Park-Ohio Industries Inc.
Park-Ohio Industries Inc.
Incorporated: 1907 as Park Drop Forge Company
Sales: $371.4 million (1995)
Stock Exchanges: NASDAQ
SICs: 2656 Sanitary Food Containers; 3089 Plastics Products, Not Elsewhere Classified; 3411 Metal Cans; 3462 Iron & Steel Forgings; 3291 Abrasive Products; 5088 Transportation Equipment/Supplies
Entering its 90th year of operation in 1997, Park-Ohio Industries Inc. is a Cleveland, Ohio-based conglomerate with operations in ten states. Under the direction of former dissident shareholder Edward F. Crawford since mid-1992, the company has been transformed from a consistent money-loser and takeover target into a profitable turnaround specialist. The firm’s diverse interests encompass industrial products like forged and machined engine parts, induction heating systems, and industrial rubber components as well as consumer goods like outdoor furniture and lawn care products.
Foundation and Development
Park-Ohio was created through the 1967 merger of Park Drop Forge Co. and Ohio Crankshaft Co. These two Cleveland companies experienced a similar pattern of development during the first half of the 20th century. Established in 1907, Park Drop Forge was the older of the two firms. It manufactured forgings for crankshafts, camshafts, and other engine parts used in large diesel locomotives, trucks, and buses. Dwight Goddard served as Park Drop Forge’s first president and was succeeded by George C. Gordon in 1913. With its specialization in custom forging, Park Drop Forge expanded into new modes of transportation as they developed. In 1927, for example, the company’s motor forgings were used in the Spirit of St. Louis, helping to make possible Charles Lindbergh’s historic solo transatlantic flight. By the late 1950s, Park Drop Forge had more than 500 employees, sales of $9 million, and profits of $900,000.
Park Drop’s future partner, Ohio Crankshaft, was established by William C. Dunn and Francis S. Denneen in a Cleveland garage in 1920. This company’s sales of crankshafts and camshafts for diesel engines increased so quickly that it was able to move into a new building in 1922. Growth during the 1930s was fueled by the development of a proprietary metal-working process using high-frequency electrical current. Ohio Crankshaft created its TOCCO division in 1934 to produce and sell equipment used in this process. To keep up with demand for the new machines, the company added two plants during the 1930s and erected a fourth plant during World War II.
By the mid-1950s, Ohio Crankshaft’s forged parts could be found in tugboats, construction and oil drilling equipment, tractors, trucks, trains, and aircraft brakes. The company generated sales of $20 million in 1956.
Merger in the 1960s
CEO Richard S. Sheetz and President George Bricmont guided Park Drop Forge’s postwar acquisition of its local competitor. Having accumulated a controlling 51 percent stake in Ohio Crankshaft, Sheetz and Bricmont merged the two companies via a 1967 stock swap. The unified companies’ cooperation bred rapid growth. Taking into account the 1971 acquisition of Growth International, Inc., Park-Ohio’s sales increased from $46.2 million in 1968 to $89.9 million in 1973. Net income grew from $1.4 million to $4.6 million during that same period. The merger added Bennett Industries, Inc., a manufacturer of steel and plastic containers for the chemical, oil, and food industries; Castle Rubber Co., a maker of specialty rubber goods; and Globe Steel Abrasive Co., a producer of metallic cleaners used in steel fabrication.
Spurred by the decade’s energy crisis and spearheaded by President Bricmont, Park-Ohio acquired oil and natural gas interests to become energy self-sufficient. By the late 1970s, the company’s more than 200 wells throughout Ohio, Pennsylvania, and New York were producing 37 trillion cubic feet of natural gas and 1.5 million barrels of oil. The company’s multifaceted strategy worked well through the 1970s. Revenues nearly doubled from $90 million in 1973 to $159 million in 1978, and net income grew even faster, from $4.6 million to $10.3 million.
Early 1980s Recession Heralds Tough Decade
Park-Ohio’s many years of prosperity came to an end in the early 1980s, when recession hit the midwestern “Rust Belt” especially hard. Prices of natural gas and oil—by this time a significant segment of the company’s business—went into a precipitous decline. At the same time, the conglomerate’s Ohio Crankshaft subsidiary lost its single biggest client, accounting for more than two-thirds of annual volume. Not surprisingly, Park-Ohio’s sales and profits began to decline. After peaking at more than $200 million in the early 1980s, revenues dipped to less than $150 million in 1983, the year the company suffered a net loss of $5.6 million.
In light of the economic environment, Park-Ohio asked employees at two Ohio Crankshaft plants to accept wage, vacation, and benefit concessions. Workers, who considered the plants’ steadily shrinking employee rolls and work rule changes “union-busting” tactics, balked at the proposals. In July 1983, more than 100 United Auto Worker members employed at the Ohio Crankshaft factory in Cleveland went on a protracted strike marred by violence and frequent legal tangles. Production at the Cleveland TOCCO plant was transferred to a new facility in Alabama, and Park-Ohio hired replacement workers at the crankshaft facility.
Although the national economy improved over the course of the decade, Park-Ohio’s performance only worsened. The company ended up in the red in five out of the six years from 1986 to 1992, accumulating more than $87 million in losses. In 1989, Value-Line downgraded the company’s stock to a speculative investment. Led by local businessman Edward F. Crawford, some unhappy shareholders began to call for management changes. After a series of late 1980s suits and countersuits, Crawford won a seat on Park-Ohio’s board of directors in 1989.
In 1988, the company hired Stanley V. Intihar away from a 30-year career with TRW’s automotive division. Intihar led a return to Park-Ohio’s traditional manufacturing focus, selling the company’s money-losing energy interests to Atwood Resources Inc. for $29 million in 1988. The company took a $29.7 million loss on the transaction. Intihar succeeded Richard S. Sheetz, a 24-year veteran of Park-Ohio’s chief executive office, in 1991. The new leader quickly spun off unprofitable steel abrasives operations and announced his intention to focus on what he considered the “core business,” Bennett Industries. Although they reduced revenues to $120 million by 1992, these divestments freed up sorely needed capital for debt reduction, new production equipment, and other physical plant improvements.
But before these actions could bear fruit, Intihar resigned without comment. Park-Ohio Director Thomas McGinty assumed corporate leadership on an interim basis. Combined with all of its other weaknesses, the vacancy at the top made Park-Ohio particularly vulnerable to hostile takeover. Over the course of the next few months, the company thwarted several buyout overtures while sorting out its options. In the middle of 1992, the board of directors and shareholders voted to ratify a plan formulated by one of their newest colleagues, Edward Crawford. Crawford proposed that the firm purchase his privately held Kay Home Products and elect him chairman, chief executive officer, and, incidentally, lead shareholder. The subsequent stock swap was the first step in Park-Ohio’s transformation from a weak business riddled with red ink into an aggressive, efficient turnaround expert.
Reorganization Brings Return to Profitability in 1990s
Although he was only 53 years old in 1992, Crawford had started out in business in 1962 with a steel container concern. Under the aegis of Crawford Group, Inc., he later diversified into roofing materials and, eventually, into consumer leisure goods. By the early 1990s, his Kay Home Products manufactured barbecue grills, patio tables, and lawn spreaders. It brought Park-Ohio $15.5 million in annual revenues, $405,600 in profits, and a measure of diversification to even out the parent company’s cyclical core businesses.
Within six months of taking the helm at Park-Ohio, Crawford had begun a sweeping reorganization. He reduced the board of directors from ten to nine members, brought in a new generation of managers, and instituted $400,000 worth of cost savings each month. Although the company still suffered a loss on 1992, Crawford’s first address to his fellow shareowners emphasized that Park-Ohio enjoyed a low level of debt and high capacity for profitable growth.
Crawford was also credited with bringing the nine-year strike at Ohio Crankshaft (by this time the longest walkout in UAW history) to its conclusion. Union officials and management agreed that the key to the settlement was Park-Ohio’s dismissal of its hard-line, anti-union law firm. By the end of 1992, the parties had ratified a three-year agreement that featured company-funded health and retirement benefits as well as pay increases. About half of the original picketers had endured the record-breaking conflict.
Acquisitions, New Products Expected in the Mid-1990s and Beyond
In 1993, Crawford set the firm on a path of growth through acquisition, targeting local companies, for the most part, that had untapped potential or that complemented Park-Ohio’s core operations. Within that year alone, the firm made seven separate acquisitions, increasing annual sales to $149 million by the end of 1993 and, perhaps more important, returning the parent company to the black with a $6 million profit.
Flush with his success, Crawford set a sales target of $500 million for the end of the decade and then made a large stride toward that goal with the 1995 acquisition of RB&W Corp. (formerly Russell, Birdsall & Wood). This $60 million stock swap, Crawford’s largest transaction to date, was the company’s only acquisition for the year. Park-Ohio gained another $8 million toward its $500 million sales goal with that year’s acquisition of northeast Ohio’s Geneva Rubber Co. In 1996, the conglomerate began to fine-tune its family of companies through the sale of Bennett Industries, Inc. to a subsidiary of Australia’s Southcorp Holdings Ltd. Crawford said that he planned to use the proceeds of the divestment for new acquisitions. In the fall of 1996, in fact, Park-Ohio made a $170 million cash bid for Sudbury Inc., a northeast Ohio firm with about $300 million in annual sales.
Although corporate transactions were clearly Crawford’s primary expansion strategy, Park-Ohio also sought growth through product diversification. In the spring of 1996 the company created a new subsidiary, Park-Ohio Biomedical Group, to manufacture a patented prescription drug container. Created by a team of physicians, this vial featured a one-piece child safety cap that was purported to be easier for arthritic and elderly adults to remove.
Tangible signs of Crawford’s successful turnaround abounded. Park-Ohio’s stock appreciated from about $2 in late 1990 to more than $17 in early 1996. And not only did the company stay in the black, but its net income quadrupled from $6 million in 1993 to $24 million in 1995. Sales more than doubled during the same period, from $147 million to $371 million. It appeared mid-decade that the company had finally found a reliable formula for profitable growth.
Ajax Manufacturing Company; Blue Falcon Forge, Inc.; Castle Rubber Company; Cicero Flexible Products; General Aluminum Mfg. Company; Gilchrist Kustom Molders, Inc.; National Automatic Pipeline Operators, Inc. (50%); Park-Ohio Bio-Medical Group, Inc.; The National Pipe Line Company (60%); RB&W Corporation; Steel Abrasives, Inc.; TOCCO, Inc.
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—, “Suitor Makes Conditional Bid for Park-Ohio,” Plain Dealer, March 4, 1992, p. 2G.
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—, “Companies Have Much in Common,” Plain Dealer, October 27, 1994, p. 1C.
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—, “Park-Ohio Rejects Takeover Offer in Spite of Shareholder Urging,” Plain Dealer, March 27, 1992, p. 6F.
—, “Park-Ohio To Sell Bennett Industries Unit to Australians,” Plain Dealer, May 30, 1996, p. 1C.
—, “Park-Ohio Unveils Easier-To-Open Prescription Vial,” Plain Dealer, March 29, 1996, p. 1C.
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—April Dougal Gasbarre