The Stanley Works History

Address:

1000 Stanley Drive
New Britain, Connecticut 06053
U.S.A.

Telephone: (860) 225-5111
Fax: (860) 827-3895

Public Company
Incorporated: 1852
Employees: 18,903
Sales: $2.67 billion (1996)
Stock Exchanges: New York Pacific
SICs: 3421 Cutlery; 3423 Hand & Edge Tools, Except Machine Tools & Hand Saws; 3425 Hand Saws & Blades; 3429 Hardware, Not Elsewhere Classified; 3496 Miscellaneous Fabricated Wire Products; 3541 Machine Tools, Metal Cutting Types; 3546 Power Driven Hand Tools

Company Perspectives:

All Stanley employees share a common vision: To please our customers so well that our products are their first choice. As a resource for customers around the globe, we are committed to providing: innovative products which are appropriately tailored to meet regional needs throughout the world; outstanding customer service and effective marketing support; specialized products to fulfill individual customer requirements; a company-wide commitment to rigid environmental and quality standards for our manufacturing--worldwide.

Company History:

The Stanley Works is a manufacturer of a broad range of tools and hardware for home improvement, consumer, industrial, and professional applications. Stanley is a global manufacturer, with production facilities in 18 countries, and is the world leader in hand tools, based on its 20 percent share of a $12 billion market. Stanley is an old and successful company in a hidebound industry--metalworking--that has proven extremely vulnerable to foreign competition since the 1960s.

Stanley Brothers Founded Company in Mid-19th Century

The company was founded in 1843 by Frederick T. Stanley, a 41-year-old merchant and manufacturer whose previous work experience included stints as a clerk on a Connecticut River steamboat and as an itinerant peddler in the South. In 1831, Stanley, in partnership with his younger brother William Stanley, had opened a small facility in New Britain, Connecticut, for the manufacture of house trimmings and door locks. Though the business failed to survive the Panic of 1837, it seemed to have served as the prototype for a second manufacturing venture in New Britain--Stanley's Bolt Manufactory--which Frederick Stanley, again in concert with his brother, established in 1843.

The establishment of this "manufactory" marks the official beginning of the Stanley story. The company's present name was adopted in 1852, when the Stanley brothers--along with five neighbors--were granted a charter of incorporation by the state of Connecticut for a newly organized firm, The Stanley Works. This corporation, initially capitalized at $30,000, was to be directed by Frederick T. Stanley, who was named its first president.

During its early years Stanley was one of hundreds of similar companies in antebellum America producing hardware and builders' goods. Frederick Stanley was not unique in perceiving an entrepreneurial opening for such goods in a nation growing and industrializing as rapidly as the United States. There were scores of shops similar to his in Connecticut alone.

If Frederick Stanley had an early competitive advantage, at least locally, it may have been in his manufactory's power source, a single-cylinder high-pressure steam engine, which he had purchased from the firm of William Burdon of Brooklyn. This relatively sophisticated engine enabled Stanley's Bolt Manufactory and, later, The Stanley Works, to produce goods--whether bolts, T-hinges, or wrought-iron straps--in a more capital-intensive and efficient way than was the case in less automated shops in the area.

Nevertheless, the firm's early growth was not exceptionally rapid. Total sales were $7,328 in 1853 and $21,371 in 1854, and rose to about $53,000 in 1860, on the eve of the Civil War. Only after that conflict ended would the dramatic rise of The Stanley Works begin.

To say that the firm's rise postdated the Civil War is not to imply that the war itself was directly or fundamentally responsible. More significant than any war-induced demand for Stanley's products were deep-seated economic forces related to industrialization and increased market size and integration. Productivity gains made possible through mechanization and the creation, via the railroad, of an embryonic national market transformed the U.S. business environment in the late 19th century, presenting new opportunities to--and posing new problems for--most U.S. manufacturers. Alfred D. Chandler describes this transformation in his The Visible Hand: The Managerial Revolution in American Business.

In order to exploit new production and marketing possibilities and to overcome problems arising from oversupply and greater competition, Stanley developed new business strategies and structures. In so doing, it integrated and expanded its operations, and employed new productivity-enhancing and competition-dampening methods of production, marketing, and organization.

Such policies resulted in the dramatic growth of The Stanley Works. Frederick T. Stanley seems to have had little to do with the company's rapid postwar ascent; from the 1860s to the time of his death in 1883, he increasingly withdrew from active business operations, devoting more of his time to politics and civic affairs in New Britain. The animating spirit behind Stanley's rise was William H. Hart, whose career with the firm stretched from 1854 to 1918.

William H. Hart Led Company's Dramatic Early Growth

Prior to joining Stanley in 1854 at the age of 19, Hart, like a number of 19th-century industrialists, had worked in the railroad industry&mdash a freight agent and assistant station manager. Hart rose quickly at Stanley, assuming the position of secretary-treasurer a few months after joining the firm and in 1856, before he had reached the age of 21, winning election to the board of directors. From there, he gradually took on more direct managerial responsibility, eventually rising to the position of president, a post he held from May 1884 to February 1915.

Under Hart's leadership, the firm pursued a number of successful strategies that enabled Stanley to thrive even in the fiercely competitive business environment of the day. Hart expanded hardware production facilities in New Britain in 1866, for example, and in 1909 opened new facilities in Niles, Ohio--strategically located in the steel belt of northeastern Ohio--and in Canada in 1914. He helped to reduce Stanley's production costs by mechanizing operations to a greater degree and by repositioning equipment in his factories. Manufacturing technology improved dramatically under his helm--Stanley was particularly important in the development of a process for the cold rolling of wrought-iron strip--and the firm came to hold several significant manufacturing patents, including one issued in 1889 for the development of the first hinge to use ball bearings.

At Hart's urging, the firm made several small but noteworthy innovations in the marketing of hardware, packing installation screws along with the firm's hinges and shipping hardware in labeled boxes. In 1870, when Stanley opened a sales office in New York City, the firm began to devote attention to developing export markets for its products, a precocious strategy for the time.

Hart also tried to diversify the company and to develop a fuller product line. By moving into the production of steel strapping at the turn of the century, for example, Stanley was able to not only diversify its operations but also vertically integrate to a degree. The move into steel strapping was to prove of major consequence to the company; Stanley was one of the nation's leading manufacturers of this product before moving out of the industry in 1987.

Stanley had an impressive record of expansion in the period between the beginning of the Civil War and the end of World War I. The company's net sales by 1872 had already reached $480,000, a ninefold increase over the figure for 1860. By 1919, the year after Hart stepped down as chairman of the board, net sales were over $11 million. Nor was Stanley's a case of growth at any cost; in 1877 the firm began an unbroken streak of yearly dividends. During World War I Stanley produced belt buckles, gas mask components, and ammunition tubes.

Although William H. Hart was the central figure in the rise of The Stanley Works--the company's trademark was heart-shaped for a time--Stanley survived his departure. By the time Hart retired as chairman in 1918, he had created a corporate culture and strategy conducive to continued growth.

Acquisitions Fueled 1920s Growth

Stanley's efforts to reduce costs, often through external integration, and to diversify did not abate with Hart's retirement. For example, after years of trying, the firm was able to cut energy costs by purchasing--and later rebuilding--a hydroelectric power plant on the Farmington River near New Britain. Even more important, however, was the firm's 1920 merger with its crosstown neighbor in that city, The Stanley Rule & Level Company, an old-line manufacturer of measuring devices and hand tools, which had been founded in 1857 by a cousin of Frederick Stanley. The acquisition of Stanley Rule & Level--at the time one of the largest and most respected companies in its field--allowed The Stanley Works to increase its labor force by some 1,200 workers, its capitalization by 50 percent, and its net sales by $6 million. In addition, it brought Stanley the benefits of diversification, without distancing the company from its historical roots or its areas of experience and expertise: hardware, hand tools, and measuring devices were naturally complementary.

Stanley Rule & Level had long been active in the merger and acquisition business itself. As early as 1863 the firm had acquired a competitor, the Brattleboro, Vermont, rule factory of E.A. Stearns & Company. Two later acquisitions, that of the Atha Tool Company of Newark, New Jersey, in 1913 and that of the Eagle Square Manufacturing Company--a maker of carpenters' steel squares, based in Shaftsbury, Vermont--in 1916 contributed significantly both to the company's growth and to its appeal.

Although similar strategies were being employed elsewhere as well, the consolidation of Stanley Rule & Level into The Stanley Works--and the success of this consolidation--clearly spurred the development of one of Stanley's principal growth strategies in the post-1920 period, the aggressive pursuit of competing or related companies through merger or acquisition. Other, less dramatic, growth strategies were also employed. During the interwar period, the company continued to expand operations into new geographical areas, both at home and abroad. Stanley opened a woodworking plant in 1923, for example, in Pulaski, Tennessee, near timberlands which the company had acquired previously. By 1926 Stanley was producing hardware in Germany, and in 1937 the firm opened a factory in Sheffield, England, for the manufacture of hand tools.

Technological innovations also continued under Hart's immediate successors, at times furthering the company's efforts to develop a fuller product line and to diversify. Perhaps the most impressive individual innovation during the interwar years was Stanley's introduction in 1931 of the first automated entranceway in the United States, a technology the company patented under the name Magic Eye. The Magic Eye, which opened doors through the activation of a photo-electric cell, and other devices based on similar technology became mainstays of Stanley's product line. A number of other products were also introduced during the period, most notably a line of electric tools, which were produced under a new division established in 1929.

Great Depression Brought on Decline

If Stanley's culture and strategy were still conducive to profits and growth, they were not enough to assure either. Between roughly 1930 and 1945, economic and political conditions were at work that minimized the difference corporate culture and strategy--good or bad--could make. Stanley's fortunes declined sharply during the Great Depression, which hit manufacturing and construction--and thus the tool and hardware industries--extremely hard. The company's net income was negative in 1932, for example, and, after paying out dividends, Stanley ran a deficit on its income account in 1934 as well.

Stanley's performance in the 15 years after 1930 was neither fundamentally shaped nor adversely affected by corporate decisionmaking. The four men who successively followed William Hart as president--his son, George P. Hart, who served from 1915 to 1918; E. Allen Moore, whose term began in 1918 and ended in 1923; Clarence F. Bennett, who was president from 1923 until 1941; and Richard E. Pritchard, who served between 1941 and 1950--each performed ably, but to little effect.

With the advent of World War II Stanley, of necessity, had been forced to retool, transforming itself for the most part into a manufacturer of military hardware. Annual sales rose significantly as a result, reaching $44 million in 1943. Yet wartime sales were just that; Stanley sold 460 million belt links for machine gun bullets and 36 million cartridge clips during World War II, but this contribution did not boost its postwar performance.

Struggled During Immediate Postwar Years

The same management strategy that had helped the firm to succeed earlier limited the company's performance in the decades after the war. In emphasizing manufacturing matters, key decisionmakers tended to neglect the marketing and financial dimensions of Stanley's operations. This situation was particularly true between 1945 and the early 1960s.

Despite the fact that Stanley--like many traditional New England manufacturers--continued to produce high-quality products during this period, the company's expansion was slow and its earnings erratic. For example, Stanley's annual net sales, already over $90 million in 1951, had grown only to $95.4 million by 1960; moreover, the company's earnings for 1948--$5.25 million--were surpassed only twice between that year and 1965.

Stanley's sluggish performance in this period was shaped in part by structural factors. Much of America's basic manufacturing sector--the principal market for Stanley's products--was not mature, which dampened opportunities for rapid growth. Even when opportunities did present themselves in basic manufacturing--some segments of the metal-working industry did, in fact, grow rapidly during this period--Stanley, entrenched in its traditional lines, could not always move quickly. Indeed, were it not for the postwar baby boom, which boosted the U.S. construction industry and thus the demand for builders' tools, Stanley's record might have been worse.

While Stanley's management neglected certain key business functions, they were not totally inert and their policies were not ineffectual. Under the leadership of John C. Cairns, chief executive officer from 1950 to 1966, the company made several important acquisitions and continued efforts to expand to modernize existing operations. During the 1950s Stanley acquired the Humason Manufacturing Company of Forestville, Connecticut, a maker of springs and screw machine parts; the H. L. Judd Company of Wallingford, Connecticut, a large producer of drapery hardware; and the Florida-based Denison Corporation, a manufacturer of aluminum window frames and doors. In addition, in 1957 Stanley opened a 115,000-square-foot, state-of-the-art steel-strapping plant in New Britain, which nearly doubled the firm's manufacturing capacity for this product.

Company Revitalized by Donald W. Davis Starting in Early 1960s

Nonetheless, as Stanley entered the decade of the 1960s, its management's recent performance had been disappointing. Fortunately for Stanley, a bright and energetic young executive, Donald W. Davis--the most important figure in the company's history since William H. Hart--was coming to the fore.

Born in Springfield, Massachusetts, in 1921, Davis joined The Stanley Works in 1948. He rose rapidly at Stanley and in 1962 was promoted from his position as general manager of the steel-strapping division to executive vice president of the firm. With this promotion Davis took de facto control of the company, functioning as Stanley's chief operating officer between 1962 and 1966, when he was named president and chief executive officer.

In the quarter century between 1962, when Davis assumed control, and 1987, when he turned over day-to-day managerial responsibilities to Richard H. Ayers, Davis was able not merely to rouse Stanley from its long postwar slumber, but to transform the company into an aggressive leader in the globally competitive tool and hardware industry.

Stanley's rejuvenation program under Davis can be broken down into several distinct parts. Each part of the program was shaped by his recognition that if Stanley was to remain a central player in the industry, the company would have to become more competitive and would have to assume a more aggressive, growth-oriented posture. Davis believed that as world markets became more integrated, Stanley&mdash well as The Black & Decker Corporation, Snap-On Tools Corporation, and other U.S. tool and hardware companies--would have to face the harsh reality of global competition for the first time.

Davis called for increased competitiveness and faster growth at The Stanley Works. Under his leadership the company rationalized production and modernized plant facilities; aggressively pursued mergers and acquisitions, while at the same time divesting itself of poorly performing or nonstrategic divisions and product lines; identified new markets and penetrated such markets once identified; devoted much more attention to marketing and advertising; and exploited more fully international manufacturing and marketing opportunities.

In order to see these policies through, Davis, along with Garth W. Edwards, vice president for finance, overturned company policy in the mid-1960s by taking Stanley into long-term debt. This gambit proved extraordinarily successful; over time, borrowed funds helped to accomplish Davis's goals without compromising Stanley's financial integrity through excessive leveraging.

Davis used retained earnings, equity capital, and borrowed funds to build a number of new plants--the hand-tool plant that Stanley opened in New Britain in 1964 was the largest in the world at the time--and to upgrade existing facilities. Between 1979 and 1983 the company spent about $55 million yearly on upgrades alone. In part as a result of such efforts, Stanley was able over time to improve substantially both its capital-labor ratio and its overall manufacturing productivity.

During Davis's tenure Stanley made more than 25 major acquisitions, including Berry Industries (maker of garage doors and operators; acquired in 1965); Volkert Stampings (stampings and components in the television, radio, spacecraft, and electronic equipment industries; 1966); Ackley Manufacturing Company (hydraulic tools; 1971); Compo-Cast ("dead blow" striking tools; 1980); Mac Tools (auto-repair tools; 1980); Taylor Rental Corporation (tool rental centers; 1983); Proto Industrial Tools (specialty industrial tools; 1984); National Hand Tool (mechanic's hand tools; 1986); and Textron's Bostich Division (fasteners and fastening tools; 1986). During the 1980s Davis streamlined the company by selling off its garden-tool and electric-tool businesses, its drapery-hardware business, and its steel and steel-strapping divisions. In 1986 Stanley sold its South African interests to local management.

Successful Pursuit of Do-It-Yourself Market Starting in Early 1970s

Stanley's modernization, acquisition, and rationalization strategies under Davis were impressive. More impressive still were the company's efforts during the same period to identify and penetrate new markets. In particular, Stanley's early and aggressive push during the early 1970s into the so-called do-it-yourself (DIY), or consumer, hand-tool market paid handsome returns. This market&mdash′opelled by such factors as inflationary building and repair costs, a shortage of skilled tradesmen, and the movement of upscale baby boomers into older homes--became one of Stanley's largest and most profitable markets and one of its most important in strategic terms. Because the DIY market, unlike Stanley's others, was countercyclical, the chances that a general economic downturn would spell disaster to the firm were now significantly reduced.

In order to establish itself in the DIY market, and for other strategic reasons as well, Stanley, formerly a production-driven company, committed itself under Davis to developing its marketing capabilities. By working more closely with wholesalers and retailers of its products, increasing its market research, and, perhaps most importantly, making a sizable investment in television advertising, the company over time did just that. The phrase "Stanley helps you do things right"--coined by Davis--became familiar in different languages around the world.

Stanley became a much more international company under Davis. Not only did the firm increase its commitment to exporting but it also expanded foreign production by acquiring facilities in Latin America, Canada, France, and Germany. Perhaps most significant of all, given geopolitical trends, was Stanley's 1986 move into the Pacific Rim with its acquisition of Taiwan-based Chiro Tool Manufacturing Corporation.

By the time Davis stepped down at Stanley--Richard H. Ayers, who had risen through the ranks since joining Stanley in 1972, succeeded him as president and chief executive officer in 1987 and as board chairman in 1989--the company bore little resemblance to the one Davis had taken over in the early 1960s. Stanley had not merely survived, but had flourished under his helm, with net income and earnings at all-time highs in 1989.

Difficult Years in the 1990s

Unfortunately for The Stanley Works (and Ayers) the optimistic ending of the 1980s was quickly succeeded by the dark days of the early 1990s. First weak economic conditions contributed to flat revenues in both 1990 and 1991 and earnings declines of 9 percent in 1990 and 11 percent in 1991. Then the very future of Stanley as an independent company came into serious doubt through the appearance of a hostile takeover bid.

Stanley had itself taken over numerous companies in its long history but always companies interested in a merger. So it was somewhat ironic that the Newell Company initiated a hostile takeover attempt of Stanley in mid-1991. After initial friendly talks between executives of the two firms led nowhere, Newell--desirous of the respected Stanley brand name--began buying Stanley stock, acquiring a less than 1 percent stake, then filing a notice that it intended to boost this stake. Stanley responded in June 1991 by filing a federal antitrust lawsuit against Newell. Subsequently the state of Connecticut's attorney general, Richard Blumenthal, filed a similar lawsuit, which served to persuade Newell to abandon its hostile bid. In October 1992 a court agreement was reached whereby Newell promised to sell its Stanley stock within one year and not to purchase any additional Stanley securities or "seek to control or influence Stanley for 10 years." In return Stanley agreed to drop its lawsuit.

As he battled to keep Stanley independent, Ayers also sought out expansion opportunities through joint ventures and acquisitions, the most notable of which increased the company's overseas presence. A 1991 joint-venture agreement created Stanley Poland Ltd. to manufacture tools in the newly opened Eastern Europe. Among 1991 acquisitions were Mosley-Stone, a U.K. maker of paint brushes, rollers, and decorator tools; Nirva, a French manufacturer of closet systems; and Sidcrome Tools, the leading maker of mechanics tools in Australia. The following year brought Stanley a controlling interest in Tona a.s. Pecky, a major Czech manufacturer of mechanics tools. The domestic area was not neglected, however. In 1992 Stanley acquired American Brush Co., Inc., manufacturer of paint brushes and decorator tools; LaBounty Manufacturing, Inc., a maker of large hydraulic tools; Mail Media, a catalog marketer of precision tool kits consisting of Jensen Tools, Inc. and Direct Safety; and Goldblatt Tool Co., which manufactured masonry, tile, and drywall tools.

These acquisitions helped Stanley enter another period of sales growth, as revenues increased each year (to record levels each year) from 1992 through 1996, with the $2 billion sales mark reached for the first time in 1992 and $2.5 billion in 1994. Unfortunately, earnings did not keep pace with sales, and instead bounced up and down during this period.

Starting in 1993--the year Stanley celebrated its 150th anniversary--Ayers began making some restructuring moves in an effort to boost earnings. That year the company's 23 divisions were streamlined into 11. Ayers also sought to make selective divestments of units with low margins, and in 1993 sold the franchise operations of Taylor Rental, then sold the company-owned outlets the following year.

Ayers embarked upon a more aggressive divestment strategy in July 1995 as part of the "Four by Four" program. Over a four-year period Stanley sought, in addition to increasing revenues to $4 billion, to save $400 million by reducing operating costs by $150 million and assets by $250 million. In 1995 and 1996 Stanley exited from eight product categories; closed six factories, three distribution centers, and two support facilities; and eliminated about 550 jobs. In early 1997 the company completed the divestiture portion of "Four by Four" when it sold its garage-related operations--garage doors, garage door openers, and gate operators&mdashø Whistler Corporation. Stanley incurred 1995 charges of $85.5 million and 1996 charges of $47.8 million related to these restructuring moves.

To reach $4 billion in sales by the year 2000, Stanley had to increase revenues 10 percent a year. 1996 sales, however, grew less than 2 percent, and Ayers decided early that year to retire at year-end. Analysts quoted in Business Week felt that Stanley needed to bring someone in from the outside to shake things up and reinvigorate the company. Stanley's board did just that when it hired John M. Trani as CEO and chairman at the beginning of 1997. Trani had led the turnaround at General Electric Co.'s GE Medical Systems and had a reputation as a cost-cutter and tough leader. He also had a great deal of experience in the acquisition of foreign companies; this background was likely to be put to use at Stanley, which needed to beef up and improve the profitability of its non-U.S. operations (as of 1996, 71.6 percent of sales were derived from domestic operations, and 84.6 percent of profits).

Trani wasted no time getting started on a possible Stanley turnaround. In April 1997 the company announced a reorganization into a product management structure, aimed at strengthening the Stanley brand, focusing more on customers, improving new product development, and enhancing efficiency. The plan called for the formation of eight new product groups, which would be supported by centralized manufacturing, engineering, sales, and service, and the creation of a new corporate marketing and brand development function.

Although the 1990s were rough years for Stanley, the company seemed poised for a renaissance as it approached a new century, which would be the third for the famous Stanley brand. Competition promised to remain fierce for the foreseeable future but the Trani-led Stanley appeared ready for the challenges ahead.

Principal Divisions: Stanley Tools; Stanley Mechanics Tools; Stanley Storage Systems; Stanley Mail Media; Stanley Fastening Systems; Stanley Hydraulic Tools; Stanley Air Tools; Stanley Hardware; Stanley Home Decor; Stanley Door Systems; Stanley Access Technologies.

The Stanley Works History

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