GenCorp Inc.

views updated May 17 2018

GenCorp Inc.

175 Ghent Road
Fairlawn, Ohio 44333-3330
U.S.A.
(216) 869-4200
Fax: (216) 869-4211

Public Company
Incorporated: 1915 as General Tire & Rubber Company
Employees: 13,500
Sales: $1.94 billion
Stock Exchanges: Boston Cincinnati Midwest New York Philadelphia Pacific
SICs: 3764 Space Propulsion Units & Parts; 3489 Ordnance & Accessories Nec; 3089 Plastics Products Nec; 3714 Motor Vehicle Parts & Accessories; 3764 Space Propulsion Units & Parts; 3949 Sporting & Athletic Goods Nec; 2821 Plastics Materials & Resins; 2822 Synthetic Rubber; 3069 Fabricated Rubber Products Nec; 3083 Laminated Plastics Plate & Sheet; 3499 Fabricated Metal Products Nec

As the parent corporation for three principal segments—Aerojet, GenCorp Automotive and GenCorp Polymer Products—GenCorp, Inc., headquartered in Fairlawn, Ohio, operates 28 manufacturing facilities throughout the United States, Canada, and Ireland, as well as one of the most sophisticated research centers in the world. This center, GenCorp Research, provides support for new technology development within the company’s segments. GenCorp’s investment in technology also extends to a world-class design center for its polymer segment in Salem, New Hampshire, and two design and engineering centers for its automotive segment in Indiana and Michigan.

A. William Reynolds heads GenCorp’s management team as chairman of the 11-member board of directors and serves as chief executive officer. Since electing Reynolds in 1985, GenCorp has taken a significant shift in management approach and business strategy; businesses unrelated to core technologies have been divested, and key positions in aerospace, automotive, and related polymer products have been strengthened through reorganization and selected, carefully targeted acquisitions, joint ventures, and technology exchange agreements.

Focused efforts in GenCorp’s three principal areas, in order to broaden customer bases and to expand the company’s global position, and an on-going commitment to quality in all facets of the business serve as a foundation for progress in the future. GenCorp’s vision, as it moved toward the 21st century, was to emerge as one of the most respected diversified companies in the world.

GenCorp was founded as the General Tire & Rubber Company in 1915 in Akron, Ohio, by William O’Neil, a former Firestone dealer. In order to create more dealerships, Firestone had gradually reduced O’Neil’s service area until the dissatisfied O’Neil formed his own company, Western Tire and Rubber, in 1911 to make repair materials. In 1915 O’Neil moved from Kansas City to Akron, where his father, Michael O’Neil, owned a department store. The O’Neils established General Tire & Rubber with $200,000 in capital, mostly provided by Michael, who became company president, while William became general manager. The two hired a number of Firestone managers to help manage the new business.

General Tire initially manufactured repair materials but began producing tires in 1916, aiming its wares at the high end of the market. Its first manufactured product was a premium replacement automobile tire, “General Jumbo,” for Model T Ford trucks. By 1917 the company was expanding its factory and dealership network, embarking on its first advertising campaign, and growing despite a difficult economic environment made worse by World War I.

General Tire became a medium-sized company during the 1920s, holding 1.8 percent of U.S. tire sales by 1929, when it had 14 retail stores. In 1931, with the Great Depression weakening many smaller rubber firms, General Tire bought Yale Tire and Rubber of New Haven, Connecticut, and by 1936 added India Tire and Rubber Company in Mogadore, Ohio. General Tire was now a leader in the tire industry, with 2.7 percent of U.S. tire sales in 1933. Although its sales were minuscule compared with Goodyear’s 30 percent of the market, General Tire was considered an important player because of its concentration in the market for higher-priced tires. In addition, the Depression pushed General Tire to diversify. During the 1930s the firm began investing in local radio stations, and in 1942 purchased the Yankee Network, a Boston-based chain of radio stations.

During World War II General Tire, like other tire companies, switched part of its production to defense needs. The firm produced defense items in Akron, Ohio, as well as in California and West Virginia and by 1945 acquired a controlling interest in the Aerojet Engineering Corporation, an Azusa, California-based rocket manufacturer. A plant General Tire had built in Indiana to make mechanical goods was converted to the production of aviation and other military supplies. The war also boosted synthetic rubber production, which later expanded into civilian sectors.

General Tire was among a number of medium-sized tire firms that expanded immediately after the war, fueled by a boom in car sales. It began the process with the purchase of the Pennsylvania Rubber Company and 45 percent of Mansfield, a medium-sized rubber concern. When television got off the ground, the company’s media division moved into it, going on the air from WNAC-TV Boston in 1948.

The start of the Korean War in 1950 disrupted supplies of natural rubber, leading to U.S. Government quotas on rubber consumption until 1952. Synthetic rubber became the primary raw material in U.S. rubber production, and General Tire opened a synthetic rubber plant in Odessa, Texas, in 1956. Tire production was changing in other ways; tubeless tires were accepted by 1960, as were synthetic fibers like nylon and rayon, which held tires together more firmly.

General Tire continued to expand its line of retail stores, growing from 72 stores in 1955 to 107 in 1957 to 164 in 1961. The firm also continued to diversify. Aerojet growth continued after World War II, and an industrial products division that manufactured plastic and metal parts for aircraft and electric appliances was started; the Aerojet General Corporation was formed in 1953. Subsequent programs like Aerobee, Titan, Polaris, and Minuteman required expansion of operations at its facilities in Sacramento, California.

In 1956 General Tire bought a majority interest in A.M. Byers, a manufacturer of steel pipe and wrought iron. General Tire moved further into the media with the purchase of television stations in New York, Los Angeles, and Memphis. In 1955 it bought RKO Radio Pictures from Howard Hughes for $25 million. General Tire sold RKO’s motion picture properties to Desilu in 1958, and broadcasting operations were consolidated as RKO-General, Inc., a radio and television subsidiary headquartered in New York City. Trouble later began for RKO in 1965, when a series of license challenges were filed with the Federal Communications Commission (FCC). Hearings and license reviews would continue over the next 25 years.

In 1960 company founder William O’Neil died, and his sons assumed control of General Tire. Jerry O’Neil ran the tire business in Akron, Thomas O’Neil ran RKO in New York, and John O’Neil, General Tire’s chief financial officer, lived in Washington, D.C.

A decline in the tire business, following the oil embargo of 1974 added to the firm’s woes. General Tire made one-third of its tire sales directly to U.S. auto companies, and when those companies were hurt later in the decade by Japanese competitors, General Tire’s profits declined. RKO had always been a minority contributor to the firm’s bottom line, but when General Tire’s profits fell 29 percent in 1979 to $82 million, RKO’s contribution was a record 43 percent.

In 1981 General Tire was the fifth-largest U.S. tire maker, but tire making operations were so troubled that it considered selling off its other operations. A cable television operation named Cablecom General Inc. was the first to go, selling for $105.8 million. Tire production at the Akron, Ohio, plant of the General Tire & Rubber Company was closed in 1982, after 66 years of operation. In addition, Jerry O’Neil took on General Tire’s rubber unions to win concessions necessary to make tires more competitive. Aerojet sold some of its industrial companies, but continued to negotiate major new defense programs, including the Peacekeeper ICBM Missile, and follow-on contracts for various tactical missile and ordnance products.

General Tire struggled to improve its tires, signing technical agreements with Germany’s Continental Gummi-Werke in 1982 and Japan’s Toyo Tire & Rubber Company in 1983. General Tire had 17 percent of the truck market in 1976, but only around 12 percent in 1981.

In 1982, RKO’s license for its Boston television station was denied, but the challenge against its New York station was dropped. The FCC approved the relocation of the New York station to Secaucus, New Jersey, and issued a five-year license renewal. RKO also began spending more to buy the rights of popular TV reruns, including the popular series Colombo.

In early 1980 Jerry O’Neil took steps to bring in a non-family member to succeed him as chief executive officer and initiated restructuring efforts to form a holding company called GenCorp Inc. In 1985 A. William Reynolds, a former TRW Inc. executive, was named chief executive officer of GenCorp and later, in 1987, was elected chairman of GenCorp’s board of directors. The restructuring plan went forward; General Tire and its industrial products, and chemicals, and plastics divisions, along with Aerojet General and RKO, became subsidiaries of the holding company.

With a bachelor’s degree with honors from Harvard University, and a masters in business administration from Stanford University, Reynolds immediately introduced formal strategic planning and other professional management techniques. He also began solving GenCorp’s problems, including the continuing litigation over its RKO broadcasting properties; a settlement with the government over groundwater contamination in Sacramento—an Algerian breach-of-contract suit—and the sale of GenCorp’s interest in Frontier Airlines.

Reynolds announced a restructuring that involved selling the Los Angeles and New York television stations as well as the RKO radio stations. By 1989 GenCorp had sold all of its RKO broadcasting companies and exited the broadcasting business.

In 1987 GenCorp faced a hostile takeover attempt and responded by accelerating its restructuring plans. With the sale of General Tire and RKO Bottling, a beverage bottling operation, as well as a plan to repurchase shares of common stock, GenCorp successfully prevented the takeover. While addressing these divestitures, GenCorp also took measures to ensure the effectiveness of its on-going businesses. The company then made the decision to focus on high technology and high growth in aerospace, automotive (other than tires), and related polymer products.

GenCorp’s DiversiTech subsidiary was reorganized into two new units, GenCorp Polymer Products and GenCorp Automotive. No longer a tire producer, GenCorp Automotive has grown to be a leading supplier of vehicle sealing systems, reinforced plastic components for vehicle bodies, and vibration control products. Two technology joint ventures with Japanese suppliers were finalized in 1990, and a significant number of new programs were launched, including passenger car and light truck components for Mazda, Toyota, Chrysler, General Motors, and Kia, a Korean company. New technology, facility revitalization, and new launch programs continued in 1991 and 1992. GenCorp formed a valuable strategic alliance and technology agreement with Henniges, a major German auto supplier. By 1993 GenCorp Automotive was supplying components to 98 percent of North American car platforms and a growing number of Japanese, Korean, and European platforms.

GenCorp Polymer Products continued to provide steady results in the early 1990s, and with the opening of a state-of-the-art production facility in Green Bay, Wisconsin, and the acquisition of Reneer Films, in Auburn, Pennsylvania, it was well positioned to maintain its high level of profitability. GenCorp Polymer Products has a major position in the design, styling, and manufacture of residential wall coverings and is the world’s premier source for commercial wall coverings for new construction and refurbishment. The segment is the world’s largest styrene butadiene latex producer, manufacturing coatings for publication-grade and lightweight packaging papers, carpet textile, and tire cord adhesives, and primary binders for high performance and general-purpose tapes. Its research capability provides innovative new lattices for paper towels, disposable wipes, and high performance lattices. The Penn Racquet Sports unit of GenCorp Polymer Products is the leading manufacturer of tennis balls and racquetballs in the world, with major market positions in the United States and Europe.

Four divisions are organized under Aerojet, GenCorp’s aerospace and defense segment. The Aerojet Propulsion Division has the only facility in the world with the unique capability to design, develop, test, and produce both liquid and solid propellant motors. The Aerojet Electronics Systems Division is an acknowledged leader in the design, development, testing, and manufacture of airborne, space-borne, and ground-based electro-optical, microwave, and millimeter wave sensors, as well as in sophisticated warhead design and manufacture. Aerojet’s Ordnance Division plays a major role in the production of air dispensed munition systems, medium caliber ammunition, advanced conventional ordnance, and heavy metal products for defense. The Aerojet ASRM Division is designing, developing and producing NASA’s (National Aeronautics and Space Administration) new-generation Advanced Solid Rocket Motor for the space shuttle. GenCorp’s Aerojet segment has taken steps to ensure it can compete effectively in the declining defense industry environment of the 1990s and beyond.

Principal Subsidiaries

Aerojet; GenCorp Automotive; GenCorp Polymer Products.

GenCorp Inc.

views updated May 21 2018

GenCorp Inc.

173 Ghent Rd.
Fairlawn, Ohio 44333-3330
U.S.A.
(216) 869-4200
Fax:(216) 869-4211

Public Company
Incorporated: 1915 as General Tire & Rubber
Employees: 13,900
Sales: $1.94 million
Stock Exchanges: New York
SICs: 3764 Space Propulsion Units & Parts; 3825 Instruments to Measure Electricity; 3489 Ordnance & Accessories Nee; 3089 Plastics Products Nee

GenCorp is a leading manufacturer of aerospace and defense products, including rocket motors and bombs. Through its several divisions, the company also produces plastics as well as automotive and satellite communications equipment.

GenCorp began as General Tire & Rubber, a company founded in 1915 by William O’Neil. O’Neil had served as a dealer at the Firestone Company until 1911, when he became dissatisfied with a reduction in his sales territory and left to form his own company, Western Tire and Rubber, which focused on the manufacture of tire repair materials. In 1915 O’Neil moved his operation from Kansas City to Akron, Ohio, where his father, Michael O’Neil, owned a department store. The O’Neils established General Tire and Rubber with $200,000 in capital, mostly from Michael, who became company president, while William became general manager. The two hired several Firestone managers to help manage the new business.

General initially manufactured repair materials, beginning the production of tires in 1916. By 1917 the firm was expanding its factory and dealership network and embarking on its first advertising campaign. A difficult time for tire makers began at the onset of World War I, as the rubber supply was diminished, and General Tire, along with its competitors, had trouble meeting dealer demand. Immediately after the war, the industry boomed, and 1919 saw record highs in tire sales. However, the gains realized by the industry were shortlived. An economic recession in 1920-21 hurt tire sales, and although the cost of raw materials plummeted, tire makers entered into a price war that proved damaging to the industry. Nevertheless, General managed to continue its expansion, aided by its concentration on the higher-price market and effective advertising campaigns, while larger, overextended competitors such as Firestone struggled.

By 1929 General was operating 14 retail stores and had garnered 1.8 percent of the tire market. In 1931, while the Great Depression weakened many smaller rubber firms, General, which had become a leader in the industry, was able to purchase two additional companies, Yale Tire and Rubber and India Tire and Rubber. Although General’s command of 2.7 percent of tire sales in 1933 represented a much smaller market share than Goodyear’s 30 percent sales figure, General was considered an important player because of its specialization in higher-priced tires. The effects of the Great Depression did, however, prompt General to diversify its holdings. During the 1930s the firm began investing in local radio stations, and, in 1942, it bought the Yankee Network, a Boston-based chain of radio stations.

During World War II General, like other tire companies, switched part of its production to meet defense needs. The firm produced motors and rockets in Ohio, West Virginia, and California and acquired Aerojet, a missile manufacturer. A plant General had built in Indiana to make mechanical goods was converted to the production of aviation and other military supplies. The war also led to an increase in synthetic rubber production, which would have applications in civilian sectors after the war.

General was among several medium-sized tire firms that expanded immediately after the war, fueled by a boom in car sales. The company purchased Pennsylvania Rubber and 45 percent of Mansfield, another rubber company. General’s media division also received a boost during this time, with the establishment of television as an important source of information and entertainment in many American homes. General’s Boston networks began television broadcasting in 1948.

In 1950 the onset of the Korean War disrupted supplies of natural rubber, leading to U.S. government quotas on rubber consumption over the next two years. This prompted an increase in the production of synthetic rubber, which soon became the primary raw material in U.S. rubber production. General built a synthetic rubber plant in Odessa, Texas, in 1955. By 1960 tubeless tires had been introduced into the market, and synthetic fibers such as nylon and rayon were being used by tire makers as bonding agents.

During this time, General continued to expand its line of retail stores, which increased from 72 stores in 1955 to 164 in 1961. The company also continued to diversify. Having maintained its Aerojet subsidiary after World War II, General started an industrial products division that manufactured plastic and metal parts for aircraft and electric appliances. Furthermore, in 1956 the firm bought a majority interest in A. M. Byers, a manufacturer of steel pipe and wrought iron. General’s media holdings were also enhanced through the company’s purchase of television stations in New York, Los Angeles, and Memphis. In 1955 General purchased RKO Pictures from Howard Hughes for $25 million. RKO’s stock of 750 feature films was thereby made available to General’s television stations, which aired many of these films. Although General sold RKO’s movie business in 1958, its RKO-General subsidiary remained in radio and television.

In 1960, company founder William O’Neil died, and his sons assumed control of General. Jerry O’Neil ran the tire business in Akron, while Thomas O’Neil ran RKO-General in New York and John O’Neil served as General’s chief financial officer in Washington D.C. Industry observers later claimed that the operations of Thomas, Jerry, and John lacked coordination and long-term vision, which would contribute to several challenges for General in the 1960s.

In 1965 RKO-General’s Los Angeles station’s license renewal was opposed by the Federal Communications Commission. Charges that the station’s programming was unworthy of retaining its broadcasting license resulted when Thomas O’Neil began cutting back on his programming budget, maintaining that his focus was on making money, rather than achieving high ratings. Problems also ensued at the company’s Boston station, where RKO-General was accused of pressuring the company’s suppliers to advertise on the RKO stations. While these cases were being appealed, alleged misconduct at General Tire became public. General was accused of maintaining a secret slush fund, which made payoffs to people involved in the overthrow of Chile’s Allende government, and of making illegal political contributions in the United States. A special investigation by the Securities and Exchange Commission listed $41 million in questionable transactions by General and its subsidiaries. The RKO licensing hearings became embroiled in these alleged improprieties.

A decline in the tire business following the oil embargo of 1974 added to the firm’s difficulties. During this time, General made one-third of its tire sales directly to U.S. auto companies, and when those companies began to struggle from the effects of Japanese competition, General’s profits declined. In fact, when General’s profits fell to $82 million in 1979, representing a decrease of 29 percent, RKO became the company’s leading contributor and was responsible for a record 43 percent of the company’s profits. In 1981 General was the fifth-largest U.S. tire maker, but tire making operations were so troubled that the company began selling off its other operations. Cablecom General Inc., a cable television operation, was the first to go, selling for $105.8 million. A tire plant in Akron was then closed down as were seven retreading plants, while the Aerojet subsidiary sold several of its industrial companies. During this time, Jerry O’Neil took on General’s rubber unions to win concessions necessary to make the firm’s tires competitive.

General also struggled to improve its tires, signing technical agreements with Germany’s Continental Gummi-Werke and Japan’s Toyo Tire & Rubber Co. While the firm had once been a leading manufacturer of truck tires, the quality of its truck radials was surpassed by that of rivals during the 1970s. In 1976 General tires maintained 17 percent of the truck market, but that figure fell to 12 percent over the next five years. In 1980, while its tire sales approached $1.5 billion, General saw profits of less than $10 million.

In 1982, RKO lost the license for its Boston television station. Nevertheless, the company’s Los Angeles station was allowed to retain its license, and the New York station was saved when Congress voted to grant it a five-year license on the condition that it be moved to New Jersey. In an effort to increase the popularity of its networks, RKO began spending more to secure the rights to rerun popular television series.

In 1983 Jerry O’Neil announced that he would be succeeded as chief executive by a non-family member, Warren J. Hayford, who was slated to lead a restructuring of General into a holding company called GenCorp. However, one year after joining the company, and the day after the plan was to be announced, Hayford resigned over differences with the O’Neils. Nevertheless, the restructuring went forward, and Aerojet, RKO, and General’s tire, industrial products, chemicals, and plastics divisions all became subsidiaries of the holding company.

Aerojet’s business grew rapidly during the 1980s, partially as a result of the Reagan administration’s defense buildup. Aerojet received large contracts for the MX missile and several air force projects, as well as $146 million in Strategic Defense Initiative contracts.

In 1985 Bill Reynolds, a former TRW Inc. executive, was named chief executive of GenCorp. A graduate of Stanford University’s M.B.A. program, Reynolds immediately introduced formal strategic planning and other professional management techniques. He also began dealing with some of GenCorp’s recurring problems, such as continuing litigation over its Los Angeles and Memphis television stations, California pollution problems, an Algerian breach-of-contract lawsuit, and the significant losses incurred by Denver-based Frontier airlines, of which GenCorp owned 45 percent.

Reynolds soon announced a restructuring that involved selling the Los Angeles and New York television stations as well as the firm’s stake in Frontier. The price of television stations was climbing rapidly, and the FCC had just relaxed its requirements for license transfer, making the sales more attractive. WOR New Jersey was sold to MCA for $387 million in early 1986, while KHJ-Los Angeles was sold to Walt Disney for $320 million in early 1987. The firm used the money to buy back large segments of its stock, partly to guard against takeover attempts. The restructuring had an immediate positive effect, with GenCorp achieving sales of $3.1 billion and profits of $130 million in 1986, its best results in years.

During this time, GenCorp management decided to concentrate on its defense operations rather than reinvest in its original tire business. Consequently, the company sold General Rubber & Tire to Germany’s Continental AG for $660 million. General Tire and Continental already had technical and production links, and Continental wanted to expand further into the United States. Furthermore, this move helped GenCorp resist a $2.2 billion hostile takeover attempt by The Wagner & Brown Investment Group and AFG Industries Inc., which together already owned nearly ten percent of GenCorp. As the two companies had hoped to retain GenCorp’s tire business and sell its aerospace and entertainment operations, GenCorp’s sale of General Tire helped to discourage the takeover.

Further GenCorp cutbacks included the sale of RKO Bottling to 1C Industries for $395.5 million and the shedding of its RKO properties. GenCorp received $32.7 million for its two Washington, D.C. radio stations, $750,000 for its Memphis radio station, $12.6 million for WAXY-FM, Florida, and $39 million for television station WHBQ in Memphis, purchased by Adams Communication. The firm had profits of $210 million in 1989 on $1.94 billion in sales.

Despite the selloff of General Tire and its concentration on aerospace, GenCorp remained active in the automobile market through its GenCorp Automotive affiliate. In 1988 GenCorp Automotive formed GTY Tire with Yokohama Tire and Toyo Tire & Rubber to manufacture radial tires in the United States. It also opened a $65 million plant in Indiana to manufacture reinforced plastic auto parts. In 1990 the affiliate formed GKK Automotive with Japanese firm Kurashiki Kako to sell vibration-control parts.

GenCorp’s Aerojet subsidiary continued to meet with success in its work on propulsion systems, including gel propellants for rocket engines. In the early 1990s, Aerojet was bidding on such projects as the manufacture of the main engine for the Advanced Launch System sponsored by the National Aeronautics and Space Administration and the U.S. Department of Defense.

As the United States experienced an economic recession in the early 1990s, GenCorp made several moves to counteract declining sales. In 1992, the company restructured its debt, leading to a significant reduction in interest payments. Despite lower profit margins during this time, GenCorp had become a more focused, stronger company and was poised to explore a broad range of opportunities as the economy recovered.