Milacron, Inc.

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Milacron, Inc.

2090 Florence Avenue
Cincinnati, Ohio 45206
U.S.A.
Telephone: (513) 487-5000
Fax: (513) 487-5057
Web site: http://www.milacron.com

Public Company
Incorporated: 1884 as Cincinnati Screw and Tap Co.
Employees: 7,885
Sales: $1.2 billion
Stock Exchanges: New York
Ticker Symbol: NZ
NAIC: 333512 Machine Tool (Metal Cutting Types) Manufacturing; 324191 Petroleum Lubricating Oil and Grease Manufacturing; 327910 Abrasive Product Manufacturing; 333298 All Other Industrial Manufacturing; 333319 Other Commercial and Service Industry Machinery Manufacturing; 333515 Cutting Tool and Machine Tool Accessory Manufacturing; 333518 Other Metalworking Machinery Manufacturing; 334513 Instruments and Related Product Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables

At the dawn of the 21st century, Cincinnati-based Milacron, Inc. (formerly Cincinnati Milacron Inc.), ranked among the world’s largest manufacturers of plastics machinery, but up until the late 1990s, it was best known as a machine tool company. The company’s slogan, “Helping the World’s Leading Companies Make the World’s Favorite Products,” only hints at its impressive list of customers. From machines to make everything from baby bottles and car seats to sporting goods and toys to auto parts and medical supplies, Milacron’s products are used worldwide.

Late 19th-century Origins

Cincinnati Milacron traces its roots to 1874, when George Mueller inherited his father’s small machine shop on Vine Street in Cincinnati and asked his friend, Fred Holz, to be his partner. Initially, the men maintained the elder Mueller’s focus on manufacturing parts for sewing machines and repairing small machines. Gradually, however, they began building specialized machinery, including a device that produced screws and the taps and dies that cut threads for them. By 1876, the company largely centered on manufacturing the screw machine, and Mueller and Holz renamed their business The Cincinnati Screw and Tap Company.

Around 1878, when the small company needed a new milling machine for the tap making business and could not afford one, Holz put his machinist background to work and built one with an improved basic design. Soon, other shops began requesting machines, and by 1882, Cincinnati Screw and Tap found itself adding milling machines to its product line. In 1884, the company became incorporated to raise the capital it needed to produce the more costly machines and to finance a move to a larger facility near the Ohio River.

In 1887, Frederick A. Geier, while doing business with the Cincinnati Screw and Tap Co., became excited about this innovative company’s potential. Within three months, Geier, then 21 years old, had bought a stake in the company. While Holz concentrated on the technology side of the business, Geier focused his energy in the areas of organization and sales. Believing that a company should focus primarily on one product, Geier favored the production of the milling machine over the company’s screw and tap business. In early 1889, the stockholders approved the sale of the screw and tap business to a group of employees. Holz, Mueller, and Geier all stayed with the milling machine business, which became the Cincinnati Milling Machine Company, or the Mill, as employees would come to call it. Two years later, co-founder Mueller sold his one-third interest in the company and retired.

Although the milling machine industry had long been controlled by companies in the eastern United States, the Mill found its niche by emphasizing quality. In 1889, Holz built a cutter grinder that would help shops and factories save money by sharpening cutting tools so they would last much longer. This gave the company a new product to sell with its millers and helped to build the Mill’s machine tooling reputation with its customers.

As early as the next year, the Mill had its first export order to a Swedish company. This was the beginning of an export business that would continue to grow and would, in fact, help keep the company afloat during times when the U.S. economy foundered.

One of those troubling times occurred in 1893, when a sharp recession hit, and factories and machine shops stopped placing orders for new equipment. Sales were almost nonexistent, credit was unavailable, and, moreover, the Mill had its capital tied up in building a new plant on Spring Grove Avenue. Nevertheless, the company worked its way out from the slump by taking a chance. When an order for a dozen milling machines came in from a bicycle maker in Indianapolis, who was short of cash and would need nine months to pay, Geier called the employees together and asked them what they wanted to do. The employees decided to take the order; the bicycle maker received his 12 machines and paid for them. The Mill survived and by 1895 was again prosperous. Reportedly, throughout the 1890s, bicycle makers purchased almost half the machine tools made by the company.

New Century, New Plant

During the early 1900s, Holz sold his common stock to Geier and retired from the company. Geier, who had already held controlling interest in the company, was looking to move the company again, this time to a site where the Mill could be as self-reliant as possible with its own foundry and power plant. By 1907, land was purchased in the nearby community of Oakley, financing had been secured for the move, and work on the foundry began. The foundry and power plant were completed in 1908, and, by 1911, the new complex was complete and operational. The new plant had more than six acres of floor space and was the world’s largest milling machine factory. Geier’s timing had been perfect. The motor car was just becoming popular, and the Mill was ready to provide the tools that the industrial world needed.

The onset of World War 1 in 1914 brought with it an initially sluggish market for the Mill. However, once the Allies realized the war was going to last for a while, they began to turn to America for machine tools to gear up for war production. In 1916, the U.S. government began its own war-readiness program, which put even heavier demands on American industry, particularly on the machine tool makers. Sales for the Mill were $1.4 million in 1914 and grew to $7 million in 1917, while its work force increased from 310 to 1,270.

Interwar Contraction

By the time the armistice was signed in November 1918 and the postwar “return to normalcy” had begun, however, government contracts were being cancelled, and the Mill found itself with a sudden excess capacity. In 1919, in an attempt to temper the cyclical nature of the business, Geier announced a plan to build a warehouse for storing the milling machines produced by the company until a time when orders exceeded capacity. As Geier sought to keep his employees in work year-round, and for the highest possible wages (a strategy known as “work-spreading”), Mill employees remained generally disinterested in forming unions or becoming involved in strikes during the labor union wars of the early 1920s.

Still, the economic climate during this time remained ominous, and, early in 1921, Geier announced to his workers that the company had out-produced sales by 66 percent. Specifically, the Mill had 561 machines on hand, unsold. The policy of paying employees to make machines that weren’t selling did not make business sense, and changes had to be made. Management salaries were cut, and a 15 percent wage reduction was initiated. Employment fell from an average of 1,004 in 1920 to 250 in 1921.

In the midst of this economic downswing, Geier’s son, Frederick V. Geier, convinced management that the company should branch out into the production of centertype grinding machines, devices that used wheels to grind metal into round or cylindrical precision parts, such as pistons, valve stems, and bearings. This move, the younger Geier contended, would help absorb overhead and more fully utilize plant capacity. In September 1921, the company bought controlling interest in the Cincinnati Grinder Co. and the following year moved production of the grinding machine to Oakley. In addition, the Mill obtained the rights to key patents on centerless grinding, and formed a subsidiary, Cincinnati Grinders, Inc. With the success of these machines, in 1926, Cincinnati Milling became the nation’s largest machine tool company.

When the Great Depression hit, the Mill was able to rely on its export trade to carry it through. Exports, one-fifth of all sales in 1929, grew to represent one-third of sales in 1932. During this time, the Mill continued to “spread” work, keeping as many employees on the payroll as possible. Management also worked closely with the Mutual Aid Committee, which was founded in 1916 as an employee insurance association and used as a relief organization for those hardest hit during the Depression.

Company Perspectives:

Milacron will be a global leader in industrial processes, offering products and services so clearly outstanding in terms of innovation, quality, delivery, and value that we are constantly the supplier of choice. We will be driven to Find A Better Way for our customers and provide growth opportunities for employees, suppliers, and shareholders, while adhering to the business philosophy of Total Quality Leadership and our core values. Core Values: We believe in Customer Satisfaction, Employee Opportunity, Company Growth and Profitability, Integrity In All We Do.

Changes occurred at the Mill during this era. Traditionally, the company had used agents and distributors to sell machines to customers. In 1931, after providing sales training for graduates of its co-op program with the University of Cincinnati, the Mill put some of its own sales staff in the field and began direct selling. The company formed a wholly-owned sales subsidiary and opened offices in Detroit, Chicago, and Cleveland.

Moreover, instead of guarding its resources and waiting for better days, the Mill continued to invest in research and development. During this time, the company introduced hydraulic-powered machines, broaching machines able to make finer and more precise cuts, and the Dial Type milling machine, which, with its power speed and feed change features, became the industry standard. In 1932, the Mill agreed with Heald Machine Co. of Worcester, Massachusetts, to share engineering, research, and patents. Although both companies produced grinding machines, their machines were used in different applications and therefore complemented one another. A little over 20 years later, after years of working together, the Mill would purchase Heald outright.

First Overseas Subsidiary

In 1934, Frederick A. Geier died of a heart attack. A month later, his son, Frederick V. Geier, was elected president of the company. One of the younger Geier’s first projects was to establish a subsidiary in Great Britain to make machines for world markets. In fact, as World War II began, Britain became one of the Mill’s major customers, buying $16.5 million worth of machines in 1940.

Because of the increased number of military orders before the war, the machine tool industry was prepared to meet demand once the United States began mobilizing forces. With forethought, the Mill had decided to expand the company’s capacity in 1938 and had also began a formal three-stage training program for workers. This training program became invaluable, as the Mill’s work force escalated to a wartime peak of 8,561 employees. By 1941, the company was producing nearly eight percent of America’s machine tools.

Throughout the war, the Mill continued its emphasis on research and development. It began exploring the physics of metal cutting as well as ways to increase tool life. Out of this research came the Mill’s first synthetic cutting fluid, called Cimcool. During the postwar era, Cimcool rose to become Milacron’s most-recognized brand, with a line of thousands of water, oil, and oil-soluble coolants.

In 1943, Geier began meeting regularly with four other key executives in an effort to identify strategies for postwar growth. According to the official company history, the four goals the committee agreed upon were “to extend overseas manufacturing; to broaden machinery product lines; to enter the industrial consumables market; and to develop new technologies.” These goals for growth and diversification brought with them the task of finding a way to finance new company endeavors. In February 1946, the Mill raised $3.8 million in new capital when it issued its first public stock offering.

Acquisitions and Diversification in the 1950s-60s

The next ten years brought a variety of acquisitions and the development of new product ideas. Some of these new products included grinding wheels, cutting fluids, and lathes. In 1955, the Mill expanded its move into chemicals, acquiring a company that, among other things, made additives for plastic. By 1957, the Mill was working with glass reinforced plastic components and had formed the Cimastra division to oversee production and sales of the materials. This division began selling molded plastics to different companies, including manufacturers of children’s sleds, seats for bowling alleys, and cases for movie projectors.

The 1950s also bore witness to the Mill’s expansion in Europe. The company increased its holdings in England by acquiring and expanding plants and foundries in Birmingham and nearby Cannock. In 1952, the Mill began building a machine tool factory in the Netherlands that was completed in 1954.

The electronic era at the Mill began in the late 1950s, as the company became involved with a new technology called numerical control. Using numerically coded instructions on punch cards, the technology allowed computers to control the movements of machine tools and thus had great potential in automating American industry. In 1955, the Mill received a contract from the U.S. Air Force for numerically controlled machines that could produce intricate aircraft parts at high speed. The company continued to improve on its use of the technology, and, in 1966, the Mill introduced a new generation of controls for its machines using miniaturized integrated circuits rather than the cumbersome vacuum tubes and mechanical relays it had relied on. Using its expertise in both plastics and electronics, the company also began producing plastic circuit boards that were used in TV sets, radios, and eventually computers.

Key Dates:

1874:: Mueller and Holz establish a partnership to make sewing machine parts.
1876:: The business, christened The Cincinnati Screw and Tap, focuses on the manufacture of screw machines.
1917:: Sales reach $7 million under wartime production.
1941:: The company is producing about 8 percent of U.S. machine tools.
1946:: First public offering of stock is held.
1952:: Construction of a machine tool factory in the Netherlands is completed.
1970:: Stockholders approve a name change to Cincinnati Milacron.
1979:: The company establishes its own semiconductor materials division.
1984:: The Mill is among the world’s largest suppliers of silicon wafers for semiconductors.
1992:: A quality assurance program called Project Wolf-pack is initiated.
1998:: Focusing on metalworking and plastics, the company divests its machine tool business and changes its name to Milacron, Inc.
2001:: Efforts at restructuring to improve profitability continue as the country recovers from economic recession.

As the 1960s came to a close, Cincinnati Milling found it had become a far more diverse company than its name indicated. In May 1970, the stockholders approved a new name. Cincinnati Milacron capitalized on the continued use of Cincinnati—a city linked with machine tools—while also introducing a new word, Milacron, the roots of which meant ‘’highest precision.” Thus, despite the name change, company employees could logically continue to refer to their company as the Mill.

Plastics Machinery Drives Growth in the 1970s

The 1970s became a time of streamlining and redirection for the Mill. Frederick V. Geier retired from his position as chair of the executive committee in 1976 and was given the honorary title of director emeritus. His cousin, Philip O. Geier, Jr., who had served as the Mill’s president and then chairperson, also retired during this time, leaving James A.D. Geier in charge as chairperson. Under Jim Geier, the company began focusing its machine tool efforts on computer-controlled equipment, and, perhaps more importantly, a corporate research department was set up to look into non-machine tool products. As an outgrowth of this research, the Mill moved into the plastics machinery business, producing its first plastics injection molding machine in 1968. With expertise in injection molding and extrusion, the Mill worked with E.I. du Pont Co. to perfect a reheat blow molding machine that would revolutionize the way soft drinks were packaged. A fourth molding process called reaction injection molding was also introduced by the Mill. By 1977, the Mill was the largest U.S. maker of plastics machinery.

Also in the 1970s, the Mill intensified its focus on electronically operated machines, venturing into the markets for minicomputers and semiconductors. While its efforts to manufacture and market minicomputers proved disappointing and shortlived, the company had more success with semiconductors, specifically in the development and manufacture of the silicon wafers on which semiconductors were built. Demand for the Mill’s silicon epitaxial wafer prompted the company to provide its semiconductor materials division with its own facility in 1979, and, by 1984, the Mill had become the world’s largest supplier of this type of wafer. Also during the late 1970s, the Mill became one of the world’s first companies to make computer-controlled-industrial robots. These robots, which performed such tasks as spot-welding, became integral to assembly lines at companies like Ford, General Electric, and Volvo.

Restructuring in the 1980s and 1990s

In 1980, the Mill sold its profitable specialty chemical operations to the Thiokol Corporation in order to focus more strongly on its three more closely allied divisions: machine tools, plastics machinery, and industrial specialty products. During the 1980s, the company felt the effects of a severe economic recession that became second only to the Great Depression in terms of loss in the capital goods markets. In addition, the Japanese were giving U.S. machine tool builders some severe competition. The Mill began cost cutting measures, including plant consolidations and early retirement plans. Worldwide employment declined by one-third, and, in 1983, the company reported its first annual loss.

In fact, the Mill reported losses in five of the next ten years. Increasingly tough competition and misdirected business turns took their toll on the Mill. Under the leadership of Daniel Meyer, who succeeded Jim Geier in 1990, a campaign began that would help fine tune the company for the 1990s. Called Project Wolfpack, this effort utilized the teamwork of employees from different disciplines to cut product development cycles and cost. According to an April 1992 article in The Cincinnati Enquirer, each team was charged with improving the quality of Milacron’s machines while removing up to 40 percent of the cost and 40 percent of the components. The teams worked together to consider the market needs, feasibility of design concepts to operate machines of the size range being considered, and the availability of the latest technology to perform functions required. Harold Faig, vice-president of the U.S. Plastics Machinery Division said in The Cincinnati Post in May 1991, “Our single goal is to offer the best quality, American-made machines with the widest range of features at a competitive price.”

The success of the Wolfpack, as well as moves to abandon or sell several money-losing businesses such as robots and semiconductors, helped the Mill return to profitability in 1992. Aligned with the Wolfpack’s goals, the Mill committed itself to simpler, lower-priced, globally competitive tools. In 1993, excess capacity in machine tool facilities prompted the Mill to consolidate operations. In October 1994, the Mill’s plastic machinery plants in Ohio were named among Industry Week magazine’s ranking of the ten best plants in America for their performance, production, and customer satisfaction.

Acquisitions in the 1990s set the pace so that almost half the Mill’s revenue came from outside the United States in 1995. Its machine tool, plastics technologies, and metalworking technologies divisions each roughly represented one-third of the business, helping to even out the cyclical nature of the business identified so long ago. Due to a continued emphasis on research and development, more than 75 percent of the Mill’s 1993 machinery sales consisted of products not sold five years before. A particular focus on consumables—both consumer and industrial—held out the promise of nonstop growth.

Then, in 1998, after more than a century in the machine tool industry, the company divested that segment of its business and simplified its name to Milacron, Inc. The sale of the machine tool division, combined with a variety of other acquisitions and divestitures in the late 1990s, left Milacron’s business nearly evenly split between plastics and metalworking. Machinery for the aerospace industry constituted an important growth industry, with revenues in this business category tripling from 1994 to 1996.

Company leaders hoped that global diversification would also insulate them from domestic economic downturns. Acquisitions and joint ventures in Europe, Asia, South America, and elsewhere increased Milacron’s international sales from about 30 percent of revenues to more than 45 percent.

“Finding A Better Way”

Milacron’s efforts to diversify could not shield it from a recession in the first years of the 21st century. The company’s sales declined from over $1.6 billion in 2000 to just under $1.3 billion in 2001, while net earnings plunged from $72 million to a loss of $36 million over the same period. These setbacks prompted another round of restructuring. Over the first two years of the 21st century, Milacron shuttered 18 plants and eliminated 2,200 jobs. In 2001, the company adopted both Six Sigma and Lean programs in an effort to reduce overhead and increase working capital. This austerity program also entailed withholding senior management bonuses for fiscal 2001.

The restructuring continued in 2002 with the divestment of Valenite, a 1,300-employee metal-cutting tool subsidiary. Milacron also shed the overseas metal cutting tool businesses Widia and Werko that same year. The company used the $290 million proceeds of these sales to pay down debt. CEO Ronald Brown noted that the divestments would also refine the company’s focus on its plastics processing and industrial fluids operations.

In keeping with what had by this time become part of the corporate culture, Milacron invested heavily in research and development as well as capital expenditures so as to be prepared for a rebound. Chairman, CEO, and president Ronald Brown, who took over from Daniel J. Meyer in May 2001, expressed his hopes for Milacron’s future in his presentation to shareholders on April 23, 2002. “It appears the downturn in the manufacturing sector is bottoming out,” Brown observed. “We expect to return to profitability in the second half of this year.”