Southwire Company, Inc. History

Company Perspectives:

We will design, produce, and market products and services which exceed the expectations of our customers. We will create an environment in which personal involvement leads to individual satisfaction and continuous improvement. We will achieve long-term prosperity and success as a profitable business competing in the world marketplace.

Company History:

Southwire Company, Inc., is the largest manufacturer of copper and aluminum rod, wire, and cable in the United States. Throughout its history as a leading supplier of rod, wire, and cable for use in the transmission and distribution of electricity, the company made significant technological advances that have been adopted by the worldwide wire and cable industry. As of 1998, Southwire's products included building and utility wire and cable, industrial power cable, communications cable, and such specialty products as transit-system cabling.

Entrepreneurial Beginnings

The creation of Southwire is a classic example of entrepreneurial spirit facing unfavorable odds and triumphing. Shortly after graduating from Georgia Institute of Technology, Roy Richards, who ran his father's sawmill by the time he was 14 years old, started his own business in 1937. Called Roy Richards Construction Company, it was an extension of his father's sawmill. Six months after opening his business, the 25-year-old Richards was awarded a $118,000 Rural Electrification Administration (REA) contract to set the poles and string the wire for 108 miles of power lines in Georgia.

Although REA officials were somewhat anxious about Richards' young age and lack of experience, his construction of the Georgia power lines garnered high praise and additional REA contracts. In fact, Richards' method of setting poles and stringing wire had reduced the time it took to build a year's worth of power lines to three months, a process soon adopted by REA contractors nationwide. By 1939 Richards' company had strung 3,500 miles of power lines for the REA throughout Georgia and Alabama, establishing it as the second largest constructor of power lines for the REA in the nation. Two years later, the company was awarded its first international contract to construct a power generation station in St. Croix in the Virgin Islands.

By the time Richards' work was completed in the Virgin Islands, the Japanese had bombed Pearl Harbor and the United States had entered World War II. The onset of the war marked a significant decline in the number of REA contracts offered, so Richards decided to actively join the war effort and enlisted in the U.S. Army. Shortly after his return in 1945, Richards landed a contract to build 500 miles of an electrical transmission line in Georgia. The war, however, had severely limited the amount of aluminum wire available. Richards canvassed all of the large wire manufacturers and was told that he would have to wait a minimum of three years to receive enough wire to complete his 500-mile project. Faced with either waiting for the aluminum companies to deliver the wire and losing the contract in Georgia, or manufacturing the wire himself, Richards opted for the latter. In 1950, with $80,000 in capital and the assistance of a professor of mechanical engineering under whom he had studied during college, Richards created Southwire Company.

Hiring 12 employees who worked with second-hand machinery in a 12,000 square-foot building, Richards set up operations to manufacture copper and aluminum wire for his first customer--himself. Industry pundits had warned Richards that his remote location would make the shipping of raw materials too costly and that the number of skilled labor available in the area could not support his venture. Richards, however, proved them wrong and produced his first lot of copper and aluminum wire in four months. By the end of its second year, Southwire had shipped five million pounds of wire, amassed $560,000 in sales, and doubled the size of its manufacturing facility.

1950s-60s: Growth and Innovation

Having achieved remarkable results in his first two years of operation, Richards then began searching for a way to improve the quality of his wire. Wire is made by winnowing a thicker stock of aluminum or copper, called a "rod," into a smaller diameter to reach the desired thickness. Traditionally, segments of rod were welded together, end to end, to create a continuous roll that was then compressed and stretched into a strand of wire. Welding the rods together, however, created a weak wire and, frequently, a strand of wire would break at the location of the weld.

Wishing to somehow avoid the inherent weakness that welding caused, Richards traveled to Italy to investigate a method developed by an Italian industrialist named Illario Properzi for continuously casting and rolling rod. Properzi's casting method had only been used with commercial grade lead and zinc, and he was convinced the method would not work with aluminum electrical wire due to the vastly different metallurgical properties between the metals. Richards nevertheless signed a contract for the rights to the process, and after a year of experimentation by Southwire engineers, a machine was developed that would continuously cast aluminum rod.

Next, Richards sought to make the process applicable to copper rod, which posed even greater metallurgical problems. After five years of tests on its own, Southwire entered into an agreement with Western Electric Company, and experiments continued under the joint venture for several more years. Finally, in 1963, a suitable process was developed. This process, known as the Southwire Continuous Rod (SCR) system, marked a revolutionary advance in wire production technology and immediately began being employed by other wire manufacturers. Eventually, 90 percent of copper rod for electrical wire and cable produced in major industrial countries would be manufactured by continuous casting systems, half of which would be designed and built by Southwire.

After presiding over the successful completion of Southwire's experimentation with copper wire production, Richards began exploring the possibility of constructing his own aluminum smelter to produce the aluminum needed in wire production. Unable to finance the construction on his own, Richards searched for a partner in the venture and by 1967 had signed an agreement with Copper Range Company to build a $90 million plant. A copper strike and other projects Copper Range was involved with, however, forced Copper Range to withdraw from its involvement with the project.

The fact that labor difficulties were partly to blame for the collapse of the negotiations between Southwire and Copper Range must have irritated Richards to some extent. A man who chose to guard both himself and his company from public scrutiny, Richards disapproved of organized labor and went to great lengths to keep its presence from penetrating Southwire. For years, a classic anti-union film, And Women Must Weep, was shown on Fridays to inculcate his opinion of the union movement to new Southwire employees. During one particularly contentious incident in the 1960s, Richards reportedly hired private detectives to pose as Southwire employees in order to identify union sympathizers on his payroll.

The frustration over the Southwire-Copper Range agreement, however, was short-lived. In 1968 Southwire and National Steel Corporation agreed to build a 135,000-ton, $200 million aluminum smelter in Kentucky. The joint venture, called National-Southwire Aluminum, became upon its formation the seventh-largest primary aluminum producer in the United States. In a peripheral deal, Richards sold 20 percent of Southwire to National Steel for $25 million, which provided him with the necessary working capital to build his own copper smelter in 1971.

By the late 1960s Southwire had evolved from a business created to supply Richards' construction company with wire into a thriving company that far exceeded the original objectives established for it. With sales of $80 million in 1967, Southwire had two plants fabricating electrical wire and cable in Georgia and one in San Juan, Puerto Rico.

Dramatic Growth in the 1970s

The addition of aluminum and copper smelters helped spawn a decade of dramatic growth in the 1970s. Sales in 1970 stood at $123 million and ballooned to $723 million by 1980. This success was partly attributable to Richards' efforts to vertically integrate the company. In addition to the two smelters, Richards operated a sawmill to make shipping pallets and spools from his own timber, a plastics processing plant to prepare wire installations, and owned a fleet of trucks to transport his products. When the oil crisis in 1973 limited the availability of natural gas supplies for his aluminum smelter, Richards drilled gas and oil wells to mitigate the effects of the energy crisis on his operations.

Not all attempts at achieving vertical integration were successful, however. In 1971 Southwire and National Steel signed an agreement with Earth Sciences Inc. to mine and develop a mineral called alunite as an alternative for another mineral, bauxite, in the production of alumina, the raw material from which aluminum is refined. Traditionally, bauxite had been used, but reports of Soviet scientists working on a process to replace bauxite with alunite persuaded Southwire and its partners to develop an alunite process of their own. With a 25 percent interest in the venture, Southwire built a pilot plant and began mining property owned by Earth Sciences in Utah, Colorado, Arizona, and Nevada. The project was expanded in 1973 and then again two years later, but a solution was never found and the project was abandoned.

Despite this failure, Southwire, by 1976, was the third-largest wire producer in the United States, ranking behind Western Electric and United Technologies' Essex Group. With sales of $400 million, the company had become a major force in the industry, competing with such giant corporations as Anaconda, Kaiser, and Reynolds Metals. Flushed with success on the domestic front, Southwire's international involvement had also grown. By 1976 overseas business had intensified, accounting for ten percent of the company's revenues. It now had facilities operating in England and Venezuela and had signed a contract to build and manage a $500 million aluminum plant in Dubai, Saudi Arabia.

Recession Leads to Losses

After a decade of robust growth, Southwire entered the 1980s with optimism, expecting to expand its operations and collect further profits. But the geometric rise in sales during the 1970s plummeted in the early 1980s. After posting record sales of $723 million in 1980, sales the following year dropped to $606 million for a net loss of $9.15 million; in 1983 the company's net loss totaled nearly $30 million. Part of the explanation for the sudden collapse was the deleterious effect the worldwide recession had on the housing and automobile industries, both of which were major customers of Southwire's products. Also, throughout the late 1970s and into the 1980s, Southwire continued to borrow large sums of money, convinced the growth of the 1970s would continue into the 1980s. As the recession pushed interest rates skyward, Southwire's interest payments began to drain its cash flow. Yet, during this economic slide, Richards continued to expand, adding a $30 million copper rod mill in 1981.

By 1984 the end of the recession had extricated Southwire from its financial malaise. Upswings in housing construction and the automobile industry buoyed the company's sales, and the elimination of inefficient and unprofitable operations improved the profitability of the company. Several plants in New Jersey and Puerto Rico were closed, ventures in the steel conduit business were dropped, and Kagan-Dixon-Eldra, a joint venture with an Austrian company to manufacture magnet wire in Arkansas, was abandoned.

In June 1985 Richards died of bone cancer. Two of his sons, Roy, Jr., and James, assumed the leadership of Southwire, which now--after the streamlining of the early 1980s--posted sales of more than $600 million. With Roy Richards, Jr., as chief executive officer and James Richards as president, Southwire began to diversify its product line to increase its customer base. In 1986 the company acquired a building wire and cable plant in Utah and three years later purchased Hi-Tech Cable Corporation, one of the largest copper wire and cable production facilities in the United States.

Diversification and Globalization in the 1990s

In 1991 Southwire purchased the remaining 54.5 percent interest in National-Southwire Aluminum originally held by National Steel. Also that year Southwire bought the assets of AT&T Nassau Metals Corporation, from which Gaston Copper Recycling Corporation was formed, making Southwire the largest recycler of copper in the United States. Southwire returned to the conduit business in 1992 with the purchase of Integral Corporation, a manufacturer of cable-in-conduit.

Southwire's efforts in the early 1990s to increase its international sales weren't without challenge. The company targeted Japan for expansion, both because Japanese utilities bought large amounts of aluminum cable and because Southwire already had a presence in the country through its sales of equipment for continuous casting of metal rod. Southwire offered large aluminum wire with a steel core needed for transmitting electricity at prices 20 to 30 percent lower than those offered by Japanese manufacturers, but the Japanese utilities continued to use their traditional Japanese suppliers. Having met all of Japan's technical standards, Southwire complained of what it perceived as an unfairly closed market to the U.S. government, yet the company persevered in its efforts to sell to Japan.

Although increasing exports remained a high priority for the company, it also pursued revenues outside the United States by building international plants and establishing joint ventures in other countries. In 1997, the company's subsidiary Integral began manufacturing cable-in-conduit products from a new facility in Malaysia. Late in 1997 Southwire revealed plans to open a plant in Mexico to make metal-clad cable for sale in the United States and to make wire and cable products for the Mexican market. A joint venture with India to make aluminum overhead cables in that country was in the works for late in the 1990s.

Through its subsidiary Forte Power Systems, Inc., Southwire pursued exports in Europe, Asia, and South America in the late 1990s. Forte Power Systems expanded its ability to manufacture high voltage underground cables, a product much in demand in those areas, and hired international marketing experts.

Southwire's vice-president of international development, Glenn Mann, explained the company's globalization plan: "Our strategic plan is to enter those markets where we can apply our core competencies, leading-edge technology and focus on quality and customer service."

The company was not only entering new countries but new markets as well. In 1997 Southwire introduced CyberLAN twisted-pair cables, the first of a whole line of telecommunications and data communications cable products. The market for twisted pair cables was expected to reach $1.8 billion in the United States by 2001.

Southwire made remarkable progress in its first five decades, especially given the circumstances of its creation. Beginning with only a casual understanding of how to manufacture wire, Roy Richards quickly became a leader in the industry and transformed his modest 12-employee company into one of the premier wire manufacturers in the United States. Although sales in 1997 remained flat, demand for higher margin products led to Southwire's most profitable year. With another generation of the Richards family leading the company and hoping to build upon the legacy established by their father, prospects looked favorable for Southwire.

Principal Subsidiaries: Forte Power Systems, Inc.; Integral Corporation; Southwire Cyber Technologies, Inc.

Principal Divisions: Southwire Wire and Cable Division; Southwire Copper Division; Southwire Machinery Division; Southwire Aluminum Rod Area; NSA, A Division of Southwire; Southwire Specialty Products; Southwire Georgia Wire Products; SCR Technology; Southwire Comsumer Products Division.

Further Reading:

• "Copper Range, Southwire to Build Jointly $90 Million Aluminum Plant in Kentucky," Wall Street Journal, October 20, 1967, p. 4.
• Cumming, Joseph B., Roy Richards, Carrollton, Ga.: Southwire Company, 1987.
• "Earth Sciences Inc.'s Joint Venture Widened," Wall Street Journal, January 17, 1973, p. 7.
• Keatley, Robert, "Georgia's Southwire Cites Small Orders, Big Runaround, in Trade with Japan," Wall Street Journal, July 30, 1993, p. A6.
• Lauterbach, Jeffrey R., "Southwire's Empire Builder Struggles to Hang On," Industry Week, May 2, 1983, pp. 35-38.
• "Live Wire," Forbes, August 1, 1976, p. 26.
• "National Steel Slates Aluminum Smelter Venture," Wall Street Journal, May 9, 1968, p. 6.
• "Roy Richards: Money for Good Ideas," Forbes, May 1, 1967, p. 72.
• Southwire Company Corporate History, Carrollton, Ga.: Southwire Company, 1993.
• "Southwire Creates a New World of Opportunity," Business Wire, October 2, 1997.

Source: International Directory of Company Histories, Vol. 23. St. James Press, 1998.