Cabot Corporation
Address:
75 State Street
Boston, Massachusetts 02109-1806
U.S.A.
Telephone: (617) 345-0100
Fax: (617) 342-6103
http://www.cabot-corp.com
Statistics:
Public Company
Incorporated: 1922 as Godfrey L. Cabot, Inc.
Employees: 4,800
Sales: $1.64 billion (1998)
Stock Exchanges: New York Boston Pacific
Ticker Symbol: CBT
NAIC: 325182 Carbon Black Manufacturing; 326113 Unsupported Plastics Film & Sheet (Except Packaging) Manufacturing; 331419 Primary Smelting & Refining of Nonferrous Metals, Except Copper & Aluminum; 42272 Petroleum & Petroleum Products Wholesalers, Except Bulk Stations & Terminals; 42152 Coal & Other Mineral & Ore Wholesalers
Company Perspectives:
Cabot will be a great company--the best company in all markets that it serves, best particularly in safety, quality and innovation; employee, customer and community satisfaction; and shareholder return. Cabot will become a great company by striving for excellence in everything it does, through: highly motivated employees; a values-based organization; surpassing customers' needs and earning their admiration; and expanding the use of core technologies.
Company History:
Cabot Corporation is a diversified, global chemical and plastics manufacturer with industry leadership in such areas as carbon black, fumed silica, tantalum powder production, and plastics compounds. It is also involved in liquified natural gas importation and distribution and the manufacture of industrial safety products.
Early Days: Cabots and Carbon
Godfrey Lowell Cabot, the founder of Cabot Corporation, lived to be 101, and the choices he made early in his career set much of the company's course to the present day. Born in 1861, he was both a Cabot and a Lowell, a son of two of the most powerful and prestigious old Boston Brahmin merchant families. After graduating from Harvard in 1882, he went to the oil and gas fields of western Pennsylvania to start a business. There he found that the industry produced huge amounts of carbon debris, waste products of gas blow-offs and refining.
Godfrey's older brother Samuel had founded a paint and stain business, using coal tars to make black pigment. Godfrey decided to build his business around carbon black, the very substance that was fouling the oil fields. Distinct from soot, this substance, a form of carbon sometimes called lamp black, had been around for a long time. Prehistoric cave dwellers used it to draw animals on cave walls, and the Egyptian pharaohs used it as a pigment. The Cabots saw similar applications for it.
The Cabots built a plant in Buffalo Mills, Pennsylvania, that used natural gas to produce carbon black in 1882, and in 1884 Godfrey patented a carbon black production process that used stationary plates and rotating burners. In 1887 Godfrey bought out Samuel's interest in the business.
At about this time, a glut developed in the carbon black market; at the same time, new uses were being found for natural gas, which was the raw material for carbon black. Cabot's response was to purchase gas leases and drill on the sites, drilling his first successful gas well in Saxonburg, Pennsylvania, in 1888. He continued, despite the glut, to buy up small carbon black factories as well, and by 1897 he was probably the largest producer in the industry.
In 1898, with the exhaustion of the Pennsylvania gas fields, Cabot moved his operation to West Virginia, where he acquired oil and gas leases, which he drilled successfully. He continued to add gas sites in West Virginia, consolidating his holdings, and building a natural gasoline extraction plant near Elizabeth, West Virginia, in 1914. These holdings were the forerunners of Cabot's natural gas processing plants in the Southwest.
World War I and New Carbon Black Applications
While the advent and spread of high-speed presses and similar applications greatly expanded Cabot's business, World War I demonstrated the potential for carbon black in the modern economy. It had been known for a while that carbon black could inhibit damage to materials caused by the sun; a few years before the war, the India Rubber Gutta-Percha and Telegraph Works Co. of Silvertown, England, began to manufacture automobile tires using carbon black as a stabilizing or reinforcing agent. During World War I the United States began using carbon black, and its superior properties became evident in improved tread wear and lower rates of tire failure. After the war, its use spread throughout the tire industry, providing a tremendous burst of growth to Cabot and other suppliers. The company came to excel in producing different grades and types of carbon black for different applications.
In 1922 Cabot's company was incorporated as Godfrey L. Cabot, Inc. At about this time, the locus of carbon black production was shifted out of West Virginia, first, unsuccessfully, to Louisiana, and then to Texas. Carbon black plants in the East were sold; gas production and distribution continued, though it was cut back. Thomas Cabot, Godfrey's son, opened Cabot's Southwestern Division, headquartered in Breckenridge, Texas, in 1925. Two years later, headquarters were moved to Pampa, Texas.
By 1930 Cabot had built eight carbon black plants in Texas and one in Oklahoma. In the early 1930s Cabot used a new technique to develop a pelletized, dustless carbon black, which was tradenamed SPHERON. Bulk sales of this easily transportable product fueled Cabot's growth in the mid-1930s, in spite of the Great Depression. This in turn led to the construction of other carbon black plants in 1937 and 1938.
As was the case from the very beginning of Godfrey Cabot's enterprise, carbon black production and energy were developed in tandem. Cabot formed Cabot Shops, Inc., in 1930 to construct the carbon black plants. It also made oil well pumping units. In 1935 Cabot began drilling for oil and gas in Texas and built two natural gas processing plants in West Texas near two of its carbon black plants. Residue from the gas process was delivered to the carbon black plants and used as raw material.
Although Godfrey L. Cabot, Inc. was able to stay afloat, the period from 1925 to 1939 was not a boom period for the company. The Depression greatly cut back demand for gas as well as carbon black. In fact, the carbon black facilities in the Southwest experienced losses that were barely balanced by gas and gas distribution profits from West Virginia, Pennsylvania, and New York.
World War II: Rubber Shortage and Governmental Support
By 1939 Cabot had sales of nearly $7 million. Natural gas accounted for more than 50 percent of sales, while carbon black yielded about 35 percent. In that year, too, war changed the nature of the business. As Japan spread its control over the rubber plantations in Malaya and the East Indies, the United States was faced with a cutoff of shipments of natural rubber. The government responded by imposing restrictions on the use of natural rubber and by constructing synthetic rubber plants. Cabot stockpiled 100 million pounds of carbon black at its own expense when it anticipated shortages for 1943 to 1945. The substance was considered so important to the war effort that a governmental interagency carbon black committee was set up when production lagged in 1942, and funds were made available to producers. Among the facilities built or added to by Cabot during this period, with government support, included plants in McCoy, Louisiana; Borger, Texas; Guymon, Oklahoma; and Wickett, Texas.
After the war, Cabot converted several of its carbon black plants from gas process to oil process. This move helped set the stage for Cabot to become an international company later, as oil did not need to be piped and plants could be built closer to their markets.
By 1950 the company had become the largest producer of carbon black and reaped the benefits of a general upsurge in worldwide demand. Also, as GIs returned home, automobiles were sold in increasing numbers, and those automobiles needed tires. In 1950 Cabot built its first carbon black plant in Europe, near Liverpool, England. Plants followed in Canada (1953), France (1958), and Italy (1960). In addition, plants partially owned by Cabot were opened in Australia (1959) and in the Netherlands (1960); both of these facilities relied heavily on Cabot technology.
Diversification and Expansion: 1950--80
During this period Cabot continued to perform research that improved carbon black processes and products, opening a research facility in Cambridge, Massachusetts. The company also began to branch out. In 1952 Cabot began importing fumed silica and in 1957 began production of the substance in the United States under the name Cab-O-Sil. Fumed silica is an ultra-fine high purity silica that is used to provide reinforcement, viscosity control, and free flow properties to a variety of products, including silicones, adhesives and sealants, reinforced plastics, and coatings. It is used extensively in the automotive, cosmetics, paint and ink, construction, and pharmaceutical industries. Cab-O-Sil would become the leading producer of fumed silica in North America.
At this time, Cabot also became involved in a study group on liquified natural gas (LNG). This involvement led to the opening in 1971 of Distrigas in Everett, Massachusetts, the only LNG terminal and distribution center in New England. Cabot LNG Corporation supplies between 5 percent and 25 percent of New England's liquified natural gas needs, including those of power companies, in the late 1990s.
In 1960 all of the various Cabot businesses and subsidiaries were united into Cabot Corporation. The company went public in 1963 with the sale of 12 percent of its common stock. In 1962 founder Godfrey Cabot died.
Expansion continued throughout the 1960s, particularly overseas. Subsidiaries and plants were opened in Argentina, Colombia, Germany, and Spain. In 1963 Cabot entered into two completely new arenas. The company began experiments on plastic polymers and compounds and in 1963 began producing titanium, a high-performance metal, at its facility in Ashtabula, Ohio. The company also launched considerable research in the area of experimental plastic polymers and compounds. It eventually became a world leader in the production of thermoplastics used in films as well as in injection-molded and extruded plastic products. By the end of the 1960s, it was clear to Cabot that production of high-performance materials was a high-growth area.
To this end, the company, under CEO Robert A. Charpie, acquired the Stellite Division from Union Carbide in 1970. According to the 1970 annual report, Stellite "profoundly changed the nature of the Company by launching Cabot in a new direction, that of high performance materials, by providing major diversification strength, and by broadening our technological base in a way that is complementary to the technical skills we have in the performance chemical field."
The main business of this new division consisted of nickel- and cobalt-based alloys that were designed to withstand extreme heat, corrosion, and wear. Such materials were used in gas turbine engines, electrical power generating stations, chemical processes equipment, and other like applications. In 1978 Cabot acquired Kawecki Berylco Industries, which enabled the company to produce beryllium-copper, tantalum, and columbium products as well as aluminum alloys. Tantalum in particular was used extensively by computer and electronics manufacturers, as well as in aerospace, ballistic munitions, and various chemical processes.
Apart from gains made by entry into the high-performance metals business, Cabot's energy component experienced major growth in the 1970s as a result of the energy crisis of 1973--74. The value of Cabot's oil and gas reserves shot up, and this provided a major impetus to step up exploration, particularly in the Gulf of Mexico and mid-continent. The company withdrew from exploration outside the United States. In addition, the company undertook further development in West Virginia, and the pipeline and distribution systems there were upgraded.
The company also expanded its gas processing and pipeline business in the 1970s. It acquired further industrial gas pipelines in West Virginia and completed another gas processing plant in Texas. Most significantly, it acquired TUCO, Inc. in 1979, which added about 500 miles of pipeline and two gas processing plants to its holdings in the Southwest.
Although Cabot's energy holdings increased in value, the energy crisis also negatively affected Cabot. The cost of the type of oil needed for carbon black production tripled, putting a severe squeeze on profits. Cabot invested heavily in new, more efficient technology and instituted programs to reduce raw material costs.
However, in the 1970s, Cabot, on the advice of the Boston Consulting Group, came to see its chemical businesses, including carbon black, as "cash cows." In essence, cash was extracted from this vital area of the business and put into diversification into metals manufacturing, ceramics, semiconductors, and other businesses in which Cabot had little expertise. Chemical plants were ignored and allowed to deteriorate. This destabilized the entire company. On top of this, gas prices collapsed in the 1980s, leaving Cabot with vast liabilities from acquisitions and plant investment, but much reduced income.
Late 1980s: New Leadership
In 1987 the Cabot family, which owned 30 percent of the company, replaced Charpie and tapped Samuel Bodman as CEO in hopes of turning the company around. Among other things, Bodman stopped the slide of the chemicals side of the business by investing $500 million to upgrade the plants. Bodman also divested the metals and ceramics businesses and got out of energy exploration and production in order to concentrate the company on its strong suits in organic industrial chemicals, such as carbon black, fumed silica, high-performance materials, and plastics. The result was that through the early 1990s, the company consistently had operating revenues around $1.5 billion, and in 1992 earned 12.5 percent on equity.
In 1993, Cabot purchased the Tantalum Mining Corporation in Manitoba, Canada. The mine was North America's only significant producer of tantalum, a rare, anti-corrosive hard metal. It was also one of two major suppliers of spodumene, a mineral used primarily in the pyroceramic industry, and for cesium, a rare, highly reactive metal with various uses. Cabot acquired the mine with an eye toward using its tantalum reserves to further expansion of the company's high-performance materials business, which began with the acquisition of Union Carbide's Stellite Division in 1870.
Also in 1993, Cabot began to experiment with developing inkjet colorants. Building upon its long-time experience in working with carbon black, the company was able to develop colorants that offered enhanced color, stability, ink formulation flexibility, and print quality. In 1996, Cabot formally established a new division--the Inkjet Colorants Division&mdashø oversee development, production, and marketing of this new product line. In 1998, the Cabot's Inkjet Colorants' products were used for the first time in new inkjet printers being produced by the printer manufacturers. By 1999, the Inkjet Colorants Division had four facilities located in Massachusetts, Germany, and Japan.
Another operating division was added to the Cabot stable in 1995. The Aurora, Illinois-headquartered Microelectronics Materials Division (MMD) was established to develop and manufacture high-performance products for the semiconductor industry. MMD's major products were chemical-mechanical planarization slurries--liquid suspensions with an abrasive component used to microscopically polish and plane down tiny layers of semiconductor chips. Within four years of its inception, the division had grown to include manufacturing operations in Hammond, Indiana, and Barry, Wales, and was serving customers in North America, Japan, Europe, Taiwan, Korea, and the South Asia Pacific.
Meanwhile, Cabot had discovered a new use for the rare metal cesium, which was abundant in the Manitoba mine the company had purchased in 1993. The company's researchers developed a cesium-based formula that could be used to decrease clogging during oil drilling, thereby speeding up the process substantially. In 1996, Cabot formed the Cabot Specialty Fluids business unit to oversee development and marketing of these new cesium-based drilling and completion fluids. This same year, it sold its TUCO operation for $77 million.
Cabot's new divisions got off to a somewhat slow start, causing a 54 percent decrease in the company's net income between fiscal 1996 and 1997. However, in 1998 Cabot regained some of its lost ground, posting a 35 percent net gain--up to $122 million from the previous year's $93 million.
Looking Ahead
In 1998 Cabot began the lengthy process of revamping its corporate structure. The company's goal was to move from a product-focused structure to a market-focused structure, in which business units would be defined by the markets they served. Toward this end, plans were underway to replace the company's eight traditional business units--Fumed Silica, Carbon Black, Plastics, Microelectronics Materials, Performance Materials, Specialty Fluids, Inkjet Colorants, and Liquefied Natural Gas--with 20 new, more market-specific business units.
The company also had plans for expansion in several of its divisions. A natural gas liquefaction plant was scheduled for opening in Trinidad in mid-1999. In addition, a new fumed silica manufacturing facility in Midland, Michigan, and a Microelectronics Materials slurry manufacturing plant in Geino, Japan, were both expected to be operational by the close of the millennium. Cabot also expected to maintain a rapid pace in new product development and applications. According to a February 22, 1999 article in Forbes, the company was spending $83 million annually--almost a full third of its pretax income--on research and development.
Principal Subsidiaries: Cabot LNG Corporation.
Principal Divisions: Carbon Black; Inkjet Colorants; Fumed Silica; Microelectronics Materials; Plastics; Performance Materials; Specialty Fluids.
Further Reading:
Berlin, Rosalind Klein, "The Smutty Story of Cabot Corp.," Fortune, December 5, 1988, p. 133.
"Cabot CEO Looks to Future Growth," Chemical Marketing Reporter, March 8, 1993, p. 9.
Chakavarty, Subrata N., "White Slacks and Carbon Black," Forbes, October 26, 1992, p. 122.
Condon, Bernard, "The Soot King," Forbes, February 22, 1999.
Plishner, Emily S., "Cabot Concentrates on Microparticulate Growth," Chemical Week, March 10, 1993, p. 14.
Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.
