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Ducommun Incorporated (NYSE: DCO) is a manufacturing company that supplies products, engineering, and support services to the global aerospace and defense industry. It manufactures structural and electronic components and subassemblies for a wide variety of commercial, military, and space aircraft, notably for the Boeing 737 NG and 777 airliners, the C-17 heavy lift cargo jet, the Apache, Chinook, and Blackhawk helicopters, and the Space Shuttle. It also provides engineering and program management services to the United States military, Homeland Security, NASA, and other government agencies.
The company’s revenues were expected to be about $400 million in 2008; it employed about 2,000 people in facilities located in California, Alabama, Arizona, Colorado, Kansas, Mississippi, Missouri, and New York. The Company’s corporate offices are in Carson, California.
Ducommun is the oldest surviving company in California, established in 1849 by Charles Louis Ducommun, a watchmaker by training, who emigrated to the US from Switzerland in the early 1840s. The Company started as a general store, providing supplies (and credit) to gold prospectors and other pioneers who had settled in the burgeoning pueblo of Los Angeles. At the time, California was still a territory of the US, just on the verge of statehood with the population of Los Angeles then standing at just about 1,600. The store had a public "Circulating Library," lending books if paid in full with a full refund upon return.
In 1857 he married Bertha Rontex, of San Francisco, and they had a baby girl the next year. In 1873 he was an officer of the Los Angeles Chapter No. 33, Royal Arch Masons. They built a "mansion" at 527 Lazard street, east of Alameda street, south of Aliso street, and about 1875 their street was renamed "Ducommun street". In 1892 their vacant "mansion" was donated and converted into the "News' and Working Boys' Home," a woman-run charity (formerly on First street) which charged $1.50 per week for room, board, and laundry. In 1900, the Boy's Home moved to San Pedro street and the mansion was donated to the First Congregational Church of Los Angeles repurposed as a "men's boarding house", called the "Bethlehem Hotel" from the Bethlehem Institutes (nearby, corner of Vignes and Ducommun streets) under the supervision of the Rev. Dr, Dana W. Bartlett. In 1902 a new Bethlehem Men's Hotel was built on Vignes street, and this mansion became a "Japanese lodging house."
In the 1890s he was a stockholder and member of the board of directors of Farmers and Merchants Bank of Los Angeles, of which Isaias W. Hellman was president. Ducommun kept pace with the growth of the Southern California economy, and in 1907 incorporated as The Ducommun Hardware Company, evolving into a value added distributor of metals provided by the Eastern mills. This coincided with the emergence of a defense based industry (e.g., munitions and shipbuilding) as the country entered the First World War, and during the 1920s the arrival of general aviation. Charles Albert Ducommun (one of Charles Louis Ducommun’s four sons) decided early on to support an innovative aircraft designer named Donald Douglas, marking the beginning of the Company’s longstanding partnership with what was to become the aerospace industry. Symbolic of this new relationship, Ducommun tubular steel flew in 1927 on the Ryan designed Spirit of St. Louis during Charles Lindbergh’s historic transatlantic flight from Long Island’s Roosevelt Field to Paris.
Ducommun became a more prominent distributor during WWII, inventorying large quantities of stainless and carbon steel, and alloys mostly to support the production of bomber and fighter aircraft that were used in both the European and Pacific theaters. Following the war, the Company joined its customers in the aircraft industry’s transition to making long-distance passenger aircraft (e.g., the Lockheed Constellation) and, just as importantly, their commitment to the space age. Under the leadership of Charles Emil Ducommun (the grandson of Charles Louis Ducommun, and son of Charles Albert), the Company went public in 1949 having become the leading metal materials distributor in the West, and Alcoa’s largest distributor nationwide. Over the next 15 years, Ducommun diversified to support the needs of an aircraft industry that was rapidly incorporating more electronic components. With the acquisition of Kierulf Electronics in the early 1960s and the distribution business of Texas Instruments in 1981, Ducommun became a national force in the distribution of electronic components and subsystems. Charles Ducommun retired as the Company’s Chairman in 1978.
The 1980s were years of restructuring and change. Both the metals and electronics distribution businesses were sold as the Company retrenched having suffered punishing losses, coming very close to bankruptcy by 1987. It had reoriented itself to become a member of the aerospace industry supply chain with the acquisition of four small companies that fabricated metal parts, and that in one case manufactured switches for aircraft cockpit instrument panels. In 1987 Norman Barkeley, a seasoned aerospace executive and recently retired Chief Executive Officer of Lear Siegler, joined the Ducommun Board of Directors, and the following year became the Company’s Chairman. Barkeley’s leadership restored the Company’s growth and profitability, and with five targeted acquisitions established the footing for the progress of the next decade. He retired as Chairman Emeritus in 1998, and was succeeded by Joe Berenato who had been the Company’s Chief Financial Officer for 6 years before becoming its President and Chief Operating Officer.
Berenato has built upon the stable platform established by Barkeley, both through acquisition and the investment in process capability, which, in turn, have helped the Company win important new programs. The enablement provided by the acquisition of Composite Structures, Miltec, WiseWave, CMP, and most recently DynaBil Industries, and the companywide application of Lean and Six Sigma to manufacturing, engineering, and administrative processes has resulted in the profitable doubling of revenues since the year 2000.
Faulty Parts Dispute with Boeing
In 2000, Boeing convened an internal audit team to investigate alleged quality control and regulatory compliance problems with parts manufactured by Ducommun. The questionable parts were manufactured in the company's Gardena, California factory, and were ultimately installed on as many as 300 Boeing 737 Next Generation aircraft built as early as 1994. In the audit, Boeing alleged that Ducommun's factories failed to produce parts using the processes and levels of precision specified by Boeing engineers, and recommended that its supplier relationship with Ducommun be re-evaluated. Additionally, the audit team was allegedly threatened with murder by Ducommun employees. The audit committee also recommended that Boeing should seek financial recourse. Although the company has stated in the past that no such payment was made, Ducommun did ultimately agree to repay $1.6 million to Boeing as compensation for manufacturing problems and overbilling.
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