EG & G Incorporated
Address:
45 William Street
Wellesley, Massachusetts 02181
U.S.A.
Telephone: (781) 237-5100
Fax: (781) 431-4255
http://www.egginc.com
Statistics:
Public Company
Incorporated: 1947 as Edgerton, Germehausen & Grier, Inc.
Employees: 13,000
Sales: $1.41 billion (1998)
Stock Exchanges: New York
Ticker Symbol:EGG
NAIC: 334413 Semiconductor & Related Device Manufacturing; 334419 Other Electronic Component Manufacturing; 334513 Instruments & Related Product Manufacturing for Measuring, Displaying & Controlling Industrial Process Variables; 334519 Other Measuring & Controlling Device Manufacturing; 54133 Engineering Services; 54199 All Other Professional, Scientific, & Technical Services; 54171 Research & Development in the Physical, Engineering & Life Sciences
Company Perspectives:
Our vision is that we can create value in an environment of ever-accelerating change. Value creation is our singular aim and ultimate measure of success. We believe that the increasing drive to create value represents the surest and most consistent avenue for us to benefit our customers, employees, stockholders and constituent communities. Our value creation model focuses on growth primarily derived from internal development.
Company History:
EG & G Incorporated is a diversified technology company that develops and provides products for public and private customers in the medical, aerospace, telecommunications, semiconductor, photographic, and other industries. The company's operations are broken into five business units: Instruments; Life Sciences; Engineered Products; Optoelectronics; and Technical Services. Its Instruments operation is based on x-ray imaging systems and provides screening and inspection systems for use in airport and industrial security, and environmental, food, and nuclear industry monitoring. The Life Sciences unit develops systems for biochemical research and medical diagnostics. The Engineered Products unit designs and produces pneumatic systems, seals, and bellows for aerospace, semiconductor, and power generation markets. EG & G's Optoelectronics division specializes in optical sensing devices for industrial and medical applications. The company's final unit, Technical Services, provides engineering, research, management, and support services to governmental and industrial clients.
Nuclear Management and Monitoring: 1940s--50s
EG & G was established by three nuclear engineers from the Massachusetts Institute of Technology shortly after the end of World War II. These engineers, Harold E. Edgerton, Kenneth J. Germehausen, and Herbert E. Grier, had been involved in the American effort to construct an atomic bomb during the war. So valued were their contributions that after the war the government asked them to establish a company to manage further development of the country's nuclear weapons. The three established a small partnership called Edgerton, Germehausen & Grier on November 13, 1947, and quickly began collecting contracts to advise the government on nuclear tests in Nevada and on South Pacific islands.
One of the first employees of the new company was Bernard J. O'Keefe, another MIT graduate who had worked for Dr. Grier during the war. O'Keefe served with the 21st Bomber Command in the Mariana Islands during the war, and is said to have personally wired the bomb that later destroyed the Japanese city of Nagasaki. O'Keefe was sent to Japan after its surrender to investigate that country's progress with nuclear technology and recruit promising Japanese scientists for other atomic projects. A specialist in the design and development of electronic instrumentation and controls, O'Keefe quickly gained an important position in the growing firm.
Inconvenienced by the length of the company's name, employees soon began to rely on the simple acronym EG & G, which later became its official name. In order to maintain close contact with MIT and its excellent nuclear and electronic engineering programs, EG & G set up its headquarters in Bedford, Massachusetts, in northwest suburban Boston.
EG & G was involved in the U.S. effort to build a more powerful nuclear weapon, the hydrogen bomb. That year, Grier and O'Keefe were present at a Nevada test site to personally witness an H-bomb detonation. After the weapon failed to explode, Grier and O'Keefe flipped a coin to determine who should scale the 300-foot test tower and disarm the bomb. Although O'Keefe lost, he won the special distinction of being the first man to disarm a live H-bomb.
O'Keefe had a second brush with disaster in 1958 when he witnessed an H-bomb detonation at Bikini Atoll in the South Pacific. There, shifting winds in the upper atmosphere caused a radioactive cloud of fallout to shower his bunker.
These experiences taught O'Keefe the awesome destructive power of nuclear weaponry and the dangers of radioactive fallout. As an engineer and manager he was bound to perform his company's contracts, but grew personally opposed to the use of nuclear weapons. This sharpened his sense of responsibility toward the emerging form of warfare, a quality that was not lost upon the government's Atomic Energy Commission.
As a result of EG & G's experience with detonations, and O'Keefe's concern for nuclear non-proliferation, the company became increasingly involved in distant monitoring projects, particularly as they related to Soviet nuclear tests. By observing changes in the atmosphere, EG & G was able to determine the incidence and strength of Soviet tests and provide important data on the progress of Moscow's weapons program. In the process, EG & G gained highly specialized knowledge in environmental sciences. These skills had numerous applications outside the weapons industry, in such areas as pollution control and environmental management.
Exploring Commercial Markets: 1960s
As early as 1960, O'Keefe and the company's three founders had considered establishing a new environmental analysis business, which would lessen EG & G's dependence on low-margin government contracts and permit the company to enter new commercial markets. But at the time, neither public concern nor legislation placed a high value on such endeavors.
Three years later, the United States, the Soviet Union, and the United Kingdom signed a protocol that banned nuclear tests in the atmosphere, above ground, in the water, or in outer space. With this document, EG & G appeared to lose a major portion of its business. However, the protocol did not prevent underground tests, which were far more complicated. EG & G remained the only company with the proper supervisory credentials to manage this type of nuclear testing. The company was forced to develop geologic analytical capabilities and become a tunneling and mining operation as well.
Furthermore, the government had also laid plans to establish a kind of oceanographic equivalent to NASA. Eager to take a place in this organization, EG & G invested heavily in oceanographic research. While the underwater NASA never materialized, the efforts enabled O'Keefe to further cultivate new commercial markets for EG & G, including excavation and water transmission.
During this time the company's three founders moved further into retirement, taking ceremonial "executive chairman emeritus" positions. As a result, O'Keefe became the de facto head of the company. EG & G also pursued a strong acquisition campaign, taking over 13 companies between 1964 and 1967.
By 1967 a strong environmental movement began to form in the United States. With legislation still years away, EG & G began laying plans to play an important role in the environmental projects it was sure would result.
EG & G was divided into four main operating divisions. The smallest of these was EG & G International, which was primarily concerned with oceanography. The standard products and equipment division, which grew fastest during the 1960s, produced a variety of machines and electronic devices. EG & G's largest segment remained its nuclear detonation and monitoring business. But perhaps the most innovative and interesting division was the nuclear technology group, which was involved in the design of nuclear rocket engines for interplanetary propulsion.
Other noncombat nuclear projects included "nuclear landscaping" projects, in which controlled nuclear explosions could carve out harbors, canals, and other types of passages. EG & G's CER Geonuclear unit participated in tests wherein nuclear explosions were used to fracture layers of rock so that otherwise inaccessible gas and oil reserves could be exploited. These public works projects, while feasible, failed to gain public support. In fact, opposition to nuclear technology in general increased as people grew wary of the safety of nuclear energy. In addition, nuclear excavation would have required an unlikely waiver of the 1963 Nuclear Test Ban Treaty.
With the evaporation of good commercial prospects for its nuclear engineering expertise, EG & G was forced to rely again on military projects. Despite efforts to step up mechanical and electrical engineering work (partly by acquiring a spate of small research companies), EG & G mustered only four percent annual growth during the late 1960s.
Failed Initiatives: 1970--75
Interest in nuclear power increased dramatically during the 1973--74 Arab oil embargo, in which Americans sought to reduce their costly dependence on imported oil. Realizing that the world's oil exporting nations stood to permanently lose their largest customer, the United States, King Faisal of Saudi Arabia promptly called for an end to the embargo. Nonetheless, while Americans regained access to Arab oil, the end of the embargo was disastrous for the U.S. nuclear energy industry--and for EG & G. The end of the embargo removed one of the great justifications for nuclear power, and gave anti-nuclear activists time to properly organize legislative battles.
While EG & G was being locked out of yet another promising commercial application of its technologies, it attempted projects in other fields. Some years earlier, in an effort to develop a new process for purifying nuclear isotopes, EG & G developed a flash tube that was ideal for photocopiers. However, by the time an application could be developed, Xerox had already saturated the market with conventional designs. In another ill-timed move, the company bet that environmental laws would cause demand for the unconventional Wankel engine to rise. EG & G purchased a Texas automobile testing agency in hopes of winning large emission monitoring contracts. However, the oil embargo destroyed the market for the clean, but gas-eating Wankel, and automobile environmental legislation was abandoned.
During this time, with the encouragement of the government, EG & G established a minority-dominated subsidiary, EG & G Roxbury, in a neighborhood of Boston, hoping to help strengthen the economic structure of the community. The project floundered, however, when bureaucrats failed to properly support the program, causing only a few sales to be made from the subsidiary. After a few years of disastrous results, the entire program was wound up.
On the Upswing: 1976--80s
EG & G's environmental division, which languished after the oil embargo, finally began to take off in 1976. Rather than concentrating on environmental compliance, the group evolved into a comprehensive resource efficiency operation that could provide complete oceanographic, atmospheric, and geophysical analysis. By conserving resources, operations could more easily achieve pollution and waste reduction targets.
Another area of success was in port development. Although unable to blast out custom designed harbors with nuclear devices, EG & G was a world leader in oceanographic studies and channel engineering. The company designed numerous tanker ports in the Persian Gulf and bauxite harbors in South America.
In 1979 President Jimmy Carter asked Bernard O'Keefe to serve as chairperson of the government's synthetic fuels corporation. Having already been asked to serve on a transition team for then presidential candidate Ronald Reagan, however, O'Keefe refused Carter's offer.
With the election of Reagan in 1980, the United States took a sudden turn toward military armament programs. EG & G experienced a resurgence in its flagging nuclear testing business and was tapped to develop a number of new nuclear weapons systems, including the MX missile and the Strategic Defense Initiative. A self-described "card carrying member of the military-industrial complex," Bernard O'Keefe wrote in his book Nuclear Hostages that the United States and the Soviet Union were locked in an arms race that neither of them could control. Ironically, EG & G remained deeply involved in a number of Reagan administration projects O'Keefe opposed, including the MX, the neutron bomb, and stationing of nuclear missiles in Europe. Nevertheless, EG & G's pretax operating profit doubled from the new business.
EG & G also became involved in the space shuttle program, checking the spacecraft's electrical components, loading its fuel, and managing the Cape Canaveral space center during shuttle missions. EG & G's site management abilities won it a position with the Department of Energy's elite Nuclear Emergency Search Team which investigated nuclear extortion threats. The company also won a contract to manage the government's troubled Rocky Flats installation outside Denver. This facility, which manufactured nuclear weapon triggers, was widely criticized for mismanagement under Rockwell International.
EG & G maintained its momentum throughout the 1980s, winning contracts from diverse governmental agencies, including the Department of Energy, the Army, the Air Force, the Department of Defense, and U.S. Customs. In 1988 the company hit a record high for both sales and earnings. O'Keefe retired from EG & G during this period of strong growth, and was succeeded by John M. Kucharski.
Rapid Diversification: 1990s
Under U.S. President George Bush, and with the subsequent collapse of the Soviet military threat, the number of EG & G nuclear test projects decreased significantly. As such, EG & G was under pressure to cultivate profitable new commercial ventures to offset the loss of revenue from military contracts. The company responded rapidly, entering new commercial markets via a series of acquisitions. One of the first acquisitions of the 1990s was Electro-Optics, the optoelectronics business of General Electric Canada. Electro-Optics designed and produced advanced semiconductor emitters and detectors for defense, space, telecommunications, and industrial applications. Other new ventures followed quickly: the Finland-based WALLAC Group, which produced analytical and diagnostic systems; IC Sensors, a maker of sensing devices for industrial, automotive, medical, and aerospace uses; and NoVOCs, Inc., an environmental remediation specialist.
In 1994, facing legal pressure from activists' groups, EG & G announced that it would discontinue its nuclear-related endeavors as its various existing contracts expired. That same year, the company undertook a major reorganization to accommodate its newly acquired interests and the discontinuation of its nuclear business. One important area of focus for the company was its Instruments division, which was rapidly becoming a leader in the field of weapons and explosives screening systems. After providing x~ray machines and metal detectors for the Democratic and Republican national conventions in 1992, the company won a contract to supply state-of-the-art explosives detection systems for federal courthouses across the nation. A subsequent contract with the Federal Aviation Administration called for ten of EG & G's most advanced explosives detection systems for screening checked baggage in airports.
In 1998 Gregory Summe replaced Kucharski as EG & G's president and CEO. Summe, formerly the president of AlliedSignal Inc.'s Automotive Products Group, was known for his ability to streamline and consolidate technology businesses. He assumed his new position with the twin goals of improving operational efficiency and restructuring EG & G's portfolio to sharpen the company's focus on identified high-growth markets. One of his first efforts toward better operational efficiency was to consolidate all EG & G's business into five independent strategic business units: Life Sciences, Instruments, Engineered Products, Optoelectronics, and Technical Services. The company also began repositioning its portfolio by liquidating assets that fell outside these growth areas and making acquisitions that strengthened EG & G's position within its identified markets. This strategy led to the largest acquisition in the company's history: Lumen Technologies. Lumen, purchased for $250 million in December 1998, was known globally as a producer of specialty lighting. The Lumen acquisition served to strengthen the company's existing position in the medical lighting market, while at the same time allowing it entry into the areas of video and entertainment lighting.
Looking to the Future
The consolidation efforts that Summe's management team initiated in 1998 were expected to continue, with the goal of streamlining sites, functions, and processes so as to reduce operating costs and improve quality, consistency, and response time.
The company intended to continue its focused acquisition strategy. It also planned to continue aggressively developing and marketing new products in its various divisions. Some of the products expected to be introduced were high-volume, cost-effective systems for drug screening, and a Point of Care system that allowed diagnosticians to determine whether or not a patient had suffered a heart attack in just 15 minutes. In addition to introducing new products, the company also anticipated an increased emphasis on product line extensions and renewals.
Principal Subsidiaries: EG & G Alabama, Inc.; EG & G Astrophysics (England); EG & G ATP GmbH (Germany); EG & G ATP GmbH & Co. Automotive Testing Papenburg KG (Germany); EG & G Automotive Research, Inc.; EG & G California, Inc.; EG & G Benelux BV (Netherlands); EG & G Canada Investments, Inc.; EG & G Canada Limited; EG & G Defense Materials, Inc.; EG & G do Brasil Ltda.; EG & G E.C. (U.K.); EG & G Emissions Testing Services, Inc.; EG & G Energy Measurements, Inc.; EG & G Exporters Ltd. (U.S. Virgin Islands); EG & G Florida, Inc.; EG & G GmbH. (Germany); EG & G Holdings, Inc.; EG & G Hong Kong, Ltd.; EG & G IC Sensors, Inc.; EG & G Idaho, Inc.; EG & G Information Technologies, Inc.; EG & G Instruments GmbH. (Germany); EG & G Instruments International Ltd.; EG & G Instruments, Inc.; EG & G International Ltd.; EG & G Japan, Inc. (U.S.A.); EG & G Judson Infared, Inc.; EG & G KT Aerofab, Inc.; EG & G Langley, Inc.; EG & G Ltd. (U.K.); EG & G Management Services of San Antonio, Inc.; EG & G Management Systems, Inc.; EG & G Missouri Metals Shaping Company, Inc.; EG & G Mound Applied Technologies, Inc.; EG & G Omni, Inc.; EG & G Pressure Science, Inc.; EG & G Singapore Pte Ltd.; EG & G Special Projects, Inc.; EG & G Star City, Inc.; EG & G S.A. (France); EG & G SpA (Italy); EG & G Technical Services of West Virginia, Inc.; EG & G Vactec Philippines, Ltd.; EG & G Ventures, Inc.; EG & G Watertown, Inc.; Antarctic Support Associates (Columbia); B.A.I. GmbH. (Germany); Benelux Analytical Instruments S.A. (Belgium; 92.3%); Berthold A.G. (Switzerland); Berthold Analytical Instruments, Inc.; Berthold France S.A. (80%); Berthold GmbH & Co. KG (Germany); Biozone Oy (Finland); EC III, Inc. (Mexico; 49%); Eagle EG & G, Inc.; Eagle EG & G Aerospace Co. Ltd.; Heimann Optoelectronics GmbH (Germany); Heimann Shenzhen Optoelectronics Co. Ltd. (China); NOK EG & G Optoelectronics Corp. (Japan; 49%); Pribori Oy (Russia); PT EG & G Heimann Optoelectronics (Singapore); Reticon Corp.; Reynolds Electrical & Engineering, Inc.; Science Support Corporation; Seiko EG & G Co., Ltd. (Japan; 49%); Shanghai EG & G Reticon Optoelectronics Co. Ltd.; Societe Civile Immoiliere (France; 82.5%); The Launch Support Company, L.C.; Vactec, Inc.; WALLAC ADL AG (Germany); WALLAC ADL GmbH (Germany); WALLAC A/S; WALLAC Holding GmbH (Germany); WALLAC Norge AS (Norway); WALLAC Oy (Finland); WALLAC Sverige AB (Sweden); WALLAC, Inc.; Wellesley B.V. (Netherlands); Wright Components, Inc.; ZAO Pribori.
Further Reading:
'Bombs for Peace,' Forbes, September 15, 1969, pp. 71-72.
'EG & G Plays Big Role in Nuclear Weaponry, Other Defense Work,' Wall Street Journal, May 21, 1984, pp. 1-21.
'Hope for the Wild Ones--But Don't Count on Them,' Forbes, May 15, 1975, pp. 110-14.
'One-Stop Environmental Aid,' Business Week, July 19, 1976, pp. 44-47.
'Personality: A Pioneer of the Nuclear Age,' New York Times, January 15, 1967, p. F3.
'Pounds of Plutonium in the Ventilation Ducts,' New York Times, December 12, 1989, p. 12.
'Spread Eagle Champ,' Forbes, April 17, 1978, pp. 83-85.
Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.
