Howmet Corp.
Address:
475 Steamboat Road
Greenwich, Connecticut 06836-1960
U.S.A.
Telephone: (203) 661-4600
Fax: (203) 622-4617
Statistics:
Wholly Owned Subsidiary of Pechiney International
Incorporated: 1903 as Howe Sound Co.
Employees: 8,000
Sales: $800 million
SICs: 3324 Steel Investment Foundries; 3479 Coating, Engraving & Allied Services; 3499 Fabricated Metal Products; 3511 Turbines & Turbine Generator Sets; 3542 Machine Tools, Metal Forming Types; 5051 Metal Services Centers & Offices
Company History:
Howmet Corporation, a wholly owned subsidiary of Pechiney International, produces high-technology components used in gas turbine engines for industrial use as well as for jet aircraft. Specifically, the company casts complex superalloy, titanium, and aluminum-alloy parts for such engines. Originally the Howe Sound Co., a holder of North American mining securities, by the early 1960s Howmet had completely abandoned mining for diversified manufacturing. The company was acquired by Pechiney in 1970, which later divided it into separate subsidiaries. The Howmet unit engaged in the production of aluminum and the fabrication of aluminum products was sold in 1983.
The Howe Sound Co. was incorporated in Maine as a holding company for buying the securities of mining companies. It was named for a major copper strike along an inlet of the Pacific coast of British Columbia. Mining operations began around 1906. By 1930 its subsidiary, Britannia Mining & Smelting Co., held properties that included 17 beach lots and 549 government-granted mineral claims on Howe Sound, comprising 25,517 acres. Britannia also held 10 timber licenses comprising 5,600 acres adjacent to its mining claims, a hydroelectric development, and a mill with daily capacity of 5,000 tons of ore. Through other subsidiaries it operated mines and a concentrating mill in Mexico.
In 1940 the company's largest investment still was in Canadian properties producing copper, zinc, lead, silver, and gold. Torbit Mining Co., a subsidiary of Britannia created in 1930, controlled a property on Howe Sound 13 miles north of Alice Arm, British Columbia. Howe's Mexican interests ranked second, with a subsidiary, El Potosi Mining Co., and its subsidiaries owning and operating about 400 acres of mining properties in the state of Chihuahua, whose ores contained silver, zinc, and lead. Through another subsidiary established in 1930, Chelan Copper Mining Co., Howe also owned mining property at Chelan, Washington, with ores containing copper, silver, and gold. Active operations there began in 1938, when the company completed a new milling plant at Holden, Washington. In all, Howe's operating revenues in 1940 were a modest $11.6 million and its total income $2.5 million.
At the end of 1949 Howe Sound Co. also operated another subsidiary, Howe Sound Exploration Co. Located on the north shore of Snow Lake in Manitoba, it milled gold and silver from ore. Still another subsidiary, Calera Mining Co., was developing the Blackbird mine near Forney, Idaho, expected to yield copper, cobalt, and gold. Between 1920 and 1950 Howe's mines had produced more than 51 million tons of ore, recovering and selling 812,797 ounces of gold, 8,271,110 ounces of silver, 407,147 tons of copper, 713,061 tons of zinc, and 951,862 tons of lead. The company had operating revenues of $19.33 million in 1949 and a total income of $2.96 million.
The boom-and-bust nature of the mining industry was to lead to a loss of nearly $10 million in 1957 and, consequently, a major reconstruction of Howe Sound. During 1958 the company merged with Haile Mines, Inc., a producer of tungsten concentrates, metallurgical-grade manganese nodules, and other materials. The transaction was on the basis of an exchange of one Howe share for every two-and-a-half Haile shares. The merged company was then incorporated in Delaware under the Howe Sound name. By now the Manitoba and Washington mines and one of the two Mexican mines had been shut down, but the Blackbird mine was a major cobalt ore producer, and a refinery near Garfield, Utah, was treating its concentrate. From Haile the new company inherited a manganese mine near Henderson, Nevada, and a tungsten mine near Henderson, North Carolina. Howe also operated, among other properties, a copper-and-brass rolling mill in Springdale, Connecticut, and a research laboratory in Dover, New Jersey, and it inherited from Haile four Pennsylvania factories, including an aluminum fabricating plant and rolling mill near Lancaster that was to prove highly profitable. Operating revenues in 1958 came to $60 million, but total income was only $2.5 million.
Haile's president, William M. Weaver, Jr., became president of the merged company. By 1962 he had almost totally recast Howe from a mining to a manufacturing company. The Idaho mine was abandoned and written off, the Nevada mine closed, and the remaining Mexican mine sold. The Britannia and tungsten mines were shut down that year. "In 1962, less than 5 percent of our sales will be from mining," Weaver told a New York Times reporter. "Manufacturing is not as risky as mining." He said the company intended to concentrate its future efforts in three main areas: dental and surgical products, aluminum, and high-temperature alloys. But not all of Howe's manufacturing was profitable, either; the Connecticut copper rolling mill, bought for $18.5 million in 1958, eventually had to be sold at a pretax loss of $5 million. By the spring of 1962 Howe's profits were down by more than half since the record $6.6 million of 1959, and its stock had dropped from $29 to $15 a share.
A tennis game at Manhattan's exclusive River Club between Weaver and Yves H. Robert, an executive of an affiliate of the large French aluminum-making firm Pechiney, proved fateful for Howe Sound. A locker-room discussion revealed Robert's interest in Howe's aluminum mill, now the largest U.S. fabricator of the metal. In October of 1962 Pechiney made a tender offer for 40 percent of Howe's shares at $15 a share. By late 1964 the French company had invested $22 million in Howe and owned 46 percent of the stock.
In 1966 Howe started receiving its primary aluminum from Intalco Aluminum Corp., a company in which both Howe and a Pechiney subsidiary had taken a quarter stake. Howe's earnings were coming from superalloy products like blades and vanes for gas-turbine engines, aluminum sheet and strip, metal refractories for steel and other industries, and dental and medical products. Howe's sales had more than tripled in a decade, reaching $107.9 million in 1964--but income was only $2.5 million, and its aluminum operations were not profitable.
In 1965 Weaver was moved up to the post of chairman of the board, and John J. Burke, a 42-year-old aerospace executive, succeeded him as president. The company name was changed to Howmet Corp. because, in Burke's words, "we all got completely fed up explaining to people that we didn't make stereo sets, tape recorders, or any sort of hearing aid." In Burke's first full year, Howmet's stock scored the biggest gain in a losing year on the New York Stock Exchange, soaring from $20 to $48 a share. The quarterly dividend rate increased three times. These gains were realized by selling off unpromising parts of the diversified company and eschewing new acquisitions. In 1967 Howmet's sales reached $195 million, and its profit was $14 million. Its stock reached around $100 a share in 1968 before a split.
Burke, who also found time for scuba diving, motorcycle racing, and free-fall parachuting during his three-year tenure as president, moved to chairman in 1968 and was succeeded by Robert, the Pechiney executive whose tennis match with Weaver had changed Howe Sound's direction. In the same year Pechiney Enterprises, Inc., the company's U.S. subsidiary, decided to build jointly with Howmet a primary aluminum-reduction plant near Frederick, Maryland. The plant was to cost $190 million and have a capacity of 255,000 tons of aluminum a year, giving Howmet an additional source of the metal to support the planned expansion of its fabricating plants. Alumina, from which aluminum is made, would be supplied by Pechiney from abroad and shipped to Frederick from the nearby port of Baltimore.
Howmet had sales of $183.1 million and a net income of $8.9 million in 1969. It became a Pechiney subsidiary in 1970, when Pechiney Enterprises, its U.S. holding company, raised its stake in Howmet to 58 percent. Howmet then moved from New York to Pechiney's headquarters in Greenwich, Connecticut. The acquisition made Howmet, when the new Eastalco aluminum plant came on-line during the year, the nation's fourth largest producer of aluminum ingots and fabricated products. Its profitable medical, dental, and hospital products were placed into a separate corporation called Howmedica, Inc., with 80 percent of its common stock distributed to Howmet's shareholders. Robert became chairman and chief executive officer of Howmedica, Andre Jacomet, a Pechiney executive, became president of Howmet, and Eugene Black, former World Bank president and chairman, succeeded Burke as chairman of Howmet. Pechiney raised its stake in Howmet to 69 percent in 1973 and 92 percent in 1975.
Effective at the start of 1976, Pechiney reorganized its U.S. operations. Howmet's aluminum business was placed under a subsidiary called Howmet Aluminum Corp. and its production of gas-turbine components into a subsidiary named Howmet Turbine Components Corp. Pechiney reportedly was prepared to sell a majority interest in the latter because of concerns by the U.S. government over full control by a foreign company of the sensitive military implications involved in the manufacture of components of gas-turbine engines. Howmet's work in this field had included precision castings for the engine powering the F-15 and F-16 airplanes. However, Howmet Turbine subsequently remained in the Pechiney portfolio.
In 1979 Howmet Aluminum opened the nation's first secondary-metals plant capable of producing high-quality aluminum from all-recycled materials. The $4-million factory, in Rockwell, Texas, had an initial capacity of 75 million pounds a year. And Howmet Turbine joined with Dow Chemical Co. the same year to create a joint venture intended to commercialize an electrolytic cell process for the production of titanium sponge. Dow and Howmet had been engaged jointly in research in this field since 1973.
Howmet Aluminum Corp. was sold to Alumax, Inc., an aluminum producer based in San Mateo, California, in 1983. Alumax in turn was half owned by Amax Inc. of Greenwich, Connecticut, and half owned by Japanese interests, with Mitsui & Co. holding a 45 percent stake. Alumax also took a quarter-interest in an aluminum smelter Pechiney had decided to build in Quebec.
Howmet was operating 22 facilities worldwide in 1985. Two years later it changed its name to Howmet Corp. to reflect its diversification of products. In 1987 the company was producing biomedical implants, industrial ceramic products, and large structural castings for the engines of a number of industries as well as for jet aircraft. The company also had begun repairing small-aircraft engine parts in 1982. By 1988 it was planning a similar facility dedicated to large engines, because, according to a Howmet executive, it was the only company in the repair business also making original turbine castings.
By mid-1990 Howmet was operating two U.S. plants refurbishing aircraft parts. The company purchased a site in North Haven, Connecticut, in August 1990 for still another repair plant. Howmet said this acquisition included a building where a facility was planned to coat and repair parts like blades and vanes for advanced jet engines.
Howmet installed its third chemical vapor-deposition production unit--the largest in the Western world, according to company officials--in 1990. This unit was capable of processing parts up to 40 inches in diameter and 50 inches in length. Coatings included aluminides, various metallics, carbides, nitrides, and oxides, in addition to fluoride-ion cleaning. Such coatings were being used for high-strength composites, superalloy hot-section turbine-engine components, and the cleaning of engine-run hardware. The company's Thermatech Coatings Division also was installing a low-temperature physical vapor-deposition unit capable of applying coatings to titanium hardware, tooling, and compressor section components. In addition this division expected to install a robotic air-plasma unit to help meet expected demand for thermal barrier coatings (TBCs). Production of engine parts in the 1990s was expected to employ TBC technology.
Howmet was also supplying the heat- and corrosion-resistant cobalt-, nickel-, and iron-based superalloys used in the casting operations needed to produce sophisticated components for jet- aircraft engines. In October 1991 the company announced it would consolidate its machining and alloy production activities. Its precision-machining facility in Whitehall, Michigan, was phased out and the work there merged with its facility in Winsted, Connecticut, while its alloy operations in Plymouth, Michigan, were phased out and merged with its facilities at Dover, New Jersey.
Howmet's Dover Castings Division was manufacturing high-technology airfoils for turbine engines. This division began rethinking its operations in 1988 by breaking up departments and reassembling them into decentralized cells. These cells rethought Dover's work processes and by so doing improved the inventory supply flow. A journal reported in 1993 that lead time was reduced 67 percent, work-in-progress inventory reduced 39 percent, scrap and rework reduced 30 percent, casting nonconformance improved 68 percent, and work-in-progress turns up 42 percent.
In December of 1993 Howmet established a joint venture with Rolls Royce named R-H Component Technologies, Inc. This 50-50 joint venture was to specialize in the refurbishment of certain aircraft parts, selling to North American markets. In 1994 Howmet joined a six-member consortium planning to develop a demonstrator automobile engine significantly lighter and more efficient than those in use, using high-temperature, high-strength materials. Named the Advanced Materials Engine Project Consortium, this body was planning a 1.5-liter, V8 overhead-cam reciprocating engine with four valves per head that would weigh only about 200 pounds. The valves would be fabricated from Howmet's gamma titanium aluminides.
An uncertain factor for Howmet in the mid-1990s was the proposed privatization of Pechiney CIF, in which the French government had held a majority share beginning in 1982. Sale of the company, initially planned for 1994, was put off because it lost FFr 800 million ($164.3 million) in 1993. Howmet represented only a small part of this giant diversified corporation, but it was thought the unit could share in layoffs and other cutbacks intended to improve the bottom line. Turbine operations accounted for somewhere between eight and 14 percent of Pechiney's sales in 1993.
In 1994 the Howmet structure consisted of 16 divisions devoted to such activities as making castings, coatings, alloys, ceramic products, insulators, and titanium ingots. The company operated ten facilities in nine states in the United States and three others in England, France, and Japan. Howmet Cercast (United States) and Howmet Cercast Canada were separate subsidiaries of Pechiney International.
Principal Subsidiaries: Howmet Sales, Inc.; Howmet Tempcraft, Inc.; Howmet, Ltd. (U.K.); Howmet S.A. (France); Komatsu-Howmet, Ltd. (Japan).
Further Reading:
Du Bois, Martin, "Pechiney Emerges as Test of France's Will to Privatize," Wall Street Journal, August 17, 1994.
Buggs, Nandi, "Howmet Opens New Facility in Texas," Journal of Commerce, November 14, 1979, p. 8.
"The Game That Two Could Play," Forbes, December 1, 1964, pp. 40-41.
Gampetro, Tony, "Spotlight on Howmet Corp.," Journal of Commerce, November 14, 1969, pp. 3, 20.
Hawkins, Philip, "Howmet Corp.'s Remarkable Performance Is Linked to Its Adventuresome President," Wall Street Journal, January 30, 1967, p. 24.
"Howmet to Join Machining, Alloy Work," Defense News, October 21, 1991, p. 37.
"Pechiney's Howmet Buys Site," Wall Street Journal, August 17, 1990, p. B10.
Regan, Bob, "Pechiney Realigns U.S. Operations," American Metal Market, November 7, 1974, pp. 1, 20.
Smith, Kenneth, "Personality: A Leader for a Transformation," New York Times, March 25, 1962, p. 3.
Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.
