Carbone Lorraine S.A.

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Carbone Lorraine S.A.

Immeuble La Fayette
La Defense 5
ISA 38001
F-92919 Paris La Defense Cedex
France
Telephone: ( + 33) 1 46 91 54 00
Fax: ( + 33) 146915401
Web site: http://www.carbonelorraine.com

Public Company
Incorporated: 1891 as Compagine Générale Electrique de Nancy; 1892 as Compagnie Lorraine de Charbons pour 1’Electricite
Employees: 6,911
Sales: EUR 690 million ($662.98 million)(1999)
Stock Exchanges: Paris
Ticker Symbol: CBLP.PA
NAIC: 335312 Motor and Generator Manufacturing; 334419 Other Electronic Component Manufacturing; 335991 Carbon and Graphite Product Manufacturing; 335314 Brakes, Electromagnetic, Manufacturing

Carbone Lorraine S.A. is a world-leading manufacturer of electrical components, especially brushes, brush holders, and related equipment and assemblies for electrical motors; permanent magnets, especially for the computer industry, where the company’s products are used in the production of disk drives, and for the automotive industry. Carbone Lorraine is also a global leader in the production of high-performance carbon-and graphite-based materials and components, used for such purposes as high-temperature protection for the nuclear, space, and aeronautics industries, among others, and high-energy braking systems for aircraft, trains, motorcycles, and heavy machinery. Carbone Lorraine has long operated beyond its French home base, with an international presence in more than 44 countries. Some 85 percent of the company’s sales are made outside of France; the company’s U.S. activities alone account for more than 22 percent of total sales. Led by Chairman and CEO Michel Cocozza, Carbone Lorraine has pursued a steady acquisition campaign in the late 1990s. These acquisitions and the company’s internal growth have secured it the number one positions worldwide in the production of brushes for electric motors and thermal corrosion resistance applications; the number two position for electrical protection products for semiconductors; and the world’s number three position for production of permanent magnets for the automotive industry. Carbone Lorraine trades on the Paris Stock Exchange.

Powering the Electric Motor Industry in the 19th Century

Carbone Lorraine was formed by the merger, in 1937, of two prominent French manufacturers, Compagnie Genérale Electrique de Nancy, and Compagnie Lorraine de Charbons pour 1’Electricite. The first of the two was founded in 1891, with a factory in Pagny sur Moselle producing electric motors, lighting equipment, and electric dynamos and generators. The second company was formed one year later, near Paris, and played a central role in the development of the electric motor. In 1893, one of Compagnie Lorraine de Charbons’s engineers discovered a means of artificially creating graphite from amorphous carbon. The company quickly specialized in this process, and began producing graphite brushes for electric motors.

Graphite had numerous advantages as a material. A naturally occurring “pure” state of carbon, graphite offered extremely high heat resistance, a high degree of both electrical and thermal conductivity, self-lubricating properties, and a chemical stability enabling it to resist corrosion. While naturally occurring graphite, along with the other “pure” carbon form, diamond, were relatively rare, the availability of carbon in its amorphous state—one of the most abundant substances on Earth and present in the form of coal, peat, and other mixed forms—offered an opportunity for unlimited, low-cost quantities of artificially produced graphite. In 1893 Compagnie Lorraine was granted the patent for its process of generating graphite from amorphous carbon using an electric arc.

Industries quickly adopted electricity and electric motors. Quieter and less polluting than internal combustion and steam engines, electric motors could be built on extremely small scales—such as the tiny electric motors in an automobile’s windshield wipers. The company’s graphite brushes and seat-ings, as well as its later partner’s electric motors, were fast to find international markets. By 1892, Compagnie Genérale Elec-trique de Nancy had already begun to develop its business beyond France, opening the first of its branches in England. Both companies quickly built their international networks, expanding into Germany, Belgium, Italy, Sweden, and Switzerland, before opening operations in Latin America and North America.

By the mid-1930s, both companies had succeeded in establishing themselves as leaders in electric motor technology. The two companies merged in 1937, forming Carbone Lorraine S.A. The build-up toward World War II provided some of the impetus for the merger, as the company’s products came into demand to support the new generation of military vehicles, including the tanks and aircraft that were to play an important role in warfare for the first time. Yet, the Nazi takeover of France in 1940 temporarily halted Carbone Lorraine’s independent operations.

After the war Carbone Lorraine returned to its international growth. While rebuilding its European network, the company expanded further in western Europe, forming subsidiaries in Denmark, Norway, Austria, Spain, the Netherlands, Greece, and Turkey. Carbone Lorraine also boosted its presence in the Americas, complementing its existing Brazilian, Argentinean, and American presence with operations in Mexico, Columbia, Venezuela, and Canada. The company also took its first steps into the Pacific region, opening a subsidiary in Australia. In 1961, the company stepped up its graphite brush production with the opening of a new dedicated facility in Amiens.

Acquisition Drive in the 1980s

For much of its history, Carbone Lorraine remained focused on its core graphic brush production. In the early 1980s, however, the company saw the opportunity to expand its business into new areas, while building up leading global positions in its specialty areas. Carbone Lorraine’s long background in graphite production led it to step up its development of advanced graphite materials and their applications. The company’s thermal corrosion and heat resistance technologies played essential roles in developments in the nuclear power industry, the space and aeronautics industries, but also in such diverse areas as motorcycle racing, where the company’s graphite composites provided secure braking materials as racers neared the 200 mile per hour mark. Carbone Lorraine established itself as the world leader in advanced graphite materials and technology.

The company’s participation in the electric motor industry, primarily through its graphite brushes, led it to develop its expertise in related fields. In 1985, Carbone Lorraine purchased Ferraz, one of the world’s leading producers of industrial fuses and electrical protection components. Based in France, Ferraz had established a strong worldwide presence, particularly through its North American and Japanese subsidiaries. With the Ferraz acquisition, Carbone Lorraine expanded its electrical components complement to include products such as lightning and surge arresters; isolating switches and short-circuit equipment; current conductors and protectors for the railroad and other industries; industrial fuses; and fuses for the protection of semiconductors. By the 1990s, Carbone Lorraine would gain the world’s number two position in this market.

Spurring the company’s growth in the 1980s was the deep-pocket financial backing of Groupe Pechiney, which held more than 64 percent of Carbone Lorraine’s stock into the early 1990s. A new acquisition in 1991 propelled the company still higher in the ranks of leading electrical components suppliers. Buying up the North American assets of the Stackpole company, Carbone Lorraine secured its leadership position as the world’s top producer of brushes for the electrical motor market, as well as boosting its position as a leading developer of advanced materials for high-temperature applications. Meanwhile, Carbone Lorraine looked beyond electrical components, and into the sealants, especially waterproofing, market, where the company hoped to build a strong market position.

Company Perspectives:

Carbone Lorraine’s industrial strategy is driven by its customer. The Group serves widely diversified industries, both in the electrical components and in the thermal applications markets. These industries operate in a context of increasing globalization, and have gained powerful international positions. Right from its beginnings Carbone Lorraine has implemented a policy of accompanying its customers as their business develops on an international scale, and to this end sets up facilities near to their production sites to facilitate their integration. The overall aim is to promote partnerships with industrial customers, to offer the best lead times and to provide high-performance, close-at-hand services. To keep pace with the increasing internationalization of its markets, Carbone Lorraine has had to continuously intensify its international, industrial and commercial developments. Along with this increasing internationalization, the Group has expanded the number of products and services it provides to industry. From products to systems, Carbone Lorraine’s supply strategy is now based on a total service and preas-sembled product provision approach. Its “made-to-measure” and integrated partnership initiatives have been elaborated with a view to satisfying the expectations of customers demanding greater and greater functionality and proximity. With nearly 85% of its sales figure turned over outside France, and industrial and commercial presence in over 40 countries, international recognition of its industrial expertise and an international customer base, Carbone Lorraine has everything it needs to successfully implement its strategy: development in niche markets where it is committed to winning worldwide market leading positions.

The recession of the early 1990s, and the extended economic crisis in its core European market, cut deeply into Carbone Lorraine’s growth. As its key customers in the automotive industry and in the chemical engineering and other fields cut back on orders, the company saw its sales shrink and its profits dwindle. The company’s heavy reliance on the European market, where it posted some two-thirds of its annual revenues, left it vulnerable to a recession that lasted until the middle of the decade for most of its European customers. The company began losing money, a pattern that continued into early 1993. By then, with annual sales topping FFr 2 billion, the company was forced to streamline its operations, while seeking capital from new investors. Groupe Pechiney, at the same time, began looking to decrease its majority share position in Carbone Lorraine.

In April 1995, Groupe Pechiney announced its intention to sell a 21 percent share of Carbone Lorraine to Paribas Affaires Industrielles. By then, Carbone Lorraine had largely completed its recovery from the difficult early years of the decade—with sales rising to FFr 2.6 billion, with profits returning to FFr 87 million. In that year, the company stepped up its electrical components arm with two major acquisitions, those of UGIMAG, one of the world’s leading manufacturers of permanent magnets, and Dietrich, of Germany, which held the leading European position in the market for brush holders for electric motors.

In the second half of the 1990s, Carbone Lorraine seemed to have found its stride, beginning a series of acquisitions that secured leadership positions for the company in its core businesses of electrical components, particularly graphite brushes, permanent magnets, and electrical protection products, and advanced graphite materials and technologies. Completing the acquisitions of the ferrite magnet divisions of Philips and ITT-Automotive in 1997 and 1998, Carbone Lorraine added to its automobile products range. In 1997, also, the company purchased Astrocosmos, of the United States. Despite difficulties in merging Astrocosmos into its existing operations, the acquisition gave Carbone Lorraine an added boost in the market for corrosion resistant materials, and extended expertise in such advanced materials categories as titanium, zirconium, and tantalum.

After Paribas sold the bulk of its ownership position, Car-bone Lorraine found itself an independent company, with the majority of its stock available on the stock exchange. At the same time, the company exited the sealings business, selling off its assets. The boost in funds provided the fuel for the company’s strongest acquisition drive yet. In 1998 and through 1999, Carbone Lorraine completed some ten major acquisitions, including those of Canada’s Gle Noram (industrial fuses); Danks Electrical Industri, of Denmark (brushes); Midland Materials (graphite parts for the semiconductor industry) and Vitre-Cell’s carbon composite activities, both based in the United States; Bert, of Germany, and Soulé, of France, both specializing in high-power disconnect systems; and Metaullics System of the United States (heat exchangers).

Carbone Lorraine showed no signs of slowing as it approached the 21st century. After completing the acquisitions of the cerberite division of the United Kingdom’s Johnson Radley, boosting its expertise in the manufacture of carbon compositions, the company announced its intention to acquire the ferrite magnet activity of Tongkook, in Korea. Carbone Lorraine hoped that the Tongkook purchase would give it a stronger base from which to pursue its development in the Far Eastern market, which had suffered during the economic collapse of the late 1990s. Another key acquisition came in July 1999, with the purchase of the electrical fuse division of Gould Electronics, of the United States, formerly one of Carbone Lorraine’s chief competitors in that market. The purchase consolidated Carbone Lorraine’s position as the world’s number two producer of electrical fuses, in line with the company’s future plans to achieve leadership status in its chosen areas of operation in the new century.

Principal Operating Units

Ferraz; UGIMAG; Ferroxdure; Carlor Finland; Le Carbone Holland; Carbone Norge (Norway); Carbone Danmark (Denmark); Le Carbone S.A. Beige (Belgium); Deutsche Carbone (Germany); G. Dietrich (Germany); Cometec (Germany); Sofacel (Spain); II Carbonio (Italy); Le Carbone (U.K.); Sofacel (Spain); Cabonne KK (Japan); Nihon Ferraz (Japan); Carbone-Lorraine Korea Co. Ltd.; Carbone Lorraine Sdn. Bhd. (Malaysia); Le Carbone-Lorraine Australia Pty. Ltd.; Carbone of America (U.S.); Carbone Lorena de Mexico; Carbono Lorena (Brazil).

Principal Competitors

Morgan Crucible; Hitachi Metals, Ltd.; Sumitomo Corporation; TDK Corporation; Bussmann; Toyo Tanso; Ibiden; SGL Carbon.

Key Dates:

1891:: Compagnie Genérale Electrique de Nancy is founded.
1892:: Compagnie Lorraine de Charbons pour 1’Electricite is founded.
1893:: First international branch opens, in the United Kingdom.
1937:: Companies merge to form Carbone Lorraine S.A.
1961:: Factory in Amiens, France, opens.
1980s:: Group Pechiney acquires a significant stake in Car-bone Lorraine.
1985:: Carbone Lorraine acquires Ferraz (France).
1991:: Company acquires Stackpole (United States).
1995:: 21 percent share of Carbone Lorraine is sold to Paribas Affaires Industrielles.
1997:: Paribas sells its stake, and Carbone Lorraine is an independent company.