Manville Corporation

Manville Corporation

Post Office Box 5108
Denver, Colorado 80217
U.S.A.
(303) 978-2000
Fax: (303) 978-2041

Public Company
Incorporated: 1901 as H.W. Johns-Manville Corporation
Employees: 17,000
Sales: $2.19 billion
Stock Exchange: New York

Manville Corporation is an international manufacturing and natural-resources supplier operating in three areas: forest products such as paper, cartons, and plywood; fiberglass products such as home insulation; and specialty products that include lighting fixtures and industrial filters. Until the mid-1980s, Manville mined and sold asbestos for use in insulation, building, aerospace, automotive, and other industries. Manville’s history is inextricably intertwined with asbestos. The company has divested itself of its interests in all asbestos-related businesses, and is enmeshed in substantial litigation brought by asbestos workers with claims on the effects of working with the material. While operations continue, Manville’s future hinges on the decisions issued by the courts in these cases.

In 1858, at the age of 21, Henry Ward Johns founded the H.W. Johns Manufacturing Company in New York City, makers of asbestos textiles, roofing, and insulation materials. Over the next 40 years, until his death in 1898 of “dust phthisis pneumonitis,” believed to be asbestosis, Johns discovered some of the applications of asbestos from which it became known as the “mineral of a thousand uses.” In 1886, Charles B. Manville founded the Manville Covering Company in Milwaukee, Wisconsin. Manville managed the company until 1900. In 1901, H.W. Johns and Manville merged to create H.W. Johns-Manville (J-M), a corporation engaged primarily in the mining, manufacturing, and supply of asbestos fibers and products to industry and the government.

The management of J-M has been relatively stable over the years. The Manville family remained active in the management of the company through most of the 20th century. From 1921 to 1923, Thomas F. Manville headed the company as president, treasurer, and a member of the board. In 1924, he became chairman; H.E. Manville was elected president, and T.F. Manville Jr. joined the board of directors. By 1928, H.E. Manville and Thomas Manville Jr. sat on the board, while T.F. Merseles was president of J-M. In 1930, H. E. Manville was named chairman of the executive committee and L.H. Brown became president. This hierarchy continued until 1939.

In 1927, J-M became a publicly held corporation. During the 1920s and 1930s, J-M acquired mining and manufacturing operations in the United States and Canada, including, in 1928, the Celite Company of California, miners and processors of diatomaceous earth—diatomite is a filtering agent— and, in 1930, the Stevens Sound Proofing Company of Chicago, owners of patents for sound insulation.

As early as 1929, J-M was defending itself against lawsuits for asbestos-related deaths. Asbestosis is a non-malignant scarring of the lungs caused solely by exposure to asbestos. The incidence of the disease seems to be related to the duration and intensity of exposure. It may take decades for evidence of the disease to appear. Mesothelioma is a form of cancer associated with asbestos that affects the linings of the chest or abdominal cavities and that usually kills its victims within a year of its appearance. The legal issues in asbestos cases centered on two questions. When did the health hazards of working with asbestos become foreseeable? When warnings were issued, did they communicate adequately the danger? From the beginning, J-M claimed that employees were contributorily negligent, because they knew or should have known the dangers associated with asbestos and taken precautions. Manville used this defense, often successfully, in cases filed during the next four decades. Into the 1980s, Manville continued to argue also that there was no known reason to warn insulation workers until 1964 of the dangers of working with asbestos. Plaintiffs countered that warning labels should have been in use as early as the 1950s.

In 1930, Dr. A.J. Lanza, of the Metropolitan Life Insurance Company, began a four-year study, “Effects of Inhalation of Asbestos Dust upon the Lungs of Asbestos Workers.” Based on his findings, in late 1933 Lanza recommended that J-M perform dust counts at its plants. Vandiver Brown, Manville vice president, corporate secretary, and chief attorney, wrote Lanza, requesting changes in his report, requesting specifically that he downplay the negative implications of asbestos exposure. In his book, Outrageous Misconduct: The Asbestos Industry on Trial, Paul Brodeur described a memo Brown wrote in 1935 to company colleagues in which he noted a speaker who said, “ ‘the strongest bulwark against future disaster for the industry is the enactment of properly drawn occupational-disease legislation,’ which would ’eliminate the jury’ as well as ‘eliminate the shyster lawyer and the quack doctor since fees would be strictly limited by the law.’” Later that year, Brown wrote that the company’s best interests would be served by having asbestosis receive minimal publicity. Brown’s correspondence would be entered as evidence in trials almost a half century later, by plaintiffs who, in efforts to win punitive as well as compensatory damages against the company, contended that J-M deliberately downplayed the effects of exposure.

British studies concurrent with Lanza’s encouraged Parliament to pass legislation to protect asbestos workers in 1931. In the United States, three years passed before asbestosis was considered for classification as a disease under workmen’s compensation laws.

Beginning in 1936, J-M and nine other asbestos companies funded a study of the effects of asbestos on animals. Dr. LeRoy U. Gardner reported significant changes in the lungs of guinea pigs within a year after exposure to asbestos dust. Gardner died in 1946, before formally reporting his findings.

In 1939, L.H. Brown became president of J-M, a position he held until 1948, and H.E. Manville stepped down as chairman. The year 1940 was significant as the only year in which the name Manville did not appear in the list of company officers. In 1941, H.E. Manville Jr. joined the board of directors, a post he held into the 1960s.

At the start of World War II, J-M was among the world’s leading suppliers of asbestos, and 1939 through 1945 were strong years for J-M financially. During those years, tens of thousands of workers in U.S. government shipyards and other installations used thousands of tons of asbestos in building ships and airplanes. In 1943, the Navy Department and the U.S. Maritime Commission published a study that outlined the risks to insulation workers of high asbestos dust levels. In “Minimum Requirements for Safety and Industrial Health in Contract Shipyards,” the study reported that asbestosis could arise from breathing asbestos in any job that created dust. Many of the workers and seaman exposed to asbestos during this period would bring suit against J-M years later.

In 1947, J-M signed the first in a series of policies with the Travelers Insurance Company, the company’s insurers for the next 30 years. The extent of the insurers’ liability in the asbestos suits would be debated and litigated into the 1990s.

In 1948, L.H. Brown became chairman of the board. R.W. Lea was named president. Three years later, L.M. Cassidy, formerly vice president of sales, became chairman; a second vice president, A.R. Fisher, became president and a third, C.F. Rassweiler, was named vice chairman. These men controlled the company until 1957.

From 1950 through 1970, J-M’s sales grew at an average annual rate of 4%. While sales of asbestos and other raw materials represented only 13% of J-M’s volume, they contributed between 30% and 40% of earnings.

In 1951, John A. McKinney joined the company as a patent lawyer; he was to become president 25 years later. By 1952, the staff included Fred L. Pundsack, Chester E. Shepperly, Monroe Harris, and Chester J. Sulewski, all of whom, along with McKinney, figured prominently in the bankruptcy court protection program some 30 years later. In 1958, J-M acquired L-O-F Glass Fibers Company, which then became and operates today as the Manville Sales Corporation. Francis H. May Jr., of Libbey-Owens-Ford Glass Company, joined Manville and became executive vice president for finance and administration. Fisher was named chairman, as well as president.

During the 1950s, J-M workers who came into contact with insulation on job sites began filing workmen’s compensation claims against the company. The company’s first-hand knowledge of the dangers of asbestos would become a factor in future suits in which it would be a defendant.

In 1960, Clinton Brown Burnett became president of J-M, a post he held for a decade. Burnett headed the company during a period of rising production costs and price declines. In response, he trimmed operations by closing plants and assembly lines. He led the company through cautious diversification into fiberglass, carpeting, and gypsum; opened a building materials research and development center in New Jersey; and expanded vigorously overseas.

During the 1960s, asbestos received increasing attention from the medical community. In 1963, Dr. I.J. Selikoff, of Mount Sinai Medical Center in New York, reported to the American Medical Association the findings of his study of the effects of asbestos on workers. Selikoff estimated that 100,000 U.S. workers and their family members would die of diseases associated with asbestos in the 20th century. That study, along with the news coverage that followed, brought the problem to the public’s attention. In 1964, for the first time, J-M agreed to place warning labels on its products. The labels read, “Inhalation of asbestos in excessive quantities over long periods of time may be harmful.”

By 1969, Burnett, now 62, and the board of directors were looking for solutions to two problems: J-M’s slow growth over the preceding ten years, and the lack of an heir apparent to succeed the president when he retired. William C. Stolk, a director since 1951, recommended W. Richard Goodwin, a 45-year-old management consultant with a doctorate in experimental psychology, for help with the first problem and, potentially, the second. Goodwin began counseling J-M in June 1968. He joined the company as vice president for corporate planning in April 1969, and was named president in December 1970. Burnett became chairman of the board, only to retire in about a month. He left Goodwin with a solid company, having $145 million in working capital, no long-term debt, and a leading position in environmental control, building materials, and asbestos.

Goodwin immediately implemented the changes he had recommended during his consultancy. He formed a three-man management team, composed of himself and J-M veterans Francis May and John B. Jobe, executive vice president for operations. May and Jobe ran the company while Goodwin concentrated on growth. He led the company into real estate development, recreation, irrigation systems, and construction. Sales rose 91% from 1970 to 1975; profits rose 115% between 1970 and 1974, and earnings in 1976 set a company record. In 1974, J-M’s international division, with 22 plants and 4 mines in 12 countries and sales offices worldwide, generated 32% of corporate net profit on 14% of gross sales.

In 1973, Manville and its co-defendants lost their final appeal in Clarence Borel v. Fibreboard Paper Products Company, et al. The case would be a turning point in asbestos litigation, for the jury found the defendants guilty of contributory negligence. It also awarded the plaintiff damages based on the contention that the companies knew of the dangers inherent in working with the product. In upholding the verdict, the U.S. Appeals Court wrote what was described in Strategic Management as a scorching indictment of the defendants.

One of Goodwin’s major contributions to J-M was his decision to move the company from Madison Avenue in New York. Goodwin selected the Ken-Caryl cattle ranch, 15 miles from downtown Denver, Colorado, as the site for the new headquarters. When completed, the new building was described in the October 31, 1977 issue of Business Week as “ultramodern... [the building] juts out like a landlocked ocean liner in a mountain canyon.” The building was a tangible reminder that J-M’s style had changed drastically.

Goodwin never worked at the new location. Just two weeks prior to its completion, he was summoned to New York to meet with the board of directors. On September 1, 1976, Goodwin, Francis May, and other aides flew in and were met by John A. McKinney, a senior vice president and the company’s top legal officer. The next evening, William F. May, John P. Schroeder, and Charles J. Zwick, members of the board of directors, met with Goodwin. Schroeder explained that they represented the nine outside directors on J-M’s twelve-member board, and that they all wanted his resignation. Goodwin was surprised but acquiesced. The terms of his separation agreement prevented him from ever discussing his departure or the reasons for it. Industry observers speculated that Goodwin’s management style was too casual or flamboyant for the conservative board, and that once he got the company moving in the right direction, the directors replaced him. The next morning, John A. McKinney, who did not know in advance that the board sought to remove Goodwin, was appointed the new president of J-M. The October 1976, Fortune quoted McKinney as saying, “It happened so fast, I almost missed it.”

Under Goodwin, J-M had stressed growth. Under McKinney, J-M stressed profits. During his first year as president, McKinney eliminated unprofitable diversification and expanded asbestos and fiberglass capacity. One of his early acts as president was to elevate Fred L. Pundsack, a 24-year J-M veteran, to executive vice president of operations, on equal footing with Francis May. Pundsack’s directive was to maximize profits.

McKinney quickly earned a reputation as a tough negotiator. In 1977, Quebec threatened to nationalize the company’s Jeffrey mine, the world’s largest asbestos mine. McKinney put J-M’s $77 million expansion plan on hold, and took a hard line with Premier René Levésque. Levésque withdrew his proposal, and J-M resumed its expansion plans. Later in the year, J-M’s fiberglass production suffered from a 102-day strike at its Defiance, Ohio, plant. The strike cost the company $7.5 million in lost revenues. McKinney stood his ground, and in October, workers accepted the same offer they had rejected in September, by a two-to-one margin. In May 1977, McKinney was named chairman of the board and chief executive officer. Pundsack became president and chief operating officer.

In 1977, J-M estimated that the $16 million available through primary coverage to settle outstanding asbestos suits would be depleted within two years. New case filings rose from 159 in 1976 to 792 in 1978. Cases were being settled at a faster pace as well, with an average cost to the company of $21,000, of which $15,400 was awarded to the plaintiff, the balance for legal fees. As Travelers was unable to predict the scope and number of future suits, it refused to renew its policy for the 1977 fiscal year. J-M was forced to insure itself.

By 1979, McKinney was spending half of his time on the asbestos problem. He continued to be a tough negotiator. In May 1979, Fortune stated, “Asbestos litigation is almost a separate business at J-M.” The company was a co-defendant in about 1,500 lawsuits brought by insulation workers who handled J-M’s products while working for other companies in construction or in the shipyards. At McKinney’s insistence, J-M sued the government to force it to indemnify the company against the suits from shipyard workers, because many of the claimants worked with asbestos insulation during World War II and the Korean War.

In January 1979, J-M completed its acquisition of Olin-kraft Inc., a $447 million forest-products company, for about $600 million. W. Thomas Stephens, who was to have a lead role in J-M’s later bankruptcy reorganization, moved to J-M from Olinkraft. Olinkraft, now operating as Manville Forest Products Corporation, owned 600,000 acres of timberlands in Louisiana, Arkansas, and Texas. It owned or leased another 100,000 acres in Brazil. Unexpectedly high start-up costs for Olinkraft, combined with a currency devaluation and tax increases in Brazil, caused J-M’s net income to fall 20% in the fourth quarter of 1979. Although its stock price fell 40%, Manville surpassed the $2 billion mark in sales for the first time.

1980 revenues were on a par with 1979, with earnings dropping sharply in a weak construction market. The company remained involved heavily with asbestos. McKinney noted that asbestos and Manville were virtually synonymous, telling Forbes in May 1980, “The day asbestos isn’t good business for us, we’ll get out of it.” At the same time, he felt that Olinkraft, once past its initial problems, would shape the future of J-M. In 1980 McKinney reported that the company remained optimistic in the face of mounting lawsuits, having won 19 of 28 cases that had proceeded to trial. Of the preceding 24 cases, Manville had won 18.

Effective October 30, 1981, J-M’s share-holders approved a reorganized corporate structure consisting of a new parent company, Manville Corporation, and five wholly separate operating subsidiaries: Manville Building Materials Corporation, Manville Forest Products Corporation, Manville International Corporation, Manville Products Corporation, and Johns-Manville Corporation. Johns-Manville share-holders retained their stock, which was converted to Manville Corporation stock on a share-for-share basis.

As of December 31,1981, Manville was a defendant or co-defendant in approximately 9,300 asbestos suits brought by 12,800 individuals. Juries were making large awards in punitive damages, which were not covered by insurance. By 1982, settlements approximated $40,000 per case, including legal fees. Manville’s consultants estimated that over the next 20 years, the company could be liable for 32,000 cases in addition to the 16,500 that had already been filed, and litigation could cost the company $2 billion, twice the company’s assets at the time. By 1985, 19,750 claims had been filed against the company. In addition, Manville was alleged to be liable for asbestos-removal property-damage claims. Manville repeatedly filed appeals to postpone payments in suits it had lost. McKinney continued to assert that the government must pay a portion of the claims arising from exposure in the shipyards and other government jobs.

In 1982, in light of the asbestos litigation, and following losses in the first and second quarters of the year, Manville filed for protection under Chapter 11 of the U.S. Bankruptcy Code, on August 26. While under bankruptcy court protection, Manville’s earnings for the first nine months from continuing operations improved from $10 million to $59 million. Legal expenses, however, increased apace: in one year, 1982-1983, legal costs rose from $1 million for a period of nine months, to $11 million for the same period a year later.

After a dozen court-granted postponements, Manville proposed its reorganization plan on November 21, 1983. The plan was unilateral, since attempts at a negotiated settlement with asbestos victims’ representatives had failed. At that time, Manville proposed to split itself into two companies: the first would handle the business, and the second would possess few assets yet all of the liability for the asbestos claims. Manville would be insulated from any and all claims. All cash, after operating expenses, would be funnelled to the second company. Suits would be settle by the company out of court. Concurrently, Manville left the asbestos business, selling its last plant in 1985.

Leon Silverman, court-appointed attorney for unknown future asbestos claimants, helped orchestrate the final reorganization plan, filed on February 14, 1986. This plan resembled the earlier proposal with these amendments: the second company became two trusts, for personal injury—the health fund—and for property-damage claims. The trusts would be funded through cash, future earnings, stock, bonds, and insurance payments worth at least $2.5 billion. Initially, the health-fund trust was to receive $1 billion. Beginning in 1992, Manville would have to pay the health fund $75 million a year. The property-damage trust was to be funded initially with $125 million, with additional funds available. In addition, plaintiffs retained the right to a jury trial if they disagreed with the determination made by the trusts. The plan seemed to satisfy the claimants, but at considerable expense to Manville common stock owners, who saw their investment becoming virtually worthless under the plan. On neither side was there agreement that the trusts were viable solutions. Michael L. Goldberg, attorney for 700 asbestos claimants, estimated in 1988 that the trusts would be almost $200 million short by 1992.

In 1986, McKinney resigned and Josh T. Hulce, who had been president since 1984, abruptly quit. George Dillon, a Manville director for 17 years, became chairman and W. Thomas Stephens was tapped to become president and chief executive officer. Stephens, formerly an industrial engineer with Olinkraft and Manville’s chief financial officer during the preceding three years, was credited with playing a pivotal role in bringing Manville out of bankruptcy. One of Stephens’s first moves as president was to establish small meetings with Manville employees, who, like the public and the stockholders, had lost faith in the company. Stephens reassured them that Manville would continue to operate much as it had in the past. He intended to concentrate on its core businesses and generate enough cash flow over the next years to fund the trust. Profits doubled in 1987 to a record $164 million.

In 1988, Manville emerged from bankruptcy. After three full years of trimming operations, Manville was again a healthy company with new product lines. It moved out of its headquarters into smaller spaces in Denver, and reinvested the concomitant savings in plant upgrading. In the November 1988, Business Month, Stephens stated “Two back-to-back years of record performance should send out a signal pretty loud and clear that we’re stronger than ever.”

By 1990, almost 130,000 claims had been filed and the Manville Personal Injury Settlement Trust ran out of funds. The dearth of cash was due to the rapid pace of claims settlement, many of which were delayed during Manville’s bankruptcy. Manville proposed buying stock from the trusts in an effort to help ease the situation, but the negotiations broke off when it became clear that it was impossible to satisfy both Manville’s stockholders and the claimants. Although the company accelerated a $50 million payment to the trust, it was revealed that the claims that had been settled would not be paid for almost 20 years, long after many of the claimants had died. In July 1990, the court imposed a payments freeze while the company tried to determine how to handle the situation. In September 1990, Manville agreed to add up to $520 million to the asbestos fund during the next seven years. The future of the company included resolution of the asbestos issue.

Principal Subsidiaries

European Overseas Corporation; Glaswerk Schuller G.m.b.H. (Germany); International Manville Corporation; Johns-Manville Corporation; Johns-Manville India Limited; Ken-Caryl Ranch Corporation; Manville Canada Inc.; Manville Sales Corporation; Rocky Mountain International Insurance Ltd.; Manville de France S.A.; Manville Deutschland G.m.b.H. (Germany); Manville do Brasil Isolantes Termicos Ltda. (Brazil); Manville Española S.A. (Spain); Manville Europe Corporation; Manville Forest Products Corporation; Arkansas & Louisiana Missouri Railway Co.; Pine Pipeline Inc.; Manville (Great Britain) Inc.; Manville h.f. (Iceland); Manville Investment Corporation; Manville International B.V. (Netherlands); Manville Italiana S.p.A. (Italy); Manville Japan Ltd.; Manville Mexicana S.A. de C.V. (Mexico); Manville Produtos Florestais Ltd. (Brazil); Lages Reflorestamento Ltda. (Brazil); Igaras-Servicos Agro-Florestais Ltd. (Brazil); Manville Remedtech, Inc.; New Materials Inc.; New Materials, Ltd. (U.K.).

Further Reading

Solomon, Stephen, “The Asbestos Fallout at Johns-Manville,” Fortune, May 7, 1979; Brodeur, Paul, Outrageous Misconduct: The Asbestos Industry on Trial, New York, Pantheon Books, 1985; Pearce, John A., II, and Richard B. Robinson Jr., “Case 18: Manville Corporation (1987),” Strategic Management: Strategy Formulation and Implementation, Homewood, Illinois, Irwin, 1988.

—Lynn M. Kalanik