Waste Management, Inc.
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60521
Fax (708) 572-9857
Sales: $6.03 billion
Stock Exchanges: New York Midwest London Tokyo Toronto Frankfurt Australian Geneva Zürich Basel
Waste Management, Inc. has made a fortune taking care of what the rest of the world prefers not to think about. Waste Management is the undisputed world leader in nearly all facets of waste treatment, including low-level nuclear, chemical, and asbestos cleanup; and daily garbage removal, waste reduction, and recycling. Waste Management has expanded its operations both technically and geographically, acquiring a host of sophisticated suppliers of trash-to-energy plants, pollution control equipment, and recycling services, while signing contracts with municipalities from Buenos Aires to Hong Kong. The company has frequently been attacked by governmental agencies and environmental groups for a variety of alleged failings, but its phenomenal growth and strenuous efforts in the recycling and pollution-control areas make it likely that in the future Waste Management will be perceived as a hero rather than villain by the world’s increasingly polluted cities. Waste Management, it seems, is well on the way to becoming the planet’s garbage collector.
Sensitivity to the problems of waste disposal is a comparatively recent development. When the predecessors of Waste Management, Inc. (WMI) were hauling trash in the 1950s, neither they nor their customers gave much thought to the complexities of garbage. Garbage generally was collected by municipalities or small private haulers such as Ace Scavenger, WMI’s immediate forerunner, a Chicago-area company with 12 trucks and 1956 revenue of about $750,000. In that year, Ace Scavenger’s founder died, and management of the company was turned over to his 24-year-old son-in-law, Dean L. Buntrock. Buntrock already had experience running a family farm-implement business in his native South Dakota, and his in-laws felt that although young he was the best family member to take over their refuse company. Ace was a prosperous, well-established firm, and Buntrock was able to take command with little difficulty.
It was an exceedingly good time to join the waste-treatment industry. Not only was the national economy at the peak of its postwar prosperity, the U.S. consumer was just then beginning to be inundated with a wave of new packaging and convenience items designed to be used once and thrown away. The nation’s production of garbage was growing much faster even than its population, and companies such as Ace Scavenger found themselves in great demand. Dean Buntrock moved aggressively to expand his business, buying up and creating a number of similar companies in Chicago and Wisconsin during the early 1960s. In getting to know the waste-treatment industry, Bun-trock met his father-in-law’s nephew, H. Wayne Huizenga, then running a small collection company of his own in Pompano Beach, Florida. The two men compared notes and talked about the possibility of someday joining forces, although at the time few if any waste-collection companies operated in more than one state.
That situation changed shortly after Congress passed the Solid Waste Disposal Act of 1965. The act, in response to a growing awareness of the need for safe, efficient waste removal, required collection companies to meet new standards of hygiene and effectively forced out of business many of the oldest and least sophisticated companies. The Solid Waste Disposal Act also mandated higher safety levels at disposal sites, again increasing the costs of doing business and encouraging the formation of larger, better capitalized companies able to afford the necessary investments. Buntrock and Huizenga correctly interpreted the 1965 act as the beginning of a new era in U.S. waste management, in which increasing population pressures and pollution awareness would render inadequate the industry’s former standards of competence and organization. Belatedly, the garbage business was about to take on the characteristics of modern industrial efficiency, and in 1968 Buntrock and Huizenga accordingly agreed to unite their various collection firms as Waste Management, Inc.
In its first year of operation, WMI companies in Illinois, Wisconsin, and Florida totaled a modest $5.5 million in revenue, but its founders recognized that the waste industry had a nearly unlimited future. To create a nationwide organization, Buntrock and Huizenga took WMI public in 1971 with an initial offering of 320,000 shares. WMI’s founders used the proceeds of that stock sale to launch one of the most spectacular success stories in the history of U.S. business. From 1971 to 1980, WMI revenue grew at a rate of 48% per year. In 1979 earnings were almost 10% of sales.
Most of this phenomenal growth was achieved by means of acquisition—WMI bought 75 companies in the 18 months following its stock offering—but some of the growth reflected increasing concern for the long-term health and appearance of the planet. The oil crisis of 1973-1974 impressed upon the U.S. public the need for conservation of resources and the potentially disastrous effects of unrestrained energy use. A result of these shifts in public awareness was a new emphasis on the professional, safe, and environmentally responsible handling of all forms of waste, which was no longer perceived simply as whatever was unwanted. A company such as WMI offered the appearance of professional service and provided fiscally troubled municipalities with garbage collection at up to 30% less than what it cost them to collect trash on their own.
From the beginning, Buntrock and Huizenga made provision for a large corporation of national scope. During the hectic expansion of the early 1970s WMI hired Arthur Andersen & Company to design and install a centralized information network and system of managerial controls that assured the company of uniform procedures among its suddenly numerous subsidiaries. The control system funneled to company headquarters in Oak Brook, Illinois, detailed information on everything from the monthly volume of garbage hauled by each of the company trucks to billing and payment patterns. This powerful system was an example of the kind of prescient thinking that within a few years effected a revolution in the entire waste industry.
Also of significance at this time was WMI’s decision to enter the newly recognized field of chemical- and toxic-waste treatment. The proliferation of oil-based plastics and other industrial chemicals had burdened the country with a growing mass of dangerous materials in need of secure final disposal. Neither the companies that generated these substances nor the average disposal service was equipped to handle such problems, which posed dangers of both a physical and legal nature. WMI recognized the extent of the problem—and the profits likely to be generated by its solution—and cautiously purchased a few of the as-yet rare and little-known toxic-waste dumps around the country.
Toxic-waste control remained a relatively minor part of WMI’s business, however, until Congress passed the Resource Conservation and Recovery Act in 1976. The act was the first significant piece of legislation to address the issue of toxic and chemical waste, setting minimum standards for disposal and greatly increasing public awareness of the dangers involved. The resulting tightening of controls and heightened scrutiny scared off most of the companies capable of handling toxic waste; but for those like WMI that chose to pursue the business, the rewards proved to be very large. Under a three-quarter-owned subsidiary, Chemical Waste Management, Inc., WMI rapidly enlarged its presence in the toxic field, acquiring a number of the largest toxic landfills and by 1980 emerging as the industry leader.
As they had demonstrated in founding WMI in 1968, Buntrock and Huizenga displayed remarkable foresight in thus plunging into the hazardous-waste business. Rapidly increasing public fears about all forms of toxic waste soon made it extremely difficult to gain approval for new landfills, which in turn drove up the market value of existing sites, many of them in the hands of Chemical Waste Management by the early 1980s. In 1980, the year in which the last phases of the Resource Conservation and Recovery Act became law, WMI stock rose from $36 to $123.
In 1975 yet another rich opportunity presented itself to the company’s founders. The royal city of Riyadh, Saudi Arabia, made it known that it sought help in handling its mounting garbage and sanitation problems. The Saudis wanted unusually comprehensive services—including daily garbage pick-up from every home, street cleaning, and the disposal of dead animals—and WMI formed a 60-40 joint venture with a British-Saudi partner to pursue the lucrative business. Management came up with a slightly curtailed package of services at a cost of US$242 million over five years and was awarded the contract beginning in 1977.
For WMI, a company in existence for only nine years, the deal was audacious in the extreme; it required the assembly of 2,500 workers, many of them recruited in India, and all of whom needed housing, medical services, and extensive training to meet the Saudis’s fastidious standards. As Huizenga told Fortune, April 7, 1980, “We had to succeed. We couldn’t afford to fail.” Succeed WMI did, becoming in effect the world’s first international supplier of sanitation services, and paving the way for a plethora of subsequent contracts.
Soon the city of Buenos Aires turned to WMI for help with its waste program, in 1980 giving the firm a contract for the disposal of garbage generated by two million residents and a substantial portion of the city’s commercial and industrial concerns. In rapid succession followed agreements with Jeddah, Saudi Arabia; Caracas, Venezuela; Brisbane, Australia; and, in the late 1980s, a number of European cities as well as Hong Kong. As in toxic waste, WMI no sooner entered the international field than it became the dominant player.
In 1979 WMI sales stood at $382 million; three years later that figure was close to $1 billion, and net income remained comfortably above the 10% level. In the space of a decade, WMI had shot ahead of its rivals to become the world’s largest disposal company and a favorite investment of many securities analysts. WMI had also become the favorite target of innumerable governmental and environmental groups outraged by what they perceived as WMI’s slipshod and even criminal mishandling of its responsibilities. Most widely publicized of the many lawsuits brought against the company were those arising from the discovery in March 1983 that WMI’s oil-waste landfill in Vickery, Ohio, contained 135,000 gallons of material contaminated with poly chlorinated biphenyls (PCBs). A former employee at Vickery charged that he was fired for refusing to falsify test results, while both the state of Ohio and the Environmental Protection Agency (EPA) brought suit against WMI, the former asking $480 million in damages and the latter $6.8 million. Though the suits were settled for a fraction of those amounts, the incident was only one of a raft of similar controversies. In the two years following the Ohio incident, WMI faced suits alleging illegal dumping in at least six states, and several competitors brought actions complaining of monopolistic practices.
The company responded with characteristic energy. At each of its nine chemical dumps, WMI installed environmental-compliance officers with power to override the decisions of local plant managers. These watchdog foremen reported to WMI’s new environmental-management head, Walter C. Barber, a former acting chief of the EPA. In addition, the Chemical Waste subsidiary in charge of most of the troubled sites was provided with a new president, Jerry E. Dempsey, former president of Borg-Warner Corporation. To smooth relations with Congress, WMI hired Frank B. Moore as its chief lobbyist. Moore had previously served as President Jimmy Carter’s liaison officer with Congress. Finally, WMI adopted new advertising campaigns stressing the company’s services on behalf of the environment and customers alike.
While such moves had not satisfied critics such as Greenpeace International, it appeared that WMI learned a lesson from its legal battles and took some pains to adopt more safety measures. As proof of its progress in these areas, WMI can point to the long-term contracts it won in the late 1980s to handle much of the waste from Portland, Oregon; and Seattle, Washington; two cities known for their strong environmental commitment. In both cases, the municipalities found that WMI’s experience and resources made it the best choice for waste problems of great magnitude.
Despite its shaky image in the mid-1980s, WMI’s revenue and net income continued to grow at an impressive pace. Most significant among its many acquisitions was the 1984 purchase of 60% of SCA Services, Inc., a Boston-based company ranking third in the waste-treatment industry. The purchase added about $200 million to WMI’s $1 billion revenue, opening up 43 markets for the parent company and increasing its total number of landfills to 89; but the move also brought its share of controversy. SCA Services was widely rumored to have ties with organized crime in New York and New Jersey, and the company had endured its own spate of lawsuits in the late 1970s over the resignation and alleged improprieties of its president, Christopher Recklitis. Once integrated into the WMI network, however, the SCA units dropped from the headlines, becoming only one more piece of WMI’s highly profitable and constantly expanding business empire. WMI was perfectly positioned to take advantage of the public’s hardening attitude of not-in-my-back-yard toward any proposed new toxic-waste dump sites. Existing dumps continued to grow in value, and as of 1986 WMI owned eight of the twenty largest hazardous dumps in the country. A similar public concern about the safety and extent of conventional landfills also strengthened WMI’s hand in that field, where its 100-odd sites and its international experience gave it a prestige hard to match. Sales continued to spiral, approaching $2 billion by 1985.
Since that time, WMI has added a number of secondary businesses to its threefold core of solid-waste collection, chemical-waste treatment, and international waste services. Most important of these developments are the group of companies known collectively as Wheelabrator Technologies, Inc. and WMI’s increasing involvement in all phases of the recycling business. Wheelabrator Technologies includes a number of companies involved in the waste-to-energy business, in which solid waste is burned and a certain amount of energy recaptured in the form of electricity that can be sold to local utilities. In 1988 when Wheelabrator sold 20% of its stock to WMI, it was the second-leading builder and operator of such systems, with sales of about $1 billion. WMI acquired controlling interest in Wheelabrator in 1990 and restructured its assets into a number of divisions including waste-to-energy companies, makers of air-pollution control systems, and waste-water treatment facilities. Another part of Wheelabrator, Rust International, is the world’s leading engineer of waste-to-energy incinerators, which WMI believes will play an increasingly important role in the disposal of urban solid wastes. By combining with WMI, Wheelabrator solved what had been its most serious problem, the difficulty of finding land on which to situate its plants. Such facilities are generally less objectionable to the public when built on land already zoned as a garbage dump. If the cost of electricity and the burden of excess garbage continue to mount, Wheelabrator’s systems may well become a far more common sight in many cities.
In recycling, which enjoyed a tremendous boom starting in the late 1980s, WMI repeated its pattern of entering an industry as its leader, in 1987. By 1991 WMI, the largest collector of recyclable materials in the United States and Canada, served some four million households. WMI and Stone Container created Paper Recycling International, L.P., to market recycled paper products back to Stone as well as to other manufacturers. Similarly, the company has substantial footholds in the areas of aluminum recycling, waste sorting centers, and tire shredding. In 1990 WMI’s residential recycling service grew 150%.
In every facet of waste treatment, in fact, WMI continued to expand quickly. Since the company’s creation, WMI had yet to overlook a development of any significance in its exploding industry. In solid waste, hazardous, chemical, recycling, and waste-to-energy, WMI in the early 1990s enjoyed a position of undisputed leadership. Its international division had developed significant accounts in Europe; its chemical division was the country’s largest operator of asbestos-abatement programs; and WMI was also the leading disposer of low-level radioactive wastes in the United States. WMI was doubling its revenue every two years, which is even faster than the world can pile up new garbage.
Burck, Charles G., “There’s Big Business in All That Garbage,” Fortune, April 7, 1980; “Waste Management, Inc.: Company History,” Waste Management, Inc. corporate typescript, 1988.