Collins & Aikman Corporation History

Address:

5755 New King Court
Troy, Michigan 48098-2396
U.S.A.

Telephone: (248) 824-2500
Fax: (248) 824-1614

Public Company
Incorporated: 1988
Employees: 14,300
Sales: $1.9 billion (2000)
Stock Exchanges: New York
Ticker Symbol: CKC
NAIC: 31321 Broadwoven Fabric Mills; 336339 All Other Motor Vehicle Parts Manufacturing; 326199 All Other Plastics Product Manufacturing

Company Perspectives:

Our mission is to be recognized as a leading-edge automotive interior systems supplier and an innovator of world-class NVH and acoustic technologies. Our goal is to continually find ways to integrate our unparalleled styling and innovative acoustics technologies into all of our interior products. Key Dates:

Key Dates:

1843:: Gibbons L. Kelty opens a window shade shop.
1870:: Charles M. Aikman joins the business, by now a retailer of a wide variety of home furnishings.
1891:: Kelty's interests are sold, Aikman partners with William Collins, and Collins & Aikman (C & A) is formed.
1916:: The Collins family sells its holdings to Thomas Doody and Melville Curtis, and the company goes public.
1937:: Company begins supplying the airline industry.
1943:: A double-faced thermal cloth, initially used for cold-weather uniforms, is patented.
1960:: Company acquires Pennsylvania-based Bangor Mills.
1971:: Wall coverings producer Imperial Paper is acquired.
1987:: The Wickes Companies purchase C & A for $1.16 billion.
1988:: Blackstone Group and Wasserstein Perella purchase the firm and reorganize it as WCI Holdings Corp.
1992:: WCI changes its name to Collins & Aikman and moves corporate headquarters from Southern California to Charlotte, North Carolina.
1994:: Automotive products account for 59 percent of $1.5 billion in sales, and the firm initiates a public offering.
1997:: Restructuring begins as C & A divests some holdings in order to focus on the automotive industry.
2000:: Company headquarters are moved to Troy, Michigan.
2001:: Heartland Industrial Partners L.P. purchases a 60 percent stake in the firm.

Company History:

Founded as a supplier of window shades in the mid-19th century, Collins & Aikman Corporation has survived a century and a half of corporate maneuvering to become a leading supplier of floor systems, fabric, interior trim, and convertible top systems to the automotive industry. Its acoustic component operations provide Noise/Vibration/Harshness (NVH) solutions to its clients. Collins & Aikman operates in 13 countries and its customer base includes General Motors, DaimlerChrysler, Ford, Honda, Nissan, and Toyota. In 2000, the company moved its headquarters from North Carolina to Troy, Michigan, a suburb of Detroit, in order to be closer to its major clients.

19th Century Origins

The business that was to become Collins & Aikman was founded in 1843, on the Lower East Side of New York. Sensing that the rapid growth of the increasingly crowded city would spur the market for privacy products, 21-year-old Gibbons L. Kelty opened a window shade shop on Catherine Street. Kelty's business prospered, and he gradually added various home furnishings lines and began to import upholstery fabrics. Kelty also opened a textile factory across the East River in Astoria.

By 1870, G.L. Kelty & Co. was operating several downtown stores, selling furniture, curtains, and upholstery. That year, Gibbons Kelty admitted his nephew, Charles M. Aikman, into partnership, and in 1871, they were joined by Gibbons's son, William Kelty. A year later Kelty became the first U.S. weaver of satin damask, and it won a gold medal for these fabrics at an American Centennial exhibition a few years later.

After Gibbons Kelty died in 1889, Charles Aikman formed C.M. Aikman & Co. and bought out the principal Kelty interests. The Kelty holdings included a half interest in a weave plant in the Manayunk section of Philadelphia. The other half was owned by William G. Collins. In 1891, they incorporated Collins & Aikman (C & A), with Aikman as president and Collins as secretary and treasurer. C & A continued its expansion as a specialist in heavy, upholstery-type fabrics. In 1898, it became the first American producer of jacquard velvet. About the same time the company got out of its original window shade business.

Charles Aikman retired in 1909, and sold his C.M. Aikman & Co. (which he may have used primarily as a holding company for his C & A and other interests) to C & A. A few years later, William Collins also retired, turning the presidency over to his son Kenneth. Tragically, Kenneth Collins was killed in early 1916 in a fire, after he had rescued two women who were trapped. His cousin, Dr. William M. Collins, who had held the title of treasurer in the company, took over as interim president, but by July 1916, the Collins family sold its holdings to Thomas Doody and Melville Curtis, who had first bought a stake in the firm in 1911, and had been directors and assistant treasurers.

Early in their tenure, Doody and Curtis brought in Willis G. McCullough, whose family was to play a major role in C & A for 70 years. Hired as a salesman, McCullough was promoted to sales manager within a year and also named treasurer and elected to the board. By 1929, he was president (with Melville Curtis stepping up to chairman), a job he held until his death in 1948.

In the early 1920s, McCullough was instrumental in steering C & A into what was quickly to become its largest business--and has remained so much of the time since. For a producer of upholstery fabrics, auto seat materials seemed a natural outlet, and soon C & A also provided fabrics for headlining, sidewalls, and other automotive uses. McCullough persuaded the company to build a new plant for auto and furniture fabrics in West Philadelphia.

Going Public: 1926

In 1926, Collins & Aikman Company went public and was listed on the New York Stock Exchange. The next year it reincorporated as Collins & Aikman Corp. while absorbing three other companies, including its long-time mohair yarn supplier, Cranston Mills of Rhode Island, and a velvet weaver, which gave it a plant in North Carolina. More plants were built over the years. In 1929, C & A established a Canadian subsidiary with a plant in Farnham, Quebec, to supply the auto and furniture industries. By 1937, C & A moved into supplying the infant airline industry with specially developed fabrics that were light and durable. The company later supplied fabric for President Roosevelt's plane.

C & A managed to stay in the black for all but one year during the Depression. With the advent of World War II, civilian auto production, which by then accounted for about 75 percent of C & A's volume, came to a halt. The company switched to duck, alpaca linings, and upholstery fabrics for war uses, but it took time to adapt to new machinery, techniques, and employees. Profits collapsed from $3.1 million in the February 1941 fiscal year to $123,000 in fiscal 1943 before rebounding partway to $2 million in fiscal 1945.

Throughout his presidency, Willis McCullough emphasized C & A's tradition of research and development. For instance, the company developed techniques for back-coating auto and furniture fabrics and for large-scale range dyeing of pile fabrics. Even during the war, research efforts continued. In 1943, C & A patented a double-faced thermal cloth, initially used for cold-weather uniforms, and it worked with nylon originator duPont to adapt this first synthetic 'miracle fiber' for upholstery fabrics. Also during the war, C & A expanded its presence in North Carolina by acquiring Norwood Company, a cotton spinner, in 1943, then modernizing its plant with the C & A-developed Bird spinning system.

McCullough also made C & A an early provider of health insurance and the 40-hour week. McCullough himself was very reticent. He kept published information about the company at a minimum and never permitted his photo to be released to the press. Fortune, with its army of indefatigable researchers, long tried to gather enough material for an article on C & A, but finally gave up in frustration.

Postwar Challenges

After McCullough's death in 1948, general counsel Albert Jube stepped in as what a company history describes as 'caretaker president.' Whitworth Bird, who had developed the Bird spinning system for the company, took over in 1953. But despite the general economic prosperity in the United States, the first decade after the war was difficult for many textile companies, including C & A. It was saddled with many obsolete, high-cost plants in the Northeast and undertook a painful process of relocating to the South, especially North Carolina. C & A continued as a major supplier to the auto companies, but the shift away from pile and plush upholstery and greater use of plastics in seats and body linings cut C & A's contribution per car. C & A's efforts to compete with large, mass-volume textilers in 'flat fabrics' for men's and women's clothing incurred substantial losses, until the Rhode Island plant producing them was finally closed in 1956. C & A ran three deficits in the four years ending February 1957.

In December 1956, C & A hired 49-year-old textile veteran Ellis Leach as president. With automotive products dropping as a percentage of C & A's sales, Leach stressed flexibility and emphasis on more specialized and stylish products. A prime goal was 'getting away from staple items' where fierce competition permitted little if any profit, while 'putting emphasis on style' where 'our forte lies in the finish of a product.' Aided by Stead & Miller, a subsidiary acquired in 1952 that emphasized furniture damasks and novelty weaves, C & A increased furniture upholstery fabrics to a quarter of total business by the late 1950s, much of it to better-quality furniture makers. For the apparel market, C & A developed synthetic fur-like fabrics, mainly for use as liners that could also be reversed for use as outerwear, and trim. It also came out with periodic novelty items like Bear Hug shaggy-pile coats, and supplied plush 'fur' for the toy market.

In 1961, Leach stepped up to the position of chairman and the presidency was assumed by 36-year-old Donald McCullough, the younger son of Willis, a Yale-trained engineer who had been persuaded by his father to turn down a job at Republic Steel to start as a C & A trainee in 1946. When Leach retired in 1966, Don McCullough also became chairman and CEO. Don McCullough shared Leach's faith in 'mobility and flexibility.' Their policy was not only to replace plants and machinery as they became outmoded, but also to replace products that had outworn their welcome with new, market-pleasing varieties. They also believed in frequent acquisitions to expand C & A's market niches.

Expansion in the 1960s and 1970s

The 1960 acquisition of Pennsylvania-based Bangor Mills gave C & A an entry into tricot knitting. In less than a decade C & A tripled its tricot capacity and developed Certifab tricot for bonding to other fabrics. Another new field was entered in 1965 through Painter Carpet Mills, a specialist in commercial and institutional carpeting. C & A acquired wall coverings producer Imperial Paper in 1971, and Tennessee Trifting, which made scatter rugs, in 1972. By then, 42 percent of C & A's business was in apparel fabrics, while the home furnishing market (which comprised both furniture fabrics and wallpaper) accounted for 36 percent. Although the auto business was bringing in more revenues than it had in the past and was extended to such important new products as molded carpet flooring, C & A's transportation business (which also included airline sales) was down to about 20 percent of its revenues.

Leach and McCullough's policies paid off financially, with C & A returning to the black in Leach's first year and growing steadily for the next quarter century. Acquisitions and internal growth increased sales from $45 million in the year ending February 1959, to more than $200 million in 1969, and $1 billion in 1985. Earnings over the same period rose from $1.7 million (which was still below the nearly $2 million netted in mid-Depression 1937) to more than $60 million in 1985. Five stock splits between 1961 and 1985 turned each pre-1961 share into 24 new shares. Thus, the $22 market price of the stock in June 1985 compared with a split-adjusted trading range of $.50 to $1 during most of the 1950s and a 1937 high of $2.60.

The price nearly doubled again over the next twelve months, but by then C & A was beginning to get caught up in the market excitement that made most any company, whether ill or well managed, small or large, a potential buyout target. In particular, C & A attracted the attention of Sanford Sigoloff, CEO of The Wickes Companies.

Like C & A, Wickes traced its origin to family businesses started in the mid-1800s. By the 1960s, it was an important supplier of building materials and operated the Builders Emporium chain and other outlets. In 1980, it merged with Gamble-Skogmo, which operated a variety of merchandising units. However, the resultant Wickes Companies was burdened by $2 billion in debt and many run-down operating units. In March 1982, it turned for help to Sigoloff, who had a reputation as a turnaround specialist. Sigoloff, whose self-adopted nickname was 'Ming the Merciless,' derived from a villain in Flash Gordon comic strips, prided himself on ruthless cost-cutting and efficiency. He promptly threw Wickes into Chapter 11 bankruptcy and managed to bring the reorganized company out again by January 1985, winning wide admiration for the speed and effectiveness of his moves.

Wickes was barely four months out of bankruptcy when Sigoloff announced his intention of making a $1 billion acquisition within a year. He handily beat that timetable when in September 1985, he completed the $1 billion purchase of Gulf & Western's Consumer and Industrial Products Group, doubling Wickes's size.

Changes in Ownership: Late 1980s

He amassed a new $1.2 billion war chest in 1986, but hostile efforts to capture National Gypsum and Owens-Corning Fiberglas both failed. He was more successful in quiet negotiations with C & A, and won the board's assent in November with a 'can't-refuse' offer of $1.16 billion. That meant $53 a C & A share, a 50 percent premium over the market price two days earlier and double the price 12 months before. At almost the same time Wickes struck a $1.62 billion deal for Lear Siegler, but the takeover market had peaked and Wickes's investment bank Drexel Burnham Lambert was beginning to have problems of its own. The Lear deal was dropped by 'mutual consent' in December, but the C & A transaction was pushed through. It formally took effect in January 1987.

In April came a shocker. It was discovered that for nearly a decade C & A had produced $360 million in carpeting that didn't meet flammability tests, although Wickes noted that it thought the products were safe. In early May the head of the Floor Coverings division was removed. Then the news improved. Government-ordered tests indicated the problem might not be as severe as first feared. That summer Wickes established an $11.2 million after-tax reserve, which, as the Wall Street Journal noted, 'surprised analysts who initially estimated liability in the hundreds of millions.' For the year ended January 1988, C & A contributed $83 million in operating profits to the Wickes total.

Even so, Wickes, again burdened with heavy debt, never managed to gain momentum. Corporate-wide profits were down substantially for the year ending January 1988, and the company was in the red for the next two quarters, burdened by losses from units slated for disposal. In August 1988, Sigoloff tried a new tack. He proposed a buyout by his management team at $12 a Wickes share, well below what stockholders had been led to believe was the company's true value (the theoretical and admittedly unrealistic book value had been $25). Many Wall Street analysts reasoned that 'Ming' really wanted to put the company 'in play,' hoping to attract higher bids by outsiders. But with Wickes having to admit that earnings would be below projections (a falloff in C & A results was given much of the blame), no other bids were generated, and Sigoloff himself was unable to get the needed financing.

In November, Wickes settled for a buyout offer by prominent Wall Street investors Blackstone Group and Wasserstein Perella at $11.25 a share through a newly formed company named WCI Holdings Corp. The transaction, through which WCI also inherited some $2 billion of Wickes debt, was completed in December 1988. Representatives of Blackstone and Wasserstein took over as the 58-year-old Sigoloff departed.

In contrast to the highly centralized, detailed control practiced by Sigoloff, the new group allowed considerable operational autonomy, stating, 'We plan to establish a sense of ownership among the executives at each of the businesses.' But by then the former senior executives at C & A were gone. Don McCullough retired at the end of 1987. He was succeeded as the unit's CEO by Alfred Crimmins, who had been president since 1984, but within five months Crimmins and a score of other executives also departed and Sigoloff had divisional C & A executives report directly to him.

In February 1989, the new owners brought in Thomas Hannah, an executive from the Milliken textile firm, to head C & A. In 1994, he was also named chief executive officer of the restructured parent corporation.

Restructuring and Continued Growth in the 1990s

WCI was determined to quickly implement a restructuring plan that slashed corporate overhead and focused on 'businesses in which it enjoyed a competitive advantage'--which turned out to be primarily the old C & A activities. This was emphasized by the 1992 name change from WCI to Collins & Aikman, as well as the move of corporate headquarters from Southern California to Charlotte, North Carolina, in the heartland of C & A operations.

During the restructuring process, some 27 business units, which had contributed 73 percent of 1988 sales, were divested (some to groups headed by division management). When no buyers could be found, some units were closed, as was the case with the Builders Emporium chain. One unit from the Wickes Manufacturing side originally slated for divesting--Dura Convertible Systems, the largest producer of top systems for convertibles--won a last-minute reprieve and was shifted to the C & A automotive group.

In the new C & A, automotive products were once again the dominant segment, accounting for 59 percent of the $1.5 billion in sales for fiscal 1994, with at least some C & A product in 86 percent of all North American cars. Customers included not only the Big Three but also U.S. plants of foreign producers. C & A claimed to be the largest supplier of seat fabrics, floor mats, and convertible tops, and ranked number two in molded floor carpets and luggage compartment trim. C & A moved abroad with plants in Mexico and Austria, primarily to serve local Chrysler plants. The company's other market segments included interior furnishings (27 percent), in which the company ranked first in both flat-woven upholstery fabric and commercial-type carpets, and wallcoverings (14 percent) in which C & A also claimed first place with its Imperial label.

By July 1994, C & A was ready to go public again, with an offering of 15 million shares at $10.50 each, followed by listing on the New York Stock Exchange. However, Blackstone and Wasserstein Perella still retained 76 percent of outstanding stock. Proceeds of the offering permitted substantial lowering of outstanding debt and refinancing of much of the rest on more favorable terms. CEO Tom Hannah noted that C & A was prepared 'to grow in businesses we know and understand. ... We will invest in [our] existing businesses and [also] seek to expand into related product lines and in international markets to service our customers.'

In the mid-1990s, C & A continued to strategically position itself as a leading automotive supplier. In 1995, the firm purchased AMCO, a convertible top producer. One year later, the company made several key acquisitions including Manchester Plastics, BTR Fatati, and JPS Automotive--both manufacturers of automotive floor carpet--and Perstorp, an acoustics technologies firm. The shopping spree left C & A remained debt laden--some $1.2 billion in 1995--and strikes at General Motors plants cost the firm nearly $30 in revenues in 1996. Still, the company's products were found in 85 percent of the cars produced in North America, and revenues increased 28 percent to $1.1 billion, securing its position as the third-largest public auto supplier.

In 1997, C & A divested a number of its holdings to further strengthen its portfolio. Among those divested were the Collins & Aikman Floorcoverings unit, JPS Air Restraint & Technological Products, and the Mastercraft Decorative Fabrics Group. The following year, it also sold its Imperial Wallcoverings unit for $72 million. The firm also sought to beef up its international presence, entering into an alliance with Courtaulds Textiles, a European firm. It also acquired full interest in C & A Plastics UK and C & A Floormats Europe, as well as Enjema, a Mexico-based carpet systems manufacturer.

Thomas E. Evans joined the firm in 1999, after Hannah announced his retirement. The new chairman and CEO, formerly the president of Tenneco Automotive, immediately began a new restructuring plan and brought several top executives in the industry to the firm to aid in his strategic effort. Part of the new plan included the reorganization of the firm's global automotive carpet, acoustics, plastics, and accessory floormats businesses, into two major divisions: North America Automotive Interior Systems and Europe Automotive Interior Systems, with headquarters in Michigan and Germany. The company also formed the Specialty Automotive Products division, which operated the automotive fabrics and convertible tops business.

Alliances for the New Millennium

As C & A entered the new millennium, company headquarters were moved to Troy, Michigan, in order to be closer to the heart of the automotive industry and its customers. The firm continued its focus on its key business segments and purchased Comet, an acoustic software developer focused on NVH.

In 2001, Heartland Industrial Partners L.P., a private equity firm that invested in certain industrial companies and positioned them for growth, purchased a 60 percent stake in the firm for $260 million. CEO Evans elaborated on the deal: 'I believe that with this infusion of new capital from Heartland, we should be able to significantly enhance the growth opportunities for our global business, subsequently maximizing value for our organization and, as evidenced by their significant investment in the automotive industry, we couldn't ask for a more supportive and strategically aligned partner. This transaction should position Collins & Aikman to be an even stronger player in our sector.' Shortly after receiving the cash infusion, C & A announced the acquisition of Becker Group LLC, an injection molder, for $60 million in cash, $2.5 million in stock options, and a $18 million non-competition agreement.

By this time, the company was the market leader in flooring and acoustic systems, convertible tops, floormats, and body cloth. With management strongly focused on its role in the automotive supply industry, and establishing a global presence, Collins & Aikman seemed assured of its strong market share in the future.

Principal Subsidiaries: Collins & Aikman Products Co.; The Akro Corporation; Carcorp Inc.; Cepco Incorporated; Collins & Aikman Asset Services; CW Management Corp.; Hopkins Services Inc.; SAF Services Corp.; Collins & Aikman Automotive International, Inc.; Collins & Aikman Carpet & Acoustics Inc.; Collins & Aikman Export Corp.; Collins & Aikman Holdings Canada, Inc.; Collins & Aikman Luxembourg SA; Collins & Aikman Europe Inc.; Collins & Aikman Products GmbH (Austria); Collins & Aikman International Corp.; Dura Convertible Systems GmbH; Collins & Aikman de Mexico, S.A. de C.V.

Principal Competitors: Lear Corporation; Johnson Controls Inc.; Magna International Inc.

Collins & Aikman Corporation History

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Key Dates:

Company History:

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