Rockwell Automation, Inc.

1201 South Second Street
Milwaukee, Wisconsin 53204
U.S.A.
Telephone: (414) 382-2000
Web site: https://www.rockwellautomation.com

Public Company
Founded:
1928 as North American Aviation
Employees: 22,000
Sales: $6.31 billion (2017)
Stock Exchanges: New York
Ticker Symbol: ROK
NAICS: 333612 Speed Changer, Industrial High-Speed Drive, and Gear Manufacturing; 334290 Other Communications Equipment Manufacturing; 334513 Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 335311 Power, Distribution, and Specialty Transformer Manufacturing; 335314 Relay and Industrial Control Manufacturing; 335999 All Other Miscellaneous Electrical Equipment and Component Manufacturing; 511210 Software Publishers; 541330 Engineering Services; 541511 Custom Computer Programming Services; 541512 Computer Systems Design Services

Rockwell Automation, Inc., specializes in industrial automation products, software, systems, and services. Among the company's offerings are controllers, variable-speed drives, input/output systems, sensors, power supplies, network and communications devices, and signaling equipment, along with the computers and software that tie such devices together. Its main brand names include Rockwell Automation, Allen-Bradley, A-B, ICS Triplex, Rockwell Software, and FactoryTalk. Rockwell Automation serves a wide range of industries in more than 80 countries using a combination of direct sales and sales through distributors. About half of the firm's sales are generated outside the United States, with Canada, the United Kingdom, Italy, China, Brazil, and Germany making up the largest foreign markets. Rockwell Automation emerged in the early 21st century as the successor to Rockwell International Corporation, which was best known as a major defense and aerospace firm, after the latter made a series of strategic divestments starting during the mid-1990s.

ORIGINS

Charles Lindbergh's flight across the Atlantic Ocean in 1927 generated such interest in aviation that suddenly even small aviation companies were deluged with money from investors. With so much capital made available by investors, almost $1 billion by 1929, holding companies created hundreds of airlines and airplane manufacturers. Three companies emerged during the late 1920s as the largest aeronautic concerns: the Aviation Corporation of the Americas, run by Averell Harriman and the Lehman Brothers investment firm; the Boeing/Rentschler consortium known as United Aircraft and Transportation; and North American Aviation, the predecessor of Rockwell International, organized in 1928 by the New York financier Clement Keys.

COMPANY PERSPECTIVES

Our mission is to improve the quality of life by making the world more productive and sustainable. We are committed to enabling the next generation of smart manufacturing. With the right strategy, talented people, and our substantial financial strength, we are dedicated to deliver value to our customers.

North American's major airline, National Air Transport, was one of 45 aviation companies operated by Keys; the list also included the Curtiss Aeroplane & Motor Company and Wright Engine, which became the exclusive supplier of engines for Keys's companies. Curtiss was a successful manufacturer of airplanes such as the Condor, and Wright manufactured some of the highest quality aircraft engines of the day. North American also owned Eastern Air Lines, the pioneer of air service along the eastern coast of the United States, and Transcontinental Air Transport. These subsidiaries made the parent company's stock exceptionally attractive. Money flowed into North American from investor groups, making the original stockholders (Keys among them) extremely wealthy.

The bright future of the aviation companies came to an abrupt end in October 1929, when a financial disaster hit Wall Street. Virtually all stocks were inflated in value and backed only with borrowed funds. When investors realized that the market could no longer support the inflated values of their stock, they flooded brokerage houses with orders to sell. The resulting stock market crash brought about a 10-year world depression.

In 1930 North American lost its majority control of National Air Transport to the United Aircraft company. The buyout provided temporary relief to the financially troubled North American, which was then purchased by the General Motors Company four years later. General Motors was one of the few companies with capital available to refinance a business that held such promise for the future. General Motors acquired North American in an attempt to diversify, because automobiles were not selling well during the Great Depression.

Keys retired from business in 1932 due to ill health. General Motors, which held a substantial amount of stock in Trans World Airlines, sold its holdings in that company in 1936. That same year North American (still a subsidiary of General Motors) sold its Eastern Air Lines unit to the airline's director, Eddie Rickenbacker. The divestiture of airline companies from airplane manufacturers was forced on the three largest aeronautic conglomerates by the U.S. senator Hugo Black, who also advocated the breakup of numerous other monopolies. No longer a high-flying airline company, North American Aviation was merely a manufacturer of airplanes and airplane parts.

MILITARY DEMAND DRIVES AERONAUTIC INDUSTRY

During World War II North American manufactured thousands of P-51 Mustangs for the U.S. Army Air Corps. The P-51, one of the last mass-produced piston engine airplanes, saw action in every theater during the war. The company also built the B-25 Mitchell bomber and the T-6 Texan trainer. North American built more airplanes for the U.S. military than any other company during the war years. The rapid expansion of the company was financed mostly by the government, which was North American's largest customer.

When the war ended, North American's military contracts also ended. Like the Grumman Corporation, though, North American opted to avoid entering the competitive commercial airliner market. Instead, the company focused its resources on the development of the next generation of military aircraft: jets. Working from designs and prototypes of jet aircraft captured from the Germans during the war, North American built its first fighter jet: the F-86 Sabre. Because the Sabre's supersonic wings were developed from German designs, the company saved millions of dollars in research and development costs.

North American made one attempt to enter the private airplane market. However, poor sales of its small four-passenger plane, the Navion, led the company to sell the design and production rights to Ryan Aeronautical in 1947. North American continued to develop new equipment for the military. The company built a number of fighters and trainers for the U.S. Navy's aircraft carriers, in addition to a new jet, the F-100 Super Sabre. North American also constructed the first experimental supersonic aircraft, the rocket-powered X-15 and X-70.

KEY DATES
1903:
Lynde Bradley and Stanton Allen create the Compression Rheostat Company.
1928:
North American Aviation is established and soon becomes one of the three largest aeronautic firms in the United States.
1948:
North American Aviation begins diversification into rockets, guidance systems, and atomic energy.
1967:
Rockwell-Standard merges with North American Aviation to form North American Rockwell.
1973:
North American Rockwell merges with the Rockwell Manufacturing Company; the company is renamed Rockwell International Corporation.
1985:
Rockwell acquires the Allen-Bradley Company of Milwaukee.
2001:
Rockwell International changes its name to Rockwell Automation, Inc.
2013:
Rockwell deploys the first system to access plant floor data via smartphone and cloud based data storage and retrieval, ushering in its concept of the Connected Enterprise.
2017:
Rockwell Automation's board of directors rejects takeover bid from the Emerson Electric Company.

ROCKWELL AND THE SPACE RACE

When the Soviet Union put Yuri Gagarin into space in 1961, the U.S. space program was jolted into action. North American's Redstone rocket was used to launch Alan Shepard and Virgil Grissom into space during the Mercury space program in 1961. Later, John Glenn was launched into orbit aboard a Mercury spacecraft perched atop an Atlas rocket. North American Aviation enabled the United States to recover its technological edge in the space race with the Soviet Union.

To meet President John F. Kennedy's challenge to land a man on the moon before 1970, the National Aeronautics and Space Administration (NASA) contracted North American to build the three-passenger Apollo 1 space capsule. On January 27, 1967, a flash fire swept through the manned capsule during a ground test. Killed in the accident were Grissom, Edward White II, and Roger Chaffee. The astronauts' widows each received $350,000 in a legal settlement, but North American was still harshly criticized. Despite the fact that most of its business involved government contracts, the company suffered severe financial reversals that threatened it with bankruptcy. Within two months of the accident, North American Aviation was a prime candidate for a takeover.

Rockwell-Standard made a $922 million bid for North American Aviation in March 1967. Rockwell-Standard was established in Wisconsin in 1919 as a manufacturer of truck axles; Willard Rockwell was the company founder. By 1967 Rockwell-Standard was the world's leading producer of mechanical automotive parts, including parts for both light and heavy vehicles, in addition to being a manufacturer of industrial machinery.

Under the terms of the merger, J. L. Atwood, the president and CEO of North American, would assume the same duties at the new company, while Colonel Willard Rockwell of Rockwell-Standard would serve as chair. The merger was delayed for a few months by the U.S. Department of Justice, which argued that the merger would be anticompetitive. The problems were finally resolved and the smaller Rockwell, with sales of $636 million, took over North American, with sales of $2.4 billion. The new company was called North American Rockwell, and Colonel Rockwell was firmly in charge.

Rockwell's role in the U.S. space program continued, but the company maintained a low profile. It spent much of its first years after the merger manufacturing car and truck parts, printing presses, tools, industrial sewing machines, and electronic instruments for flight and navigation. The company devoted much of its resources to the development of space systems, including the enormous Saturn V rocket engines, which launched subsequent Apollo missions to the moon. Later, the company was chosen as the primary contractor for the National Aeronautics and Space Administration's (NASA) space shuttles. During that period it also became NASA's largest contractor, a position it continued to hold into the 1990s.

EMERGENCE OF ROCKWELL INTERNATIONAL

Willard Rockwell Jr., who took over from his father in 1967, retired in 1979, and Robert Anderson assumed the position of chair. Anderson had joined Rockwell in 1968 after he left the Chrysler Corporation. He was named president of Rockwell in 1970 and CEO in 1974. Anderson's background in the automotive business made him a conservative and cautious manager. Generally regarded as an engineer more than as a financial manager, he had a strategy for the company's growth and expansion that was markedly different from that of his predecessor. Anderson himself later remarked, “It's fair to say that we disagreed on the direction of the company altogether.”

Under the junior Rockwell, the company made some risky acquisitions, stretching its balance sheet to an uncomfortable degree. At one point the company was reportedly losing a million dollars a day. Rockwell was trying to establish the firm's business in high-profile consumer markets, such as Admiral television, which Anderson sold in 1974.

Anderson, who was originally hired to smooth the transition of management and resources during the 1967 merger, had little tolerance for the waste that was usually associated with defense contracts. He introduced the General Motors policy, which required all company divisions to submit profit goals for various production periods. As a result of Anderson's strict management, Rockwell's debt-to-equity ratio (the company's debt divided by its net worth) fell from 99 percent in 1974, to 50 percent in 1977, and to 9 percent in 1983.

NEW DIRECTIONS BY PLAN AND BY CIRCUMSTANCE

Rockwell had initially planned to build the B-1 bomber, but in 1977 the administration of President Jimmy Carter canceled the program, favoring instead the development of Northrop's stealth bomber. By 1983, however, the Reagan administration had reactivated the B-1 project as part of its ambitious military program. Production of the B-1 bomber was expected to generate a profit of approximately $2 billion a year for Rockwell, but subsequent orders for more of the bombers ceased. Once again, Rockwell and its B-1 were summarily excluded from consideration for the production of the next U.S. strategic bomber.

The company still had other defense contracts, however, including the MX “Peacekeeper” missile (designed to replace the nation's stock of aging Minuteman missiles), five space shuttles, and the navigation satellite Navstar. Halfway through the decade, another disaster rocked the aerospace industry when the space shuttle Challenger exploded seconds after liftoff in January 1986. The tragedy killed all seven astronauts and decimated the orbiter. A few months later President Ronald Reagan announced that a new shuttle would be built—by Rockwell—to replace the Challenger.

In 1985 Anderson oversaw the first major acquisition of his career at Rockwell with the $1.7 billion purchase of the Allen-Bradley Company of Milwaukee. Rockwell was suffering from a decrease in business after the cancellation of the B-1 bomber and the completion of the original set of space shuttles. Allen-Bradley, a successful manufacturer of industrial automation systems, provided Rockwell with steady profits from its operations and helped reduce the company's dependence on government contracts. Allen-Bradley traced its origins back to 1903, when Lynde Bradley and Stanton Allen created the Compression Rheostat Company, which adopted the Allen-Bradley name in 1909. By 1985 Allen-Bradley was the number-one maker of industrial automation equipment in North America, with revenues of more than $1 billion.

Donald R. Beall became chair of Rockwell when Anderson retired in 1988. Beall's strategy for the company focused on reducing Rockwell's dependence on federal defense contracts and increasing its presence in the electronics market. Specifically, this meant an expansion of Rockwell's telecommunications operations and a more significant role for the Allen-Bradley subsidiary. Beall also wanted to make the company more responsive to customers. He granted company managers nearly autonomous control of their operations and dramatically reshaped the corporate structure. Seven management levels were compressed into three, the company's headquarters staff was cut by more than half, and Rockwell's various businesses were reorganized into four major categories: electronics products, automotive products, a graphics unit (which manufactured high-speed newspaper presses), and aerospace.

ESTABLISHING NEW COMMERCIAL MARKETS

When conditions did improve, the fruits of Beall's strategy were unveiled. Government-funded business, which in 1988 had accounted for 50 percent of Rockwell's revenues, contributed only 23 percent to the company's sales total in 1993, a span during which 40,000 government-funded jobs within the company had been eliminated. Conversely, Rockwell's commercial business had grown substantially, fueled by Beall's efforts to expand the company's telecommunications business and bolster Allen-Bradley's market position. By 1994 Rockwell's telecommunications unit was manufacturing 80 percent of all modems inside computers and fax machines sold throughout the world, and the company's investment in Allen-Bradley began paying off handsomely. In early 1994 Allen-Bradley was recording $8.1 million in sales per day, the greatest amount in the company's history and cause for much optimism for Rockwell's future as a more dynamic player in the commercial electronics market.

Rockwell solidified its move into industrial automation in January 1995 with the acquisition of the Reliance Electric Company for $1.6 billion, outbidding the General Signal Corporation in a several-months-long takeover battle. The addition of Reliance made industrial automation Rockwell's largest business, accounting for 28 percent of overall revenues in fiscal 1995. Reliance was a producer of electric motors and drives used in factories, making for a strategic fit with Allen-Bradley's factory automation systems. Reliance traced its roots back to the founding in 1904 of the Lincoln Electric Manufacturing Company in Cleveland, Ohio, whose first product was the Type AS DC motor. In 1967 Reliance acquired the Dodge Mechanical Company, a firm that specialized in gear reducers, mounted bearings, and power transmission components.

FOCUS ON ELECTRONICS AND COMMUNICATIONS

In mid-1995 Don H. Davis was named president, with Beall remaining as chair and CEO. Shortly thereafter, Rockwell began a series of moves that dramatically changed the nature of the company. Seeking to focus the company on the potentially higher growth areas of electronics and communications, Beall and Davis began divesting operations outside of these areas. In 1996 Rockwell sold its graphic systems business to Stonington Partners Inc. for $600 million. Then late in 1996 the company sold its defense and aerospace businesses—its best-known operations—to Boeing for $3.2 billion, one part of an ongoing consolidation of the U.S. defense industry. Following the sale, business with the U.S. Department of Defense and NASA accounted for only 6 percent of Rockwell's revenues. A further concentration on its newly designated core areas came in September 1997, when Rockwell spun off its automotive business to shareholders as Meritor Automotive, Inc.

The divestments left Rockwell with three core businesses: automation, avionics and communications (known as Rockwell Collins), and semiconductors. Rockwell Collins was beefed up in December 1997 through the purchase of the in-flight entertainment business of Hughes-Avicom International, Inc. In early 1998 Beall retired and Davis took over as chair and CEO.

Davis quickly left his own mark on the company with another spinoff. In December 1998, facing a sluggish and potentially volatile market for semiconductors, Rockwell spun off its semiconductor operations to shareholders as Conexant Systems, Inc. This move also precipitated a shifting of the company's headquarters in 1999 from California to Milwaukee, where its industrial automation business was located. Meanwhile, the company launched a sweeping restructuring of its automation operations in mid-1998 that included the layoff of about 3,000 of the unit's 27,000 employees, the closure of factories and the exit from certain product lines, and special charges of nearly $600 million. Consequently, for the fiscal year ending in September 1998, Rockwell posted a net loss of $437 million on sales of $6.8 billion.

EMERGENCE OF ROCKWELL AUTOMATION

As U.S. manufacturers cut back on their orders for automation equipment during the economic downturn, Rockwell responded by trimming its workforce by a couple thousand and promoting its consulting services to counter the drop-off in manufacturing revenue. The firm also completed a series of strategic acquisitions to fill in particular product, technology, and geographic gaps in its operations. For example, the January 2002 purchase of Tesch GmbH bolstered the company's safety product portfolio and its position in Europe, while the acquisition of Propack Data GmbH expanded Rockwell's presence in the provision of information systems for the pharmaceutical, food and beverage, and specialty chemicals markets. Growth returned to Rockwell in fiscal 2003, when its net income nearly doubled to $286 million while its sales edged up 5 percent to $4.1 billion.

In February 2004 Keith Nosbusch was named CEO. Davis remained chair for an additional year, at which point Nosbusch assumed that post as well. The new leader was a company veteran who had risen through the engineering ranks at Allen-Bradley and Rockwell and had spent about six years heading Rockwell's control systems division. At that point the market for automation equipment in the United States was limited more to upgrading existing systems than installing new ones in concert with capacity upgrades. Nosbusch thus placed increasing emphasis on overseas markets where new factories were still being built. By fiscal 2005 the company's non-U.S. revenues had reached more than 38 percent of the total, with the Asia-Pacific and Latin American regions leading the way with sales increases of 16 percent and 27 percent, respectively. One of Rockwell's fastest-growing markets was China, where sales reached $145 million by 2005. Other important growth markets included India, Mexico, Brazil, and central and eastern Europe.

DIVESTMENT AND REFOCUS

In 2006 Rockwell Automation and its Rockwell Collins spinoff sold their jointly owned research and development unit, Rockwell Scientific Company LLC, to Teledyne Technologies, Inc. A much more significant divestment occurred in January 2007, when Rockwell Automation sold the bulk of its power systems business to the Baldor Electric Company for $1.8 billion in cash and stock. Included in the divested assets, which had generated about $1 billion in annual sales, were the Reliance line of industrial electric motors and the Dodge line of power transmission products. Rockwell thus became even more focused on high-tech factory automation systems and services based on computers and advanced software.

Rockwell proceeded to complete a string of acquisitions, particularly of software companies, that filled in gaps in its core business. The largest during this period was the July 2007, $218 million purchase of Industrial Control Services Group Limited, which operated under the name ICS Triplex. This British firm specialized in the supply of control and safety solutions for the oil and gas, chemical, and power generation industries.

Rockwell remained solidly profitable through fiscal 2008, when its net income totaled $577.6 million on sales of $5.7 billion. The overseas push reached a milestone status that year when half of the company's sales were generated outside the United States. Rockwell aimed to increase its non-U.S. revenues to 60 percent of the total by 2013 by targeting faster-growing markets such as China. At the same time, Rockwell was developing the ability to offer manufacturers integrated control, power, communications, and information technology systems, and by doing so the company hoped to capture a greater share of its customers' business systems investments. However, a global economic downturn posed new challenges for the firm over the course of 2008 and into 2009 as manufacturers severely reined in their capital spending.

The collapse of global financial markets in 2008 led Rockwell to begin taking cost-cutting actions in September of that year. In February 2009 Rockwell announced plans to reduce its costs for fiscal 2009 by $240 million to mitigate the effects of this particularly steep economic slump. Despite even deeper measures that resulted in a $300 million reduction in costs, fiscal 2009 ended with revenues at $4.3 billion, a 19 percent drop over fiscal 2008. Its income took a 60 percent hit, dropping to $217.9 million. Fortunately, 2010 saw a better than expected recovery for the company, due to a combination of factors. The cost-cutting measures undertaken the previous year preserved the company's long-term investment in core technologies and expertise, allowing Rockwell to engage rapidly as high demand for industrial automation returned, as it did in 2010. Its annual sales rose 12 percent, to $485.7 billion, while its income rebounded nearly 67 percent, to $712.2 million.

THE INTERNET OF THINGS AND ROCKWELL'S CONNECTED ENTERPRISE

Financial results continued to improve steadily over the next three years, with annual sales of $6.3 billion in 2012, $6.4 billion in 2013, and $6.6 billion in 2014. Profits rose each year, as well. The company deployed its first installation of cloud-based mobile access to manufacturing plant data via smartphone in 2013, marking the advent of the Connected Enterprise. In its annual report for 2014, Rockwell asserted that the Connected Enterprise and its implementation “will drive more change in industrial operations in the next 10 years” than has occurred through all other technological developments over the previous 50 years. By integrating information technology (IT) and operations technology (OT), Rockwell explained, companies can reduce time to market for products and services, improve their enterprise-wide utilization of assets, lower the cost of ownership, and increase digital security for all aspects of their operations.

By 2014 less than 14 percent of manufacturers worldwide had entered the enterprise network world by automating their operations with connected technology. Even fewer had begun the process of bridging the IT/OT division. However, just as the consumer world was starting to buy into the concept of the Internet of Things, whereby household appliances, security systems, and more could be controlled through smartphone apps, so, too, awareness was growing in business and industry of the ways that digital enterprise technology could improve their operations. Partnering with Cisco, Rockwell spent several years transforming its own global manufacturing and supply chain via information management and analytics, scalable computing, mobility and visualization, secure network infrastructure, multidiscipline control and information, and smart data collection. The partners integrated 20 plants, 387,000 stock keeping unit codes, and data generated by a global workforce of more than 22,000 employees serving customers in more than 80 countries. Results included a standardized process approach that improved quality control, purchasing, and manufacturing across all facilities; faster and smarter decision-making based on realtime data from across the enterprise; and increased flexibility to handle changing manufacturing and supply chain demands.

REJECTS A TAKEOVER ATTEMPT: 2017

Mixed results prevailed for Rockwell in 2015 and 2016. Weakening industrial production during the second half of 2015 dampened expectations for moderate growth. Although its sales dropped to $6.3 billion that year, its income remained more or less steady at $826.9 million. Results lagged in 2016, with revenues of $5.9 billion and an income of $729 million. Nonetheless, in November 2016 Rockwell announced a 5 percent increase in the annual dividend to shareholders.

In 2017 its sales rebounded to $6.3 billion. In November that year Rockwell Automation's board of directors unanimously rejected a $29 billion takeover bid from the Emerson Electric Company. It was Emerson's third attempt to acquire Rockwell Automation. According to Reuters's Greg Roumeliotis, Blake Moret, the CEO of Rockwell, asserted that Rockwell believed that combining with Emerson could “dampen, not enhance, the ability to grow in the evolving industrial automation and information market.” Rockwell remained committed to bringing clients into the Connected Enterprise initiative through its programable logic controller platform called Logix.

At the start of 2018, Rockwell Automation's Architecture and Software segment accounted for 46 percent of sales, while its Control Products and Solutions segment brought in 54 percent. Domestic sales accounted for 55 percent of the annual total. Rockwell conducted business in more than 80 countries with the largest concentration of its international business in Brazil, Canada, China, Germany, Italy, Mexico, and the United Kingdom. Of its 22,000 employees, approximately 8,500 were based in the United States. Looking forward, global economic factors appeared to be favorable for Rockwell Automation's future.

Jeffrey L. Covell
Updated, David E. Salamie; Pamela Willwerth Aue

PRINCIPAL SUBSIDIARIES

PRINCIPAL DIVISIONS

Architecture and Software; Control Products and Solutions.

PRINCIPAL COMPETITORS

ABB Group; Emerson Electric Company; Honeywell International Inc.; Mitsubishi Electric Corporation; Schneider Electric S.A.; Siemens AG.

FURTHER READING

Berman, Dennis K., and J. Lynn Lunsford. “Rockwell Firms to Sell R&D Unit.” Wall Street Journal, February 7, 2006.

Gertzen, Jason. “Rockwell Names New Chief: Nosbusch Plans to Focus on Overseas Sales, Expansion of Services, Consulting.” Milwaukee Journal Sentinel, December 5, 2003.

Hand, Aaron. “The Journey of the Connected Enterprise.” Automation World, November 17, 2015.

Jagler, Steve. “Corporate Diversity Is No Accident at Rockwell.” Milwaukee Journal Sentinel, December 1, 2017.

Lipin, Steven, and Jeff Cole. “Rockwell's Beall Takes Big Step toward Strategy Goal: CEO's Deal with Boeing Advances Aim of Refashioning His Company.” Wall Street Journal, August 2, 1996.

Perry, Nancy J. “Getting Out of Rocket Science.” Fortune, April 4, 1994.

“Rockwell Automation Moving Work from Illinois to Indiana.” Associated Press, May 13, 2018.

Roumeliotis, Greg. “Rockwell Automation Rebuffs Emerson's Latest $29 Billion Bid.” Reuters, November 22, 2017.

Schmid, John. “A Milestone, and a Warning: Rockwell Gets More Than Half Its Sales Abroad, but Sees Tough Year Ahead.” Milwaukee Journal Sentinel, November 12, 2008.

Wartzman, Rick. “Rockwell Touts Non-aerospace Business: Only a Quarter of Its Work Comes from Pentagon.” Wall Street Journal, December 27, 1989.