) is one of the largest conglomerates in the United States and a major military contractor. Although it keeps a low profile, UTC’s holdings (Carrier, Hamilton Sundstrand, Otis, Pratt & Whitney, and Sikorsky) are among the leading companies in their respective fields. Stung by global recession in the 1990s, UTC has embarked upon a never-ending quest to cut costs, and jobs, much to the displeasure of its unions.

Origins

United traces its origins to Fred Rentschler, who founded the Pratt & Whitney Aircraft Company in 1925 as one of the first companies to specialize in the manufacture of engines, or”power plants,” for airframe builders. Pratt & Whitney’s primary customers were Bill Boeing and Chance Vought. Interested in securing a market for his company’s engines, Rentschler convinced Boeing and Vought to join him in forming a new company called the United Aircraft and Transportation Company. The company was formed in 1929, and thereafter Pratt & Whitney, Boeing, and Vought gave exclusive priority to each other’s business.

Early in its history, United Aircraft became so successful that it was soon able to purchase other important suppliers and competitors, establishing a strong monopoly. The group grew to include Boeing, Pratt & Whitney, and Vought, as well as Sikorsky, Stearman, and Northrop (airframes); Hamilton Aero Manufacturing and Standard Steel Prop (propellers); and Stout Airlines, in addition to Boeing’s airline companies.

The men who led these individual divisions of United Aircraft exchanged stock in their original companies for stock in United. The strong public interest in the larger company drove the value of United Aircraft’s stock up in subsequent flotations. The original shareholders quickly became very wealthy; Rentschler himself had turned a meager $253 cash investment into $35.5 million by 1929.

During this time, U.S. Postmaster William Folger Brown cited United Aircraft as the largest airline network and the most stable equipment supplier in the country. Thus, the company was assured of winning the postal service’s lucrative airmail contracts before it applied for them. The company’s airmail business required the manufacturing division to devote all of its resources to expansion of the airline division. Soon United Aircraft controlled nearly half of the nation’s airline and aircraft business, becoming a classic example of an aeronautic monopoly.

Breaking Up in the 1930s

In 1934, Senator Hugo Black initiated an investigation of fraud and improprieties in the aeronautics business. Bill Boeing was called to the witness stand, and subsequent interrogation exposed United Aircraft’s monopolistic business practices, eventually leading to the break-up of the huge aeronautic combine. Thereafter, Boeing sold all of his stock in his company and retired. In the reorganization of the corporation, all manufacturing interests west of the Mississippi went to Boeing Airplane in Seattle, everything east of the river went to Rentschler’s United Aircraft in Hartford, and the transport services became a third independent company under the name of United Air Lines which was based in Chicago.

Chance Vought died in 1930, and his company, along with Pratt & Whitney, Sikorsky, Ham Standard and Northrop, became part of the new United Aircraft Company. Sikorsky became a principal manufacturer of helicopters, Pratt & Whitney continued to build engines, and Vought later produced a line of airplanes including the Corsair and the Cutlass.

At the onset of World War II, business increased dramatically at United’s Pratt & Whitney division. The company produced several hundred thousand engines for airplanes built by Boeing, Lockheed, McDonnell Douglas, Grumman, and Vought. Over half the engines in American planes were built by Pratt & Whitney. After the war, United Aircraft turned its attention to producing jet engines. The Pratt & Whitney subsidiary’s entrance into the jet engine industry was hindered, however, as customers were constantly demanding improvements in the company’s piston-driven Wasp engine. In the meantime, Pratt & Whitney’s competitors, General Electric and Westing-house, were free to devote more of their capital to the research and development of jet engines. Thus, when airframe builders started looking for jet engine suppliers, Pratt & Whitney was unprepared. Even United Aircraft’s Vought division had to purchase turbo jets for its Cutlass model from Westinghouse.

Postwar Jets

Recognizing the gravity of the situation, United Aircraft began an ambitious program to develop a line of advanced jet engines. When the Korean War began in 1950, Pratt & Whitney was again deluged with orders. The mobilization of forces gave the company the opportunity to reestablish its strong relationship with the Navy and conduct business with its newly created Air Force.

In the early 1950s, United Aircraft experienced a conflict of interest between its airframe and engine manufacturing subsidiaries, as Vought’s alternate engine suppliers—Westinghouse and General Motors’ Allison division—were reluctant to do business with a company so closely associated with their competitor, Pratt & Whitney. On the other hand, Pratt & Whitney’s other customers, Grumman, McDonnell, and Douglas, were concerned that their airframe technology would find its way to Vought. As a result, both of United Aircraft’s divisions were suffering, and, in 1954, the board of directors voted to dissolve Vought.

In 1959, Fred Rentschler died, following a long illness, at the age of 68. Commenting on Rentschler’s role in developing engine technology to keep pace with that of the Soviet Union, a reporter in the New York Times stated:”This nation’s air superiority is due in no small measure to Mr. Rentschler’s vision and talents.” Rentschler was succeeded as president of United Aircraft by W.P. Gwinn, while Jack Horner became chairman of the company’s subsidiary Pratt & Whitney.

United Aircraft continued to manufacture engines and a variety of other aircraft accessories into the 1960s. Much of its business came from Boeing, which had several Pentagon contracts and whose 700-series jets were capturing 60 percent of the commercial airliner market. When Horner retired in 1968, he was succeeded by Gwinn. While this change in leadership was of little consequence to United Aircraft, which was running smoothly, Pratt & Whitney was about to enter a period of crisis.

First, there was considerable trouble with Pratt & Whitney’s engines for Boeing’s 747 jumbo jet. The problem, traced to a design flaw, cost Pratt & Whitney millions of dollars in research and redevelopment. Moreover, it also cost millions of dollars for Boeing in service calls and lost sales. Commercial airline companies suffered lost revenue from canceled flights and reduced passenger capacity.

A Change of Vision in the 1970s

By 1971, the performance of the Pratt & Whitney division had begun to depress company profits. The directors of United Aircraft acted quickly by hiring a new president, Harry Gray, who was drafted away from Litton Industries. Harry Gray was born Harry Jack Grusin in 1919. He suffered the loss of his mother at age six and was entrusted to the care of his sister in Chicago, when his father’s business was ruined in the Depression. In 1936, he entered the University of Illinois at Urbana, earning a degree in journalism before serving in Europe with General Patton’s Third Army infantry and artillery during World War II. After the war, he returned to Urbana, where he received a Master’s degree in journalism. In Chicago, Grusin went through a succession of jobs, working as a truck salesperson and as a manager of a transport company. In 1951, he changed his name to Harry Gray, according to the court record, for”no reason.” He moved to California in 1954 to work for the Litton Industries conglomerate, and he spent the next 17 years at Litton working his way up the corporate ladder.

Hindered in promotion at Litton by superiors who were not due to retire for several years, Gray accepted an offer from United Aircraft. While at Litton, Gray had been invited to tour General Electric’s facility in Evandale, Ohio. Litton was a trusted customer of General Electric, and consequently Gray was warmly welcomed. He was made privy to rather detailed information on GE’s long-range plans. A few weeks later, officials at GE read that Gray had accepted the presidency at their competitor United Aircraft. The officials protested Gray’s actions but were casually reminded that Gray had asked not to be informed of any plans of a”proprietary” nature during his visit to the GE plant.

Company Perspectives:

United Technologies provides high technology products to the aerospace and building systems industries throughout the world. UTC’s companies are industry leaders and include Pratt & Whitney, Carrier, Otis, International Fuel Cells, Hamilton Sundstrand, Sikorsky and our world-class Research Center.

One of Gray’s first acts at United Aircraft was to order an investigation into and reengineering of the Pratt & Whitney engines for Boeing’s 747. He then sought to reduce United Aircraft’s dependence on the Pentagon and began a purchasing program in an effort to diversify the business. In 1974, United Aircraft acquired Essex International, a manufacturer of wire and cables. One year later, the company purchased a majority interest in Otis Elevator for $276 million, and, in 1978, Dynell Electronics, a builder of radar systems, was added to the company’s holdings. Next came Ambac Industries, which made diesel power systems and fuel injection devices.

United Aircraft changed its name to United Technologies (UTC) in 1975 in order to emphasize the diversification of the company’s business. Acquisitions continued, as UTC purchased Mostek, a maker of semiconductors, for $345 million in 1981. Two years later, the company acquired the Carrier Corporation, a manufacturer of air conditioning systems. In addition, UTC purchased several smaller electronics, software, and computer firms.

Gray was reportedly known to maintain a portfolio of the 50 companies he most wanted to purchase; virtually all of his targets, including the ones he later acquired, viewed Gray’s takeovers as hostile. Some of the companies which successfully resisted Gray’s takeover attempts were ESB Ray-O-Vac (the battery maker), Signal (which built Mack Trucks), and Babcock and Wilcox (a manufacturer of power generating equipment).

During the 1980s, UTC operated four principal divisions: Power Products, including aircraft engines and spare parts; Flight Systems, which manufactured helicopters, electronics, propellers, instruments and space-related products; Building Systems, encompassing the businesses of Otis and Carrier; and Industrial Products, which produced various automotive parts, electric sensors and motors, and wire and printing products. The company, through its divisions, built aircraft engines for General Dynamic’s YF-16 and F-lll bomber, Grumman’s F-14 Tomcat, and McDonnell Douglas’ F-15 Eagle. In addition, it supplied Boeing with engines for its 700-series jetliners, AWACs, B-52 bombers, and other airplanes. McDonnell Douglas and Airbus also purchased Pratt & Whitney engines.

Gray, who aimed to provide a new direction for UTC away from aerospace and defense, proved to be one of the company’s most successful presidents. He learned the business of the company’s principal product, jet engines, in a very short time; upon his appointment as president of United Aircraft, sales for the year amounted to $2 billion, and, by 1986, the company was recording $16 billion in sales. A year after he joined the company, Gray was named CEO, and soon thereafter he became chairman as well. In his 15 years at UTC, Gray completely refashioned the company. As Gray’s retirement drew near, however, UTC s directors had a difficult time convincing him to relinquish power and name a successor. When a potential new leader appeared to be preparing for the role, Gray would allegedly subvert that person’s power. One former UTC executive commented, ’ ’Harry equates his corporate position with his own mortality.”

One welcome candidate to succeed Gray was Alexander Haig, who had served on UTC s board. However, Haig left the company after being appointed secretary of state in the Reagan administration. The members of the UTC board then created a special committee to persuade Gray to name a successor. Finally, in September 1985, Robert Danieli (formerly head of the Sikorsky division) was appointed to take over Gray’s responsibilities as CEO of UTC. Nevertheless, Gray remained chairman.

Getting Rid of Gray in 1986

In light of the poor performances posted by the company’s various divisions, some industry analysts were beginning to question Gray’s leadership. His refusal to step aside threatened the stability of UTC. With the $424 million write-off of the failed Mostek unit, many analysts began talking of a general dissolution of UTC; the divisions were worth more individually than together. But these critics were silenced when Gray announced in September 1986 that he would retire and that Danieli would take his place.

Even before the official departure of Gray, Danieli had moved quickly to dismantle the company’s philosophy of”growth through acquisition.” Hundreds of middle-management positions were eliminated, and there was speculation that some of the less promising divisions would be sold. Danieli told the Wall Street Journal, ’ ’This is a new era for United Technologies. Harry Gray was brought here to grow the company. But now the company is built, the blocks are in place and growth will be a secondary objective.” Danieli then had to prove that neither Gray’s overstayed welcome nor his departure would affect the company adversely.

Danieli also had more pressing challenges. The U.S.S.R.’s collapse in the late 1980s revealed that it had been a much weaker military foe than previously believed. As a result, the end of the Cold War brought Congressional and public pressure to cut domestic defense budgets. While some other leading defense companies moved to carve out niches in the shrinking market, UTC worked to strengthen its interests in more commercial industries.

Key Dates:

1929:

Aircraft makers Bill Boeing and Chance Vought join forces with Pratt & Whitney.

1934:

United Aircraft officially incorporates from the triumvirate’s eastern manufacturing assets.

1945:

Pratt & Whitney powers half of all U.S. planes built during World War II.

1954:

Aircraft manufacturer Vought dissolves due to conflicts of interest with P&W.

1975:

United Aircraft buys majority of Otis Elevator; changes name to United Technologies.

1983:

UTC buys Carrier Corporation, an air conditioner manufacturer.

1991:

Amid global recession, P&W, Otis, and Carrier post losses.

1992:

Major restructuring is launched by new management.

1999:

UTC sells its auto parts business and buys aerospace supplier Sundstrand Corp.

UTC s transition was not smooth, and Pratt & Whitney suffered the most. While in 1990 Pratt & Whitney had brought in one-third of UTC s sales and an impressive two-thirds of operating profit, the subsidiary’s losses from 1991 to 1993 reached $1.3 billion. Pratt & Whitney was hampered not only by defense cuts, but also by the serious downturn in the commercial airline industry, intense global competition, and a worldwide recession. Moreover, saturation of the commercial real estate market during this time caused declines in demand for elevators and air conditioners, products manufactured by UTC s Otis and Carrier subsidiaries. These companies also recorded losses for 1991. That year, UTC also faced six charges of illegal dumping against its Sikorsky Aircraft division. In the largest penalty levied under the Resource Conservation & Recovery Act up to that time, UTC agreed to pay $3 million in damages.

In 1992, Danieli brought George David, who had been instrumental in the revival of both the Otis and Carrier units, on board as UTC president. David, in turn, tapped Karl Krapek, who was called a”veteran turnaround artist” by Financial World, to lead the beleaguered Pratt & Whitney subsidiary. Krapek quickly reduced employment at the unit from a high of 50,000 to 40,000 by the beginning of 1993. The divisional reformation also focused on manufacturing, with the goals of shortening lead times, reducing capacity, and expediting processes. Overall employment at UTC was cut by 16,500 from 1991 to 1993.

By the end of 1993, Danieli was able to report positive results; UTC made $487 million on sales of $20.74 billion. In April 1994, after leading the corporation for nearly a decade, Danieli appointed David as the company’s CEO, retaining his position as UTC s chairman.

Otis’s annual revenues remained in the $4.5 billion range in the early to mid-1990s, while Carrier’s rose from $4.3 billion in 1992 to nearly $5 billion in 1994. During the same period, automotive sales rose from $2.4 billion to $2.7 billion. Pratt & Whitney saw commercial engine revenues fall by $800 million, to 2.9 billion. Military and space engine sales fell from $2.5 billion to $1.8 billion while general aviation sales fell by about ten percent to $1.1 billion. During this time, the company paid $180 million for environmental remediation at more than 300 sites. Although cost-cutting improved profits by the mid-1990s, UTC continued cutting jobs.

UTC entered more than a dozen joint ventures overseas while the aerospace industry suffered a recession. The company derived a little over half of its revenues from abroad, and enjoyed strong growth in Asia in the mid-1990s, at least until the Asian financial crisis of 1997. In 1996, UTC had revenues of $1 billion in the People’s Republic of China and Hong Kong.

Some technical developments seemed promising. Pratt & Whitney unveiled its most powerful engine ever in 1996. The PW4090 was rated at 90,000 pounds of thrust. (Three years later, the company tested the PW4098, rated at 98,000 pounds.) The new Odyssey system at Otis allowed elevator cars to move both vertically and horizontally.

In January 1997, Sikorsky and Boeing won a $1.7 billion contract to continue developing their RAH-66 Comanche armed reconnaissance helicopter. Sikorsky was able to maintain production levels of its Black Hawk helicopter. Pratt & Whitney engines were chosen for two new military aircraft programs, the F-22 fighter and the C-17 freighter. On the civilian side, Otis Elevator cut 2,000 jobs as sales fell in the wake of the Asian financial crisis. It also closed its Paris headquarters and most of its engineering centers.

UTC was able to save money on commodities by having its thousands of vendors bid online. These types of products accounted for about a quarter of the $14 billion the company spent on outside goods and services, according to the Financial Times.International revenues accounted for about 56 percent of UTCs total in the late 1990s, reaching 60 percent in 1999. Profits were rising in all divisions except UT Automotive.

Reconfiguring for the Future

UTC bought Sundstrand Corp. for about $4 billion in 1999, merging it with Hamilton Standard. Sundstrand derived 60 percent of its $2 billion in annual revenues from aerospace products. On the recommendation of the Goldman, Sachs & Co. investment bank, UTC decided to sell its automotive parts unit in the light of growing price pressure from automakers. Lear Corporation bought the business for $2.3 billion in May 1999. Otis Elevator entered a joint venture with LG Industries in South Korea while Carrier bought out North American competitor International Comfort Products and allied with the Toshiba Corporation.

Layoffs continued at Sikorsky, Carrier, Pratt & Whitney, Hamilton Sundstrand, and Otis—part of a new wave of company-wide restructuring designed to reduce UTCs total workforce by ten percent, or 15,000 jobs. However, in February 2000, a federal judge barred Pratt & Whitney from moving engine repair work out of Connecticut, saying this violated an existing union agreement. Plans to close Hamilton Sundstrand’s Connecticut electronics facility also prompted complaints this was aimed at taking away about 400 jobs from the machinists’ union.

The company bought Cade Industries, a Michigan aerospace supplier, in February 2000. The next month, UTC announced a new engine overhaul joint venture with KLM, the Dutch airline, which already had a relationship with Hamilton Sundstrand.

Principal Subsidiaries

Carrier Corporation; Hamilton Sundstrand Corporation; Otis Elevator Company; Pratt & Whitney; Sikorsky Aircraft Corporation.

Principal Divisions

Carrier; Otis; Pratt & Whitney; Flight Systems.

Principal Competitors

The Boeing Company; General Electric Company; Textron Inc.

Further Reading

”EPA Levies Record RCRA, CWA Fines,” Environment Today, June 1991, p. 14.

Fernandez, Ronald, Excess Profits: The Rise of United Technologies, Reading, Mass.: Addison-Wesley, 1983.

Griffith, Victoria,”Otis Cuts 2,000 Jobs As Asia Crisis Bites,” Financial Times, April 14, 1998, p. 24.

Jacobs, Karen,”United Technologies’ Job Cuts Spark Labor-Board Inquiry, Action by Judge,” Wall Street Journal, February 23, 2000, p. A6.

Ma, Peter,”Virtual Auctions Knock Down Costs,” Financial Times, November 3, 1998, pp. 17 +.

Norman, James R.,”Welcome to the Real World,” Forbes, February 15, 1993, pp. 46-47.

Smart, Tim,”UTC Gets a Lift from Its Smaller Engines,” Business Week, December 20, 1993, pp. 109-10.

Stainburn, Samantha,”Big Names Bow Out,” Government Executive, August 1997, pp. 67-81.

Sullivan, Allanna,”United Technologies, Looking to Sell Auto-Parts Business, Talks to Buyers,” Wall Street Journal, February 17, 1999, p. A6.

——,”United Technologies Profit Exceeds Estimates, As Revamping Is Launched,” The Wall Street Journal, July 21, 1999, p. B9.

Velocci, Anthony L., Jr., “United Technologies Restructures in Bid to Boost Profitability, Competitiveness,” Aviation Week & Space Technology, January 27, 1992, p. 35.

—updated by April Dougal Gasbarre

—updated by Frederick C. Ingram

United Technologies Automotive Inc.

5200 Auto Club Drive
Dearborn, Michigan 48126
U.S.A.
(313) 593-9600
Fax: (313) 593-9580

Wholly Owned Subsidiary of United Technologies Corp.
Incorporated: 1930
Employees: 37,000
Sales: $2,683 million
SICs: 3714 Motor Vehicle Parts & Accessories; 3694 Engine Electrical Equipment

United Technologies Automotive is a global designer and supplier of components and systems for automotive manufacturers. Its products include a broad array of automobile components ranging from sun shades to electrical distribution systems. UTA, a subsidiary of the giant United Technologies Corporation, was formed in 1979 when the Essex Group was merged with Ambac Industries. The Sheller-Globe Corporation, in addition to a number of smaller producers of automotive products, were later absorbed.

The Essex Wire Corporation was founded in Detroit in 1930 when Addison E. Holton acquired the wire and cable division of the Ford Motor Company. Ford had been producing internal wire assemblies for its cars since the early 1920s but had begun to farm out secondary production. The large automaker reached an agreement with Holton whereby it leased a portion of its sprawling Highland Park plant to the new firm, and Essex met Ford’s wire needs in addition to manufacturing for the general market.

As the demand for auto wire grew, Holton found that the small corner of the Highland Park plant was no longer sufficient to meet the company’s manufacturing needs. So, during the early 1930s Essex acquired the Chicago Transformer Company (an Indiana automotive switch manufacturer) and the Indiana Rubber and Insulated Wire Company. But Essex’s most significant acquisition was made in 1936 with the purchase of the wire manufacturing facilities of the Dudlo Manufacturing Company in Fort Wayne, Indiana. Holton was searching for facilities in which to manufacture the enamelled magnet wire that was in great demand by electric motor manufacturers. Dudlo had been a pioneer in the production of this wire, but its 38,000-square-foot plant had fallen victim to the Great Depression and had been idle for three years. The revived plant became Essex’s largest manufacturing facility and would eventually become the company’s corporate headquarters.

By the early 1940s Essex was an established independent manufacturing firm with 12 plants in several states. The company’s diverse line of products included electrical wire assemblies for cars, small transformers, magnet wire, power cords for electrical equipment manufacturers, and cable wire for the construction industry. Like many American companies, Essex’s focus during the mid-1940s was on wartime needs. The organization quickly adapted its facilities to produce the field wire and airplane wire assemblies needed for the war effort.

The postwar boom of the 1950s was a period of further diversification and growth for Essex. Essex’s expertise in electric wiring systems was in great demand by the growing electric appliance industry. Automobile manufacturers were also calling on Essex to produce the increasingly sophisticated wire assemblies demanded by new car designs. In response to these growing markets, the company, which was still controlled by its founder Addison Holton, expanded its product line to include electrical insulating materials and electrical and electro-magnetic controls and systems. New plants were added to accommodate increased demand. By 1959, Essex’s earnings had grown to over $8 million, an almost fourfold increase in just two years.

The early 1960s was a period of tremendous growth for Essex. The decade saw the company transform itself from a moderate-sized manufacturing firm to an international competitor in the automotive equipment industry. This transition, however, was not accomplished without growing pains. In 1959 Walter Probst succeeded company founder Holton as president of Essex. He began a reorganization of the 30-year-old firm. The head office was moved to Fort Wayne and the business was consolidated into six divisions.

In spite of its rapid post war expansion, Essex had remained a very tightly held private corporation. Probst’s vision for a multi-national corporation, however, could not succeed without a new influx of capital. In 1965 Essex shares were offered on the New York Stock Exchange. Although the offering was successful, the Chapín family, which had owned six percent of Essex through the 1950s, sued the company for $12 million, claiming that management had misrepresented the company’s financial position in order to repurchase shares at a reduced cost before the initial public offering. The suit was settled in 1967, but not without damage to the Essex’s reputation. Labor relations also became a serious problem for Essex during that period. An unusually violent strike closed the company’s Hillsdale, Michigan magnet wire plant for four months in the spring of 1964, and a series of labor disputes followed during the next few years.

With the new capital provided by the sale of shares to the public, Essex was in a position to begin serious expansion. From 1967 to 1972 Essex acquired 16 manufacturing companies with a diverse range of products. In addition to its longstanding automotive wire assemblies and electrical components, Essex now also produced extruded aluminum products, plumbing and hydraulic fittings, and plastic moldings. It also operated a copper mining and exploration division. To reflect this diversification, in 1968 Essex Wire Corp. changed its name to Essex International. By 1974 Essex had lived up to its new name by opening plants in Spain, The United Kingdom, Canada, and Mexico, in addition to its nearly 100 American manufacturing plants. Essex’s 1973 earnings had reached $40 million on sales of $845 million, attracting the attention of United Aircraft Corporation’s president and CEO Harry Gray.

Harry Gray had been appointed president of the United Aircraft Corporation in 1971. United Aircraft was at that time one of the largest companies in the country and had a long history of manufacturing airplanes and helicopters for the American military. Gray was determined to diversify United Aircraft in order to diminish the company’s reliance on defense contracts. Flourishing Essex International became his first acquisition. Under United Aircraft, soon to be renamed United Technologies, Essex operated as the Essex Group but continued to produce essentially the same range of products as it had before the change in ownership.

Through the 1970s, Gray continued his program of growing and diversifying United Technologies through acquisitions. Among his many new purchases was Ambac Industries. Ambac, founded in 1906 as the American Bosch Magneto Corp, had begun life as a manufacturer of small magnet-powered generators for early internal combustion engines. By the 1950s the company was a leading producer of automobile voltage regulators and ignition equipment for commercial stationary engines. When Gray became interested in Ambac in 1978, the company was manufacturing medical, scientific, and environmental equipment in addition to its traditional fuel injection systems. At the time of its acquisition by United Technologies, Ambac’s annual profits were about $16 million on sales of $225 million. Gray surprised the business community by paying $220 million for Ambac even though the company’s underlying net assets were worth only about $130 million. The outstanding $90 million was written off as “goodwill” in a move that raised eyebrows among some analysts.

In 1979, as part of an attempt to reorganize the growing number of companies entering the United Technologies stable, the electrical and electronics operations of the Essex Group and the operations of Ambac Industries were merged to form United Technologies Automotive, which became a unit of the United Technologies Industrial Products Division. The newly formed unit established its headquarters in Dearborn, Michigan, strategically placed in the heart of the automotive industry. The principal products of UTA remained Essex’s wire assemblies and electrical components, and Ambac’s fuel injection systems. But in 1985 UTA acquired Alma Plastics, which added interior plastic trim and moldings to the product line. By 1987 sales to the automotive industry had reached about $155 million and were accounting for more than half of the Industrial Products Division of United Technologies.

Although Harry Gray’s aggressive policy of growth through acquisitions had built United Technologies into one of the 20 largest industrial corporations in the United States, in the mid-1980s a number of Gray’s riskier ventures turned sour. Indeed, net income dropped by about $600 million between 1985 and 1986. After a great deal of internal turmoil amongst UTC management, Gray stepped down as CEO of the troubled firm in 1986. Robert Daniell was appointed in his place. Daniell immediately undertook a major restructuring of UTC, streamlining the unwieldy company by selling off divisions that did not fit into United Technologies’ main product lines. In 1988, as part of this reorganization, the wire manufacturing operations of Essex were spun off as an independent company, although the new enterprise continued to produce the wire for the automotive wire assemblies and electronic devices manufactured by United Technologies Automotive. Daniell’s reorganization of UTC also included the dissolution of The Industrial Products Division, thus making United Technologies Automotive an independent business unit within UTC.

By the late 1980s, with the major building blocks of the restructuring in place, UTC began to look once again towards strategic expansion, although this time only businesses that would mesh with their major product lines would be considered. The Sheller-Globe Corporation was acquired in 1989 and merged into the operations of UTA. Sheller-Globe was formed in 1966 when the Sheller Manufacturing Corp. was merged into Globe-Wernicke Industries. Sheller had been the primary producer of independently manufactured steering wheels for some 30 years, and Globe was a leading producer of automotive replacement parts. By the time of the UTC acquisition, the company had largely abandoned replacement part sales in favor of original equipment interior automotive products. UTA was seeking to expand its line of interior trim products, and Sheller-Globe’s steering wheels and other interior components were ideally suited to these goals.

Throughout the 1980s and 1990s UTA made extensive efforts to expand its international sales. During the mid-1980s the company entered into joint agreements with Renault, Grundig, and Furukawa Electric to produce wiring systems in Europe and Asia. UTA was also quick to respond to the emergence of new foreign markets created by the changing political climate of the 1990s. The company opened a plant in Godollo, Hungary in 1991 and entered into joint manufacturing agreements with Dongfeng-Citroen of China for production of electrical distribution systems in 1994. By 1994 UTA had manufacturing facilities in 14 countries worldwide in addition to a dozen international sales and engineering offices. In the same year, UTA’s international sales had reached $939 million, which was approximately 35 percent of total revenues.

Back at home, UTA increased sales to domestic automakers by expanding their product line. By the mid-1990s, UTA was producing a huge variety of automotive products, ranging from electrical components like junction boxes and DC motors to interior trim including mirrors, visors, and door trim. It was also still producing the wire assemblies and steering wheels that had been the mainstay of Essex and Sheller-Globe. As American automobile manufacturers began increasingly to look towards suppliers to provide not only individual components but overall design and engineering capabilities, UTA expanded its engineering and product development programs. Ford Motor Company, which had long been UTA’s major domestic customer, granted the company full-service supplier status in 1995, reaffirming the strong relationship between the two companies.

In 1994, with sales of $2.6 billion, United Technologies decided that UTA’s performance was strong enough to warrant a public offering of UTA stock and thereby unlock some of the parent company’s investment in the automotive subsidiary. UTC was to remain in control of the company, however, by retaining 60 percent of the equity interest and by electing 80 percent of UTA’s directors. The offering, however, was not favorably received by the investment community, which was generally unwilling to meet the targeted stock price. The IPO was postponed indefinitely. In spite of this setback, United Technologies Automotive remained a significant contributor to UTC revenues into the mid-1990s.

Further Reading

Ankenbruck, John, “Essex Group of United Technologies,” The Fort Wayne Story: A Pictorial History, Woodland Hills, Calif.: Windsor Publications, 1980, pp. 178-179.

Fernandez, Ronald, Excess Profits: The Rise of United Technologies, Reading, Mass.: Addison-Wesley, 1983.

Naj, Amal Kumar, “Offerings of Stock Planned for United Technologies Unit,” Wall Street Journal, January 20, 1994, p. A6.

“Roy D. Chapin Heirs Sue Essex Wire Charging Erroneous Information,” Wall Street Journal, December 16, 1966, p. 4.

—Hilary Gopnik

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