Carpenter Technology Corporation
Carpenter Technology Corporation
Carpenter Technology Corporation
P.O. Box 14662
Reading, Pennsylvania 19612-4662
610) 208- 2000
Fax: (610) 208- 3242
Incorporated: 1889 as Carpenter Steel Company
Sales: $628.8 million
Stock Exchanges: New York
SICs: 3441 Fabricated Structural Steel
Carpenter Technology Corporation produces and distributes specialty steel and structural ceramics worldwide for consumer and industrial applications. The company’s products are part of every Pentagon weapons system and comprise approximately six pounds of every American automobile. In 1995, Carpenter employed 4,200 workers throughout the world, including a core force of 2,600 at its Reading, Pennsylvania, headquarters.
The man whose name the present company bears, James Henry Carpenter, served in the Navy during the Civil War, then embarked on a career as a construction engineer, developing an interest in metallurgy and the manufacture of tool steel. A New Yorker, Carpenter was encouraged to found a steel-making enterprise in Reading, Pennsylvania, by a visionary city councilman who, realizing that the region’s bustling iron industry would naturally support such a venture, foresaw a boon to the city’s economy. Incorporated in New Jersey on June 7, 1889, Carpenter Steel Company leased a rail-making plant in Reading and soon received its first order for 3,000 tons of steel. Within five months, the fledgling company had outgrown the rail-making plant and acquired a facility known as Union Foundry, which over 100 years later still functioned as company headquarters and a specialty steel mill.
Carpenter’s branching into specialty steel operations began with a May 1890 contract with the U.S. Secretary of the Navy. Having found Carpenter’s tool steels to be of superior quality, the Navy was betting, correctly as it turned out, that the company could develop armor-piercing projectiles. The fulfillment of the Navy contract was enabled by a patent granted to James Carpenter for an “air-hardening steel” manufacturing process. In November 1896, the Navy informed Congress that Carpenter’s projectiles had tested successfully, calling them “the first made that would pierce improved armor plate.” In the Spanish-American War of 1898, the routing of the Spanish fleet at Manila Bay was credited in part to Carpenter projectiles.
Unfortunately, the preeminence Carpenter achieved through its wartime armaments proved to be a curse when the Spanish-American War, and the contracts it fostered, ended. Complicating the decline in business was the death, in March 1898, of founder James Carpenter. By 1903, the company had fallen into receivership. However, the court-appointed receiver, Robert E. Jennings, was a former vice-president of a rival steel company and would soon oversee a dramatic resurgence at Carpenter. Elected president of a reorganized Carpenter Steel Company the following year, Jennings’s expertise was in marketing; for the remainder of the decade he presided over innovations resulting in a variety of steel grades broad enough for almost every extant tooling application, including heavy-duty cutting tools, highspeed cutting tools, and hot heading.
Early in the 20th century, the nascent automobile industry afforded the single most auspicious market for Carpenter’s innovations in specialty steel. In 1905, the company developed a prime grade chrome-nickel steel; by 1908 it had created ten other steels that were used to make automobile chassis. Most of the “runabout” vehicles of the day ran on Carpenter steel, and “Old 16,” the racer that won the Vanderbilt Cup in 1908, comprised front and rear axles, crankshaft, gears, and other parts fabricated from Carpenter steel. Affinity with automobile manufacturers gave rise to a hallmark of Carpenter’s distribution system: maintaining service centers where its customers were based. The beginnings of its modern regional service center system began with the opening of branch warehouses in Cleveland and Hartford, then the centers of automobile production, in 1907 and 1909.
With the 1917 entrance of the United States into World War I, wartime munitions and supplies overtook automotive steel as Carpenter’s principal product. The Reading plant operated on around-the-clock shifts, producing everything from tool steels to soldiers’ safety razor blades. Accelerated production levels, however, did not distract Carpenter from technical and metallurgical innovation. During the war, the company put into operation four new electric-arc furnaces, which allowed greater control over the melting process than had the old crucible furnaces. It also turned out its first batch, in December 1917, of what would become its principal product: stainless steel. The first applications of this new high-strength, chemical-resistant steel were airplane engine components, cutlery, and spark plugs.
Continuing its quest to improve what was already a successful product line, Carpenter unveiled its “rustless steel,” an alloy of .3 percent carbon, 20 percent chromium, and one percent copper, in December 1920. Throughout the 1920s, Carpenter spent much effort in improving the fabricability, into parts, of its stainless steel. In 1928, it brought out the first free-machining, “antifriction” stainless steel, sulfur being the component responsible for the breakthrough. The introduction of stainless steel strip in the mid-1920s reestablished Carpenter as an important supplier to the automobile industry; in 1929, the company trumpeted the statistic of 24 pounds of automotive trim on each Pierce Arrow car. Strip also began to be welded into tubing, and in 1927, Carpenter’s Welded Alloy Tube Division became the earliest commercial supplier of stainless tubing, with applications in chemical processing, oil refining, generation of electricity, and food and beverage processing.
Another historical milestone that demonstrated Carpenter’s preeminence was Charles Lindbergh’s pioneering nonstop flight from New York to Paris in May 1927. The gears, shafts, and fasteners of the engine of the “Spirit of St. Louis,” Lindbergh’s legendary plane, were all made from Carpenter steel. An identical engine had powered Richard Byrd’s flight to the North Pole the previous year. Even the Wright Brothers’ maiden flight in 1903 had been achieved with Carpenter steel-based engine components. The aircraft industry, like the earthbound automobile industry, owed much of its success to Carpenter.
The Great Depression, particularly during the early 1930s, caused Carpenter to operate at a loss for three consecutive years and forced it to downsize. Still, the company’s penchant for new product development continued virtually unabated. The Depression years saw the introduction of new stainless steels with additives of selenium, tellurium, and chrome and nickel. For the first time, Carpenter began licensing other manufacturers to produce some of its stainless steels. Also during the 1930s, increasingly high wear-resisting varieties of tool steel were introduced, and in 1937 Carpenter brought out Tool Steel Simplified, a book of diagrams to assist customers in choosing the proper tool steel for a specific application, depending on toughness and hardening properties. The book would remain a standard industry reference work through the 1970s. In June 1937, Carpenter Steel Company went public.
The most obvious challenge to Carpenter in the 1940s, as to the country as a whole, was World War II. In March 1941, with U.S. entrance into the war looking increasingly probable, the U.S. Office of Production Management summoned Carpenter’s president to Washington, D.C., to discuss expanding the company’s production capacity on an urgent basis. Carpenter’s board of directors responded by voting an immediate capital investment program of nearly $1 million. During the course of the war, the company’s numerous varieties of stainless steel found their way into virtually every conceivable wartime application: engine parts, steel fasteners, and cockpit instruments for fighter planes and bombers; components of Sherman tanks and submarines; radio masts for PT boats and radio equipment for battle fronts; and medical supplies such as hypodermic needles and surgical implements.
After the war, Carpenter returned to stable, profitable operations. The 1950s brought significant technological advances in melting, particularly with the process of vacuum arc remelting in a consumable-electrode furnace, which allowed unprecedented high purity in steel alloys—and none too soon, since applications in the embryonic aerospace field required immaculate degrees of purity. During the same decade, Carpenter introduced “Stainless 20,” an alloy which by virtue of rare earth element additives could withstand harsh, corrosive chemicals. Expansion of infrastructure and capacity continued apace. In 1951, Carpenter bought a wire redrawing plant in New Jersey, thus acquiring the capability to produce extremely fine wire for applications such as surgical sutures and knitting machines. The year 1954 saw the addition of a new mill in Reading which allowed Carpenter to become extremely competitive in the manufacture of specialty alloy wire. When, in the mid-1950s, the company found itself having to turn down orders despite operating at full capacity, it purchased Northeastern Steel Corporation in Bridgeport, Connecticut, enabling a 100 percent increase in the production of ingots.
Research and development (R&D) and technology were the dominant themes of the 1960s; the company changed its name in 1968 to reflect this, becoming Carpenter Technology Corporation and reincorporating in the state of Delaware. The company also announced that it was spending five times as much on R&D as were other steel manufacturers, and proudly opened a new $3 million R&D center in Reading in 1967. Carpenter began to cast a wide technological net through three strategic acquisitions: NTH Products, Inc., of El Cajon, California, in 1961; a 50 percent share in Gardner Cryogenics Corporation, Bethlehem, Pennsylvania, in 1969; and a 50 percent share in Titanium Technology Corporation, Pomona, California, also in 1969.
NTH Products eventually became Carpenter’s special products division, responsible for making metal and specialty steel products such as tubular components, precision-rolled solid shapes, and photoetch sheets. It also made fuel channels for nuclear reactor cores. Gardner Cryogenics (taking its name from the science of low-temperature phenomena) facilitated the company’s entrance into making storage and transport equipment. Titanium Technology Corporation supplied the aerospace and other industries with titanium castings.
Infrastructure enhancements in the 1960s included the installation of a 15,000-pound vacuum induction furnace, which permitted the melting of alloys of unprecedented purity, and of a mill capable of rolling thin electronic alloy strip used in transistors and semiconductors. Then, in the early 1970s, installation of two varieties of increasingly sophisticated furnaces enabled additional improvements to the product line. First, two 25-ton ElectroSlag Remelting furnaces, which had their world premiere at Carpenter, allowed ingots to be remelted in molten slag, reducing overall amounts of microscopic impurities. Then the Argon-Oxygen Decarburizing unit accomplished, as its name implied, efficient removal of carbon through a process of blowing argon and oxygen through the steel bath.
Carpenter managed to ride out the two national recessions of the 1970s, with sales and profit figures consistently breaking records throughout the decade. Separate multi-million dollar capital expansion plans were put into action in 1976 and 1979. Beginning in 1970, the company had implemented a pollution control plan, installing ducts, exhaust fans, and 2,400 filter bags to trap exhaust fumes and iron oxide dust that would otherwise escape into the atmosphere.
The 1970s also saw Carpenter reverse course after its earlier aggressive pursuit of diversification. Many previously acquired enterprises were sold during the decade, including the New Jersey wire redrawing plant, Titanium Technology Corporation, Gardner Cryogenics, and affiliates in Brazil and Mexico. According to Howard O. Beaver, Jr., who was then president, the divested enterprises “did not fit Carpenter’s long-range goals and objectives,” and the proceeds from the sales would be “more effectively employed” in enhancements to the stainless steel product line.
The recession of 1981-82 was one of the deepest ever to afflict the U.S. economy, and steel companies were especially hard-hit due to fierce competition and price undercutting from foreign producers. To combat such severe economic buffetings, the bulk of the domestic industry began selling off tangential operations and trying to diversify by branching into insurance or retail—but not Carpenter. Even though its fiscal year 1982 earnings fell significantly below the previous year, the company was proceeding unflinchingly with its 1979 capital investment plan. The new president, Paul Roedel, conceded that Carpenter’s previous efforts in diversification had caused return on capital to plummet and vowed the same mistake would not be repeated.
Factors that tended to immunize Carpenter better than most steel producers against recession were noted in a 1982 Forbes magazine article. Its highly specialized steels were selling at ten times the average price per ton of the rest of the industry, and its share of the specialty steel market was 25 percent. Company philosophy was to broaden the market base, which it had done successfully, rather than diversify the product line. Its nationwide warehouse and service center system, begun in 1907, now numbered 21 facilities, and had put Carpenter in the unique position of hearing its customers’ conundrums first-hand; this allowed the company to develop custom markets for itself.
By fiscal year 1989, when Carpenter marked its 100th anniversary, the 1982 recession was just a memory as net sales reached an all-time high of $634.3 million, and net income was 19 percent higher than in the previous year. Market forces had reduced the number of publicly traded specialty steel companies to four at this point, but these entities, Carpenter included, were regarded by financial analysts as highly efficient and high in quality. Consumer demand for specialty steel had risen faster than the economy in general since the early 1960s, and over the same period, the amount of specialty steel in cars had risen from ten to 70 pounds.
Carpenter had made two significant acquisitions during the 1980s—Eagle Precision Metals Corporation of Fryeburg, Maine, and AMAX Specialty Metals Corporation of Orange-burg, South Carolina—and had sold the Bridgeport, Connecticut, steel-making facility after market growth rate had slowed. Eagle, a precision drilling facility, beefed up Carpenter’s ability to produce high quality hollow steel bars, while AMAX was a wire-finishing plant, capable of redrawing steel wire to extremely fine sizes.
Economic cycles continued to affect Carpenter’s balance sheet; the 1991 recession once again forced restructuring and downsizing, and as with many basic-industry companies, recovery seemed more elusive than with the economy as a whole. However, at the end of fiscal year 1994, Carpenter president Robert W. Cardy exulted that net sales had been second only to 1989 and observed that the company was operating virtually at full capacity. The dual goals of the year—“to strengthen and grow specialty metal operations worldwide, and to expand strategic business opportunities worldwide”—had been achieved.
Especially important during 1994 were two acquisitions destined to fulfill Carpenter’s aspirations as a worldwide steel distributor. First, a joint venture with Walsin-Lihwa, a Taiwanese cable and wire manufacturer, resulted in the company’s first presence in Asia. Second, the acquisition of Aceros Fortuna, Mexico’s number one specialty steel distributor, resulted in the bulk of Carpenter’s increased 1994 sales. On the domestic front, Carpenter bought Certech, Inc., a Woodridge, New Jersey, maker of structural ceramics. According to a senior vice-president, “Some customers who traditionally bought steel had switched to structural ceramics for some applications. To keep its customers, Carpenter decided to broaden its product line.”
According to American Metal Market, structural ceramics had high temperature properties and high corrosion resistance, and were “used to make precision valves, components for electrical and fiber optic connectors, special wear inserts, and critical application components for the plasma spray industry.” Carpenter accelerated its push into this new field in 1995 with the acquisition of Technical Ceramics Laboratories, Inc. (TCL) of Alpharetta, Georgia. TCL’s specialty, ceramics research, was expected to complement the ceramics manufacturing capability provided by Certech.
As its second century of operation unfolded, Carpenter was poised to become increasingly influential as a global supplier of specialty steels, structural ceramics, and specialty materials complementing applications that were formerly the exclusive domain of metals. This emphasis, together with its far-reaching warehouse and service center system, indicated that Carpenter planned to bolster and broaden its market niches and customer bases.
Carpenter Technology International Corporation (U.S. Virgin Islands); CRS Holdings Inc.; Carpenter Investments, Inc.; Eagle (CRS) Investments Inc.; Certech, Inc.; Certech International Ltd. (U.K.); Certech Incorporated; Carpenter Technology Limited (Canada); Carpenter Technology GmbH (Germany); Carpenter Technology (Europe) S.A. (Belgium); Carpenter Technology SARL (France); Carpenter Technology Corporation (Taiwan); Carpenter Technology s.r.l. (Italy); Aceros Fortuna, S.A. de C.V. (Mexico); Movilidad Moderna, S.A. de C.V. (Mexico); Temple y Forja Fortuna, S.A. de C.V. (Mexico).
Building a New Growth Model for Carpenter, Reading: Carpenter Technology Corporation, 1994.
Building on 100 years of Progress, Reading: Carpenter Technology Corporation.
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