Reynolds Metals Company History

Company Perspectives:

"Working together, our mission is to provide our customers with uncompromising quality, innovation and continuous improvement, which will result in the profitable growth and financial strengh of our company."

Company History:

Reynolds Metals Company is the world's third largest aluminum and packaging company. As a fully integrated manufactuer, distributor, and marketer of primary and value-added fabricated aluminum products, the company operates 100 manufacturing facilities in 24 nations. Reynolds also produces plastic products which are primarily used in its packaging and consumer products businesses. Other end-uses for Reynolds products are aluminum beverage cans, flexible and foodservice packaging, consumer home food managment, transportation, building, and construction. In addition, the company has a metal supply system with operations in bauxite mining, alumina refining, and primary and reclaimed aluminum production. As a leader in consumer aluminum recycling, Reynolds distributes aluminum and stainless steel mill products through a nationwide network of metal service centers.

Reynolds began as a supplier of foil for cigarette packaging. The company was founded by R.S. Reynolds, a former law student and nephew of R.J. Reynolds, one of the first U.S. tobacco barons. After spending several years in the tobacco business working for his uncle, R.S. Reynolds borrowed $100,000 and in 1919 he purchased a small, one-story building in Louisville, Kentucky, and founded the United States Foil Company (U.S. Foil). The increased demand for foil was the result of the ever-increasing public appetite for cigarettes, the demand for which was so great that it created constant shortages of foil used for packaging.

U.S. Foil's entrance into the market generated a price war with other foil manufacturers, who hoped that by cutting prices they could drive the fledgling company out of business. Their plan did not work. At the time, most foil was manufactured in tall, multi-storied buildings. The material was moved manually from one floor to another before the finished product was ready for shipment. All the lifting and transferring of raw materials was a costly and inefficient way to manufacture foil. The newly purchased Reynolds plant in Kentucky, however, was all on one floor, at ground level. The production equipment was, therefore, installed in long rows, which eliminated the need for the expensive transporting of the product. The resulting lower manufacturing costs allowed the company to undersell its competitors by several cents per pound, ensuring the company's share of the growing market. During the 1920s most foil for packaging was made of lead and tin alloys. R.S. Reynolds recognized the advantages of using lighter-weight, less-expensive aluminum foil. In 1928, after buying back the stock he had sold to R.J. Reynolds to start U.S. Foil, R.S. Reynolds built the company's first aluminum foil plant and rolling mill in Louisville, and the Reynolds Metals Company was formed.

The Great Depression did not affect the growth of the newly formed company. In fact, the company recorded annual sales of $13 million in 1930 and moved its corporate headquarters to New York City. In 1935 Reynolds developed a method of printing on aluminum foil, employing the rotogravure process, which enabled the company to expand quickly into other aluminum foil packaging markets. The following year, Reynolds ventured outside the United States for the first time by opening a foil production plant in Havana.

In 1938 R.S. Reynolds decided to move the company's headquarters south again. Taking his son, Richard S. Reynolds, Jr., with him as assistant to the president, the company settled in Richmond, Virginia. Reynolds, Jr. had previously founded a stock-brokerage firm that would later become Reynolds Securities, which eventually merged with Dean Witter.

In 1937, in Europe to search for new sources of raw materials, Reynolds, Sr. observed that German production capacities for aluminum were more than two times that of the combined production capabilities of the United States, England, and France. Reynolds deduced that Germany was preparing for war, with a massive production effort in aluminum sheet used to build military airplanes. After his return to the United States, taking his cue from what he observed in Germany, Reynolds set about to increase dramatically his own production capacity. The company borrowed $15 million and began construction on its first smelting facility, located at Sheffield, Alabama. The company also acquired a bauxite mining operation in Arkansas to help feed the smelters. Reynolds's World War II production was extensive. By the end of World War II, Reynolds had increased the company's production capacity to more than 450 million pounds. Impressive as the wartime figures were, they were dwarfed by postwar demand for aluminum.

With the end of World War II, the company focused its direction on consumer goods and construction. Reynolds developed aluminum siding for the booming postwar housing market. In 1946, the company leased, then purchased six government-owned production plants, and by doing so doubled its production capacity. Reynolds Wrap, the company's well-known household aluminum foil, was introduced in 1947.

R.S. Reynolds, Jr. was named the company's new president in 1948. His three brothers, David, William G., and J. Louis, also assumed much of the responsibility for running the business, concentrating primarily on a program of rapid overseas expansion. Reynolds expanded its holdings worldwide, and in 1953 the company organized Reynolds International, Inc. in an effort to consolidate and further expand foreign operations. Reynolds closed the 1950s with a move to a new, modern corporate headquarters in suburban Richmond, Virginia.

During the 1960s the company continued to grow and introduce new all-aluminum products for home and industry. Included were the first aluminum drill pipe in 1960 and the first aluminum beverage can in 1963, both successful. An attempt to increase production capacities by 20 percent cost Reynolds an estimated $650 million in the mid-1960s. Plagued by cost overruns and delays, by the time the project was finished demand for aluminum had leveled off. Reynolds's leadership came under criticism from the financial community, particularly for what was perceived as the Reynolds family having too much control over the company. The company began a reorganization during the late 1960s, and separate operating divisions were formed, each of which was responsible for its own profit performance. R.S. Reynolds, Jr. brought in a financial consulting firm to streamline operations. Control of the company was still held by the Reynolds family. In 1976 David P. Reynolds was its chairman; J. Louis and William G. Reynolds were board members; a cousin, A.D. Reynolds was a vice-president; and William G. Reynolds, Jr. was the company's treasurer.

In 1973 a Reynolds unit pleaded guilty to charges of importing ores from Rhodesia, in violation of U.S. government sanctions against the country at the time. In 1975 the company's assets in Guyana were nationalized and Reynolds was forced to settle for a $10 million payment for its Guyanese holdings. In 1980, 51 percent of its Jamaican assets and operations and all of its Jamaican land holdings were sold to the Jamaican government. The company continued to offer new products to the marketplace. In 1970 the first all-aluminum automobile engine block was introduced. All-aluminum car bumpers were in use in 1973. The beverage can with the stay-on, pull-top tab was well received in 1975.

Reynolds has been involved in an impressive recycling effort since 1968. It has received a great deal of praise for its recycling philosophy. As of 1980, the company was recycling almost half the number of cans it produced. In 1981, the company expanded its recycling capacity with two more facilities. In 1990 Reynolds recycled 438 million pounds of consumer-generated aluminum scrap, paying out $123 million to the recycling public. The company recycles more cans than it produces. In addition to its environmental advantages, recycled aluminum requires only five percent of the energy that would be used to produce aluminum from virgin materials.

Like most U.S. industrial giants, Reynolds lost sales in the recession of the early 1980s. Reynolds looked into new products and areas of manufacturing to redeploy its assets, seeking businesses that would provide higher profits and faster growth than those of aluminum. In the early 1980s, David Reynolds and William Bourke, a former Ford Motor Company vice president and now Reynolds's chairman and CEO, realized that Reynolds's upstream costs--for mining, smelting, and refining--were cutting into downstream profits on finished goods, like aluminum foil and cans. Reynolds then embarked on a capital-improvements program that involved the expenditure of billions of dollars and the shutting down of some of the company's less-profitable operations. By 1988 Reynolds had cut the number of employees by one-third and reduced by almost 25 percent its production costs, reversing the drain on company profits.

Reynolds fortunes were greatly improved by the discovery of gold at one of the company's bauxite properties in Australia in 1986. The company's entrance into the gold market, an unexpected upsurge in aluminum prices in the late 1980s, the company's continued commitment to the modernization of its production facilities, and the expansion of its consumer products division made Reynolds a solid, profitable enterprise with the ability to weather the cyclical nature of the aluminum business.

Under the leadership of chairman and CEO Bourke the company moved into the 1990s with its focus on consumer products and on gold. By using its well-established marketing, sales, and distribution organizations, Reynolds was able to add new products without increasing employment. Late in the 1980s the company introduced a line of colored plastic wraps and resealable plastic bags. In May 1988 Reynolds acquired Presto Products, Inc., a $200-million-a-year producer of plastic bags. Presto produced a full range of plastic bags and wraps for both indoor and outdoor use, including freezer, sandwich, and food storage bags, along with a line of moist paper tissues and cotton swabs. In line with its commitment to recycling, Reynolds set a long-term goal of recycling more plastics each year than it produces.

As Reynolds Metals entered the 1990s, the company was in the best financial condition in its history. Modernization of its plants continued with the construction of a new 120-metric-ton-per-year facility at the company's Baie Comeau, Quebec, smelter, along with expansion and modernization of other company plants in Western Australia, Texas, and Louisiana. Reynolds invested more than $400 million in Alabama to ensure its position as a world-class producer of aluminum-can stock and can-end stock. In addition to its capital investment program, the company expanded its research-and-development efforts. The company has developed new process technologies in aluminum-lithium casting, electromagnetic casting, and various techniques in automation. In 1991 new products included a light-weight, stronger composite architectural panel metal for the construction industry.

With the demand for lighter, more fuel-efficient automobiles, the use of aluminum in U.S. cars was expected to rise during the 1990s. Reynolds's research had helped develop technology for the manufacture of aluminum automobile drive shafts and radiators. In 1989 the company acquired an interest in the Fata European Group in Italy, a company with strong ties to and business experience in Eastern Bloc countries. Fata, Reynolds, and a group of Soviet organizations began constructing a $200 million aluminum-foil plant in Siberia in the 1990s.

In 1992, Reynolds sold its wire and cable operations, as well as its 84 percent interest in Eskimo Pie. The company also announced that employment would once again be reduced by 12 percent to cut costs. In 1993 Reynolds underwent a restructuring that included reducing alumina production and aluminum production by 21 percent, and sold its aluminum reclamation plant in Benton Harbor, Michigan.

In 1994, Reynolds purchased the aluminum and stainless steel products distribution business of Prime Metals. The company also sold its 40 percent interest in Australia's Boddington Gold Mine, but was to exit the gold business altogether the next year. In 1994, a pact to scale back production in the next two years among the chief aluminum-producing nations helped Reynolds to achieve strong sales. However, decline for beer beverage cans was continuing, and another can-making plant was closed in Fulton, New York. One market that did show promise, though, was bridge deck replacement, and in 1996 Reynolds renovated the Corbin suspension bridge in Huntingdon County, Pennsylvania. The 320-foot bridge built in the 1930s was refitted with 22 aluminum deck panels.

In 1996, another can-making plant was closed in Houston, Texas, but the modernization of a plant in Torrance, California, neared completion with the number of manufacturing lines reduced from six to three. Many of the other modernized plants were making cans with smaller, lighter ends which reduces the amount of metal needed for a 12-ounce can by three percent.

Even with smaller cans, recycling them and other aluminum products was achieving record levels. Reynolds recycled 584 million pounds of aluminum, including more than 11 billion aluminum beverage cans, and nearly 228 million pounds of non-can aluminum scrap in 1996 alone. Furthermore, the company noted that as more and more aluminum is used in automobiles, appliances, building products, packaging items, foil and foil products, and other household goods, there will be more metals entering the recycling stream.

Disappointing sales in 1996, due to low aluminum prices and lower demand for some of its products, led to yet another company restructuring. Effective April 1, 1997, the company was organized into six global units, down from its former 20 operating units, that would focus on the most profitable aluminum markets around the world. The new units were packaging and consumer products, construction and distribution, transportation, metals and carbon products, bauxite and alumina, and cans. The year also saw a milestone for Reynolds Wrap Aluminum Foil, which celebrated its 50th year. In tribute, Reynolds donated $1 million to Meals on Wheels.

Principal Subsidiaries: Reynolds Metals Development Company; Southern Reclamation Company; Reynolds Consumer Products, Inc.; Reynolds International Inc.

Principal Operating Units: Packaging and Consumer Products; Construction and Distribution; Transportation; Metals and Carbon Products; Bauxite and Alumina; Cans.

Further Reading:

Source: International Directory of Company Histories, Vol. 19. St. James Press, 1998.

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