Cooper Cameron Corporation
Company History:
Cooper Cameron Corporation operates as a leading manufacturer of oil and gas
industrial equipment and services. Through its three main business
segments--Cameron, Cooper Cameron Valves, and Cooper Compression--the company
produces valves, wellheads, controls, chokes, and blowout preventers. The firm
also provides assembled systems for oil and gas drilling as well as engines and
compressors used in oil and gas production. Nearly two-thirds of company
revenues stem from operations in over 115 countries around the globe.
Origins
In 1833, brothers Charles and Elias Cooper built a foundry in their hometown
of Mount Vernon, Ohio, and called it the Mt. Vernon Iron Works. Soon known as
the C. & E. Cooper Company, the firm's first products were plows, maple
syrup kettles, hog troughs, sorghum grinders, and wagon boxes. Charles Cooper
stood out as the lead figure in the company. Aggressively anti-slavery and a
dedicated prohibitionist, he became a respected community leader even though
many of his views differed greatly from those of his neighbors. When Elias
Cooper died in 1848, Charles Cooper took on a succession of partners. With each
new partner, the company name changed accordingly.
Mount Vernon was linked to the rest of the nation by railroad in 1851, and
the following year Cooper was able to ship its first steam-powered compressors
for blast furnaces. Cooper's relationship with the railroad, however, had its
difficulties. When the Sandusky, Mansfield, and Newark Railway was delinquent in
paying for woodburning locomotives from the company, Charles Cooper was driven
to chain the wheels of a locomotive to the track, padlock it, and stand sentry
until he was paid in full.
By the time of the Civil War, Cooper products included wood-burning steam
locomotives and steam-powered blowing machines for charcoal blast furnaces.
After Charles Gray Cooper--son of Elias--served in the Union Army and attended
Rensselaer Institute, he became a partner with his uncle.
Post-Civil War Development
In 1869, Cooper became the first company in what was then the West to produce
the new, highly efficient Corliss engine. Six years later, it offered the Cooper
traction engine, America's first farm tractor. The company was incorporated as
the C. & G. Cooper Company in 1895, and Frank L. Fairchild, a respected
salesman of the Cooper-Corliss engine, was named its first president. Fairchild
so enjoyed selling that throughout his 17-year presidency he continued to serve
as sales manager.
By 1900, gas was being discovered in new fields and shipped more than 100
miles through primitive pipelines. At the same time, the oil industry was also
beginning to develop. Not long after Charles Cooper's death in 1901, it became
clear that steam turbine engines were destined to replace the Corliss engine.
Cooper management recognized the necessity of focusing on a small segment of the
market, and in 1900 it wisely chose to make a gradual change to natural-gas
internal-combustion engines, which were being used successfully at the
compression stage of pipeline transmission.
Fairchild died suddenly in 1912, and Charles Gray (C.G.) Cooper, took his
place. One story describes C.G.'s famous bluntness particularly well: C.G. once
visited a procrastinating client and without any preliminary niceties asked, "Do
you want to buy a steam engine?" The man said he did not want one just then.
"All right, then you can go to hell," C.G. said and stormed out abruptly.
Transitions Following World War I
During World War I, Cooper built high-speed steam-hydraulic forging presses
for government arsenals, munitions plants, and shipyards, as well as giant gas
engines and compressors and triple-expansion marine engines. The company's
wartime production demands slowed its transformation from a producer of steam to
gas engines, since steam engines were needed for the war effort. After the war,
however, it became clear that the company's focus on developing gas
internal-combustion engines would pay off. The old Corliss was quickly becoming
outmoded by competition from steam turbines and gas-powered engines.
In 1919, C.G. Cooper became chairman and Desault B. Kirk, the company's
treasurer, became president. Just a year later, Cooper began a long-range
program for growth, and the directors elected Beatty B. Williams president.
Although he had married the boss's daughter, few credited Williams's rise to
simply marrying into the family. Serving as vice-president and general manager
during the war years, Williams was single-minded in his dedication to the
company's success and directed Cooper (and subsequently Cooper-Bessemer) with
great energy and foresight for 22 years. Always mindful of what he called "an
aloofness" that could develop between office and factory workers, Williams held
conferences in which factory workers were invited to air their views and offered
evening courses in production and management in which any employee could enroll.
By this time, natural gas was gaining importance in the manufacture of steel
and glass and in the emerging petrochemical industry. Cooper field service
engineers were often on hand for months at a time to oversee the installation of
huge four-cycle Cooper engines and compressors in compressor stations as new
pipelines were routed through West Virginia, Louisiana, Arkansas, Oklahoma, and
Texas.
Within just a few years, Cooper became the country's leading producer of
pipeline compression engines. Although Cooper also produced smaller two-cylinder
engines used in natural-gas fields to extract gas as it came from the well, the
Bessemer Gas Engine Company of Grove City, Pennsylvania, dominated that field.
Founded in 1899, Bessemer had produced oil-pumping engines for most of its
existence and had invested heavily in diesel engine development during the
1920s. While Cooper and Bessemer had some product overlap, their major strengths
were in different areas. By 1929, Cooper needed additional production facilities
to meet the mounting orders for large natural-gas engine compressor units.
Bessemer, after its lengthy period of diesel development, badly needed new
capital. Both companies had posted nearly identical average earnings for the
previous three years. The companies negotiated a merger for several months, and
the Cooper-Bessemer Corporation came into being in April 1929. The merger made
the company the largest builder of gas engines and compressors in the United
States. Soon afterward it was listed on the American Stock Exchange.
Cooper-Bessemer's business boom was brief. The company continued the Bessemer
line of diesel marine engines, and since most ships were built or converted on
the East Coast, Cooper-Bessemer soon decided to open a sales office in New York.
The office was opened on October 23, 1929, at the very beginning of the Great
Depression.
Two years later, annual sales had dropped more than 90 percent, reflecting
the almost total halt of construction on long-distance pipelines and in American
shipyards. Half of all sales that year were for repair parts. Along with
thousands of other American companies, Cooper-Bessemer was forced to lay off
workers.
Cooper-Bessemer slowly revived in the middle and late 1930s by continuing to
improve products and by entering new markets. The company was convinced that the
diesel would replace steam-powered railroad engines, and it developed one for
the new market. Charles B. Jahnke was elected president in 1940, and Williams
moved to chairman of the board. When Jahnke died a year later, Williams returned
to the presidency for two additional years.
World War II Production Spurs Growth
Only when Cooper-Bessemer embarked on a wartime production schedule in 1941
did its sales figures surpass their pre-Depression level. The company had sold
engines to several branches of the military before the war and was thus in a
favored position to receive large orders during World War II. It became a major
producer of diesel engines for military vessels of all kinds and also increased
production of locomotive engines. At the peak of its wartime production,
Cooper-Bessemer had 4,337 employees working in round-the-clock shifts.
In 1941, Cooper-Bessemer's net sales jumped to an all-time high, and just two
years later they had more than tripled. The company was listed for the first
time on the New York Stock Exchange in 1944. Gordon Lefebvre was elected company
president in 1943. He had previously served as vice-president and general
manager. Formerly the head of General Motors's Pontiac division, he had a
background in engineering and was energetic, likable, and a tough negotiator.
After World War II, Cooper-Bessemer became increasingly interested in selling
its products worldwide. It formed an international sales office and announced
its first sales-service branch outside the United States, in Caracas, Venezuela,
in 1945. Later in the decade, it expanded warehouse facilities in Canada and
established a subsidiary sales unit, Cooper-Bessemer of Canada, with three
offices, and received its first postwar orders from the Soviet Union.
Cooper-Bessemer had developed its innovative "turbo flow" high-compression
gas-diesel engine in 1945, and two years later it introduced the GMW engine,
which delivered 2,500 horsepower and could be shipped in one assembled unit. In
these postwar years, Cooper officials began to discuss diversification, which
Lefebvre defined as "finding new markets for old products and new products for
old markets, rather than moving into fields with which we are not familiar."
In 1951, Cooper-Bessemer's sales of $52 million surpassed its wartime high by
nearly $10 million. Business that year was boosted by the Korean War; company
shipments were almost solely to markets supported by the war effort, such as the
petroleum, aluminum, chemical, and railroad industries.
Struggles and Expansion: 1950s to the Mid-1990s
A combination of internal and external circumstances in 1954 led to a
startling 38 percent decrease in net sales and Cooper-Bessemer's first net loss
since 1938. The company's problems included a seven-week strike at the Grove
City plant and a nationwide recession, but the main difficulty was the U.S.
Supreme Court's decision in the Phillips Petroleum case, which ruled that
producers selling gas to interstate pipelines had to submit to the Federal Power
Commission's jurisdiction. This decision produced upheaval and uncertainty among
pipeline operators, including Cooper-Bessemer.
At the same time, the company was rebuffing a 1955 takeover attempt by a
private investor named Robert New. During the process, Lefebvre resigned
unexpectedly, and Lawrence Williams, Beatty Williams's son, became president. He
served beside his father, who was chairman of the board. Lawrence Williams had
already served the company in many capacities and had taken early retirement to
pursue other interests; he considered his return a temporary one. The takeover
attempt had shaken management. In an attempt to bring an infusion of young
talent to the company, Williams made a number of top management changes,
including elevating Eugene L. Miller to chief operating officer. Due to
revitalized demand, sales bounced back in 1956 to a record high of $61.2
million, but it was becoming increasingly clear that Cooper-Bessemer needed to
diversify in order to avoid the cyclical pitfalls of energy-related
manufacturing.
In 1957, Gene Miller was elected president. At 38, he was the youngest man to
hold the position since the company's original founder. Miller had begun at
Cooper-Bessemer in 1946. A year after he became president, the company acquired
Rotor Tool Company of Cleveland, the makers of pneumatic and high-cycle electric
portable tools. Over the next few years, Cooper-Bessemer struggled to develop an
engine to meet the challenge of General Electric's new combustion gas turbine
engine, which threatened to supplant several of Cooper's engines in the pipeline
transmission market. Its efforts resulted in the world's first industrial
jet-powered gas turbine, introduced in 1960.
Under Miller's leadership, the distinction between Cooper-Bessemer
administrative and operational management grew more pronounced, as was happening
in companies throughout the country. Innovations such as computerization,
fluctuations in worldwide monetary exchanges, increased government controls, and
changing tax structures had made operating a large business increasingly
complicated. In recognition of this, Miller moved the corporate offices from the
Mount Vernon plant to offices on the city square to "establish a corporate group
capable of administering many relatively independent divisions."
Meanwhile, Cooper-Bessemer's international division was also growing. By the
end of the 1950s, Cooper had sales agents in ten countries, licensees in three,
and franchises in two. In 1964, it opened an office in Beirut and also formed a
wholly owned British subsidiary, Cooper-Bessemer (U.K.), Ltd.
Cooper-Bessemer was no exception to the trend toward large conglomerates
during the 1960s, but it did try to limit its acquisitions to those that could
be mutually beneficial. In the early 1960s, it acquired Kline Manufacturing, a
producer of high-pressure hydraulic pumps; Ajax Iron Works, which built gas
engine compressors and a water flood vertical pump for oil and gas production;
and the Pennsylvania Pump and Compressor Company. Between 1960 and 1965, the
company's sales grew from $68 million to $117 million.
By this time, Cooper had grown into a large, diverse company. To better
reflect its nature, it changed its name to Cooper, Inc. in December 1965. Two
years later, it moved its corporate headquarters to Houston in order to be more
in the geographic mainstream of American business.
Cooper acquired Lufkin Rule Company of Saginaw, Michigan, in 1967. It was the
first of many acquisitions for what Lufkin president William G. Rector called a
"tool basket"--a high-quality hand tools manufacturing group. Subsequent hand
tool-related acquisitions included Crescent Niagara Corporation (wrenches) in
1968, Weller Electric Corporation (soldering tools) in 1970, Nicholson File
Company (rasps and files) in 1972, Xcelite (small tools for the electronics
industry) in 1973, J. Wiss & Sons Company (scissors) in 1976, McDonough
Company's Plumb Tool subsidiary (striking tools) in 1980, and Kirsch Company
(drapery hardware) in 1981. Charles Cooper, the last Cooper family member to be
associated with the company, retired in 1968. The grandson of Elias, he had
served as a vice-president and board member.
The company branched out into aircraft services in 1970 by acquiring Dallas
Airmotive, and later acquired Southwest Airmotive Company in 1973 and Standard
Aircraft Equipment in 1975. While these acquisitions performed satisfactorily,
the company sold its airmotive segment to Aviation Power Supply in 1981 because
it did not see much potential for further growth. In 1973, the oil embargo threw
many industrialized nations into an uproar. Cooper's Ajax division struggled to
keep up with orders from domestic crude-oil producers and Cooper received a
large order for its Coberra gas turbines for the Alaskan pipeline.
After having served as president and chief operating officer since 1973,
Robert Cizik was named chief executive officer in 1975. Lured to the company
from Standard Oil New Jersey in 1961, Cizik started his career at Cooper as
executive assistant for corporate development. Under his leadership, the company
stepped up its acquisition program. After satisfying a Justice Department
challenge, Cooper acquired the White Superior engine division, a heavy-duty
engine maker, from the White Motor Company in 1976. In 1979, Cooper realized a
dream of acquiring the Dallas-based Gardner-Denver Company, a company roughly
the same size as Cooper. Although Forbes described Gardner-Denver as "a company
notorious for lack of planning or cost controls," Cooper was confident the
company's three energy-related business segments could be successfully merged
into its own energy-related manufacturing operations. Forbes magazine
reported at the time that the merger was one of the ten largest in U.S. history.
That year the company passed the $1 billion sales milestone, only three years
after it had reached a half a billion dollars in sales.
During its acquisition spree, Cooper was criticized for handling acquisitions
cold-heartedly. After acquiring Gardner-Denver, it closed the company's
corporate headquarters, decentralized it, reduced employment, and cut benefits.
Nevertheless, many analysts defended these actions, noting that Gardner-Denver
had been full of operational problems and very poorly managed.
By the 1980s, Cooper was known for its manufacturing efficiency and
willingness to make capital investments to improve production or market
position. For instance, when the last domestic producer of the very hard steel
needed to manufacture files stopped making it, Cooper developed a process for
making its own steel that was different from the traditional method but still
suitable for making files and doing it at half the cost.
In 1981, Cooper acquired the highly respected Crouse-Hinds Company of
Syracuse, New York, makers of electrical products, after a long battle in which
Cooper played white knight, rescuing Crouse-Hinds from Inter-North Corporation.
Cooper also acquired the Belden Corporation, a wire and cable manufacturer that
Crouse-Hinds had been in the process of purchasing. This acquisition expanded
Cooper's size by 50 percent. Shortly after the merger, Cizik explained to
Business Week that he had entered the electrical components business because
"we needed to be in a business that looked beyond the 1980s and even the year
2000 for growth." When demand for gas and oil began to slump in 1981, Cooper's
diversification paid off. Sales of the company's energy-related products dropped
by 60 percent, but its other two divisions were hurt far less.
Acquisitions Culminate in 1995 Merger
Cizik continued to look for new acquisitions. Cooper's next move was a 1985
merger with McGraw-Edison Company, a manufacturer of electrical energy-related
products for industrial, commercial, and utility use. The merger nearly doubled
Cooper's size and made the company one of the largest lighting manufacturers in
the world. Cooper's 1985 sales passed $3 billion.
After the McGraw-Edison deal, most Cooper acquisitions were on a somewhat
smaller scale. In 1987, they included the molded rubber products division and
the petroleum equipment and products group from Joy Technologies. In 1988,
Cooper acquired RTE Corporation, a Wisconsin-based manufacturer of electrical
distribution equipment, and Beswick, a manufacturer of fuses and related
products in the United Kingdom. Then, in 1989, Cooper made another major
acquisition, adding Champion Spark Plug Company, the world's leading
manufacturer of spark plugs for combustion engines, to its arsenal. Based in
Toledo, Ohio, Champion was also known as a major producer of windshield-wiper
blades. In late November 1989, Cooper acquired Cameron Iron Works, a
Houston-based maker of oil tools, ball valves, and forged products with annual
sales of $611 million.
Cooper, before its initial public offering in 1995, manufactured more than a
million products in 145 plants, 41 of them in foreign countries. Its annual
revenues exceeded $4 billion. Despite its success, the company had divisions
that were performing badly resulting in a backlog of debt that ate away at the
impressive figures. In early 1995, the company faced a net loss for the year of
$500.1 million. Management believed it was time for a reorganization, and in
July the company went public as Cooper Cameron Corporation.
The restructured firm took dramatic steps in its first months. It sold the
Wheeling Machine Products division for $14 million and used that to help pay
down the company debt. It also sold its foundry in Richmond, Texas. Plants and
facilities were combined in the United States, Mexico, the United Kingdom, and
France, and employees were offered severance packages. The number of employees
plummeted from 43,300 to 8,500.
As part of the organization, three new business divisions were created:
Cameron, Cooper Energy Services, and Cooper Turbocompressor. Cameron,
headquartered in Houston, was the petroleum production equipment side of the
house and was organized into four business units, each reporting to a
vice-president. The first three units were geographical: Eastern (Europe,
Africa, former Soviet Union), Western (United States, Canada, Mexico, Central,
and South America), and Asia-Pacific-Middle East. The fourth group was
established to interface with valve customers and was called Cooper Cameron
Valves. Cooper Energy Services, headquartered in Mt. Vernon, Ohio, concentrated
on compression and power equipment for the energy industry. Cooper
Turbocompressor, headquartered in Buffalo, New York, sold specialized
compressors. In 1996, Cooper Cameron cleared a profit of $64.2 million on
earnings of $1.4 billion. Nearly 60 percent of its business was conducted
overseas.
Working to Become an Industry Leader: Mid-1990s and Beyond
In June 1996, the company acquired Ingram Cactus Corporation, a manufacturer
of oil and gas production valves and actuators. The $100 million company was
folded into the Cameron division and retained its brand name. Tundra Valve &
Wellhead, a Canadian firm, was also acquired, along with some of the assets of
ENOX Technologies, for a sum of $13,431,000. The company's revenue was up 21
percent over 1995 levels, with the Cameron segment individually seeing a 23
percent increase. The Cooper Energy Services/Cooper Turbocompressor segments
were up 19 percent over 1995.
During the late 1990s, Cooper Cameron worked to establish itself even more
firmly in the profitable and hazardous oil platforms of the North Sea. The
company faced harsh competition from industry giants, including General Electric
and other well-established firms such as European Gas Turbines, Caterpillar
Inc., and Vetco Gray Inc. The company also focused on moving into turbine and
compressor markets in Canada, Europe, the Middle East, and the Far East. In May
1997, the firm declared a two-for-one stock split and saw its stock price rise
from $20 to $70 per share as a result.
Cooper Cameron made several key moves over the next few years that secured
its position in the oil and gas industrial equipment and services industry. In
1998, Orbit Valve International Inc. was added to its holdings in a $100 million
deal. The company also beefed up its Cooper Energy Services division by
purchasing Ajax Repair & Supply, General Turbine Systems, and PDQ Machine.
At this time the company embarked on a divestiture mission, selling off its
stake in a rotating compressor product line venture to partner Rolls Royce plc
for approximately $200 million. In 2001, the company closed its Springfield,
Ohio, manufacturing plant, signaling its exit from the Superior brand natural
gas engine market.
Cooper Cameron faced a challenging operating environment in the early years
of the new century due to uncertainty in the North American market, weak energy
demand, and unsteady pricing in energy markets. Revenues fluctuated from $1.8
billion in 1998 to $1.38 billion in 2000 and $1.53 billion in 2002. In an
attempt to streamline its operations, the company restructured into three
business segments in 2002. It combined its Cooper Energy Services and Cooper
Turbocompressor divisions together to create a new division, Cooper Compression.
In September of that year, various Stewart and Stevenson Services Inc.'s
petroleum equipment holdings were merged into the company's Cameron division. In
December, Canada-based Nutron Industries was folded into Cooper Cameron Valve's
operations.
In May 2003, rumors began to surface that Cooper Cameron planned to make a $1
billion play for competitor Vetco Gray Inc., a subsidiary of industrial
conglomerate ABB Ltd. The deal would significantly increase Cooper Cameron's
size, giving it access to Vetco Gray's oil and gas equipment and services
business. Neither company made an official announcement regarding the deal, and
by July European buyout company Candover Investments plc was reportedly in
negotiations with ABB.
Despite the apparent breakdown of its proposed offer for Vetco Gray, Cooper
Cameron was poised to make additional acquisitions. The company's strong
financial position--its debt-to-capitalization ratio was less than 14
percent--left it well positioned to add new companies to its holdings or make
capital investments to improve its operations. While the health of the domestic
and international energy sector remained in question, Cooper Cameron appeared to
be on track for future growth.
Principal Divisions:
Cameron; Cooper Cameron Valves; Cooper
Compression.
Principal Competitors:
ABB Ltd.; Dresser Inc.; Dril-Quip Inc.