Federal-Mogul Corporation

P.O. Box 1966
Detroit, Michigan 48235
U.S.A.

Public Company
Incorporated: May, 1 1924
Employees.12,500
Sales:$942 million Market Value:$568 million
Stock index : New York Pacific

Federal-Mogul Corporation had its origins in the Muzzy-Lyon Company, which was founded in Detroit, Michigan, in 1899 to sell mill and factory supplies. This firm, which became a national producer of bearings and bearing alloys, combined in 1924 with Federal Bearing and Bushing to form a new company called the Federal-Mogul Corporation. The growth of the organization through a series of expansions and acquisitions made it an important defense supplier during World War II. That growth continued with the acquisition of Bearing Company of America in 1953, the merger of Bower Roller Bearing Company into Federal-Mogul in 1955, and the acquisition of National Seal in 1956. In more recent years, the company has acquired a number of other units in both the United States and abroad. With headquarters in South-field, Michigan, Federal-Mogul presently operates some 40 plants, more than 50 distribution centers, and four major research facilities throughout the world. Its product line ranges from a variety of precision parts for the transportation, farm equipment, construction and manufacturing industries, to aerospace components.

The history of Federal-Mogul goes back to the turn of the century when two young Detroit mill supply vendors began searching for ways to produce better babbitt metal. Babbitt metal, an alloy of tin, antimony, and copper, had been patented in 1839 by Issac Babbitt as an antifriction agent surrounding moving metallic locomotive parts. It remained the principal means to prevent rotating metallic shafts from overheating and wearing out. However, the 19th century methods were unsuitable for 20th century combustible engines. J. Howard Muzzy and Edward F. Lyon’s success in developing new formulas for and applications of babbitt metal would help to make more efficient automobile engines possible.

Muzzy and Lyon left secure jobs to begin their new business. As employees of J.T. Wing and Company, a vendor of mill and factory supplies, their friendship and business acumen had gradually matured. Determined to be their own bosses in the market they knew best, the two partners wasted no time opening the doors to their first building in 1900. The mill and factory supply business was highly competitive at the turn of the century. Many producers offered shoddy merchandise at inexpensive prices. The business also required a large running inventory of slow moving items, which would stretch the new firm’s limited capital. Nonetheless, the partners established a reputation for quality items and made it through the early years, putting most of their profits back into the business. They also used aggressive and imaginative advertising, providing money-back guarantees and coupons good for prizes ranging anywhere from pocket rulers to firearms.

Whatever time Muzzy could spare from his primary responsibility of managing the financial and manufacturing end of the business he devoted to endless experimentation with babbitt metals. Lyon, when not on the road selling company products, joined his partner in blending new formulas of tin, antimony and lead. Their hard work paid off with major orders from Clark Motor Company and the Sheffield Motor Company. As a result of the increased business, the partners formed a subsidiary company called the Mogul Metal Company.

An inquiry from Sheffield’s parent organization, the Fairbanks Morse Company, started Muzzy-Lyon on its next important breakthrough. The traditional method of making motor bearings was to pour molten babbitt metal directly onto the motor block and to shape the metal to fit by hand. Mechanics replaced worn bearings by laboriously gouging out the old metal and then pouring in the new. Why not die cast metals into standard size bearings? The partners purchased a typecasting machine and began modifying it. They were able to make some of the new parts themselves and commissioned various machine shops to produce the rest. In this way, the design and construction of their new machine remained a secret. Neither partner had any mechanical or engineering experience, but the machine worked.

The potential of the die casting machine so impressed the partners that they decided to drop the mill supply business completely. The company would devote its entire resources to manufacturing and mechandizing automotive bearings and babbitt metals. Soon orders for Mogul’s die cast bearings began to arrive. The year 1910 brought an important order for 10,000 connecting rod bearings for the massive Buick 10. That same year the partners nearly lost a large order from the Hudson Motor Company when they refused to compromise their secret processes by allowing Hudson engineers to inspect the plant.

Despite a difficult business climate, the Muzzy-Lyon management retained enough confidence in the future to expand in 1923. The most significant events began when Muzzy learned that Douglas-Dahlin, a large Kansas City-based parts distributor, stood in danger of bankruptcy while owing the company a large sum of money. S.C. Reynolds, vice president of Federal Bearing and Bushing, called Muzzy to discuss the situation. His company was also faced with losing a large sum of money; consequently, the two men traveled together to Kansas City to protect their interests. On the trip they became friends and, when they compared their companies and assessed their relative strengths and weaknesses, they realized the advantages of a merger. The Federal Bearing employees were expert bronze foundrymen but lacked the capacity to produce babbitt. Muzzy-Lyon, on the other hand, operated a complete babbitt foundry but purchased bronze on the market. It seemed like a perfect partnership. The names of Muzzy-Lyon Company and Federal Bearing were replaced by Federal Mogul Corporation.

To protect its investments, Federal-Mogul took over the near-bankrupt Douglas-Dahlin Company. Suddenly Federal-Mogul was in the service business. Other acquisitions followed shortly. In 1927 Federal-Mogul purchased U.S. Bearings Company, an Indiana distributor that resold replacement bearings. The following year, Federal-Mogul’s involvement in the service business increased substantially with the acquisition of the Watkins Manufacturing Company of Wichita, Kansas. Following this major expansion, Federal-Mogul also purchased the Pacific Metal Bearing Company in San Francisco, primarily to supply its West Coast branches. The corporation acquired the Indianapolis-based Superior Bearings Company in 1936. In 1937 the service division went international with the acquisition of the former Watkins Rebabbitting Limited that had locations in Toronto, Montreal, and Winnipeg, Canada. By 1939 Federal-Mogul operated 53 service branches across the North American continent.

World War II led to further expansion. By 1941 Federal-Mogul plants exhibited signs such as, “Defense Plant, part of the Arsenal of Democracy,” and over 50 of their facilities were devoted to military production. Federal-Mogul plants turned out millions of bearings, bushings and seals for military applications. Their marine division won highly competitive U.S. Navy tests for PT boat propellers and secured orders for over 24,000 Super Equi-poise wheels for every PT boat propeller used by all the Allied navies, including the Soviet Union. From 50 employees in 1942, the marine division grew to a workforce of nearly 1,000 by the end of the war. From September of 1939 to July of 1945, the total area of Federal-Mogul plants had increased nearly threefold. The workforce had grown correspondingly and annual sales were more than double the best prewar amounts.

Employee layoffs after the war failed to impede the additional acquisition of compatible companies. In 1953 Federal-Mogul merged with Bearings Company of America to mark the single largest acquisition in its history. The merger of the Bearings Company brought 610 new employees and approximately 121,000 square feet of manufacturing space into the organization. Even more significant growth occurred in 1955 when the Bower Roller Bearing Company merged with Federal-Mogul. The relationship that had begun with a 1950 sales agreement had culminated into a union of the two businesses. The ink had scarcely dried on the Bower agreement when the corporation announced its third major merger in as many years. The National Motor Bearing Company would join the new Federal-Mogul-Bower Bearing Corporation in 1956. The acquisition earned the company its first listing in the Fortune magazine ranking of the 500 largest American companies. It ranked 350 in 1956 with sales that exceeded $100 million that year.

As the 1950’s drew to a close, the corporation could look back on a decade of substantial growth. The service division alone had gone from 58 to 96 branches, and the number of customers had doubled to over 10,000. The mergers and increased efficiency of the 1950’s had increased annual sales to four times their 1949 level.

Further successes marked the 1960’s. The corporation’s timely response to the changing face of world automobile production ultimately resulted in large dividends. The early 1960’s saw a steady increase in the market share commanded by foreign automobile manufacturers. The worldwide spread of mass production technology, the development of the European Common Market, and increasing nationalism threatened American export sales. Federal-Mogul management noted this trend and in March of 1960 started to invest in foreign manufacturing operations and purchased interests in various major European bearing firms. Domestic expansion also continued and the firm turned more and more to specializing in the highly sophisticated missile market. In 1964 the company opened a new facility that was publicized as the most highly mechanized oil seal plant in the world. In 1965 the company purchased Steering Aluminum, a piston factory, and the Vellumoid Company, a manufacturer of gaskets and gasket materials.

The early 1970’s marked a domestic expansion into the southern states. A highly automated new plant in Princeton, Kentucky opened in late 1970. The 50,000 square foot facility was devoted to production of super alloy metal powders. In 1971 a new plant in Virginia started to manufacture aluminum sleeve bearings while another plant emphasized the manufacture of bimetal bushings and bearings. An additional powdered metal parts plant in Ripley, Tennessee opened in 1972. The following year a new 360,000 square foot plant in Hamilton, Alabama began producing tapered rolling bearings ranging up to eight inches in diameter.

The 1975 recession caused management at Federal-Mogul to reassess its long-term strategy. Earnings were too closely tied to the original-equipment automotive industry which traditionally led the national economy into and out of recessions. However, 1976 brought the beginning of economic recovery. The integration of the international manufacturing operations with domestic product lines paid off and as the decade of the 1970’s drew to a close it was apparent that Federal-Mogul had made a rapid recovery from the 1975 recession. Despite a depressed automotive market, 1979 marked Federal-Mogul’s fourth consecutive year of record sales and earnings.

Tom Russell, the current president of Federal-Mogul, is said to be placing an emphasis on the strategy of diversification. In 1985 the corporation acquired the Mather Company, a manufacturer of high performance sealing products for the automotive and industrial markets and a leader in Teflon technology. The purchase of the Carter Automotive Company, a manufacturer of fuel systems with significant sales, further strengthened Federal-Mogul’s position.

The days when an expanding automobile industry made for a good future in the bearing business have given way to a time when large numbers of stockholders expect constant growth and high dividends. For Federal-Mogul, this will result in a continued strategy of diversification and reorganization in the years to come.

Principal Subsidiaries

Huck Manufacturing Co.; Federal-Mogul World Trade Corp.; Federal-Mogul World Trade, Inc.; Mather Co. The company also has subsidiaries in the following countries: Brazil, Canada, England, France, Italy, Mexico, and West Germany.