Trinity Industries, Incorporated
Trinity Industries, Incorporated
Incorporated: 1933 as Trinity Steel
Sales: $1.19 billion
Stock Exchanges: New York
SICs: 3743 Railroad Equipment; 3441 Fabricated Structural Metal; 3731 Ship Building & Repairing
Trinity Industries, Incorporated, is a diversified manufacturer of heavy metal products. The company’s six basic business segments comprise rail car leasing and the production of rail cars, marine products, structural metal products, pressure and non-pressure tank containers, and metal components. Trinity is a leading rail car manufacturer in the United States, controlling nearly half of the national production capacity for freight cars. Tank cars and hopper cars are leading products. Marine products such as commercial boats, barges, and offshore service vessels for the United States government make up the company’s second largest business segment, generating about 17 percent of revenues. Pressure and non-pressure containers for gas and chemical storage, and structural products used in construction of highways, bridges, and buildings each account for 12 percent of revenues. Metal components such as weld fittings and container heads currently make up about eight percent of the company’s sales, with the remaining five percent coming from rail car leasing operations.
Trinity Industries was formed in 1958 when the Dallas Tank Company merged with Trinity Steel Company, which made metal products for the petroleum industry; the name was changed to Trinity Industries in 1966. The company has been run by W. Ray Wallace since its first year. Wallace had joined the original Trinity Steel in the late 1940s as the company’s 17th employee.
After the merger, Trinity was the only publicly owned company that produced a varied line of metal products for liquefied petroleum gas (LPG). LPG, a relatively new form of fuel at that time, is used for industrial production and residential heating. Compressed natural gas and petroleum by-products can be conveniently stored and transported in specially designed tanks that permit a consumer to obtain 270 cubic feet of gas from one liquified cubic foot. As the LPG industry grew rapidly in the late 1950s and early 1960s, Trinity was the only tank manufacturer operating across a large geographical area. The company’s competitors were generally smaller concerns whose markets were limited to their own regions, and Trinity, demonstrating an ability to offer consistent quality to LPG suppliers, became the industry leader.
Trinity’s tank manufacturing expertise was also applied to containers for anhydrous ammonia fertilizer, which was another burgeoning industry in the 1960s. Pressure and non-pressure storage containers made up about 75 percent of Trinity’s business. The company also manufactured custom metal products for the chemical and petroleum industries, and enjoyed phenomenal growth in the 1960s.
In the early 1970s Trinity broadened its operations to include construction of marine vessels and fabrication of structural steel products. In 1973 the company bought the Equitable Equipment Company, with shipyards in New Orleans and Madisonville, Louisiana, and the Mosher Steel Company of Houston, a large manufacturer of steel beams and framing. Other structural steel operations were acquired or built, including the Texas Metal Fabricating Company in 1976. Trinity subsidiaries manufactured highway guardrails and a number of products aimed at the road construction industry. By 1977 bridge girders and other structural products generated 37 percent of Trinity’s sales.
In 1977 Trinity entered the rail car manufacturing business. The company had been manufacturing hopper bodies and tanks for tankers for a decade, and producing the entire rail car improved profit margins considerably. By 1980 Trinity was one of the top five rail car builders in the United States. In addition, Trinity organized a leasing subsidiary which purchased its own cars with long-term debt and leased them to various railroads on ten-year minimum contracts. The unit, which accounted for five percent of the company’s profits in 1979, rapidly grew to contribute more than 50 percent in 1981.
After this initial period of growth, however, the rail car business went into a slump. Tax regulations enacted in 1981 reduced the benefits of purchasing rail cars as a tax shelter, and orders for new cars plummeted to 5,300 from 96,000 just four years earlier. Making the best of these soft market conditions, Trinity acquired several of its weakened competitors, including Pullman Standard, once the largest freight car manufacturer in the United States. In late 1986 the Greenville Steel Car Company, the Ortner Freight Car Company, and the Standard Forgings Corporation (a locomotive and rail car axle maker) were acquired. Rail cars—including tank cars, hopper cars, gondola cars, intermodal cars, and other types of freight cars—made up nearly half of Trinity Industries’ sales.
During the mid- to late 1980s more rail cars were being taken out of service than were purchased, creating pent-up demand, and Trinity anticipated a massive rail car replacement program on the part of the nation’s railroad operators. However, while a steady flow of orders came in each year, massive reorders were not forthcoming, and in 1985 the company reported a $6 million loss on sales of $455 million—Trinity’s first loss in 27 years. By the end of the decade the situation had finally reversed itself, and the company anticipated record profits. The number of companies producing rail cars had dropped from 17 to 6 in the mid-1980s, and Trinity controlled more than half the industry’s entire output capacity.
The company’s other units also made significant contributions. Trinity’s consistently profitable LPG container sales provided the capital for the company’s rail car acquisitions; although LPG handling was a mature industry offering limited opportunities for growth, Trinity’s leading position was never seriously challenged and the unit brought in steady revenues. In 1987 the Master Tank and Welding Company and certain operations of the Brighton Corporation were purchased, augmenting the container and metal components business segments. Trinity’s metal components division produced weld fittings, flanges, and container heads used in piping systems and on pressure and non-pressure tank containers for the oil and gas industry. Trinity remained the American leader in this highly active market.
The marine products division continued to operate in an extremely competitive environment, and profitability was inconsistent. The company continued to bid for new types of commercial watercraft contracts, including boats for the fishing industry, tug and barge units, river hopper barges for grain transportation, and surveillance ships for the United Sates Navy. The market remained sluggish in the late years of the decade. In 1987 Trinity sold two shipyards; the company upgraded its remaining shipbuilding capacity and acquired Moss Point Marine in 1988. The marine division invested heavily in training employees and upgrading plants. In the early 1990s demand for new ships and barges increased sharply. Trinity’s investment began to pay off as the marine subsidiaries showed satisfactory profits and healthy backlogs of orders.
In the structural products segment, Trinity focused on products marketed to public utility, highway, and bridge construction, and de-emphasized its products used in high-rise and other building construction. Trinity expected to profit from massive federal highway revamping. In 1992 Trinity diversified into concrete for road construction with the acquisition of the Transit Mix Concrete and Materials Company, one of the largest concrete companies in Southeastern Texas.
Although Trinity’s core businesses showed disappointing growth in the 1980s, the company was able to absorb some of its stronger competitors as they went out of business without over-extending itself. The company entered the 1990s financially strong and ready to benefit from the long-anticipated modernization of the American transportation infrastructure.
Beaird Industries, Incorporated; HBC Barge, Incorporated; McKees Rocks Forgings, Incorporated; Moss Point Marine, Incorporated; Standard Forged Products, Incorporated; Standard Forgings, Incorporated; Trinity-Axle Limited Partnership (90%); Trinity Industries Leasing Company; Trinity Railcar Leasing Corporation; Trinity Industries Transportation, Incorporated.
Rogge, Dwaine W., “The Security I Like Best,” Commercial and Financial Chronicle, March 4, 1965; Rolland, Louis J., “Investment Background: New Records for Trinity,” Financial World, July 13, 1966; Gordon, Mitchell, “Trinity Industries Sets Sights on Seventh Straight Peak Year,” Barron’s, December 12, 1977; Cochran, Thomas N., “One For Trinity,” Barron’s, May 9, 1988; Hannon, Kerry, “Closely Watched Trainmaker,” Forbes, April 2, 1990; “Corporate America’s Most Powerful People: Order Breaks Out,” Forbes, May 28, 1990.