General Cable Corporation
General Cable Corporation
General Cable Corporation
Sales: $2.69 billion (2000)
Stock Exchanges: New York
Ticker Symbol: BGC
NAIC: 335929 Other Communication and Energy Wire Manufacturing
General Cable Corporation, with its headquarters located in Highland Heights, Kentucky, is the third largest wire and cable manufacturer in the world, and the largest in the United States, with sales approaching $3 billion a year. General Cable designs, manufactures, and distributes products for the communications, energy, and electrical markets. Its communications’ wire and cable, including fiber optics, is used in a variety of voice, data, and video applications. Its energy cables are used for power transmission either suspended in the air, or laid underground or underwater. General Cable’s electrical wire and cable products are used in the wiring of buildings as well as in common consumer goods. Its more recognizable brand names include Romex, Carol, Aniconda, BICC, and Brand Rex. The company operates a total of 38 manufacturing facilities in nine different countries.
Formation of General Cable: 1920s
General Cable has undergone a number of name changes and ownership arrangements over the years. The original corporation dates back to the 1920s when a dozen cable and wire manufacturers were combined, many of which could boast rich histories of their own. The oldest was the Standard Underground Cable Company, founded by the prolific American inventor George Westinghouse in 1882. In that year, Thomas Edison ushered in the age of electricity when he built the Pearl Street generating station to distribute power to the Wall Street district of Manhattan. Edison relied on direct current, which could travel only short distances, thus requiring a large number of power generating plants. Westinghouse, on the other hand, focused on alternating current, which could be transmitted long distances, required fewer power plants, and could be located in less populated areas. As he did with most of his inventions, Westinghouse formed companies to supply the necessary support products, such as cables in the case of his power generating enterprise. Westinghouse would lose control over most of his companies during the financial panic of 1907.
General Cable came together in two phases. First in 1925 Safety Insulated Wire & Cable Co. of Bayonne, New Jersey, acquired two smaller companies to create Safety Cable Co. After further acquiring two Chicago companies, Safety Cable in 1927 was then combined with Standard Underground Cable and several other companies in a deal executed by the banking firm of Kissel, Kinnicutt & Co. to form the General Cable Corporation. One of the acquisitions was a copper sheet mill that would be unloaded the following year, when the new corporation would also bring yet another cable company into its fold. In essence, this merger of a dozen companies was a banker’s attempt at vertical integration, a move reminiscent of J.P. Morgan’s creation of United Steel. This was a different era, however, and the benefits of combining so many assets in the cable and wire industry were not as apparent.
The many transactions left General Cable saddled with a great deal of debt. Many of its 22 manufacturing plants, spread across 14 different locations, were out of date and virtually worthless, serving only to falsely inflate the corporation’s worth. The integration of a number of operations held some promise for General Cable, which had become one of only six companies with the capability of producing wire from start to finish; but whatever benefits it might derive were offset by a top-heavy management structure, which included 37 corporate officers. Each of the company’s five main divisions operated separately and boasted its own set of highly paid executives. At one point, General Cable devoted a large open room in its New York headquarters to serve as a visiting vice-president’s lounge. Not surprisingly, General Cable’s many executives scrambled for position in the corporate hierarchy.
The flush economic times of the late 1920s covered over a number of potential problems. General Cable posted an impressive profit of $5 million in 1929. With the crash of the stock market and the onset of the Great Depression, however, General Cable was forced to face some hard realities. Because its business was so dependent on copper, the company had focused a good deal of its attention, and hope for profit, on speculation of the raw commodity. Unfortunately, when the music stopped in 1929 General Cable was left holding a huge inventory of copper that it had bought at 24 cents a pound. The price would drop all the way to five cents a pound in 1932, a major factor in the five straight years of losses that the company would suffer.
Dwight Palmer: Steering Company Through the Depression
An executive named Dwight R.G. Palmer, who came to the company through the smallest of the 1925 acquisitions, would change the fortunes of General Cable. With the company on the verge of collapse in 1932 it was Palmer who found a new source of business in the Hoover Dam. The city of Los Angeles had already drawn up plans to build a power line from the dam but lacked the funds to implement it. Palmer helped Los Angeles to get funding from Washington, then won the bid to provide the cable. That work would lead to other major power line contracts at the Bonneville and Grand Coulee dams. As a result of his efforts, Palmer was named president of General Cable in 1933. At odds with the chairman of the board over the company’s speculation on copper and the need to trim fat, particularly in the management structure, Palmer eventually won out. In 1936 the General Cable board named him the chief executive officer of the company.
General Cable enjoyed its best year since 1929 when it posted a $1.65 million profit in 1936, but the rest of the 1930s proved less successful. Like most of American industry, General Cable would have to wait until World War II before it completely overcame the effects of the Depression. As early as 1938 Palmer recognized that war was inevitable, and despite being called a warmonger, he made a public appeal for a defense program. In the meantime, while other companies shied away from military contracts, General Cable became France’s sole supplier of wire until the country fell in 1940; likewise, it became Britain’s first and most important source of wire. When the United States did become involved in the war, General Cable was prepared to ratchet up production to unprecedented levels. Virtually overnight, the company expanded from operating six plants with 2,000 employees to operating ten plants with 12,000 employees, who worked around the clock, seven days a week.
General Cable was recognized for its wartime production. It supplied 80 percent of all communication wire used by the Army Signal Corps and allied armies, a third of all Navy wire and cable needs, and 56 percent of the wire and cable used by the Maritime Commission. In all, General Cable produced ten times more wire and cable during the war than its nearest competitor. When Palmer was told by the Pentagon to cut back on production in 1944 in anticipation of the end of the war, Palmer actually stepped up production and the military bought every inch that General Cable could turn out. Then in May 1945, with the military advising against it, Palmer began to cut back. Projecting that the war would end by September 1, he had but a two-week supply of goods on hand when the Japanese finally surrendered in August, bringing World War II to a close. Thus, when some $66 million in orders were subsequently canceled, General Cable was not left holding excess inventory.
General Cable did not make huge profits, but it came out of the war with a much more solid business going forward. It cut back to operating just six manufacturing plants, finally liquidated facilities that it had closed in the 1930s, and for the next few years worked to eliminate the debt that had hindered its growth in the past. It was not until the 1950s that General Cable initiated an expansion plan. It built new plants in Illinois, California, Florida, and Texas. General Cable also began to acquire other companies. In 1955 it purchased the outstanding stock of General Insulated Wire Works. A year later it added the Clifton Conduit Company, Alphaduct Wire & Cable, and General Insulated Wire Works. In 1957 General Cable acquired the Metal Textile Corporation, and in 1959 the Cornish Wire Company.
In addition to manufacturing its traditional wire and cable products, General Cable now produced galvanized steel wire and strand, terminal housings, and equipment for cable installation and maintenance. It also moved into the communications field. Profits that stood at $3.4 million in 1950 reached $8.7 million by the end of the decade. At its peak in 1956, General Cable posted a $12 million profit.
General Cable underwent both expansion and contraction in the 1960s. The number of plants, which stood at just six in 1950, would reach a peak of 41 in 1967. By 1970 the number would be reduced to 35. General Cable closed some plants while building new ones, as well as forming joint ventures to expand its business overseas. The best year of the 1960s was 1966 when General Cable realized a profit of $31.2 million.
Business was generally sluggish during the lean economic years of the early 1970s. In 1973 General Cable moved its executive offices from Manhattan to Greenwich, Connecticut. The company made a major acquisition in 1976 with the $67 million purchase of Sprague Electric Company, makers of electronic and electrical circuit components, and the largest U.S. manufacturer of fixed capacitors. In that same year, General Cable completed pioneering work with fiber optics cable for the U.S. Air Force.
General Cable — one company with the broadest product and global reach in the wire and cable industry. It’s a new power, built upon diverse resources that are ready to serve a global market. It’s about new ideas sketched on all four hemispheres. And it’s about the world...connected.
In 1978 General Cable made a number of moves that would further diversify its business and launch the company onto a new path. It sold its Power & Control operation to Pirelli Cable Corporation for $58 million in March 1978, then in May acquired Automation Industries for $106 million to gain a presence in engineering and technical services as well as environmental products. In September General Cable raised $53 million on a new issue of stock, which it then used to purchase 2.8 million shares of stock in the British company BICC Limited.
Changing Name to GK Technologies: 1979
To better reflect its new mix in business, the company changed its name in 1979 to GK Technologies (although it legally preserved the General Cable Corporation name). A year later it would see sales reach $1.2 billion and realize a profit of more than $70 million. It also began discussions to sell the company to the Penn Central Corporation, controlled by Cincinnati financier Carl H. Linder, whose company held varied interests in electronics, defense, telecommunications, and energy. In May 1981, Penn Central acquired all of the stock of GK Technologies and merged it with other assets to form a separate unit within the corporation. Penn Central added to its cable and wire businesses during the 1980s, although Linder was experiencing some troubles with his finances. By 1987 one of the businesses he controlled, Los Angeles-based Mission Insurance, was operating under Chapter 11 of the U.S. Bankruptcy Code. In that same year, Penn Central talked about spinning off the Sprague Electrical Company that General Cable had acquired in 1976. Sprague was part of Penn Central’s electronics division, which lost almost $155 million in 1986.
When a downturn in the construction industry in the early 1990s left Penn Central holding an excess in wire inventories, it was the wire and cable assets that were spun off in 1992. Reclaiming the name General Cable Corporation, this new entity was still owned by Linder. After some sparring between Ohio and Kentucky, General Cable was induced by tax breaks to locate its corporate headquarters in Highland Heights, Kentucky. The company, however, did not fare well. It lost more than $69 million in 1992 and another $57.8 million in 1993. General Cable was purchased for $270 million in cash and assumed debt in June 1994 by Wassail PLC, a British manufacturing holding company.
Wassall hired Stephen Rabinowitz, a former General Electric executive, to take over General Cable. He faced a situation similar to that of Palmer 60 years earlier: too many executives operating their own enclaves within the corporation. Rabinowitz quickly cut down the size of the senior staff, as well as inventory and overhead costs. He returned annual sales above the $1 billion mark and, after a net loss in 1994, began to post increasing profits. Rabinowitz developed a “Power of One” strategy, which essentially concentrated on the company’s large customers. General Cable sought to provide one-stop shopping for all wire and cable needs, forming joint ventures and relying on sourcing contracts to fill in the gaps. The most surprising line of business for the new General Cable was the old product of copper-based cable. While many competitors left the field in favor of fiber optics, General Cable found that the need for copper-based products was never higher. Fiber optics was little more than a product that General Cable produced because its customers wanted to buy it and the Power of One concept required it.
In order to concentrate on other areas, Wassail sold off 80 percent of its interest in General Cable through a public stock offering in May 1997. It sold the remaining interest a few months later. Rabinowitz remained in charge of General Cable, which now traded on the New York Stock Exchange under the symbol BGC. The company continued to enjoy healthy growth in sales and profits in both 1997 and 1998. Then in 1999 General Cable made a major acquisition when it purchased the energy cable business of BICC plc for $440 million. BICC was reportedly troubled by takeover rumors and was selling off interests in order to focus on its core construction business. The BICC deal instantly made General Cable one of the largest wire and cable companies in the world. While retaining the General Cable corporate name, the company began operating as BICC General.
The assimilation of the BICC assets, however, did not proceed as smoothly as Rabinowitz had hoped. Although sales almost doubled, topping $2 billion, profits in 1999 fell from $71.2 million the year before to just $34.3 million. In order to pay down debt, General Cable sold off its under-performing BICC-acquired businesses in Europe, Africa, and Asia to a subsidiary of the Italian company Pirelli S.p.A. for $216 million. At the time of the divestiture, the company once again began using General Cable as its go-to-market name. General Cable then moved to expand its business into Mexico, the Caribbean, and Central and South America, using the $23 million purchase of Mexican cable maker Telmag to gain a presence in the region.
Although it lost $26 million in 2000, General Cable posted record sales of $2.7 billion. With a solid management structure in place, and the BICC deal fully digested, General Cable appeared ready to take its place as a global leader in the wire and cable industry.
- Oldest of General Cable companies, Standard Underground Cable, is established by George Westing-house.
- Twelve companies are merged to create General Cable.
- Dwight Palmer is named president and CEO.
- Corporate headquarters are moved from Manhattan to Greenwich, Connecticut.
- Name is changed to GK Technologies.
- Company is acquired by Penn Central Corporation.
- Penn Central spins off wire and cable assets to reform General Cable with corporate headquarters in Kentucky.
- Wassail PLC acquires company.
- General Cable becomes independent via public stock offering.
- General Cable acquires energy cable business of BICC plc for $440 million.
BICC General Cable Company; Carol Cable; GK Technologies; Marathon Manufacturing Holdings, Inc.; MLTC Company.
Alcatel S.A.; Cable Design Technologies; Corning; Pirell S.p.A.; Sumitomo Electric Industries; Tyco International Ltd.
Deutsch, Claudia H., “Rising Stock Price and Profits Reflect a Tough Three Years of Revamping at General Cable,” New York Times, November 28, 1997, p. D2.
Frazier, Mya, “General Cable Returning to Profitable Outlook,” Cincinnati Business Courier, December 8, 2000, p. 24.
“General Cable,” Fortune, October 1947, pp. 99–104, 184–90.
“General Cable to Buy BICC Cable Business for About $440 Million,” Wall Street Journal, April 8, 1999.
Richtmyer, Richard, “General Cable Is on a Roll,” Electronic Buyers’ News, November 9, 1998, p. 33.
Yafie, Roberta C, “General Cable, BICC Linkup Is Synergistic,” American Metal Market, April 9, 1999, p. 4.