Kidde, Inc.

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Kidde, Inc.

Park 80 West, Plaza Two
Box 5555
Saddle Brook, New Jersey 07662
(201) 368-9000

Wholly-owned subsidiary of Hanson Industries
July 1, 1968 as Walter Kidde & Co., Inc.
Employees: 32,000
Sales: $2.356 billion
Market Value: $769 million
Stock Index: New York

Kidde, Inc. was not always a billion dollar conglomerate. In fact, Walter Kidde began his company in 1900 with only $300 in savings, a degree from Stevens Institute of Technology, and an interest in the construction industry. However, Kiddes business acumen helped push Kidde, Inc. into the ranks of Fortune 500 companies within the United States.

The New York construction company that Walter Kidde established in 1900 grew quickly into another area of interest. Kidde began to expand into the business of fire fighting, which became the catalyst for his companys rapid growth and development. In 1918, Kidde, Inc., then Walter Kidde & Company, purchased the rights to the Rich system for detecting fires on board ships. This method of extinguishing fires by steam had one major flaw, namely, steam caused extensive damage to the ships cargo. Kiddes answer to this problem was to use carbon dioxide instead of steam as a means of smothering the fire without damaging the cargo.

While Kidde had made advances in solving the problems confronting effective fire fighting, he still faced another major hurdle. The carbon dioxide was not being released quickly enough from its container and therefore the extinguishing process was not completely successful. In 1923, Kidde solved this problem by purchasing the patent rights for a siphon device that allowed quick release of the carbon dioxide. With this new addition to the design of its extinguishers, Walter Kidde & Company achieved two manufacturing firsts: in 1924 the first portable carbon dioxide fire extinguisher was produced and in 1925 the first built-in industrial system was installed. In addition, the company began winning government contracts. In 1926 Walter Kidde & Company, along with the Navy, designed a system to protect airplane engines against fires.

With these new developments in the fire extinguisher aspect of the company, Kidde separated the fire-fighting business from the construction business but kept the original name. This was just the beginning of the multi-interest outlook that was later to become the trademark of Kidde, Inc.

The 1930s were profitable years for Walter Kidde & Company. By 1940 the company had 200 sales agencies in the United States and major cities in Europe, South America, Africa and Asia. Subsidiary sales companies were also located in Canada, Germany, and Italy, and two factories were producing products in England.

In particular, World War II had a significant impact on the growth of the company. Prior to the war 30% of the companys extinguisher sales went to the U.S. government. In 1938 Walter Kidde & Company had its best year with sales of $2 million and a work force of 450. It was in this year that Walter Kidde wondered whether or not he was smart enough to run a $5 million business, as he pondered the inevitable expansion of his company.

Five short years later, sales far exceeded the $5 million mark. By 1943 Walter Kidde & Company was producing $60 million worth of war equipment and the work force had increased to 5,000. The transition to war-time production was not an easy one; however, once the war began, production and demand for Kiddes products grew rapidly. So rapidly, in fact, that production of war equipment could not meet demand, and the company was often behind schedule. This was in part due to the companys need to adapt their peace time products to war uses.

Although production may have been slower than demand, the products manufactured by Walter Kidde & Company did play an important role in the war. In addition to the fire detection and extinguishing equipment for tanks, planes and ships, Walter Kidde & Company also manufactured inflation devices for life rafts and safety belts. The company is credited with manufacturing the automatically inflated rubber life boats from which Captain Eddie Rickenbacker, a World War I hero and flying ace, and his seven companions, were rescued after spending three weeks in the South Pacific when their airplane ran out of fuel.

Walter Kiddes concern over whether he was capable of running a $5 million business was clearly answered by 1943. The company was headed for a profitable future. While Walter Kidde may have been reticent about his potential as a businessman, his ability to discern future trends and developments assisted him in the growth of his own company. In 1939 he predicted the demand for labor-saving machinery, and the future of the one-man-push-button-controlled plants that would create individual working efficiency.

Kiddes ability in the private sector was enhanced by his involvement in the public sector. He was chairman of the board of trustees of Stevens Institute of Technology; member of the New Jersey advisory board of the Public Works Administration; and president of the New Jersey Chamber of Commerce from 1935 to 1938. He also declined an offer to be the New Jersey republican candidate for governor in 1927. His interest in making things work is underlined by his success in reorganizing the bankrupt New York, Susquehanna & Western Railroad, of which he was a trustee, and restoring it to a paying basis in 1937. In 1943, the year his company reached peak production figures, Kidde died at the age of 65 from a heart attack, and the company was handed over to his son John Kidde.

As expected, the drop in production at the end of the war caused a dramatic drop in Walter Kidde & Company sales. In the 1950s the company diversified into areas of machinery and tool manufacturing, siphon devices for consumer and medical uses, and aircraft accessories. Fire extinguishers were still an important part of the company. However, in general, the activity of the company had markedly decreased. In 1959 sales reached the $40 million mark and did not change until 1964 when a new president was brought on board.

In January of 1964 there were several new changes at Kidde, changes that would affect the size and outlook of a company that had not experienced many since the war. Although Walter Kidde & Company was considered to be a firmly established company with an excellent reputation, it was also considered to be a company that needed direction.

Fred Sullivan, at that time an officer and director of the large conglomerate Litton Industries, was attracted to the idea of defining a new direction for the company. Sullivan was so interested in this new opportunity that he succeeded the late Robert L. Dickson, who had been president of the company since 1961.

Sullivans rise to Kiddes top leadership is a classic story. He began by working as a $14-a-week clerk during the Depression at Monroe Calculating Machine Company, which was then the number one company of its kind. After 10 years at night school, Sullivan earned his BA degree at Rutgers, and a rare MBA at New York University. At the age of 39 he was president of Monroe. When Monroe merged with Litton Industries in 1958, Sullivan became an officer and director of the company until he left in 1964 to assume a new position at Walter Kidde & Company.

From the time Sullivan began his presidency at Kidde, acquisition and growth were elements of his primary strategy. His management style is described by Forbes magazine as no-frills, tight-with-a-buck, keep it lean and liquid. This style meant reducing the work force by 10% and reorganizing the entire company upon his arrival at Kidde.

Sullivans reorganization plans included the need to think in terms of customer markets instead of product lines. Prior to Sullivans presidency, the company had separate lines for burglar alarms and fire protection services. One of the first initiatives of the company reorganization was to combine these two lines. This new definition of the protection field resulted in acquisitions of lock and safe companies by the close of the 1960s.

Under Sullivans direction Kidde quickly grew from a fire extinguisher concern of $40 million in annual revenues in 1964 to $400 million by 1968, when the company was incorporated as Kidde & Company, Inc. Some of the larger acquisitions of the 1960s included Dura Corporation, which manufactures auto parts and testing equipment; Lighting Corporation of America; and Grove Manufacturing Company, which manufactures hydraulic cranes. In particular, Grove became an important acquisition for Kidde because of its lucrative contracts with the U.S. government in the 1980s.

Kiddes fast rate of growth placed it in a unique position. While most large companies reach the Fortune 500 list after many years of development, Kidde just missed this notable ranking in 1965, a year after Sullivans move into the company. Fortune magazine reported that Kidde was ranked 501 on the list that year and missed being 500 by $60,000, the price of one of Kiddes burglar-alarm systems for a large company. One year later, Kidde not only made it onto the list, but ranked 283.

One of Kiddes most problematic acquisitions was made in 1969 when it purchased U.S. Lines, a major, but financially troubled transportation system. Sullivan was later to label this acquisition, a grave mistake. It was an acquisition that resulted in eight years of frustration and litigation. The U.S. Lines acquisition was, at the time, an attractive investment for Kidde because of its future earning potential as a container transportation system.

Although Kidde was apparently looking into the future when it made this acquisition, it did not seem to fit the Kidde formula of buying companies with a proven record of successful growth faster than the GNP. Kidde competitors looked on in disbelief, feeling sure that Kidde had decided incorrectly. However, Sullivan looked past the operating losses of U.S. Lines and into the future of container transportation, which he believed represented a major building block in a new kind of transportation system that is coming.

When U.S. Lines lost $1.5 million in 1970, Kidde began to look for a buyer. It was not until 1978 that a sale took place, and even though the shipping company had started to earn money again in the 1970s, Kidde was determined to sell it. The buyer was Malcolm McLean, who had founded Sea-Land Service, Inc., one of the U.S. Lines competitors. U.S. Lines was sold for $111 million, and the general analysis of the sale was that Kidde, and Sullivan, had managed to turn a potential disaster into a profit.

Kiddes sale of U.S. Lines was timely. With the emergence of the recession Kidde found itself in the enviable position of being in good in financial condition. This was also due to Kiddes decentralized approach and the careful acquisitions made in the late 1970s. Overall, Kidde purchased ten businesses in 1979, one of which included Victor Comptometer, which was right behind Sharp Electronics, the leader in sales of desktop calculators.

By 1980 the company had adopted Kidde, Inc. as its title and was making solid profits in its recreational and consumer lines, such as Faberware cookery, Jacuzzi water therapy equipment, Bear archery equipment and Sargent Locks. Sullivan was not concerned that the company was too diversified. He believed that his decentralized approach to managing the Kidde subsidiaries helped to keep the subsidiaries responsible and profitable. The group managers are considered to be corporate-level executives who have offices at the leading corporation within their group, and not at the New Jersey headquarters. This management style allows Sullivan to maintain control of the subsidiaries, but it also allows for decision-making at the local level.

While consumer and recreational products were doing well for the company, Kidde made a move away from this market in 1981 into the energy and industrial markets. Kiddes Grove Manufacturing purchased Oilfield Industrial Lines Inc. that same year and began its oil rig business. Although Kidde was affected when the price of oil dropped in 1982, the company promptly moved into oil and gas exploration as a way in which to establish a market for its own rigs. However, the plan failed, and the blame was placed on the explorers, who were considered to be novices. This failed expansion into oil and gas exploration resulted in the sale of five operating units to compensate for the 1985 losses of $400 million.

While Kiddes entrance into the oil industry was not successful, and its future financial stability is questioned because of such a major loss, the 80 new businesses that have been acquired by the company since Sullivan joined the company in 1964 have established Kidde as a solid, diversified conglomerate. Even though new developments for Kidde Inc. depend on its ability to recover from the oil and gas exploration setback, managements policy of continued diversification and acquisition will play an important role in determining its future earnings.

In July 1987, Sullivan announced that Kidde was studying options such as reorganization or selling off some or all its assets, and in August Hanson Industries, the US arm of Hanson Trust of the UK, bought Kidde in a $1.7 billion deal. Sir Gordon White, the chairman of Hanson Industries, commented on the good match of the two groups operations, and said that Kidde would be kept largely intact. Some of Hansons previous takeovers, however, have been paid for in part by disposing of unwanted assets, and it remains to be seen how many of Kiddes assets will be sold.

Principal Subsidiaries

Walter Kidde Sales & Service Co.; S.R. Smith Co., Inc.; Globe Security Systems Inc.; E.J. Burke Security Systems Inc.; Globe Protection Inc.; Inter-State Bureau of Investigation Inc.; Interstate Detective Agency Inc.; Interstate Service Corp.; Interstate Security Services Inc.; W.K. 38, Inc.; Thexnrer, MI; Tucker House wares, ML; S.R.M. Business Svces, Inc.; S.R.M. Business Svces, Inc.; Oilfield Pipe & Supply Co.; Oilfield Industrial Lines Inc.; Kidde Systems, Inc.; Kidde Recreation Prod., Inc.; Kidde Automated Systems, Inc.; The Jade Corp.; Input/Output, Inc.; Walkers-Roberts Corp.; W.K., Inc.; W.K. 64, Inc.; Republic Creations, Inc.; Total Ltd.; Merit Protective Service Inc.; Reliable Sentry Services Ltd.; Southern Security Services Inc.; Southern Security Devices Inc.; J.H. Sparks Inc.; Deena Products Co.; Devine Lighting Inc.; Dura Steel Products Co.; Fashion Inc.; Jacuzzi Inc.; Jacuzzi Whirlpool Bath Inc.; Jet-Phillips Inc.; Wright Light, Inc.; Keystone Lamp Mfg. Corp.; Kim Lighting Inc.; Marvin Electric Mfg. Co.; Mobilite Inc.; Piedmont Moulding Corp.; Progress Lighting; Rexair Inc.; Circle Steel Corp.; Cook Pump Co.; Grove Manufacturing Co.; Manlift Inc.; National Crane Corp.; South Texas Equipment Co., Inc.; Grove Beco Corp.; Associated Laboratories Inc.; Bayless Stationers, Inc.; Bright Star Industries, Inc.; Business Products Inc.; Chatas Glass Co., Inc.; Craig Systems Corp.; EAM Inc.; Kidde Consultants Inc.; Kidde Credit Corp.; Kidde Consumer Durables Corp.; Tose Inc.; Treher-Montague, Inc.; W.D. Byron & Sons, Inc.; Kidde Holdings, Inc.; Newport Plastics Corp.; Fenwal Inc.; Richards Manufacturing Co.; Shadeco, Inc.; Spartus Corp.; J.H. Spaulding Co.; White-way Manufacturing Co.; Vigon Lighting Inc.; The ERTL Co.; Vanity Fair Industries Inc.; Nissen Corp.; Universal Gym Equipment Co.; The Valley Co.