Loctite Corporation History

Address:

1001 Trout Brook Crossing
Rocky Hill, Connecticut 06067
U.S.A.

Telephone: (860) 571-5100
Toll Free: 800-562-8483
Fax: (860) 571-5465

Website: www.loctite.com

Wholly Owned Subsidiary of Henkel KGaA
Incorporated: 1953 as the American Sealants Company
Employees: 4,200
Sales: $788.9 million (1997)
NAIC: 32552 Adhesive Manufacturing

Company Perspectives:

Loctite is in the business of solving customers' problems. When a customer buys Loctite, they get more than a product--they get a partner who will work side-by-side with them to find innovative solutions to their manufacturing problems. From engineering and testing programs to manufacturing products on the factory floor, Loctite brings a world of expertise and experience to its customers. In a design-through-assembly partnership, no one adds value like Loctite.

Company History:

The manufacturer of Super Glue, Loctite Corporation sells more than 1,000 types of high-technology sealants, adhesives, and coatings, marketing its products to industrial and consumer markets in more than 80 countries. Although Loctite's greatest fame comes from its consumer products, notably Super Glue, the company derives the majority of its sales from industrial customers. Loctite products are used in a variety of industrial applications, ranging from electronics to cosmetics. In 1997, Henkel KGaA, a German manufacturer of chemicals, detergents, industrial adhesives, and cosmetics, acquired Loctite in a transaction valued at $1.2 billion.

Origins

The story of Loctite Corporation begins at Dr. Vernon Krieble's chemistry laboratory at Trinity College in Hartford, Connecticut, in 1953. Krieble's son Robert, who was also a chemist, worked for General Electric Company's chemical business in Pittsfield, Massachusetts. Bob had been working on the development of a synthetic sealant that was labeled "anaerobic permafil." Being anaerobic, the substance would cure only when deprived of oxygen. The problems associated with handling the product puzzled him, and he consulted his father about the chemical's strange behavior. Vernon Krieble discovered that the liquid, when applied to nuts, bolts, and fasteners, would flow into the crevices and harden and lock them together. The major problem that remained was how to package the product while keeping it aerated; if it was packaged in a sealed container it would harden. The problem was solved after the Plax Company, a division of Emhart Corp., introduced a polyethylene substance that was permeable to oxygen.

Although the original technology was sold by General Electric Company, the Kriebles patented their product as an entire system&mdashåerobic sealants stored in Plax bottles. The Plax bottles eliminated the need for separate storage devices and aerating devices, such as air compressors, to keep the liquid from hardening. This product became the pilot product of the American Sealants Company which Professor Krieble formed in 1953.

The Kriebleses began cautiously, selling the sealant system to a few companies in the Hartford area. By 1955, however, Professor Krieble retired from Trinity College and was eager to devote time to the commercial development of the product. Krieble convinced a group of Trinity alumni to put up $100,000 to start production. This liquid locknut became known as "Loctite" and made its public debut at a press conference in New York City. Despite the initial publicity and sales of $7,000 in 1956, the company remained in the red until 1960 when it reached a profitable sales figure of $1 million. Anticipating growth, the company moved to a production facility in Newington, Connecticut, and established a distribution facility in Australia. A plant in Puerto Rico opened in 1962.

Loctite would prove invaluable for mechanical engineers searching for ways to enhance friction. Despite precise machining, there are generally some inner spaces that are sources of leakage, looseness, and wear in machinery and motors. Kenneth Butterworth described in The Loctite Story that "Loctite liquids flow into all of that surface roughness, then harden because there's no oxygen available. The hardened Loctite keys the two surfaces together." Initially engineers were skeptical about this technique for bonding surfaces and worried that its widespread adoption could reduce the need for precise engineering. Business people were also wary, but they were intrigued by the potential for cost reductions.

The fact that Loctite was extremely cheap to produce and eliminated the need for mechanical locking devices, such as lockwashers, helped the company overcome such skepticism. Because Loctite competed directly with mechanical locking devices, Krieble priced its product in the same range--although the actual manufacturing cost was much less. The company educated customers about Loctite's usage and potential. The Loctite system also included customer equipment and products required for assembly line applications. As Butterworth noted in The Loctite Story, "We don't just sell a bottle of glue, we sell a system and the system can cost one million dollars." The strategy was a huge success in the 1960s, and the Loctite method was used in threadlocking, pipe-sealing, and the development of different strengths and viscosities; sealing machine tool parts (which obviated the need for machines to be built to close finishes, a costly process); and developing a completely bonded assembly for motors used in hand-held power tools for the Black & Decker Corporation.

As its liquid washer grew in popularity, American Sealants changed its name to the Loctite Corporation in 1963. President Vernon Krieble died in 1964 and his son Robert succeeded him, presiding over a line of cyanoacrylate adhesives--better known as Super Glue--and a new anaerobic structural adhesive. By 1965, the company's tenth year, Loctite sales reached $2.8 million with a net income of $260,000.

Late 1960s Diversification

By 1968 the company was poised to enter into the booming automobile market. Foreign automakers embraced Loctite to help stop vibrations in their smaller, higher revving engines. Detroit-based automakers, however, waited seven years to adopt the product and initially used it for threaded and fitted parts, thereby replacing a wide class of locking fasteners prone to loosening. By the mid-1970s, as U.S. automakers began to produce smaller lightweight vehicles, Loctite developed new product lines. Notable among these was 1973's Dri-Loc line of eight products designed for various locking and sealing strengths and for sealing equipment at different temperatures. Other new products followed into the early 1980s, including a new generation microanaerobic adhesive that does not activate until the parts are assembled. This reduced the cost of producing small motors, which could now be built as self-contained units.

Despite being founded on the basic technology of the Loctite product, the company sought to expand its product range and scope throughout its history. The majority of these products were developed by Loctite's engineers. The most significant addition to the Loctite product stable was Super Glue, developed in the company's labs in Ireland and Connecticut. Basic research and development produced new acrylics, silicones, and urethanes, but Loctite also expanded its industrial product base through several key corporate acquisitions. Most notable among these acquisitions was Permatex, an automotive line acquired in 1972, and Woodhill Chemical Sales Company, purchased in 1974. Permatex's gasket dressings made it a leader in the automotive repair market; Woodhill's product line of adhesives opened up new markets for car and home repairs. It was Woodhill that introduced Super Glue to hardware stores across the country. The two companies were combined into the automotive and consumer division of Loctite in 1974.

The growth of various Loctite product lines as well as corporate acquisitions helped the company expand into international markets. In many cases, successful companies were established separately by Loctite agents; these companies were eventually purchased by Loctite. The company went public in 1980, merging with the International Sealants Corporation. At that time International's sales were $5 million compared to Loctite's $18 million. CEO Kenneth W. Butterworth stated in The Loctite Story that the merger of International into Loctite was the most significant in Loctite's history, giving Loctite foreign revenues (accounting for 60 percent of total revenues) and making Loctite a solid transnational corporation.

Although Loctite's sales were hard hit during recessions in the 1980s and 1990s, the company's product diversity and expansion into new markets helped keep its bottom line growing. In addition, as a transnational corporation, Loctite was insulated somewhat from the instability in demand markets that often occurs during a recession; the declining profitability from operations in a recession in one country was buffered by growing markets in other economies. The consumer market remained strong, but because most of Loctite's industrial sales were to overseas firms, the company was particularly vulnerable to fluctuations in the foreign exchange markets. The strong dollar of the early to mid-1980s was particularly devastating because the company lost sales to cheaper imports. Of course, with substantial foreign operations, a stronger dollar meant that foreign profits would translate into larger dollar denominated profits, but this was not enough to offset the domestic decline in sales. Nonetheless, by the late 1980s growth in Loctite's mass of profits was still quite strong.

Loctite's Butterworth looked forward to continued product diversification to fuel future growth. Product diversification led to revenues of $400 million in 1988, only 25 percent of which were derived from the original anaerobic "Loctite" product line. Loctite's diversification also extended geographically. Reliance on foreign sales grew substantially; in 1960 foreign sales accounted for 20 percent the company's sales, while in the early 1990s they represented 60 percent of sales and 80 percent of profits.

Marketing Oriented for the 1990s

Butterworth stepped down as CEO in April 1993, but continued to hold sway over the company as its chairman of the board. Under Butterworth's leadership as chief executive, Loctite recorded robust financial growth and strident international expansion, making encouraging progress during his eight-year reign. During his tenure, sales increased from $240 million to $606 million, while annual earnings swelled from $17 million to $72 million. Internationally, Loctite had equities in companies in 24 countries by the time Butterworth relinquished his title as chief executive, selling more than 1,000 products in 80 nations. Financial and physical growth were hallmarks of Butterworth's legacy, but perhaps his most significant achievement was altering the company's strategy. Since its founding, Loctite had focused on technological innovation, operating on the premise that a product will create a market. Butterworth reversed the company's perspective, maintaining that the market should dictate product development. The transformation meant conferring with customers and addressing their needs with adhesive or sealant products, a market approach that elicited praise from industry pundits. "He [Butterworth] has helped turn Loctite from a technology-based company into a marketing-oriented company with excellent results," an analyst remarked to Sales & Marketing Management in 1993, typifying the response to Butterworth's influence on Loctite.

David Freeman, who had been named president of Loctite in 1991, succeeded Butterworth as chief executive in 1993, inheriting a company whose business was divided into three market segments. By far the largest facet of the company's business was its industrial group, which included original equipment manufacture (OEM) and maintenance, repair, and overhaul (MRO) markets. From its industrial customers, Loctite was collecting $490 million in annual revenue by mid-decade, obtaining the remainder of its volume from the consumer market ($190 million) and the automotive aftermarket ($148 million). More than half the earnings realized by the company's three business segments came from international sales, primarily from business conducted in Europe. The importance of adhesive and sealant activity in Europe took on greater significance in late 1996, drawing the attention of all those working at Loctite headquarters in Connecticut. In November, Dusseldorf-based Henkel KGaA announced its intention to acquire Loctite, proposing a takeover that industry observers valued at more than $1 billion.

Henkel, an international manufacturer of chemicals, detergents, industrial adhesives, and cosmetics, was no stranger to Loctite's management. At Loctite's request, Henkel had purchased a 35 percent stake in Loctite to thwart a hostile takeover launched by AlliedSignal during the mid-1980s. In November 1996, the DM 14-billion-in-sales German conglomerate proposed acquiring the 65 percent of Loctite it did not already own, presumably to strengthen its position in the U.S. market. Henkel's adhesives business, which generated DM 2.4 billion, or US$1.5 billion, was nearly twice the size of Loctite's entire business, making for a powerful combination in an industry undergoing consolidation. Unlike the proposed takeover by AlliedSignal, the takeover by Henkel was "friendly," embraced by Freeman and other senior executives who were expected to remain at Loctite once the deal was completed.

Henkel concluded the acquisition of Loctite in January 1997, marking the beginning of a new era for the Connecticut company. Loctite was organized as a Henkel subsidiary with Freeman serving as both chief executive and chairman. Substantial changes were in the offing as Loctite pressed forward under Henkel ownership, highlighted by the decision made in 1999 to abandon the automotive aftermarket business. Loctite sold the business to PBT Brands, Inc., deciding that its resources were better directed at its core industrial business. Along with the divestiture, the company's corporate headquarters in Hartford, Connecticut, were sold, with the remaining functions of the Hartford site consolidated into Loctite's Rocky Hill, Connecticut facility, which subsequently became the headquarters for all business conducted in North, Central, and South America. As part of the consolidation, Henkel informed Freeman he was being transferred to Dusseldorf, a move the Loctite executive avoided by resigning at the end of May 1999. Freeman's departure left Loctite facing the new century ahead with new leadership. Heinrich Gunn, president of Loctite's European group, became the company's new chief executive. As Loctite entered the 21st century, with Gunn in Dusseldorf alongside Henkel executives, its future role as an elite adhesives and sealant producer was secure, firmly rooted in decades of technological innovation.

Principal Subsidiaries: Loctite Canada; Loctite Mexico.

Principal Divisions: Industrial Automotive; Electronics Industry; Industrial Maintenance; Industrial Production; Medical Equipment.

Loctite Corporation History

Company Perspectives:

Company History:

Further Reading: