The Eureka Company
The Eureka Company
1201 E. Bell Street
Fax: (309) 823-5203
Division of Electrolux AB
Sales: $390 million
SICs: 3635 Household Vacuum Cleaners
The Eureka Company is one of the oldest names in the vacuum cleaner industry and is widely acknowledged as one of its leaders, second to the Hoover Company since both companies were launched early in the twentieth century. Founded in 1909, Eureka was purchased in its 65th year by the Swedish company Electrolux AB and became a division of that company.
In 1909, real estate auctioneer Fred Wardell of Detroit, Michigan, acquired several patents for emerging vacuum cleaner technology and started up the Eureka Company. In 1910 he incorporated the company in Michigan. By 1913 Eureka’s cleaners came in six different models with a multitude of attachments for walls, upholstery, and bare floors. The cleaners were sold to the public through two distributors, one handling accounts to the east of an imaginary line through Detroit, and the other handling accounts to the west.
From its headquarters in a 3.5-acre factory in downtown Detroit, Eureka manufactured 2,000 vacuum cleaners a day by 1919. Demand for the cleaners grew through the 1920s. Eureka advertised its cleaners nationally, and the company relied on an army of door-to-door salesmen who pitched the product’s usefulness and efficiency to housewives throughout the country. Wardell was a fiery motivator who used tactics like betting his salesmen $2,000 to their $10 that they couldn’t beat their quotas. Selling products this way was expensive—because of the cost of commissions ($22 on an $80 machine), the thousands of units tied up as demonstrators, and the fact that salesmen sometimes disappeared with customer’s deposits or machines—-but the ever-growing demand appeared to justify the cost. At times Eureka employed more than 3,000 door-to-door salesmen.
Eureka also used other modes of distribution. The company leased space in retail outlets but used its own salesmen to sell its cleaners, although customers were generally unaware that the salesmen represented Eureka and did not work for the retailer. The company also sold its products at utility-company retail outlets, which at that time sold a number of electric appliances. By the mid-1920s, Eureka held approximately one-third of the vacuum cleaner market. From 1919 through 1929, new sales averaged $7.88 million, and net profits averaged $1.09 million.
The Depression soon dampened Eureka’s enthusiasm for its costly sales force. Like other companies, Eureka retreated from its dependence on door-to-door salesmen (who averaged 20 calls before they made one sale), and shifted its emphasis from selling through retailers to selling to them. From 1933 to 1936, sales averaged $2.68 million and profits were $251,000. Its expensive distribution system, unsuccessful new product introductions (Eureka also came out with a portable range, which flopped), and outdated factory exacerbated the effects of the collapse of consumer buying during the Depression. By 1937, the company was in the red, and from 1937 to 1939 its annual losses averaged $199,000.
Although the quality of Eureka cleaners was still respected, the company was floundering and Wardell had admittedly lost enthusiasm for running it. He persuaded Henry Burritt, the chief of sales for Nash-Kelvinator (the manufacturer of Kelvinator refrigerators), to take charge of the company. In 1939, Burritt took over and set about reorganizing Eureka’s distribution system, shaking up top management, and redesigning the vacuum cleaner. In 1940, the company discontinued its use of door-to-door salesmen. Nevertheless, losses continued, with a $500,000 loss on almost $5 million in sales in 1941. Vacuum cleaners sales had fallen to about seven percent of the industry total.
From 1942 until the end of World War II, Eureka’s factory produced only war materiel. During the war years Burritt and his managers focussed on how to take advantage of the surge in consumer spending that was expected to follow the war. The company decided to diversify its offerings of consumer appliances and decentralize operations. Burritt hoped to merge with another manufacturer whose products, distribution system, and production facilities would complement those of Eureka. Burritt was also eager to evacuate Eureka’s outdated factory—and Detroit—because of what one vice-president called “the contamination of the Detroit labor area,” meaning the highly unionized workforce in that city. Also, a superhighway was set to be built through the center of Detroit and the middle of Eureka’s plant. Burritt looked at dozens of the most obvious prospects, mainly manufacturers of other household appliances like refrigerators, but none were interested. He finally settled on Williams Oil-O-Matic Heating Corporation, a manufacturer of oil burners based in Bloomington, Illinois.
Oil-O-Matic had been founded by Walter W. Williams in 1918. Scarce coal supplies during World War I spurred Williams to invent—in his garage—a new type of oil burner, one that was designed to use crude oil or even used crank-case oil (as opposed to the water-white kerosene that was most often used). Oil-O-Matic had gone on to manufacture refrigerators (introduced in 1928), water heaters, and air conditioners (the Air-O-Matic came out on 1933). Before the war, the company could turn out 40,000 oil burners and 50,000 refrigerators annually. From 1942 through the end of the war, its plant made only products for the war, including parts for B-29 bombers and C-47 transport planes, and an automatic fire-control device. By 1945, Oil-O-Matic was not faring well; Williams had grown uninterested in his company and the company’s stock, which once stood at $30 a share, was now selling for $7 a share.
In 1945, Eureka issued $1.76 million worth of common stock and used the proceeds to purchase 245,000 shares of Williams stock from Walter Williams for $1.39 million; the remaining 185,000 shares of Williams’s stock were traded for Eureka common stock two-for one. Burritt, who knew nothing about oil burners, made it a condition of the merger that Williams’s president, W. A. Matheson, would stay to run that division. The new Eureka-Williams Company came into existence June 4, 1945. The company used the $500,000 it had received in compensation for the condemnation of its Detroit plant to move to Bloomington, which was considered to have a much more “favorable” labor market than Detroit.
By 1946, the company was distributing its vacuum cleaners through 5,500 dealers, with 55 distributors, 12 of them company owned. By 1947, those numbers had increased to 8,500 dealers and 9,000 retailers. Burritt began to spend heavily on national advertising, a practice that had lapsed in the 1930s. The company had a net worth of over $6 million that year. In the fiscal year ending June 1947, sales totaled $21 million, with profits of $1 million. Oil burners accounted for approximately one third of sales and profits; however, there was almost no overlap in the production and distribution of the merged companies. In an attempt to broaden its array of consumer goods and enlarge its distribution network, Eureka-Williams bought the Chicago-based National Stamping & Electric Works in 1946 for $640,000. The company made electric toasters, irons, and other appliances under the “White Cross” label, with sales of $500,000 a year. The following year, it came out with a line of electric disposal units, the Dispos-O-Matic.
Even with wider distribution and national advertising, Eureka consistently ran behind Hoover. In vacuum cleaner circles a battle raged between the proponents of the canister-type cleaner and the upright models. Eureka sidestepped the issue by selling both, and an assortment of attachments, in the “Eureka Home Cleaning System,” which in 1947 sold for the hefty sum of $144.95. This gimmick allowed Eureka to sell two cleaners per sale instead of one.
The problematic marriage of an oil-burner business with a vacuum cleaner company became more apparent over time. In 1952, oil-burner production was shifted to Sweden, where the product had been distributed for over 20 years. Burritt cited increased demand and high Swedish tariffs as reasons for this idiosyncratic move.
In 1953, Eureka-Williams was purchased by Henney Motor Company. Henney, based in Freeport, Illinois, was controlled by principal stockholder C. Russell Feldmann. The deal was reported to be worth $4 million, with Feldmann laying down only about $400,000 in cash while assuming Eureka-Williams’ obligations. Eureka-Williams became a division of the Henney Motor Company.
Eureka celebrated its 50th anniversary year in 1959, the year in which Feldmann announced his intention to merge Eureka-Williams with National Union Electric Corporation, a heating and air-conditioning manufacturer of which Feldmann was both chairman and president. At the time of the merger Eureka-Williams was described as manufacturing vacuum cleaners, oil burners, school furniture, aircraft generators, hydraulic motors, starters and inverters, and thermal batteries at plants in Bloomington and Canastota, New York. Feldmann took Eureka private and it became a division of National Union.
Eureka-Williams fared well with National Union, playing the part of the steady and conservative manufacturer in a rather idiosyncratic company. Feldmann, an avid inventor and golfer, grew intrigued with the idea of an electric automobile and hatched a plan to build and market the cars through utility companies just like other electrical products. The car, whose top speed was 35 miles per hour, sold for $3,500. But of the one hundred cars manufactured, only 47 were sold. By 1971, Eureka-Williams accounted for 40 to 50 percent of National Union’s sales and profits, and National Union reported that vacuum cleaner volume had climbed for the 12th consecutive year.
In June of 1974, Electrolux AB, the Swedish vacuum cleaner manufacturer, announced its bid for National Union. Electrolux had been unable to use its name in the United States since 1968 (when it sold its American Electrolux Co. subsidiary to Consolidated Foods Co.), and it was looking to re-enter the lucrative American market. National Union supported Electrolux’s takeover of Eureka-Williams, whose name was changed backed to the Eureka Company.
Eureka’s 75th anniversary year, 1984, was said by the company to be its best sales year ever. Eureka reported that sales had increased 211 percent over the previous decade, five times faster than the industry average. But the company continued to trail Hoover. In an attempt to cut production costs, Eureka began to move vacuum-cleaner production out of Bloomington, opening a plant to make uprights in El Paso, Texas, in 1983, and another in Juarez, Mexico, in 1984. In 1989, a major reorganization effort saw hundreds of employees laid off at its Blooming-ton facilities as recession rippled through the economy. In 1990, Eureka announced that it was moving production of upright cleaners completely to El Paso. The manufacture and assembly of canisters were consequently consolidated at its plant at Normal, Illinois, while headquarters and other manufacturing operations remained at Bloomington. Eureka reported that it spent $2.2 million restructuring its plants in Illinois.
In 1991 Eureka saw a loss in market share, especially to the third-place Royal brand. Some industry sources quoted in HFD blamed the drop on the company’s late entry into the attached-tool upright market, which at that time held about 40 percent if the market. That experience prompted yet another round of reassignments, a visit from an executive at Electrolux to help streamline production, and another reorganization. Eureka seemed determined to take a more aggressive and proactive attitude toward product introduction and advertising, expanding its national advertising revenue by 300 percent. It also lowered prices.
An example of Eureka’s efforts to create innovative products was the introduction of the Corvette Vac in 1993, a hand-held vacuum whose styling was designed to match that of the sports car. The Corvette name, on license from General Motors Corporation, was used to lure car owners who would be attracted to cleaning their car with it. The product was instantly successful. Eureka also introduced items at the high-end of the market to fill all categories of the home-cleaning market. Examples were wet/dry vacuums and rechargeable units.
By the mid-1990s, Eureka held steady at its perennial number two position in the vacuum cleaner market, but had rebounded from losses in market share in the early 1990s. The company claimed its highest sales ever in 1993. Eureka held about 20 percent of the $600-million full-sized cleaner market, as compared with Hoover’s 35 percent. The company manufactured more than 100 different models of vacuum cleaners, for home as well as commercial use.
“AB Electrolux Bid for National Union Nets 91 Percent of Shares,” Wall Street Journal, July 2, 1974, p. 13.
“Another Merger,” Business Week May 19, 1945, p. 57.
“Board Backs Merger of Eureka Williams, National Union Electric,” Wall Street Journal, May 9, 1960, p. 18.
“Canister, Upright, and Stick,” Barron’s, December 27, 1971, p. 11.
“Electrolux Plans Bid for National Electric,” Wall Street Journal, June 20, 1974, p. 3.
“Eureka Celebrates 75,” Appliance, April 1984, p. 9.
“Eureka Realigning Operations in III.,” HFD, May 20, 1991, p. 86.
“Eureka Reinstates the Dealers,” Business Week, August 31, 1946, p. 42.
“Eureka Takes ’Aggressive’ Approach,” HFD, January 10, 1994, p. 84.
“Eureka Williams,” Fortune, December 1947, pp. 108–113.
“Financier Feldmann Sparks National Union,” Investor’s Reader, December 7, 1966, p. 18.
“Here’s How to Increase Your Off-Peak Loads,” Electrical Merchandising Week, March 28, 1960, p. 7.
“Holders Vote Sale of Eureka-Williams,” New York Times, December 24, 1953, p. 21.
“To Make Oil Burners in Sweden,” New York Times, April 8, 1952, p. 45.
Nellett, Michelle, “Going for Gold: Eureka Pursues Leadership Role with People-Driven, Product-Oriented Philosophy,” HFD, October 10, 1994, p. 50.
“Small Electric Car Is Marketed,” Edison Electric Institute Bulletin, April 1960, p. 123.
Troy, Terry, “Standing Upright: Eureka Prepares to Seize Back Lost Market Share with Attached-Tool Upright Vacuum Cleaner and New Marketing Strategy,” HFD, January 13, 1993, p. 73.
—C. L. Collins