Thiokol Corporation
Address:
2475 Washington Blvd.
Ogden, Utah 84401-2398
U.S.A.
Telephone: (801) 629-2270
Fax: (801) 629-2251
http://www.thiokol.com
Statistics:
Public Company
Incorporated: 1929 as Thiokol Chemical Corporation
Employees: 5,300
Sales: $890.1 million (1997)
Stock Exchanges: New York Pacific Boston Midwest Philadelphia
SICs: 3053 Gaskets, Packing & Sealing Devices; 3324 Steel Investment Foundries; 3369 Nonferrous Foundries, Except Aluminum & Copper; 3452 Bolts, Nuts, Screws, Rivets & Washers; 3483 Ammunition, Except Small Arms, Not Elsewhere Classified; 3546 Power-Driven Hand Tools; 3764 Guided Missile & Space Vehicle Propulsion Units & Propulsion Unit Parts
Company Perspectives:
We are a company of high integrity and excellence. We continually enhance our commitment to safety and quality. We have highly competent, dedicated employees. We have management, technical, and manufacturing expertise that puts us in an industry leadership position. We have the desire to achieve, excel, and win.
We engineer and manufacture solid propulsion motors, fastening systems, and, through our Howmet affiliate, high-performance castings. Our customers are leading global manufacturers in aerospace, transportation, and industrial markets and the United States government. We strive to maintain leadership through technical excellence and new product development using optimum designs, processes, and facilities. We have a strong, established business base in our current markets, and we are aggressively expanding into additional new markets where there is potential for growth and above-average financial returns.
Company History:
Thiokol Corporation is the world's largest producer of solid rocket motors and other parts for the aerospace and defense industries. Its Huck International, Inc. subsidiary manufactures precision fastening systems for international aerospace and industrial markets, while Howmet Corporation--a company Thiokol holds a majority stake in--is a leader in precision cast superalloy and titanium components for turbine engines used in jet aircraft and in utility power generation. Thiokol regained its independence from the salt and chemicals conglomerate Morton International in 1989, when Thiokol's rocket boosters were cited as the cause of the 1986 Challenger space shuttle explosion. Thiokol had been acquired by Morton in 1982 as part of that company's attempt to protect itself from unwelcome takeover attempts and diversify into markets unrelated to its core salt and chemical operations. Since regaining its independence, Thiokol itself has rapidly diversified its mix of operations.
Origins in 1926 Invention of Synthetic Rubber
Thiokol owes its origins to two chemists, Joseph C. Patrick and Nathan Mnookin, who were trying to invent an inexpensive antifreeze. In 1926, in the course of an experiment involving ethylene dichloride and sodium polysulfide, they created a gum whose outstanding characteristic was a terrible odor. The substance clogged a sink in the laboratory, and none of the solvents used to remove it were successful. Then the frustrated chemists realized that the resistance of the material to any kind of solvent was a useful property. They had invented synthetic rubber, which they christened "Thiokol," from the Greek words for sulfur (theion) and glue (kolla). Thiokol Chemical Corporation was subsequently founded on December 5, 1929.
Mnookin and Patrick initially negotiated with Standard Oil to develop the product, but they could not reach an agreement. Finally, a salt merchant named Bevis Longstreth provided the financial support for the construction of a plant in Kansas City, Missouri. The plant, however, produced an odor so obnoxious that local residents asked the mayor to remove the company from the area. As a result, Thiokol was forced to move to Trenton, New Jersey, in 1935.
At the onset of World War II the company hoped that the rubber shortage would increase demand for Thiokol, but organic rubber was recycled instead. Thiokol Inc. was thus relegated to making hoses for specialized uses during the wartime period. Dow Chemical Co. purchased 30 percent of Thiokol in 1948, and later sold its share of the company on the open market in 1953, when, according to Wall Street analysts, Thiokol was not a promising takeover candidate. In 1944, when Bevis Longstreth died, no one on the board of directors was willing to replace him; Joseph W. Crosby, a department head, ended up in Longstreth's position as vice-president and general manager.
Moved into Defense Contracting in the Mid-1940s
When it was brought to Crosby's attention that the Jet Propulsion Laboratory at the California Institute of Technology was buying large quantities of the company's solvent resistant polymer, he decided to talk to some of the institute's scientists. There he learned that the polymer was the best rocket fuel the scientists had ever used.
In the 1950s, the first rockets were powered by liquid fuel. This required heavy tanks to hold not only the fuel and the oxidizer but also the binding agent that held them together. Rocket fuel was so dangerous that one part fuel was mixed with four parts oxidizer to reduce flammability. Thiokol's polymer began attracting attention because it was fuel and binding agent in one.
Management at Thiokol decided to go straight to the military with its product, and the U.S. Army agreed to finance a laboratory. Research began even before the building was finished. The company's research director recalled mixing propellant late at night in a room illuminated by his car's headlights before any electric lights had been installed.
The Korean War benefited Thiokol considerably. Solid rocket fuel began to displace liquid, and the company's solvent resistant sealants were selling very well. During this time Thiokol began to design and manufacture rocket engines, and with a 70 percent share of the solid rocket fuel market the company achieved a significant measure of success.
During the 1960s the company worked on the propulsion systems for the Minuteman 3 rocket, the Poseidon submarine, and the Sam-D missile. It also provided flares and other pyrotechnic devices for the war in Vietnam. Almost two-thirds of the company's business came from the government; in fact, Crosby spent as much time in Washington as he did at the company's headquarters in Trenton, New Jersey.
Although Thiokol conducted most of its business with the government at this time, during the 1960s it also became involved in several humanitarian projects. Thiokol's educational division operated training programs for the unemployed, including Native Americans. Housing programs for low-income residents of Gulfport, Mississippi, and Raleigh, North Carolina, were also administered by Thiokol. The company's extensive contact with the military gave it an edge in the competition for these educational and housing programs, which were government-funded.
While government contracts were lucrative, they were also undependable, since programs were funded according to the policies of the political party in power. To ensure its continued success, Thiokol used its income from aerospace contracts to diversify into specialty chemicals, fibers, off-road vehicles, and household products such as Spray-n-Wash. While the market for these products was somewhat cyclical, demand was not linked in any direct way to the political climate, which influenced the size and number of the government programs that Thiokol depended on. The need to partially disassociate itself from the U.S. government became clear in 1970 when fewer government contracts caused sales to drop from $245 million to $205 million. After the market for synthetic fibers declined in 1975, Thiokol again reappraised its situation and decided to rely on specialty chemicals as the division that would provide the company with financial stability in case aerospace contracts were discontinued. The fiber and off-road operations were sold.
Takeover by Morton Industries in 1982
In the 1970s Thiokol experienced a 20 percent annual growth rate. The specialty chemicals and the Texize household products divisions were performing well, while the military contracts remained lucrative. Towards the end of the decade Thiokol became a prime candidate for merger with Morton Industries, which had embarked on a diversification program and was attracted to Thiokol's control of 40 percent of the solid rocket fuels market, as well as its lucrative Texize household products division. Morton's interest in Thiokol came out of necessity--it needed debt on its balance sheet to repel takeover bids. In addition, the company's previous attempts at diversification showed only mixed results. In Thiokol, Morton also saw a company concentrated in the rapidly growing defense industry. Propelled by feverish expansion under the Reagan administration, Thiokol stood to benefit greatly from its established role as a special-purpose rocket builder. Morton considered it possible to invest the vast profits from its salt and chemical businesses into highly lucrative new Thiokol rocket systems. Indeed, Thiokol's place as the supplier of rockets to America's ambitious space shuttle program positioned it well for work in Reagan's strategic defense initiative.
Morton completed its takeover of Thiokol in 1982. One year later a severe disagreement arose between the upper management of each company. As a result, the top management at Thiokol walked out. Among the defectors was Robert Davies, president of Thiokol, considered one of the brightest executives in the aerospace and chemical industries. Four other high-level executives with experience in aerospace either retired or quit when Davies left. Consequently, Morton's Charles S. Locke was given complete control of both companies.
Despite these defections, few industry analysts questioned the wisdom of the Thiokol-Morton merger. In the first year after the merger the company posted record earnings. Two years later earnings per share increased 26 percent. Morton's and Thiokol's specialty chemicals divisions worked well together, and the new company offered chemical purification products, electronics and metal recovery chemicals, coatings, polymers, and chemicals for the electronics industry.
The household products division saw many of its items, including Glass Plus, Yes Detergent, and Spray & Wash, achieve a 10 to 20 percent market growth in a crowded and highly competitive field. To further strengthen its position in the household products market, Morton Thiokol began to manufacture its own packaging materials, becoming one of the first companies in the industry to do so. In 1985 the household products division was sold to Dow Chemical in order to prevent an attempted takeover by that chemical firm.
1986 Challenger Disaster Led to 1989 Demerger of Morton and Thiokol
In the mid-1980s, Morton Thiokol's staff of engineers won a contract to produce rocket boosters for NASA's space shuttle Challenger. On January 28, 1986, NASA reportedly asked Morton Thiokol for its approval to go ahead with the launch of the shuttle Challenger, despite temperatures that had dipped below freezing. Company engineers, who knew that the shuttle's boosters were not rated for operation below 40 degrees, were ignored in the executive-level decision process. Just over a minute after launch, a flare of fire from one of the boosters ignited the shuttle's external fuel tank, destroying the orbiter and killing its seven astronauts.
While Locke ordered an investigation of the accident, he failed to handle the public relations crisis that followed. At one point after the blast he told the Wall Street Journal that "the shuttle thing will cost us ten cents a share." While quoted out of context, Locke nonetheless came across as callous and tactless. In a demonstration of good faith, Locke conducted more than $400 million of redesign work on the boosters, working at cost.
The company suffered further damage in December 1987 when an explosion at its MX missile plant killed five employees. Furthermore, work on the boosters revealed new design flaws that had to be corrected. In 1989, despite extensive redesign work and the resumption of shuttle flights, Morton Thiokol lost a bid for a new booster design to Lockheed Corporation. At this point, Locke decided to spin off the Thiokol division.
Before dividing the companies, Locke transferred Thiokol's chemical businesses to the Morton side of the company. Morton also retained Thiokol's promising automotive airbag business. The companies were officially split on July 1, 1989, when Locke offered stockholders shares in Morton International, with options to trade them for Thiokol shares. Morton International, with $1.4 billion in sales and 8,000 employees, remained concentrated mostly in chemicals and salt, while investing nearly $100 million in its airbag business.
Independent Thiokol Diversified in the 1990s
Utah-based Thiokol Corporation emerged as a $1.1 billion company with 12,000 employees. Nevertheless, its profitable chemicals and airbag businesses had been carved away by Morton--all that remained was rockets. With greatly relaxed tensions between the United States and the Soviet Union, defense spending began to fall. Thiokol's new management team--retired U.S. Air Force general Robert T. Marsh as chairman and Edwin Garrison as president and CEO--found itself in charge of a company with a declining market and the prospect of losing the shuttle booster business to Lockheed.
During this time, however, NASA was strapped for funds, and, unwilling to carry the development costs of Lockheed's trouble-plagued booster, the agency expressed interest in extending its contract with Thiokol and its proven boosters. Thiokol subsequently signed a contract in 1991 to supply NASA with 142 solid rocket motors for the space shuttle program through 1997. Thiokol also began looking for commercial markets, finding a new customer in Motorola, whose 77-satellite Iridium system would provide seamless, worldwide cellular telephone service. Motorola hoped to use Thiokol's Castor rockets to get its system into orbit.
Despite these positive developments, the overall market for propulsion systems continued to decline as the 1990s continued. While Thiokol derived more than $1 billion in net sales from its propulsion operations in the early 1990s, by fiscal 1997 this figure had been reduced to $606.1 million. Given this obvious trend, Thiokol moved decisively to make itself less dependent on its propulsion operations.
In 1991 Marsh retired and Garrison added the chairmanship of Thiokol to his duties, remaining president and CEO. Late that same year, Thiokol purchased Huck Manufacturing Company for $150 million as part of its diversification effort. Huck, based in Irvine, California, made high grade rivets, lock bolts, and other fasteners for industrial and commercial transportation systems--notably nondefense markets. Huck was soon renamed Huck International, Inc. and operated as a subsidiary of Thiokol. Thiokol subsequently bolstered Huck through the 1992 acquisition of a majority interest in the German-based Kamax-Aerobolt GmbH & Co. KG, a maker of fasteners for the European market; the early 1994 acquisition of the Deutsch Fastener Company, an aerospace fastener maker based in California; and the February 1995 purchase of Automatic Fastener Corporation, a Branford, Connecticut-based producer of rivets for the automotive and light truck markets. Meanwhile, in June 1993 Garrison retired as president and CEO (remaining chairman), with John R. Myers replacing him. But after Myers resigned only four months later, James R. Wilson was named president and CEO of Thiokol. In October 1995 Garrison retired as chairman, and Wilson assumed that role as well.
In December 1995 Thiokol and the Carlyle Group, a Washington D.C.-based private merchant bank, joined forces to acquire Howmet Corporation, with Thiokol holding an initial 49 percent of Howmet and Carlyle 51 percent. The Greenwich, Connecticut-based Howmet, with annual revenues of about $900 million, was a world leader in the manufacture of precision castings of superalloys and titanium, utilized primarily for jet aircraft and industrial gas turbine engine components. Thiokol had an option to purchase all of Carlyle's interest in Howmet after three years. In late 1997, however, Thiokol and Carlyle reached an agreement whereby Thiokol would purchase an additional 11 percent of Howmet, while at the same time Carlyle would sell common stock of Howmet through an initial public offering. Following the IPO, Thiokol would have a majority stake in Howmet. Beginning two years after the IPO, Thiokol would have the option of purchasing Carlyle's remaining shares in Howmet at market price.
Through its acquisition of Huck and its majority stake in Howmet, Thiokol had succeeded in rapidly diversifying itself. In 1991 all of the company's profits derived from propulsion systems, while by 1997 Huck and Howmet accounted for 16 percent and 39 percent, respectively, of Thiokol profits. Meanwhile, during this period, the company was restructuring its propulsion operations both to reflect an increasing emphasis on commercial markets over those of defense and to make them more efficient. During fiscal 1997, Thiokol created a single Thiokol Propulsion Group under which were consolidated three divisions--space, defense and launch vehicles, and science and engineering. The company named Robert Crippen, former astronaut and former director of NASA's Kennedy Space Center, to head the new group as its first president.
Approaching a new century, Thiokol was counting on its new Propulsion Group to increasingly seek out commercial customers for its boosters, as the defense market continued to look weak. The company, which had virtually erased its debt by 1997, was at the same time in a very strong position to increase its stake in Howmet and to seek out acquisitions that would further beef up Huck.
Principal Subsidiaries: Huck International, Inc.; Howmet Corporation (60%).
Further Reading:
"After an Aerospace Spin-off, Morton Is Ready for an Upswing," Chemical Week, May 23, 1990, pp. 14-19.
Bancroft, Thomas, "Morton Thiokol: New Beginnings?," Financial World, April 4, 1989, p. 22.
Dorfman, John R., "Thiokol Is Now Less Dependent on Aerospace, But It Still Can't Get Investors to Take a Flier," Wall Street Journal, August 30 1996, p. C2.
"Morton Thiokol Completes Spinoff," Journal of Commerce, July 6, 1989.
"Morton Thiokol Is to Spin Off Chemical Line, Wall Street Journal, February 28, 1988, p. A3.
"Morton Thiokol: Reflections on the Shuttle Disaster," Business Week, March 14, 1988, pp. 82-91.
Siler, Charles, "Life Beyond Challenger," Forbes, September 21, 1987, p. 44.
Smith, Bruce A., and Anthony L. Velocci, Jr., "Howmet Purchase Helps Thiokol Diversify," Aviation Week & Space Technology, October 23, 1995, pp. 68, 72.
Source: International Directory of Company Histories, Vol. 22. St. James Press, 1998.
