Norton Company

views updated

Norton Company

1 New Bond St.
P.O. Box 15008
Worcester, Massachusetts 01615-0008
(617) 795-5000
Fax: (617) 795-5741

Private Company, Wholly Owned Subsidiary of Compagnie de Saint-Gobain
Incorporated: 1885 as the Norton Emery Wheel Company
SICs: 3291 Abrasive Products; 3545 Machine Tool Accessories

The Norton Company is quite possibly the worlds leading producer of grinding wheels and coated and bonded abrasives. It is the leading producer of silicon carbide. From its inception as an offshoot of a small pottery works in Worcester, Massachusetts, in 1885, Norton pioneered the development of new abrasives. It evolved from an owner-operated concern in which the original partners were succeeded by their sons into a modern multinational corporation with manufacturing plants in over 20 countries. In 1989 it was taken over by the French conglomerate Compagnie de Saint-Gobain.

The Norton Company illustrates an interesting characteristic of emerging technologies: they often arise from unexpected quarters. In Family Firm to Modern Multinational, Charles W. Cheapes history of Norton, he says, Manufacturing fell to new people and not to firms like Pike [Company in New Hampshire] and the Cleveland Stone Company that dominated the production of natural abrasives. The older enterprises had merely quarried and shaped their output. They lacked the manufacturing skills and experience required for the new product, including the proper selection of bond and abrasive, their mixture in correct proportions, and their bonding at proper temperatures. All of the skills that Cheape enumerates are skills that a potter would either have or could easily acquire.

Frank Norton had owned a small pottery in Worcester since about 1858. He came from a family of potters in Bennington, Vermont, and had established a partnership with Frederick Hancock. Norton employed his three sons, his son-in-law, and several journeyman potters. The stock in trade of F.B. Norton Stone Ware consisted of stoneware pots, bottles, pitchers, jars, and jugs. In 1873 a depression hit the United States economy, and several of Nortons potters started experimenting with grinding wheels as a way to generate income. Norton had seen a silicate grinding wheel produced by a company in Detroit, and the story goes that he bet his crew a bucket of beer that they could not duplicate it.

In 1873 a Swedish immigrant potter named Swen Pulson mixed emery with slip clay and fired three wheels at about 2300 degrees in the Norton kiln, one of which vitrified successfully. The clay melted and the emery bonded or fused with it.

Frank Norton was unenthusiastic about the grinding wheels, mainly because he did not want to take a chance on an unproven product with an unknown market. Nevertheless, he patented Pulsons process in 1877 and started production in 1878. The wheels took a back seat to pottery and often were only fired when there were no pottery orders. Frustrated, Pulson left the company. Norton hired another Swede, John Jeppson, to take his place.

Jeppson soon became the acknowledged master at setting kilns and firing emery wheels. As business expanded, Norton hired Walter L. Messer to sell and promote the emery wheels throughout the country. He set up a distribution system that offered huge discounts and extremely easy (to the point of laxness) credit schemes, reasoning that because these wheels were consumed in use, easy terms would attract a loyal clientele. By 1881, largely as a result of Messers efforts, the company was able to expand and hire more workers. By 1882 Nortons wheel business far surpassed pottery sales, and the company probably produced 10 percent of the entire industry output.

Frank Norton never involved himself in the affairs of the outsiders he had hired to make emery wheels, and the success of the new enterprise caused friction. In 1884, Jeppson, Messer, and Charles Allen, who was brought in to run the business end of the enterprise, offered Norton $10,000 for the entire wheel operation. In consideration of several factors, including ill health and debt, Norton was more than happy to sell. In May 1885 the Norton Emery Wheel Company was incorporated. In order to raise the money and capitalize the new company, the three brought in four new partnersMilton P. Higgins, George I. Alden, Fred H. Daniels, and Horace Young.

The business style of the four owner-operators of the new firmJeppson, Allen, Higgins, and Aldenis described by Cheape as follows: Like New England merchants in the seventeenth century, they believed that business required careful attention, enterprise with close scrutiny and risk avoidance, and growth by reinvestment while maintaining a strong cash reserve. This tension between conservatism and enterprise came to be an established characteristic of the owner-operated company.

In 1886 the partners built a new factory on the outskirts of Worcester, where land was relatively cheap, yet accessible to two rail lines. To hold down costs, they recruited students from Worcester Polytechnic Institute to do the surveying, and in 1886 the partners forewent the yearly dividend. These parsimonious measures enabled the partners to virtually self-capitalize the project. Another indication of the partners general mindset is apparent upon examination of the lack of compensation the partners bestowed upon themselves in these early days. President Higgins and treasurer Alden were not paid a salary until 1892, when it was clear the company would succeed.

The new kilns at the factory were highly efficient for the time and enabled the company to standardize production. Heat could be controlled to a great extent, allowing the production of wheels with a variety of grain, grit, and grade characteristics for different jobs.

Marketing was at least as important as production. The company introduced a numbered grading system and distributed catalogues and pamphlets to customers, explaining in detail the characteristics and uses of each wheel. The permutations of 26 grades, ten faces, 15 thicknesses, 23 diameters, and 21 grits was staggering. By the early 1890s, Norton stocked the largest grinding wheel inventory in the world. In addition, Norton consultants spent whatever time necessary on site to advise on special orders and handle customer questions.

Not only did Nortons sales expand in the United States, where it opened distributorships in Chicago (1897) and New York (1904), but also in Europe. In 1891 Charles Allen negotiated distribution contracts that spread Norton wheels through England, France, Germany, Russia, Austria, Belgium, and Sweden. Sales in Europe are credited with saving the company during the depression of 1893.

By 1900 Norton was the undisputed industry leader. It employed more than 200 people and enjoyed sales of $423,000. The company was profitable each year (including 1893) and paid conservative dividends each year (with the exception of 1886, the result of the move). What was not paid out in dividends went into reinvestment and cash reserves. These cash reserves allowed the company to self-finance construction of an office building in the 1890s and an abrasives plant in 1900.

However, the firms conservatism also had a downside. It sometimes passed up innovation. For example, in 1891 Edward Acheson sent an electric current through a mixture of clay and powdered coke. The resultant crystals, which he dubbed carborundum, scratched glass, and, according to Acheson, diamonds. This new technology opened the way for artificial abrasives: the components of grinding wheels could now be controlled in ways that naturally occurring compounds could not. Norton turned down Achesons request for financing. Acheson then turned to banker Andrew Mellen for help in forming the Carborundum Company, and by the early 1900s, Achesons company was Nortons major competitor, with a big head start. It was not until the early 1900s that Norton entered into the realm of artificial abrasives.

In 1900 the company did, however, enter into a partnership with Charles H. Norton (no relation to Frank Norton) and established the Norton Grinding Company. The machine tool business was quite a departure for Norton and was undertaken gingerly. Charles Norton was a machinist who came to the company with an idea for building stationary grinding machines that could replace expensive workmen. What they got in 1901 was a versatile production grinder capable of high volume. Moreover, the grinder was able to work with pieces up to 1200 pounds and had the ability to grind to the unheard of tolerance of .00025 inch. Sales were slow at first because of resistance in the machine shops, although there were some sales to early auto makers. By 1909 Norton Company (it changed its name in 1906 after it began producing artificial abrasives) had loaned the new company some $263,000 in cash, equipment, and services. The company was slow to recoup this investment.

At the turn of the century, Norton was merely the largest enterprise in a tiny industry. Grinding and the use of abrasives was seen primarily as a way of smoothing rough edges, not as a precision tool. That was to change with the popularization of the automobile. Prior to the automobile, it was very rare for a job to require tolerances tighter than .001 inch. A skilled machinist could, with great effort and concentration, achieve that on a lathe. However, automobile engines and other parts, such as crankshafts, required tolerances of .00025 inch, and the metals used were hard steel alloys of carbon, tungsten, nickel, chromium, and vanadium. These could only be tooled efficiently, accurately, and economically by grinding.

This was where Charles Nortons production grinders made all the difference. In 1914 Henry Ford purchased 35 grinders for $30,000. In 1920 Ford is said to have commented that the abrasive processes are basically responsible for our ability to produce cars to sell for less than a thousand dollars. Were it not for these processes these same cars would cost at least five thousand dollars, if indeed they could be made at all.

In 1927 Norton estimated that 95 percent of an automobiles moving parts required grinding. At that time, the industry bought about 55 percent of Norton Grinding Companys output and had more than 68,000 grinding machines. In fact, the automotive industry had became Nortons biggest customer.

Automobiles, though, were not the only factor in Nortons growth. Norton, like many other companies, received a tremendous boost from World War I. Tanks and airplanes were among the vehicles whose parts required grinding. From a total industry output of $1.3 million in 1899, the abrasives industry reached sales of more than $30 million in 1919, the year in which Norton Grinding Machine merged with the Norton Company. Another factor in Nortons growth was the increase in the size of the machine tool industry to cope with industrial demand. Machine tools had always been a significant user of abrasives.

In the 1920s, however, Norton failed to maintain its role as an innovator in grinding machines. Its piece-by-piece construction of grinders was at odds with the needs of industry. Some products went 28 or more years without significant improvements. It also gave up leadership and business to companies that developed more efficient centerless external grinders. In part, this stagnation was due to managements (primarily Jeppson and Higgins, the owner-operators) loyalty to their original product, abrasives. Charles Norton, after all, had been an outsider. And Charles Norton himself opposed the new machines, favoring his own.

In the early 1930s, in an attempt to correct the situation, the company reorganized and redesigned its product line, although resources were withheld from the machine division and put into the construction of abrasives plants. In 1931 Norton purchased the Behr-Manning Company of Watervliet, New York. This company, Nortons first acquisition, added coated abrasives and sandpaper to Nortons line. In fact, these products became the most profitable for Norton well into the 1950s, while the companys grinders and bonded abrasives languished. However, the two companies rarely cooperated or pooled their talents and know-how. Behr-Manning became a leader in the development of belt sanders in the 1930s, although its main competitor, 3M Company, consistently led it in sales. By 1951 the division manufactured more than 30,000 items, with sales of close to $30 million. By the late 1950s, Behr-Manning monthly profits actually outstripped those of the parent company. Behr-Manning was eventually absorbed into Norton.

Overseas expansion, begun in 1891 by Charles Allen, grew slowly and for a long time was mainly concerned with sales. Nortons first foreign plant, the German Deutsche Norton Gesellschaft, was built in 1909. Its production was disrupted by World War I, and after the war Norton was hesitant to upgrade it. Norton did build a plant outside Paris, and established facilities in Canada and Japan in the 1920s. In general, Norton considered these operations peripheral, and in any case, in order to maintain secrecy, all bonds and grains were made and shipped from Worcester.

In 1929 the ten largest abrasives manufacturers formed Durex Abrasives Corporation, whose purpose it was to market American abrasives overseas. Over the years, this expanded Nortons market to a greater degree than it could have accomplished on its own, at least during the initial period. In the 1950s, 1960s, and 1970s, the company built abrasives and other plants throughout the world. By the 1990s, it had about 90 such facilities.

In 1970 Norton was still a family company; the third generation of Jeppsons and Higginses still ran it. However, the need to decentralize authority and bring on competent outsiders to manage the company had been evident since the 1950s and before. Several steps were undertaken. First, the company went public in 1962. This step enabled the company to, among other things, create a bonus plan that would attract professional managers. The company then recruited professional managers to oversee the company. It then diversified into new industries, including the manufacturing of safety products and petroleum and mining tools. Finally, it decentralized authority over the various parts of the business.

Among the companies that Norton acquired in the 1960s was the National Research Corporation (NRC) in Cambridge, Massachusetts. This company was involved in aerospace research and in areas such as the manufacture of transistors and semiconductors, but had also developed such consumer products as frozen orange juice and vacuum lens coatings for binoculars and periscopes. The hope was that the acquisition would push Norton into the consumer market. In fact, NRC began to turn out such products as space blankets, developed from space suit materials, as well as other profitable items. Its success in these endeavors encouraged further diversification. NRC also helped reorganize Nortons research operations.

By the mid-1960s, the contribution to total sales of abrasives had dropped 15 percent as plastic tubing, vacuum equipment, space blankets, rare metal coatings, and construction equipment contributed an increasing share of the companys revenue. However, by the end of the decade these sales faltered and the firm was forced to borrow for working capital. Fluctuations continued through the 1970s and 1980s, in part because of the cyclical nature of the abrasives industry, but also because of increased competition from European and Japanese manufacturers.

In 1976 Norton acquired the Christensen Company of Salt Lake City, Utah, whose core product was diamond drill bits. Under Norton, Christensen developed a new line of downhole petroleum tools used in ocean exploration. By 1980 Christensen sales had increased 107 percent and contributed 17 percent of sales and 30 percent of Nortons total income.

In March 1990 Norton became the object of an unsolicited takeover bid by the British conglomerate BTR P.L.C. The company offered $1.64 billion to stockholders ($75 per share). After looking at BTRs performance, Norton was determined to remain independent, even filing suit in federal court to prevent BTR representation on the board. However, in April, Compagnie de Saint-Gobain, a French holding company with which it had products in common, made an offer of $1.9 billion ($90 per share), with certain guarantees about how the company would be run. This offer was accepted, and the acquisition was completed in August. Saint-Gobain was founded in 1665 and is one of the worlds leading industrial companies. In 1991 it had sales of 75 billion and net income of 2.5 billion.

Nortons 1989 annual report, the last before the takeover, indicated steady rises in sales each year since 1985 to $1.53 billion, with net income of $105 million, the healthiest for Norton in ten years. While sales were down in 1991, Saint-Gobain planned to increase Nortons presence in Europe and the rest of the world through aggressive marketing. It also expanded Nortons role in industrial ceramics and its base product, abrasives, both of which Saint-Gobain saw as vital to its own growth. For example, the company opened a new ceramics plant in Worcester in 1992.

After the acquisition of Norton by Saint-Gobain, the company underwent a legal reorganization in order to bring its various parts into the parent company in a rational way. Saint-Gobain formed a new abrasives branch, made up of Norton Abrasives businesses, and established branch headquarters in Worcester, Massachusetts, the first and only Saint-Gobain branch headquartered outside France. Other, non-abrasive businesses of Norton, such as plastics and ceramics, are being incorporated into the previously existing industrial ceramics branch of Saint-Gobain.

Further Reading

Cheape, Charles W., Family Firm to Modern Multinational: Norton Company, a New England Enterprise, Cambridge, MA: Harvard University Press, 1985.

Greenhouse, Steven, Saint-Gobain Pushing Worldwide Growth, New York Times, April 26, 1990.

Hylton, Richard D., Norton Board Rejects $1.64 Billion BTR Bid, New York Times, March 30, 1990.

$1.9 Billion Bid Taken By Norton, New York Times, April 26, 1990, p. Dl.

Prokesch, Steven, Norton Gets BTR Bid; Stock Soars, New York Times, March 17, 1990, p. 33.

Kenneth F. Kronenberg

About this article

Norton Company

Updated About content Print Article


Norton Company