Rohr Incorporated
Address:
P.O. Box 878
Chula Vista, California 92012-0878
U.S.A.
Telephone: (619) 691-4111
Fax: (619) 691-2905
Statistics:
Public Company
Incorporated: 1940 as Rohr Aircraft Company
Employees: 9,200
Sales: $1.28 billion
Stock Exchanges: New York
SICs: 3724 Aircraft Engines and Engine Parts; 3764 Space Propulsion Units and Parts
Company History:
Rohr Incorporated is the world's leading manufacturer of aircraft engine parts, including nacelles, cowlings, pylons, and thrust reversers. Rohr controls about 80 percent of the market for these products, which appear on the Boeing, McDonnell Douglas, and Airbus jetliners, as well as C-130, C-5, F-14, and KC-135 military craft. The company also manufactures a variety of other formed metal products, including parts for the Titan IV rocket motor.
The company was named for its founder, Frederick Hilmer Rohr, who was born into an immigrant German family in 1896 and grew up in San Francisco. Rohr served as an apprentice in his father's sheet metal works by day and attended school by night. Upon discharge from the Navy after World War I, Rohr returned to his father's business, now in Fresno, where he developed a stamping process for forming metal trim on building facades.
Rohr and several friends pooled their savings to purchase and restore old war aircraft, including Jennys and DeHavillands, in which they learned to fly. Rohr quit flying when he married in 1920 and left his father's company four years later to establish his own firm, the Standard Steel Works, in San Diego.
When Rohr heard that the nearby Ryan Aircraft Company was searching for a fuel tank supplier, he managed to coax the specifications out of a shop foreman. He returned to Ryan the next morning with a finished product. The foreman was so impressed with the job that he asked Rohr to join the firm as a sheet metal foreman. When Rohr joined the company, Ryan was switching from fabric- and wooden-skinned aircraft to sturdier metal designs.
In 1927, shortly after Claude Ryan sold his company to Thomas Mahoney, an airmail pilot named Charles Lindbergh came by with the unusual request for an aircraft capable of crossing the Atlantic. Rohr did the sheet metal work and built the fuel tanks for the craft, the Spirit of St. Louis, which was completed in just 60 days. However, after Lindbergh's flight to Paris, Mahoney moved the Ryan company to St. Louis, leaving Rohr without a job.
Rohr was taken on as a factory manager by the Solar Aircraft Company, which produced parts for the Ford Trimotor as a subcontractor. Solar developed its own craft, an eight passenger model called the MS-1, but it failed to sell in the Depression-era market.
Solar next turned its attention to the manufacture of stainless steel manifolds--a business that sustained the company for years--and even began manufacturing milk cans for dairy farmers. Rohr, meanwhile, perfected a new process for hammering sheet metal, suggested by the method he had used earlier for punching out building trim. Rohr demonstrated his punch-and-die "drop hammer" system for Solar directors, using a form modeled from a toilet seat. When word of the system reached Boeing, Rohr was invited to set up a drop hammer line at Boeing's factory in Seattle.
Rohr served as sheet metal engineer with Boeing until 1935, when the company's chairperson, Claire Egtvedt, suggested that he go into business for himself as a subcontractor. Rohr then returned to San Diego to work for Claude Ryan, who had established a second aircraft company, before finally taking Egtvedt's advice and establishing his own firm. The Rohr Aircraft Company was established on August 6, 1940 and consisted of Rohr, two former Ryan engineers, and a couple of lawyers.
The three-person design team worked out of the garage at Rohr's home for two weeks, designing drop hammers and heat treatment tanks. Already known for his work at Ryan, Solar, and Boeing, Rohr had an easy time gaining an audience at the Consolidated Aircraft Corporation.
Rohr emerged with his first contract, building Sperry bombsights for the LB-30, an early version of the B-24 bomber. Next, Lockheed asked Rohr to build cowlings for the A-28 Hudson bombers it was manufacturing for the British. The sudden rush of business forced Rohr to relocate from a small rented factory space to a new 37,500-square foot complex, and eventually two additional facilities.
Impressed with the company's work on the bombsight, Consolidated asked Rohr to manufacture complete "power packages"--motor mounts, cowlings, plumbing, electrical harnesses and everything else that held a bare engine to a wing--for the PB2Y3 flying boat. This enabled Consolidated to concentrate on building airframes, while leaving the engine mounting to Rohr. When the United States became involved in World War II, Consolidated asked Rohr to build power packages for the B-24, which was by now rolling off assembly lines in droves. Production shot up to 56 power packages a day.
To meet this demand, the company's factory space was expanded to 600,000 square feet. But, in need of even greater space, Fred Rohr took over his father's sheet metal plant in Fresno. As production rose, and Rohr's employees went off to war, Rohr began hiring female employees. The first woman joined the payroll in May 1942. Only a year later, 55 percent of the work force, now numbering several thousand, were women. By November 1944, with Allied victory imminent, the company employed 13,000 workers. Rohr faced the tremendous dilemma of keeping the enterprise running after the war ended.
Rohr decided that the company was best equipped to manufacture consumer products for the millions of men who would soon be returning home to start families. He entered into merger negotiations with the Detroit-based International Detrola Corporation, a manufacturer of machine tools, radios, washing machines, refrigerators, furniture, and other consumer durables. Detrola's acquisition of Rohr Aircraft, through an exchange of shares, was concluded in July 1945.
A month later, the war ended and the government cancelled all orders for new aircraft. Facing a 90 percent drop in sales, Rohr was forced to lay off all but 500 employees. Fred Rohr was personally opposed to this diversification of his company into products its management did not understand, but he decided that it was the only way to keep the company going.
Just as the company began preparations for building radio cabinets and vacuum cleaners, Boeing returned with an order for a small quantity of aircraft parts. The government wished to retain a strong military deterrent for the Soviet Union, and Boeing bombers were to be a major component of that capability. Boeing also had promising commercial projects, including the 377 Stratocruiser, and a growing number of follow-on military projects that required parts from Rohr.
This work greatly lifted the spirits of Fred Rohr, who felt he had no place running a vacuum cleaner factory. However, he grew impatient with the parent company Detrola during this time. He decided that Detrola, which had changed its name to the Newport Steel Corporation, was entirely too involved in buying, selling, and reorganizing companies, while exhibiting no talent for actually operating them.
Thus, when Newport Steel decided to sell Rohr Aircraft, Rohr made an attempt to buy it. He organized a group of employees and other shareholders who together controlled 100,000 shares of Newport stock. Convincing Boeing to pay in advance for orders it had made and collecting additional cash from the treasury, Rohr presented a buy-out offer to the Newport board. The directors bargained for a higher price, and, when Rohr managed to meet this price, they finally agreed to sell the company to Rohr and his partners. Rohr Aircraft regained its independence on December 7, 1949.
The aircraft industry experienced a sudden burst in orders after war erupted in Korea in 1950, with the prospect of a wider war involving China and the Soviet Union. Rohr was forced to expand once again, but was bound by military strategy to locate a second facility away from its first plant. After considering Salt Lake City, Rohr settled on a site near Riverside, 100 miles north of San Diego.
The company produced large quantities of power packages and other engine parts for Boeing, Convair, and Lockheed. One of the company's largest contracts was for the Lockheed C-130 Hercules transport, awarded in 1954. But Lockheed balked at the prospect of shipping its engines from Pratt & Whitney in Connecticut to Rohr in California, and then to Lockheed's factory at Marietta, Georgia. In order to reduce shipping costs and provide better service to Lockheed, Rohr set up a third plant at Winder, 35 miles from Marietta, where the engines would be assembled. The Winder plant worked so well for Lockheed that Rohr established an engine build up facility for Boeing--supplying aft fuselage section for the 707--at Auburn, Washington, in 1956.
During the 1950s, Boeing, Douglas, and Convair were developing new jet-powered airliners. These jetliners were so popular with airline companies that orders for propeller-driven craft plummeted. However, because the jets were larger and faster than turboprop aircraft, airlines needed fewer of them. This created a sharp decline in demand for Rohr's jet- and piston-engine power packages.
In search of other profitable ventures, Rohr applied its metal forming experience to building large antenna dishes, one of which relayed television coverage of the first moon walk. By 1965, Rohr was one of the country's largest antenna suppliers. The company also began manufacturing hulls for patrol and rescue boats, tugs, and yachts.
Fred Rohr died suddenly of a stroke on November 8, 1965. The company carried on under Burt Raynes, a co-founder of Rohr who had been appointed president of the company two years earlier. Late the following year, Rohr received two huge orders to provide nacelles, struts, and thrust reversers for Boeing's new 747 as well as nacelles and pylons for Lockheed's enormous C-5 Galaxy.
In his determination to spur Rohr's growth, Raynes steered the company into ground transportation, winning a contract to build rail cars for public transit systems in San Francisco and Washington, D.C. In 1971, Rohr purchased the Flxible Company, an Ohio-based bus manufacturer (the company's unusual name resulted from an early trademark battle in which it was denied proprietary rights to the word "flexible").
Next, Raynes organized the purchase of a French hovercraft technology, with the aim of developing intercity transports to compete with trains and aircraft. Rohr also attempted to start up a gas turbine and light-rail people mover division. In other areas, Rohr became involved in postal automation systems, rail car conversion, and the manufacture of gas turbines and pre-stressed concrete structures.
Rayne's rapid diversification of Rohr's business diluted profits from its aviation business, causing a series of quarterly income losses. Furthermore, quality problems on mass transit systems embroiled the company in an embarrassing legal dispute. Defying his own balance sheet, Raynes continued to paint an optimistic picture. This led to Raynes' firing in February 1976 and subsequent replacement by Fred W. Garry, a former General Electric executive.
Returning to Fred Rohr's philosophy of the core business, Garry immediately began divesting Rohr of all its non-aerospace operations. He dropped the mass transit and light rail operations, the hovercraft, antenna and concrete businesses, the postal unit, and a warehouse automation group. In the process, he slashed the payroll from nearly 8,000 employees to just 3,800.
In 1978, Garry arranged the sale of Flxible to Grumman for $40 million. However, soon after taking over the bus company, Grumman sued Rohr for misrepresenting the quality of the Flxible product line. Nevertheless, the suit had little effect on Rohr's contract to supply engine nacelles for Grumman's F-14 Tomcat Navy fighter.
In 1979, President Carter ordered massive increases in defense spending. In an effort to grab orders, aircraft companies spilled their capacity demand on to subcontractors such as Rohr. Determined not to lose a contract, Rohr's board refused to deny any new business. Unprepared for a deluge of new orders, Rohr's assembly lines became snarled, its warehouses became bloated with inventory, deliveries were delayed, costs soared, and profits plunged. Unable to rein in the overambitious goals set by the board, Garry resigned in protest. He was replaced by director Carl L. Sadler, a former Sundstrand executive, who had helped overcome a similar production mess at that company.
However, much of the damage had already been done. Grumman beat Rohr in a bid to build nacelles for re-engined DC-8s, and Boeing elected to build its own nacelles for its new 767. Ironically, the loss of these contracts made it easier for Sadler to scale down the company's backlog and restore control. Despite its flirtation with disaster, Rohr managed to pull out a profit for several consecutive years. The earlier losses were made up by follow-on work for Boeing and Grumman.
In addition, Rohr's assembly plant in Toulouse, France, established in 1973 to supply the European Airbus consortium, won a contract for that company's A-310 and, later, the A-320. Gradually, Rohr built up 100 percent shares of McDonnell Douglas and Airbus' nacelle business and 50 percent of Boeing's.
Sadler retired in 1982 and was succeeded by Harry Todd, who shared Sadler's strategies and philosophies concerning Rohr. The following year, Rohr won additional follow-on work for the Lockheed C5-B, requiring the establishment of a third assembly plant at Foley, Alabama. During the latter half of the decade, commercial aircraft orders climbed drastically. This necessitated the establishment of new assembly plants at Sheridan and Heber Springs, Arkansas.
During this time, Rohr was transformed from a "build to print" subcontractor into an integrated systems designer. Rather than simply building to a customer's specifications, Rohr was invited to participate in the design process for the components it built. This served to bolster Rohr's 80 percent share of the engine nacelle and power package markets, allowing the company to derive greater profit from those activities.
In October 1987, Rohr purchased the composite bonding operations of the financially troubled Fairchild Aircraft Corporation. The purchase helped Rohr to enter the 1990s with more than $1 billion in sales.
Harry Todd retired in 1990 and was succeeded by Robert Goldsmith. Shortly after Goldsmith took over leadership at Rohr, the company came under investigation by the U.S. Attorney's office for allegedly fabricating results of its parts testing. Goldsmith admitted to deficiencies in the process, and moved to correct them, but maintained that Rohr had engaged in no "purposeful mischief" to defraud the government.
Although Rohr made progress in drawing down debt, controlling costs, and raising profitability, its share price was low, and shareholders were upset with the government's investigation. Moreover, Goldsmith announced his retirement in January 1993 without appointing a successor, leaving Rohr vulnerable to an unwelcome takeover bid.
Board member Jim Kerley was appointed interim chairperson to fill the leadership vacuum, but rumors persisted that Northrop, Martin Marietta, and the Euronacelle consortium had given serious consideration to taking over Rohr. Much of this speculation was put to rest after Martin Marietta took over General Electric's aerospace group instead, and Rohr appointed a new CEO, Robert H. Rau, a former executive with Parker Hannifin, a manufacturer of hydraulic and pneumatic aircraft systems. Under Rau, Rohr began to feel the effects of a widespread cancellation in aircraft orders by failing airline companies. Cuts in defense spending also affected Rohr's business, forcing employment to be trimmed from 12,091 in 1989 to 9,230 in 1992. The government investigation into parts testing had not yet reached a conclusion in 1993.
Further Reading:
"Bidders Look at Rohr as Aerospace Industry Shrinks," Wall Street Journal, January 14, 1993.
"A Crucial Year for Rohr's Survival," Business Week, February 28, 1977, pp. 86-87.
"Flxibility?" Forbes, October 15, 1977, p. 152.
"How Rohr's Move into Transportation Backfired," Business Week, January 19, 1976, pp. 46-48.
Rohr Incorporated Annual Report, Chula Vista, CA: Rohr, 1992.
"Rohr on a Roll," Financial World, June 13, 1989, pp. 18-19.
"Rohr Taps Robert H. Rau to be President and CEO," Wall Street Journal, April 14, 1993, p. B11.
"Soaring Demand Hurts an Overeager Rohr," Business Week, April 21, 1980, pp. 59-60.
"The Tough Route from Jets to Rail Cars," Business Week, May 1, 1971, pp. 96-99.
"What Doldrums?" Barron's, April 25, 1983, pp. 49-50.
Source: International Directory of Company Histories, Vol. 9. St. James Press, 1994.
