Corning Reinvents Itself : Painful Process Puts It in High-Growth Fields

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Times Staff Writer

Corning Glass Works offers examples of both the prosperity and the pain that marks the current American business climate.

The old-line industrial firm, after putting itself through a sweeping five-year transformation, today is poised to reap the benefits in higher profits and faster growth. But the changes have cost hundreds of lifelong Corning employees their jobs and altered the relaxed, paternalistic atmosphere at Corning facilities around the world.

Corning’s moves--shedding unprofitable units, closing inefficient plants and moving production abroad, laying off workers, spending heavily on research and new-product development--mirror similar efforts throughout American industry. Because Corning was forced to adopt these changes before many other firms, it offers what many analysts believe is a case study of a company successfully reinventing itself.


Corning traces its history to 1851 when founder Amory Houghton bought an interest in a small glass company in Cambridge, Mass. After several moves, the company located in Corning, N.Y., adopting the name Corning Glass Works in 1868.

The firm began to make its mark in 1879, when Thomas Edison asked Corning Glass Works to mass produce his new invention, the incandescent light bulb.

The company grew and diversified over the years, acquiring Steuben Glass, makers of famous crystal, and moving into consumer products with the creation of the popular Pyrex, Corning and Corelle brand glass-based housewares.

The company also was responsible for dozens of innovations in industrial technology and formed partnerships with a number of large firms, including Dow Chemical and PPG Industries, to produce and market industrial products.

The company’s growth and prosperity allowed it to enter new businesses and pamper its workers. However, falling sales of key products and the firm’s relatively high production and labor costs caught up with Corning in the early 1980s and earnings dove, from a high of $125 million in 1979 to a low of $9 million in 1983.

Corning management, awakened from its complacency, set about remaking the firm. The company divested itself of businesses that provided 17% of its sales in 1979, reduced its work force, trimmed costs companywide and bought into new joint ventures with leading U.S. and foreign firms in biotechnology, medical diagnostics and fiber optics. The company is optimistic that these high-tech, high-growth fields will fuel the company’s expansion over the coming decades.


Moves Applauded

The moves, which promise to drastically alter the shape and direction of the firm, have been applauded by analysts. Merrill Lynch projects that earnings, which fell at a rate of 10% a year over the past five years, will grow at a rate of 22% a year in the next five. Several other Wall Street brokerages are projecting healthy growth and advising their clients to buy Corning stock.

Chairman James R. Houghton said the company’s problems in recent years were caused in part by over-reliance on the products that made it so successful. New-product development was neglected in the euphoria of consistent quarterly profit growth.

“We make a basic invention and it’s terrific, but we tended to ride it and not think about making it obsolete,” Houghton said. “We weren’t thinking in the 1960s, as we were selling a ton of Corning Ware dishes, ‘What’s Corning Ware 2 and 3 going to be?”’

That attitude delayed the tough decisions on closing outmoded facilities and selling off units that didn’t fit the company’s strategy, Houghton added. He admitted that management waited too long to get out of its Corhart Refractories business, which produced heat-resistant building materials for the ailing steel and foundry industries. He also said the company was slow to realize that it could no longer profitably make light bulbs and television picture tubes in the United States when foreign production costs were many times lower.

The two kinds of bulbs provided 50% of Corning’s sales and nearly 80% of profits in the 1960s, Houghton said. Today, they yield about 10% of both.

Sale Funded Changes

Corning also recently sold its stake in Owens-Corning Fiberglas, using the $80-million pretax gain to balance losses from closed facilities and as seed money to buy into new ventures.


Corning employment has fallen to 26,900 at the end of 1984 from 28,800 in 1980. Many of these were long-term workers who joined the firm when it promised steady employment and generous benefits. Houghton said the toughest part about the firm’s restructuring is letting these workers go, in part because the company built most of its plants in small towns and rural areas to take advantage of lower costs. The majority of laid-off workers will have to relocate to find new jobs.

The remaining Corning facilities are under intense pressure to curtail spending and deliver higher quality at lower cost.

Houghton said he’s staking the company’s future on emerging technologies because American factories will never again be able to compete head-on with foreign producers of similar goods. U.S. manufacturers have to come up with new technology-based products and production methods that cannot be matched elsewhere, he said.

And if you can’t beat the competition, Houghton said, join them. He has allied Corning with Samsung, a South Korean consumer electronics firm; Siemens, a major West German company with which Corning will produce fiber optics cable; Ciba-Geigy, the Swiss pharmaceutical giant, and Genentech, a U.S.-based biotechnology pioneer.

“Technology is the glue that binds us together,” Houghton said. “If we’re not the best technically and the lowest-cost producer, the whole game is up for grabs.”