Owens Corning Corporation History
Toledo, Ohio 43659
Telephone: (419) 248-8000
Fax: (419) 248-5337
Sales: $3.83 billion (1996)
Stock Exchanges: New York
SICs: 3229 Technical Glassware & Glass Products; 2821 Resins & Plastics; 3052 Plastic & Rubber Hoses; 3069 Rubber Products; 3087 Custom Compounding of Plastic Resins; 3089 Plastic Products; 3275 Gypsum Products; 3296 Fiberglass & Mineral Wool Products
Growth Agenda: In 1996, Owens Corning announced that it expected to meet its goal of $5 billion in annual sales by 1999, a full year ahead of schedule. The company continues to strengthen its industry leadership and expand core businesses, while accelerating growth through development of new products and applications, acquisitions and geographic expansion. Our new business strategy, called System Thinking, drives innovative development in all areas of our business, from System Thinking for the Home to System Thinking for Composites and Engineered Pipe Systems.
Owens Corning Corporation is the undisputed world leader in fiberglass products for industry and insulation for homes, and one of the world's major producers of polyester resins. The company has sought to enter a number of technical and consumer-oriented markets and--through a combination of marketing techniques and technological leadership&mdashø dominate those markets completely. Owens Corning enjoys commanding market share in the domestic market for home and industrial insulation; the domestic market for reinforced plastics, with applications such as automobiles, pleasure boats, and aerospace; and the domestic market for residential roofing.
Inventing Fiberglass: 1932--45
The genesis of Owens Corning, and of the production of modern fiberglass products, dates back to the Great Depression. Owens-Illinois, then a leader in the development and marketing of new glass products, transformed one of its idle bottle plants into a research facility to study the potential uses of fiberglass. O-I vice president Harold Boeschenstein named engineer Games Slayter to oversee the research and development effort. The project bore fruit quickly with the development of cheap, high-efficiency dust filters for home furnaces, manufactured from glass wool. These filters replaced the much more expensive, traditional steel filters. The truly dramatic breakthrough for O-I and for glass fibers came during a 1932 experiment at the small O-I laboratory in Columbus, Ohio. Dale Kleist was working on ways to melt glass rods. If his experiment worked, the molten glass would seal glass blocks together. The experiment produced, however, a very fine fiber--not what Kleist had in mind. As Kleist mused over how the experiment had backfired, his colleague John Thomas, according to legend, realized that Kleist had stumbled onto a new way to make glass fiber.
Slayter and Thomas predicted that very fine glass fibers would have myriad uses and urged the formation of a joint venture between Owens-Illinois and Corning Glass Works, the country's premier manufacturer of glass products, in 1935. Harold Boeschenstein agreed, and the joint venture began developing new products and technologies immediately, including the first continuous filament fibers in 1937.
In October 1938, a new company was formed from the joint venture. It was called Owens-Corning Fiberglass and its mission was to manufacture glass-fiber products, market them to homes and industry, and develop new related technologies. Some of the technologies were implemented during World War II, when Owens Corning manufactured insulation and fireproof materials for ships and aircraft. Harold Boeschenstein, Owens Corning's director, served on President Franklin D. Roosevelt's War Production Board. The most important use of glass fiber was, of course, in fiberglass, a glass-fiber-reinforced resin product.
Postwar Prosperity 1945--70
After the war business boomed. The company built two new plants and rehabilitated or converted four more from a war footing. Construction products&mdashøgether with a technological leading edge that no other competitor could match--became a mainstay of its overall strategy. The company expanded into many aspects of new home construction with its distribution of Kaylo fiberglass pipes, and it developed a new process for manufacturing building insulation. Its "Comfort Conditioned Home" was a major national marketing effort in 1957, which promoted fiberglass insulation in homes. Owens Corning led the way with its involvement in the first glass-fiber-reinforced automobile body, Chevrolet's Corvette in 1953. The company also produced many new components for industry, including a wide array of acoustical materials and industrial and automotive insulation.
Owens Corning was so successful that in 1949 Owens-Illinois and Corning Glass works were accused of illegally monopolizing the fiberglass industry through their joint control of the company. Under a court-mandated consent decree in 1949, Owens Corning was required to license its patents to competitors, and both parent companies were forced to relinquish control of what had been their subsidiary for 14 years. As a separate entity, Owens Corning went public in 1952 when it put one-third of its shares on the New York Stock Exchange.
In the 1960s, Owens Corning expanded even more, building plants in Texas, at Waxahachie and Conroe; Indiana; and Georgia, as well as embarking on new construction for its subsidiary company in Bogota, Colombia. The company at this time was moving ahead in three broad areas: new products, new technology, and remarkably efficient marketing techniques.
Among the new products in the 1960s was a new glass-fiber yarn, called Beta, with superior flexing and handling characteristics, and the development of the glass-fiber-reinforced-plastic (FRP) underground storage tank. The development and marketing of this tank underscored the success of Owens Corning in developing new products and in getting them accepted in the marketplace. Indeed, Owens Corning has created markets for many of its innovative products. Until the late 1960s, steel underground storage tanks--such as those used by the oil industry--were the standard. Owens Corning developed the first FRP tank, which was lighter and stronger than steel, but they were also more expensive. The tank's noncorrosive properties would be the key selling point, long before government-mandated codes for such tanks, which today are utilized not only for petroleum storage, but for toxic chemicals and a wide variety of industrial and agricultural uses. By 1970, 10,000 FRP tanks were in use in the United States, and in the 1980s the company developed the first double-walled storage tanks. By 1985, Owens Corning had sold 100,000 fiberglass underground fuel storage tanks.
The company had pioneered the use of fiberglass in the recreation industry. By the late 1950s, more than 90 percent of all fishing rods in the United States were made of glass-fiber-reinforced materials, and by the late 1960s, FRP components were common in new cars. The company was also heavily involved in producing components for fiberglass pleasure-boat hulls.
Market Share, R&D, Divesification: 1971--86
In the 1970s and 1980s, the company enjoyed its market dominance and continued its diversification. It expanded into Europe, Asia, and South America, furthering its technological and marketing lead. New plants were opened in Bakersfield, California, and New York State, as well as in Texas, Pennsylvania, and Florida. The market, research, and product diversification was reflected in Owens Corning's complex organization. By the mid-1980s, the company was split into 11 different divisions, employing some 29,000 persons.
One of Owens Corning's hallmarks has been its intent to dominate any new market that it enters. To this end it uses innovative products, superb communications with retailers, and an overwhelming marketing presence. When successful, the company enjoys tremendous vertical integration in those areas in which it chooses to compete. Two examples illustrate this successful Owens Corning strategy in the 1970s and 1980s. As with FRP storage tanks, fiberglass roofing shingles were met initially with skepticism. Contractors, used to cheaper organically composed shingles, were reluctant to use the unfamiliar fiberglass products. An aggressive marketing campaign, however, stressed the much greater strength and longevity of the product. This campaign, together with the company's purchase of Lloyd A. Fry Roofing and its subsidiary, Trumball Asphalt in 1977, gave Owens Corning a commanding position in both new home roofing and reroofing of older homes. In 1980, only 20 percent of the domestic home roofing consisted of fiberglass shingles, but by 1986, the figure stood at 77 percent. The downside of this tremendous change was, as one analyst with Salomon Brothers pointed out, a resultant glut in the roof shingle market; because fiberglass shingles are easier and speedier to produce than felt shingles there was a consequent shutdown of many manufacturing facilities nationwide.
The second major example of its marketing genius was the four-to-one brand preference among consumers for Owens-Corning fiberglass blanket insulation over the nearest competitor. Owens Corning's 50 percent market share of domestic home insulation eclipsed its major competitors such as CertainTeed, Manville, Knauf, and Guardian. This brand preference, for an often-more-expensive product, was furthered in the 1986 by a U.S. Court of Appeals ruling that granted Owens-Corning a trademark on a color--pink--for its exclusive use in fiberglass insulation and advertising. The court ruling paralleled Owens Corning's exclusive rights to United Artists's Pink Panther cartoon character for its advertising and promotions. The word "Fiberglas" is also a company trademark. Through a sophisticated computer network, "Pink Link," it could keep track of inventory, and communicate with its retail dealers nationwide, thus diminishing the need for outlets to store large inventories of Fiberglas insulation. (Pink Link was replaced by an integrated enterprise management software program made by SAP of Germany in the 1990s.) Owens Corning's sales force is conceded to be among the best in the business. The company further enhanced its name recognition in 1981 by underwriting the TV program "This Old House."
The 1970s and 1980s saw not only the proliferation of Owens Corning products and an aggressive marketing strategy, but also heavy investment in research and development, forays into new and sometimes unproven technologies, and acquisition of subsidiaries. These activities emphasized the long-term, and saw the company develop expertise in a number of fields that had little resemblance to its core areas of construction products and industrial materials. Primary among these acquisitions was the aerospace and strategic-materials group from Armco, in 1985. The intent was primarily to take control of Armco's high-technology and composites subsidiary, Hitco. Hitco was responsible for research into visionary carbon-based composite materials used in such applications as missile nose cones and lightweight armored plating for army vehicles. Owens Corning was now on the cutting edge of future technologies and product applications that could not be foreseen. The consumer housing market was leveling off; the company was looking ahead to new areas for expansion. Just as in the early 1930s, when Owens-lllinois and Corning Glass delved into a highly speculative joint venture, Owens Corning was again placing its bets increasingly on long-term, costly research.
Fighting Takeover and Debt: 1986--91
The year 1986 brought the most significant--and traumatic--changes for Owens Corning in the company's history. In early August, Wickes Companies, a Santa Monica, California-based building materials retailer, announced a tender offer to buy up Owens Corning's public stock at $74 a share. Wickes chairman Sanford Sigoloff had already bought almost 10 percent of Owens Corning's shares earlier and now was out to capture the company to expand Wickes's operations into roofing and insulation. Wickes was on the rebound from bankruptcy proceedings and looking for acquisitions. At a tense meeting in Owens Corning's New York offices, chairman William Boeschenstein, son of the former chairman, rejected Sigoloff's offer and, according to affidavits filed later by Wickes, countered by threatening to "make a substantial financial investment in Wickes," which Wickes labeled the "Pac-man defense."
Owens Corning urged its shareholders not to accept the takeover bid of $74 a share, more than twice the New York Stock Exchange value prior to the bid, while it studied its options for survival. The company was also hoping for a buyout from a friendly suitor, but this was not forthcoming.
The company chose as its most viable strategy for survival as an independent company a leveraged buyout, borrowing huge sums of money to recapitalize. After borrowing $2.5 billion from Drexel Burnham Lambert and others, it was able to offer its shareholders a package including $52 a share on its stock plus a junior subordinated debenture, with a face value of $35, but which was valued at issue at half that amount, and one share of newly issued stock. Wickes was forced to withdraw its offer, and walked away with over $30 million in profit by selling its Owens Corning stock. Other shareholders were happy with the windfall. The company that emerged, however, was laden with debt and was almost unrecognizable in terms of organizational structure and goals.
In 1990, Owens Corning bore little resemblance to its former self. Its goal could be put succinctly: retire the debt. The company set about doing that in two ways. It had economized and instituted massive layoffs, early retirement, and mothballed or closed plants in several locations. From a mid-1986 employee roll of 29,000 the company in 1987 had only 17,000. The second strategy was to sell the company's many subsidiaries that were not immediate profit generators. Owens Corning thus sold 10 companies in very short order, including Hitco and the entire aerospace and strategic-materials group, Olympic Fastening Systems, the glass-fiber-reinforced-plastic-components division, and Performance Contracting, Inc., which was the largest specialty contracting firm in the United States. Four entire divisions, out of 11, were sold off, accounting for roughly $1 billion in annual sales.
There were enormous cutbacks in long-term research and development. Virtually overnight, Owens Corning transformed itself from a company known for its long-range research-and-development work--fiberglass itself had been 20 years in development before market applications bore fruit&mdashø a "cash machine," spitting out profit to pay its creditors. In its research-and-development division, the company laid off nearly 50 percent of its work force or lost them through divestiture of assets. In 1986, before the takeover bid, Owens Corning spent $63 million on research and development. In 1987, this figure had been slashed to $29 million.
Long-term research projects with little hope of short-term profit or even markets are difficult to justify in publicly held corporations. Owens Corning had, for instance, been developing liquid crystal polymers, for which no application could be foreseen at the time. The cost and lead-time for such a project require a large research investment, patience, and creative vision, three areas in which the "new" Owens Corning could not afford to indulge. The project was sold to an Italian company after the recapitalization.
The company did a solid job of retiring the debt. By early 1990, total indebtedness had been reduced to less than $1.5 billion, and the company was generating profit beyond all expectations. Indeed, in the wake of several leveraged cash-outs in the late 1980s, the Owens Corning example had become a textbook example of how to survive. Earnings were solid enough in 1989 to allow it to buy up the 50 percent share of Fiberglass Canada that had been owned by PPG Industries, a major competitor. Costs were down and profits were generally up, but the company still had a negative book value, that is, its debt outweighed its assets.
After the restructuring, the company emerged as a leaner, more centralized concern with a profit and structural emphasis on its leading cash generators. Owens Corning had organized its remaining divisions into three major units: Construction-products division, industrial-materials division, and international division, which consisted of overseas operations exclusive of Europe. The cyclicality of the housing market and the overall slowdown in housing starts affected the company's profitability in 1989--90, although the industrial materials division accounted for more and more of Owens Corning's earnings. The "soft" nature of the housing market had affected sales and profitability in the wake of the restructuring, although reroofing, not affected by housing starts, accounted for 75 percent of the demand for shingles. Net income and operating profit were both down in 1989 compared with the previous year. Profit in 1988 was $477 million, with 1989 at $430 million. The economic slowdown in 1989 and 1990 especially had cut into the company's construction products, automotive, and pleasure boat components.
The former European divisions had been absorbed into the construction-products and industrial materials divisions, primarily due to the similar consumer and industrial purchasing patterns. The emphasis in the international division was on the smaller but growing markets in the developing world. The Asia-Pacific area was the fastest-growing, with automotive manufacturing and electronic equipment providing the largest markets. Owens Corning had affiliates--less than 50 percent ownership--or subsidiaries--more than 50 percent ownership--in Japan, South Korea, and Taiwan. Latin America was another area of expansion, with Owens Corning manufacturing auto component parts in Brazil, for example. Brazil's unstable fiscal condition, however, was eroding the viability of Owens Corning investments there.
By 1990 Owens Corning's future concerns included asbestos litigation and world petroleum prices. The threat of class-action litigation stemmed from large suits brought against manufacturers and distributors of asbestos products in the 1970s and 1980s. Prior to October 1988, all claims against various asbestos manufacturers were handled through a joint claims facility, set up by 55 corporations that contributed funds to its accounts. The funds were used to pay meritorious claims. On August 6, 1987, Owens Corning notified the joint Asbestos Claim Facility's trustees that it intended to withdraw from the organization. Most of the outstanding claims had been brought by litigants who had been employed by the tire and rubber industry and who worked with asbestos brake linings. The company maintained that it had little involvement in these industries, and would not contribute to the payment plan in the future. In 1990, Owens Corning had roughly 84,500 asbestos-related lawsuits pending against it, but it looked to its liability insurance to handle those matters.
At the beginning of the 1990s, Owens Corning was the dominant manufacturer of fiberglass products in the world. It was exerting tighter control over its foreign affiliates and subsidiaries, such as controlling 100 percent of Fiberglass Canada, and concentrating on retiring its still considerable debt. The company showed every indication that it would emerge debt-free and refocused on a profit-generating business. William Boeschenstein, chairman and CEO, stepped down in 1990, ending the family dynasty, which guided Owens Corning to its preeminent position in home and industrial fiberglass and polyester resins. Owens Corning President Max O. Weber became chairman and CEO. While cutting back its long-term research, the company could continue in its role as an innovator in products in its chief areas of competition.
The Hiner Years: 1992--97
In 1990 it formed alliances with BASF, Lucky-Goldstar, and Siam Cement to expand its global presence and in 1991 formed a new products division to make window products for the home building market. At the end of the year, however, Owens Corning's new CEO Weber became fatally ill and was forced to retire, leaving the company in the hands of Gregory Hiner, the head of GE's plastics operation under Jack Welch. With the company still buried in debt and its sales $74 million lower in 1991 than in 1986, Hiner had his work cut out for him. He immediately reinstated Owens Corning's long-term research budget and by 1993 announced that, debt or no, the company was going to begin growing again. By 2000 sales would reach $5 billion; Owens Corning would be manufacturing in virtually every home products niche, from insulation to siding to windows; and international sales--which accounted for 21 percent of 1993 sales--would rise to 40 percent by the turn of the century. To reach those dizzying heights it would use acquisitions and joint ventures to broaden its product line and enter new markets, and it would fundamentally change its vision of its business. It would shift from being a bulk manufacturer of building materials to an all-in-one supplier of the entire spectrum of home-building products, thereby benefiting from lower shipping costs, low inventory levels, and reduced exposure to the seasonality of the home-building market.
In 1993 Hiner established a new division, Asia/Pacific, and traded its commercial roofing line to Schuller International (formerly Johns-Manville) for the latter's residential roofing business. In 1994 Owens Corning made the first of a long line of small acquisitions that by mid-1997 would total 16 when it acquired UC Industries, a maker of rigid insulating foam. It followed it by adding the insulation and industrial supply business of Pilkington plc, doubling its European capacity. It also formed a joint venture with Alpha Corporation to create the largest polyester resin producer in North America, developed a new home sound insulation product called Quiet-Zone, and introduced its first new fiberglass in six decades, Miraflex. By the end of 1994, Hiner announced that Owens Corning's year 2000 goals could be achieved by 1999.
In 1995 Owens Corning made five more acquisitions, adding foam manufacture and vinyl windows to its home-products arsenal, formed two new Latin American companies, and established a joint venture in India. It also began offering its retail-store customers (Home Depot, Lowe's, and others) logistics support and product training services, adopted SAP's information management software to streamline and integrate its entire information structure, and launched System Thinking, a new marketing program to help customers better understand its home-building products, work with contractors, and arrange financing. With debt down $100 million from 1993, to $800 million, Owens Corning officially dropped Fiberglass from its corporate name to reflect the new diversity of its product line.
Seven more acquisitions followed in 1996 as well as the formation of a joint venture in China to build its fourth plant in that huge new market, and by May 1997 Owens Corning had built or acquired facilities on every continent save Australia. It had also adopted a tough new policy to reduce its outstanding asbestos litigation debt. In 1996 it announced it would be contesting one-third of its asbestos case backlog and filed suit against three southeastern U.S. labs that it charged had falsified asbestos testing reports to incriminate Owens Corning. By mid-1997 Owens Corning was still hampered by stagnant sales in Europe and the stock market seemed unimpressed by Hiner's reengineering feat. But with sales well past $3.8 billion and debt headed downward, in Fortune magazine's words Owens Corning appeared to have pulled off a "striking renewal" from an also-ran to a global leader.
Principal Subsidiaries: Barbcorp, Inc.; Crown Manufacturing Inc. (Canada); Eric Company; Falcon Foam Corporation; IPM, Inc.; Knytex Company, LLC; Matcorp, Inc.; N.V. Owens-Corning Capital L.L.C.; Owens-Corning S.A. (Belgium); Owens-Corning Fiberglas A.S. Limitada (Brazil); Owens-Corning Overseas Holdings, Inc.; O/C/FIRST CORPORATION; OCFOGO, Inc.; O/C/SECOND CORPORATION; Owens-Corning Cayman Limited; Owens-Corning Fiberglas Espana, S.A. (Spain); Owens-Corning Fiberglas Deutschland GmbH (Germany); Owens-Corning Fiberglas France, S.A.; Owens-Corning Fiberglas (Italy) S.r.l.; Owens Corning (Japan) Ltd.; Owens-Corning Veil Netherlands B.V.; Owens-Corning Fiberglas (U.K.), Ltd.; Owens-Corning Real Estate Corporation; Palmetto Products, Inc.; Roscorp, Inc.; Soltech, Inc.; UC Industries, Inc.; Western Fiberglass of Texas, Inc.; Willcorp, Inc. The company also maintains subsidiaries in Denmark, Norway, China, Uruguay, Sweden, Barbados, Cyprus, Zimbabwe, Singapore, and South Africa.
- Focus, Toledo, Ohio, Owens-Corning Fiberglas Corporation, October 1988.
- "A History of Innovation," http://www.owenscorning.com, 1997.
- Stewart, Thomas A., "Owens-Corning: Back from the Dead," Fortune, May 26, 1997.
Source: International Directory of Company Histories, Vol. 20. St. James Press, 1998.