Amsted Industries Incorporated
Amsted Industries Incorporated
Incorporated: 1902 as American Steel Foundries
Sales: $827.1 million
SICs: 3321 Gray & Ductile Iron Foundries
Amsted Industries Incorporated is comprised of seven companies divided into railroad, construction and building, and general industrial divisions. The company maintains 35 plants—including three in Canada and five overseas—and is principally engaged in the manufacture of cast steel freight components, road wheels, ductile iron pipe, automotive parts, cooling towers, roller chain, and wire rope.
Amsted Industries was created as the American Steel Foundries (ASF) on June 26, 1902, upon the merger of several steel companies operating eight plants between New Jersey and Illinois. Unable to compete as effectively as independent concerns, these companies were organized along the lines of United States Steel, which was formed only a few years earlier.
ASF, in fact, was established by many of the same men who helped to put together U.S. Steel. Among them were Judge Elbert H. Gary, who chaired U.S. Steel’s executive committee, Edward Shearson, comptroller of U.S. Steel and later founder of the Shearson-Hammill brokerage house, and Charles M. Schwab, who later established Bethlehem Steel. Also involved in the partnership were Dan Eagan, president of the American Steel Casting Company, W. D. Sargent, head of the Sargent Steel Company, and Edward F. Goltra and George B. Leighton, who controlled steel interests in St. Louis, Missouri.
Headquartered in New York City, American Steel Foundries expanded its capitalization from $9 million to $40 million during its first year through the issue of new shares. The company’s first products ranged from 16-ounce cams to 38-ton ocean liner shaft bearings. ASF was not a steel producer, but rather a finisher of steel products. Steel entered the company’s factories as raw ingots but left as finished products, which eventually included locomotive and boxcar frames, couplers, and axle assemblies.
Having outgrown the small Sargent plant at Englewood, near Chicago, ASF built a huge new casting facility at Indiana Harbor. Early workers commuted to the Greenfield site by train and often had to dump sand out of their shoes after a shift.
ASF issued annual reports its first two years but skipped the third year because of mounting reverses. In fact, the company came perilously close to failure, prompting Schwab to leave the concern to establish Bethlehem Steel.
With a fair volume of business, ASF took the unusual step of acquiring another company, not for its business, but to raid its management for more capable leaders. This enterprise, the Simplex Railway Appliance Company of Hammond, Indiana, also manufactured parts for railroad freight cars. In the fall of 1905 Simplex agreed to a merger, and its president, William V. Kelley, assumed responsibility for the entire operation, moving the company from New York to Chicago, center of the nation’s railroad commerce.
Kelley took control at a most opportune time. He helped restore profitability in 1906 and 1907, before United States industry was racked by a financial crisis that dried up factory orders. Had the company still been financially weak, ASF would surely have gone broke. Kelley was later succeeded in 1912 by Robert P. Lamont, after the company had begun a special effort to help design and test railroad couplers. Previously, foundries such as ASF were asked simply to manufacture to a customer’s specifications. But by helping clients to improve their designs, the company developed a superior product.
In 1910 ASF established a full-fledged product engineering facility in Granite City, Illinois, where testing was expanded to other car parts, including springs.
During World War I, ASF was pressed into service manufacturing shell casings. By the end of the war, the company had produced more than a million of these casings.
In 1919, with advent of the automobile, ASF began manufacturing smaller springs for automobiles. This business dried up quickly, however, after auto manufacturers established their own parts operations. That year, Lamont moved on an opportunity to purchase the Griffin Wheel Company, which was founded on October 5, 1877. A leader in hard chilled iron technology, Griffin operated nine plants across the United States and did a steady business with the railroads.
While tied to the uncertain fortunes of the maturing railroad industry, Lamont reasoned that, even with no orders for new railroad cars, the market for repair and replacement was sure to be ongoing—freight car wheels would need to be replaced continually. Indeed, in 1923 alone, the company turned out more than 1.5 million wheels.
American Steel Foundries purchased the Galesburg Malleable Castings Company in 1921 and the Damascus Brake Beam Company in 1923 but later closed these operations when new brake shoe technologies made their products obsolete. In 1926 the company took over the Verona Steel Castings Company near Pittsburgh. In the first year of the Great Depression, however, the foundry was forced to close.
Lament, meanwhile, left American Steel Foundries in 1929 to serve as commerce secretary in President Herbert Hoover’s administration. He was succeeded by George E. Scott, a veteran of Simplex. Scott, noting that the company’s Pittsburgh plant had outgrown its boxed-in facilities, decided to move its operations to the shuttered Verona facility in 1936. This was the first of several site consolidations that left the company with only four of its original eight foundries, plus the rest of those it had acquired.
In 1939, however, a remaining facility at Newark was converted into an alloy metals plant specializing in corrosion-resistant products. ASF’s timing was highly advantageous as hostilities had erupted in Europe, causing the government to undertake a rearmament program. The plant was soon turning out parts for 50-caliber antiaircraft guns, bomb parts, valves, and fittings.
Also in 1939, Scott died suddenly and was replaced as president by Thomas Drever, a Scottish accountant and comptroller of American Steel Foundries. By 1940 ASF operated 21 plants and was recording sales of $26.3 million.
In 1942 Drever oversaw American Steel Foundries’ construction of a war materiel plant in East Chicago that turned out, among other things, tank parts and vessels for the atomic bomb program. Also that year, ASF acquired the Charles F. Elmes Engineering Works, a company specializing in steel engineering.
By 1945 ASF had poured 200,000 tons of cast armor—26 percent of the country’s total output during World War II. At the end of the war, however, the company was almost exclusively a producer of castings for railroad freight cars. Drever appointed R. D. Brizzolara to study opportunities for ASF to diversify.
The first step in the process of diversification came shortly before the end of the war, when the company began manufacturing semi trailer turrets. Then, in 1948, American Steel Foundries acquired the King Machine Tool Company in Cincinnati. A year later, the Elmes factory was consolidated with the King Company.
Drever retired in 1949 and was succeeded by another financial type, Charles C. Jarchow. Continuing the effort to diversify, ASF acquired the Diamond Chain Company of Indianapolis in December of 1950. Diamond, a manufacturer of bicycle and industrial roller chains since 1890, helped divert the company’s focus on the railroad industry.
After briefly returning to the cast armor business during the Korean War, ASF secured new business supplying Canadian railroads. In January of 1955 ASF acquired the Pipe Line Service Company (later called Plexco), which applied anticor-rosive coatings to petroleum transmission pipes.
As steam locomotives gave way to diesels, and as freight capacities increased, a demand arose for more durable railroad wheels. Griffin responded with a patented controlled pressure pouring method that was capable of producing superhardened wheels. Unable to keep up with demand for the wheels, Griffin constructed six wheel plants between 1952 and 1963.
In 1959 Joseph B. Lanterman became president and chief executive officer of ASF, and sales hit $94 million. Under Lanterman, ASF converted an idle factory in Council Bluffs, Iowa, into a water pipe manufacturing plant. Specially engineered water pipes were in significant demand in the 12 states of the Midwest, as the population increased and farming became more mechanized.
Feeling that the company was sufficiently diversified to warrant a new, less specific name, Lanterman hired New York marketing consultants Lippincott and Margulies to develop a name that abandoned the words “steel” and “foundries.” Settling on AMS, for American Steel, and TED, for Transportation Equipment Division—the company’s largest operation—they recommended Amsted. The change became official on January 23, 1962, but the name American Steel Foundries was retained for a division.
Later in 1962 Amsted purchased the R. D. Wood Company, a Florence, New Jersey-based cast iron pressure pipe manufacturer that was later folded into a new subsidiary, Griffin Pipe Products Company. Continuing to grow by acquisition, Amsted bought the Mac why te Company in July of 1967 and ten months later, the Burgess-Norton Mfg. Co. Macwhyte made wire rope, a basic tool in numerous heavy industries, while Burgess-Norton produced piston pins and powdered metal parts. Amsted then acquired Standard Automotive Parts—later merged with Burgess-Norton—in 1969. A year later, the company purchased the Extron Corporation, a manufacturer of plastic pipe and fittings. Extron became part of the company’s Plexco division. Griffin, meanwhile, took over the Glamorgan Pipe & Foundry Company in 1971.
In 1973 Amsted bought J&B Plastics, which was added to Plexco. Two years later, Amsted entered the filtration business by acquiring the Hydromation Company. Though suspending its acquisition binge in 1976 and 1977 to concentrate on internal expansion, Amsted made its biggest acquisition to date in 1978 when it bought the Henry Pratt Company for $58 million.
In 1980 Lanterman retired as chairman. He chose Goff Smith to succeed him and Robert H. Wellington as president. That year, Amsted’s sales reached $915 million. By 1981, however, record railcar orders dropped by 40 percent. While buoyed somewhat by diversification, Amsted still reported a 29 percent drop in earnings. This performance was repeated in the recession year of 1982, when earnings dropped a further 65 percent, led by persistent weakness in the railcar sector. That year, Smith retired.
After a third bad year, things finally rebounded for Amsted in 1984. With sales up, Amsted purchased the Broderick and Bascom Rope Company, a wire rope manufacturer, and combined the company with its Macwhyte division. The following year, Amsted acquired the Baltimore Aircoil Company—a manufacturer of evaporative coding and heat transfer equipment—from Merck & Company for $91 million. Later in 1985, the company collected Nipak Pipe and merged it with Plexco.
In April of 1985 the United States Securities and Exchange Commission received a form 13D, disclosing that a corporate raider, Charles Hurwitz, held more than eight percent of Amsted’s shares. Rather than be taken over and carved up for quick profits by a disinterested raider, the company decided—on the advice of Goldman Sachs—to arrange a leveraged buyout through an employee stock ownership plan. A number of shareholders objected to the scheme and the buyout price; some even sued. In the end, on March 5, 1986, Amsted was taken private by its own employees for a price of $529 million. Even with this distraction, Amsted finished 1985 and 1986 in the black.
Litho-Strip, a metal precoating operation, was sold off in February of 1987, because it was no longer considered a core business. A year later, the company got rid of its PACO pumps operation, and in 1989 sold both Plexco and Henry Pratt. The $183 million in proceeds was devoted to debt reduction resulting from the leveraged buyout.
Hurt slightly by a five-week strike at the American Steel Foundries division in 1990, Amsted suffered more significant reverses in 1991, reporting declining sales in all three of its operating divisions. There was, however, a small recovery in 1992, when Amsted acquired the Ceramic Cooling Tower Company, a manufacturer of low-maintenance cooling tower units, and folded it into Baltimore Aircoil.
Protected from possible future takeovers by virtue of its unique employee ownership plan, Amsted was free to concentrate in the early 1990s on its business. As the number of employees was declining—from nearly 9,000 in 1988 to slightly more than 7,000 in 1993—the company’s cost structures had fallen in line. In addition, the sale of certain noncore assets helped to ensure that the company was sufficiently focused to compete in the markets it knows best.
American Steel Foundries; Baltimore Aircoil Company; Burgess-Norton Mfg. Co.; Diamond Chain Company; Griffin Pipe Products Company; Griffin Wheel Company Griffin Canada, Inc.; Macwhyte Company; Amsted Industries International.
Reck, Franklin M., Sand in Their Shoes, American Steel Foundries Company, 1952; “The History of Amsted: 1902 to the Present,” Chicago, Amsted Industries Incorporated; “How Amsted Got Its Name,” Chicago Daily News, January 31, 1962; “Did the Amsted LBO Shortchange Shareholders?” Barron’s, February 16, 1987; Amsted Industries Incorporated annual reports, 1988-92.