WEBVTT 00:00:00.000 --> 00:00:03.060 Welcome to the Deep Dive. Today we're taking 00:00:03.060 --> 00:00:05.580 aim at a company that is quite literally foundational 00:00:05.580 --> 00:00:09.480 to modern homes and industry. Yet its 150 -year 00:00:09.480 --> 00:00:11.740 history is filled with these corporate pivots 00:00:11.740 --> 00:00:14.619 that are so radical they almost defy belief. 00:00:14.960 --> 00:00:18.160 We are diving into A .O. Smith Corporation. Yeah. 00:00:18.280 --> 00:00:20.300 And this is a deep dive into an organization 00:00:20.300 --> 00:00:23.039 that has just mastered industrial reinvention. 00:00:23.079 --> 00:00:25.820 Right. For context, we are talking about an S 00:00:25.820 --> 00:00:28.559 &P 500 company, which, you know, as of 2024 is 00:00:28.559 --> 00:00:32.060 reporting nearly $4 billion in revenue, $3 .82 00:00:32.060 --> 00:00:34.880 billion to be precise. Wow. They are the biggest 00:00:34.880 --> 00:00:37.460 name in North American water heating, but their 00:00:37.460 --> 00:00:39.600 journey to that point, I mean, it involved building 00:00:39.600 --> 00:00:42.659 everything from baby carriages to massive industrial 00:00:42.659 --> 00:00:45.560 weaponry. That is the core of our mission today, 00:00:45.659 --> 00:00:47.640 isn't it? Reconciling those two identities. Exactly. 00:00:47.640 --> 00:00:50.759 We're tracking a century and a half of this relentless 00:00:50.759 --> 00:00:54.240 evolution. Our sources take us from C .J. Smith 00:00:54.240 --> 00:00:57.280 and Sons, a manufacturer known for bicycle parts, 00:00:57.320 --> 00:01:00.859 through this breathtaking, almost necessary period 00:01:00.859 --> 00:01:03.460 of heavy war production. And then finally, you 00:01:03.460 --> 00:01:05.359 know, establishing itself as a global specialist 00:01:05.359 --> 00:01:08.150 in water technology. Heating, boiler systems, 00:01:08.609 --> 00:01:12.010 purification, the whole lot. The sheer dissonance 00:01:12.010 --> 00:01:16.150 between where they started and their ubiquitous 00:01:16.150 --> 00:01:19.469 presence in your home today is the central... 00:01:20.439 --> 00:01:22.719 fascinating challenge here. What's truly astonishing, 00:01:22.920 --> 00:01:25.439 I think, is how efficiently they utilized core 00:01:25.439 --> 00:01:28.640 engineering skills, this mastery of steel, to 00:01:28.640 --> 00:01:31.599 facilitate entirely different industrial demands. 00:01:31.879 --> 00:01:33.920 Yeah. It's not just a story of gradual change. 00:01:33.980 --> 00:01:37.000 It's a story of radical strategic realignments 00:01:37.000 --> 00:01:40.560 driven by, you know, available technology and 00:01:40.560 --> 00:01:42.840 just massive market shift. Okay, let's unpack 00:01:42.840 --> 00:01:44.799 this with the initial hook fact. Yeah. Because 00:01:44.799 --> 00:01:47.099 this is the detail that consistently blows people's 00:01:47.099 --> 00:01:48.879 minds. It really does. When you see the A .O. 00:01:48.879 --> 00:01:50.950 Smith logo today, you think reliable, efficient 00:01:50.950 --> 00:01:53.769 hot water. Sure. But by the time World War I 00:01:53.769 --> 00:01:56.450 concluded, this organization, using its high 00:01:56.450 --> 00:01:59.269 -speed steel -forming expertise, was recognized 00:01:59.269 --> 00:02:01.730 as the largest bomb maker in the entire United 00:02:01.730 --> 00:02:04.450 States. The largest. And if that doesn't put 00:02:04.450 --> 00:02:06.510 the sheer scale of their industrial capacity 00:02:06.510 --> 00:02:08.430 into perspective, just consider this. During 00:02:08.430 --> 00:02:10.849 World War II, they didn't just resume bomb production. 00:02:11.090 --> 00:02:14.419 No. They were ranked 74th among all U .S. corporations 00:02:14.419 --> 00:02:17.840 for the value of their military contracts. And 00:02:17.840 --> 00:02:20.300 critically, their engineering capacity was so 00:02:20.300 --> 00:02:23.439 high level that they were chosen to produce highly 00:02:23.439 --> 00:02:26.120 specialized components for the most complex scientific 00:02:26.120 --> 00:02:29.180 undertaking of the era, the atomic bomb project. 00:02:29.439 --> 00:02:32.330 So why should you, the listener, care about the 00:02:32.330 --> 00:02:34.310 industrial history of your water heater well 00:02:34.310 --> 00:02:37.189 because their expertise in forming treating and 00:02:37.189 --> 00:02:39.909 protecting steel developed for these incredibly 00:02:39.909 --> 00:02:43.509 high stress critical applications like rapid 00:02:43.509 --> 00:02:46.189 fire weapon casings and ultra high pressure oil 00:02:46.189 --> 00:02:49.509 vessels that is the exact foundational technology 00:02:49.509 --> 00:02:52.490 that ensures the glass lining inside your residential 00:02:52.490 --> 00:02:55.530 water heater doesn't corrode and fail prematurely 00:02:55.530 --> 00:02:57.289 so we're talking about core innovations industrial 00:02:57.289 --> 00:02:59.629 strength just applied directly to home comfort 00:02:59.629 --> 00:03:01.360 exactly that's what fun It fundamentally defines 00:03:01.360 --> 00:03:03.680 reliability in your plumbing today. Let's wind 00:03:03.680 --> 00:03:05.759 the clock way back then. Let's settle in Milwaukee, 00:03:06.000 --> 00:03:09.259 Wisconsin in 1874. The company was started by 00:03:09.259 --> 00:03:11.539 Charles Jeremiah Smith and initially named C 00:03:11.539 --> 00:03:14.460 .J. Smith & Sons. It sounds like a humble, very 00:03:14.460 --> 00:03:17.620 19th century kind of operation. What were they 00:03:17.620 --> 00:03:20.199 focused on beyond just generic carriage making? 00:03:20.580 --> 00:03:22.460 Well, their original focus was actually quite 00:03:22.460 --> 00:03:24.979 specific and for the era, technically challenging. 00:03:25.219 --> 00:03:28.340 They were manufacturing baby carriages and bicycle 00:03:28.340 --> 00:03:31.180 parts. And this wasn't just... a side gig I mean 00:03:31.180 --> 00:03:34.879 by 1895 about two decades in they had established 00:03:34.879 --> 00:03:37.659 themselves as the largest bicycle parts manufacturer 00:03:37.659 --> 00:03:39.740 in the United States the largest so what was 00:03:39.740 --> 00:03:41.860 that initial technical skill that set them apart 00:03:41.860 --> 00:03:46.300 it was the ability to take flat sheet metal and 00:03:46.300 --> 00:03:49.599 form it into robust yet lightweight steel tubing 00:03:50.349 --> 00:03:52.669 If you think about bicycle frames, they need 00:03:52.669 --> 00:03:54.909 to be strong enough to withstand road stress, 00:03:55.030 --> 00:03:57.590 but light enough to actually be functional. Of 00:03:57.590 --> 00:04:00.250 course. Achieving that kind of accuracy and consistency 00:04:00.250 --> 00:04:02.830 in forming steel tubing from sheet metal and 00:04:02.830 --> 00:04:05.430 doing it on a mass scale was not trivial at all. 00:04:05.629 --> 00:04:08.169 It established their expertise in precision steel 00:04:08.169 --> 00:04:10.750 manipulation, and that really laid the groundwork 00:04:10.750 --> 00:04:12.550 for everything that came next. And what came 00:04:12.550 --> 00:04:14.650 next was the automobile. The automobile. It was 00:04:14.650 --> 00:04:17.540 the founder's son. Arthur Oliver Smith, the AO, 00:04:17.819 --> 00:04:21.139 who gave the company its enduring name, who recognized 00:04:21.139 --> 00:04:24.259 that their precision steel skills were just perfectly 00:04:24.259 --> 00:04:26.779 suited to revolutionize the new auto industry. 00:04:27.199 --> 00:04:29.639 Arthur Oliver Smith was the visionary. Absolutely. 00:04:30.019 --> 00:04:34.079 He orchestrated that pivotal leap. In 1899, he 00:04:34.079 --> 00:04:36.740 developed the world's first pressed steel vehicle 00:04:36.740 --> 00:04:40.120 frame. And that wasn't just like a small improvement, 00:04:40.180 --> 00:04:42.860 was it? No, this was a fundamental shift. It 00:04:42.860 --> 00:04:45.699 moved away from the traditional, complex, heavy, 00:04:45.759 --> 00:04:49.019 and often unreliable wood or forged steel frame 00:04:49.019 --> 00:04:51.519 assemblies. So the significance of that move 00:04:51.519 --> 00:04:54.129 is hard to overstate. What engineering advantage 00:04:54.129 --> 00:04:56.709 did a pressed steel frame really offer over what 00:04:56.709 --> 00:04:58.569 they were using at the time? Well, before A .O. 00:04:58.569 --> 00:05:00.329 Smith, frames were often pieced together. They 00:05:00.329 --> 00:05:02.750 involved multiple rivets, castings, sometimes 00:05:02.750 --> 00:05:05.089 even wood components. Right, which means inconsistent 00:05:05.089 --> 00:05:08.319 quality. inconsistent quality, heavy weight, 00:05:08.420 --> 00:05:11.420 and susceptibility to failure under stress. Press 00:05:11.420 --> 00:05:14.060 steel allowed for large, singular components 00:05:14.060 --> 00:05:16.160 to be stamped out with incredible consistency 00:05:16.160 --> 00:05:18.399 and structural integrity. Which would enable 00:05:18.399 --> 00:05:21.100 rapid, reliable assembly for automakers. Exactly. 00:05:21.319 --> 00:05:23.639 It was cheaper, it was lighter, and it was stronger. 00:05:23.939 --> 00:05:26.620 And that innovation immediately catapulted them 00:05:26.620 --> 00:05:29.939 from being a leading bicycle parts maker to a 00:05:29.939 --> 00:05:32.100 foundational industrial supplier, right? Absolutely. 00:05:32.279 --> 00:05:35.519 They quickly cornered the market. They were supplying... 00:05:35.529 --> 00:05:39.610 the earliest major automotive players, the peerless 00:05:39.610 --> 00:05:42.970 automobile company Cadillac, and most importantly, 00:05:43.189 --> 00:05:47.029 Ford Motor Company. Wow. This innovation didn't 00:05:47.029 --> 00:05:49.589 just give them a new product line. It established 00:05:49.589 --> 00:05:52.769 their capability for large -scale, high -volume, 00:05:52.769 --> 00:05:56.170 precision steel processing. This production capability 00:05:56.170 --> 00:05:59.149 became the industrial engine of A .O. Smith for 00:05:59.149 --> 00:06:01.730 the next 90 years. But A .O. Smith was a company 00:06:01.730 --> 00:06:05.730 of... restless engineers, it seems. Very restless. 00:06:06.009 --> 00:06:07.949 Because while the car frame business was booming, 00:06:08.149 --> 00:06:10.269 the sources show they were constantly tinkering 00:06:10.269 --> 00:06:12.449 with these sideline projects, looking for the 00:06:12.449 --> 00:06:14.269 next big application of steel and combustion. 00:06:14.550 --> 00:06:16.889 Their willingness to innovate, even on items 00:06:16.889 --> 00:06:18.970 they would quickly discard, is really a marker 00:06:18.970 --> 00:06:21.110 of their R &D culture. Right. Take the Smith 00:06:21.110 --> 00:06:23.709 motor wheel, which they introduced in 1914. This 00:06:23.709 --> 00:06:25.689 was a really early attempt at making personal, 00:06:25.730 --> 00:06:28.189 motorized transportation accessible. Describe 00:06:28.189 --> 00:06:29.649 that for our listeners. It sounds like something 00:06:29.649 --> 00:06:32.839 out of a steampunk novel. It, uh, it... Essentially 00:06:32.839 --> 00:06:35.600 was. It was a complete gasoline powered wheel 00:06:35.600 --> 00:06:39.079 unit engine gas tank drive mechanism all in one. 00:06:39.139 --> 00:06:42.319 And the idea was? It was designed to attach directly 00:06:42.319 --> 00:06:45.139 to the side of a conventional bicycle, converting 00:06:45.139 --> 00:06:48.600 it into this crude motorized vehicle. It just 00:06:48.600 --> 00:06:50.740 shows their early interest in propulsion and 00:06:50.740 --> 00:06:53.620 internal combustion, an area pretty far removed 00:06:53.620 --> 00:06:56.500 from stamping steel frames. And they even briefly 00:06:56.500 --> 00:06:59.790 manufactured a complete automobile, right? The 00:06:59.790 --> 00:07:01.689 Smith Flyer. The Smith Flyer, yeah, which was 00:07:01.689 --> 00:07:03.910 fascinating. It was one of the cheapest and simplest 00:07:03.910 --> 00:07:06.370 cars on the market. Basically a light wooden 00:07:06.370 --> 00:07:09.810 box on wheels powered by that same motor wheel 00:07:09.810 --> 00:07:11.769 concept attached to the back. It was like a very 00:07:11.769 --> 00:07:14.009 early go -kart. Pretty much. And it was quickly 00:07:14.009 --> 00:07:17.129 sold off to Briggs & Stratton of Milwaukee. These 00:07:17.129 --> 00:07:19.310 short -lived diversions are key because they 00:07:19.310 --> 00:07:22.050 demonstrate a willingness to enter and exit markets 00:07:22.050 --> 00:07:24.870 quickly, testing their core tech skills in new 00:07:24.870 --> 00:07:27.790 ways. This expansion naturally demanded a more 00:07:27.790 --> 00:07:30.089 formal corporate structure to handle the scale, 00:07:30.110 --> 00:07:33.949 I'd imagine. It did. In 1904, they formally incorporated 00:07:33.949 --> 00:07:36.930 in Milwaukee as the A .O. Smith Company, acknowledging 00:07:36.930 --> 00:07:39.769 Arthur Oliver's contribution. But the really 00:07:39.769 --> 00:07:43.129 strategic move came later in 1916. What was that? 00:07:43.449 --> 00:07:45.629 They reincorporated in New York. And that was 00:07:45.629 --> 00:07:47.930 a move that placed them closer to major financial 00:07:47.930 --> 00:07:50.470 markets, strategically positioning the company 00:07:50.470 --> 00:07:52.589 for the massive capital demands and industrial 00:07:52.589 --> 00:07:55.009 scaling that would come with America's entry 00:07:55.009 --> 00:07:58.050 into World War One. So A .O. Smith enters 1917 00:07:58.050 --> 00:08:01.389 as this industrial powerhouse, a master of high 00:08:01.389 --> 00:08:04.709 volume precision skill forming. Right. And as 00:08:04.709 --> 00:08:07.790 the world shifts to war, their expertise is suddenly 00:08:07.790 --> 00:08:10.790 rerouted from. you know, peaceful transportation 00:08:10.790 --> 00:08:13.050 to defense manufacturing. It's one of the most 00:08:13.050 --> 00:08:15.449 drastic corporate image shifts imaginable. The 00:08:15.449 --> 00:08:17.610 transition was almost instantaneous. The moment 00:08:17.610 --> 00:08:20.189 the U .S. entered World War I, A .O. Smith began 00:08:20.189 --> 00:08:23.129 manufacturing bomb casings. Just like that. Their 00:08:23.129 --> 00:08:25.209 high speed presses and their ability to handle 00:08:25.209 --> 00:08:27.670 large quantities of steel made them ideal for 00:08:27.670 --> 00:08:30.290 high volume munitions production. The war ministry 00:08:30.290 --> 00:08:32.950 didn't want bespoke. They wanted rapid, reliable 00:08:32.950 --> 00:08:36.149 scale. And the numbers they achieved were just 00:08:36.149 --> 00:08:38.779 staggering. By the time the Great War was over, 00:08:38.940 --> 00:08:41.139 they had ascended to the rank of the largest 00:08:41.139 --> 00:08:44.019 bomb maker in the U .S. Yes. How did they achieve 00:08:44.019 --> 00:08:46.740 that scale compared to competitors? Was it purely 00:08:46.740 --> 00:08:49.799 automation? It was automation coupled with specialization. 00:08:50.039 --> 00:08:52.460 They weren't just forging rough shapes. They 00:08:52.460 --> 00:08:55.720 were precision forming the complex casings, the 00:08:55.720 --> 00:08:58.519 aerodynamic shells and fins. Stuff that required 00:08:58.519 --> 00:09:01.419 their signature expertise. Exactly. Their mastery 00:09:01.419 --> 00:09:03.659 of efficient mass production allowed them to 00:09:03.659 --> 00:09:06.850 outpace manufacturers who were relying on. older, 00:09:06.950 --> 00:09:10.129 slower forging methods. And as intense as World 00:09:10.129 --> 00:09:13.590 War I was, World War II forced them into an even 00:09:13.590 --> 00:09:16.450 more massive mobilization. We mentioned their 00:09:16.450 --> 00:09:18.990 ranking as 74th among all U .S. corporations 00:09:18.990 --> 00:09:21.190 in military production. It's hard to wrap your 00:09:21.190 --> 00:09:22.950 mind around that. It fundamentally redefined 00:09:22.950 --> 00:09:24.950 their purpose for almost five years. What were 00:09:24.950 --> 00:09:28.039 the numbers like? By 1945, the tallies are phenomenal. 00:09:28.340 --> 00:09:31.820 4 .5 million bombs built. And beyond munitions, 00:09:31.919 --> 00:09:33.940 they leveraged their expertise in structural 00:09:33.940 --> 00:09:38.240 components. We're talking 16 ,750 sets of aircraft 00:09:38.240 --> 00:09:42.940 landing gear, 46 ,700 propeller blades, and critical 00:09:42.940 --> 00:09:45.600 parts like the nose frames for the B -25 bomber. 00:09:45.779 --> 00:09:47.299 They weren't just producing standard materials 00:09:47.299 --> 00:09:49.340 either. They were involved in complex systems. 00:09:50.059 --> 00:09:52.580 Torpedoes, air flasks, and, as we highlighted, 00:09:52.759 --> 00:09:55.799 components for the atomic bomb project. What 00:09:55.799 --> 00:09:58.159 specific engineering challenge did their involvement 00:09:58.159 --> 00:10:00.799 in the Manhattan Project solve? The sources indicate 00:10:00.799 --> 00:10:03.500 their role was primarily in manufacturing these 00:10:03.500 --> 00:10:06.039 ultra high pressure vessels and specialized piping 00:10:06.039 --> 00:10:08.399 system. Which were required for. For handling 00:10:08.399 --> 00:10:10.759 and separating the corrosive materials used in 00:10:10.759 --> 00:10:12.960 the enrichment process. This demanded absolute 00:10:12.960 --> 00:10:15.840 precision, flawless welding and material integrity 00:10:15.840 --> 00:10:18.899 far beyond normal industrial standards. This 00:10:18.899 --> 00:10:21.200 requirement for perfection under extreme stress 00:10:21.200 --> 00:10:23.799 further honed their materials science prowess, 00:10:23.799 --> 00:10:25.500 which is a key through line for the company. 00:10:25.950 --> 00:10:27.610 This is where it gets really interesting. That 00:10:27.610 --> 00:10:29.649 wartime pressure didn't just require them to 00:10:29.649 --> 00:10:32.590 build more. It forced these fundamental industrial 00:10:32.590 --> 00:10:36.210 breakthroughs that still underpin modern manufacturing 00:10:36.210 --> 00:10:39.590 today. Yes, exactly. So what were the key innovations 00:10:39.590 --> 00:10:42.570 born out of this period? Well, the pressure for 00:10:42.570 --> 00:10:45.809 reliability and speed drove revolutionary leaps 00:10:45.809 --> 00:10:49.129 in how you join materials together. In the 1920s, 00:10:49.129 --> 00:10:51.549 their engineers developed the coated welding 00:10:51.549 --> 00:10:54.470 rod. Okay, what did that do? Before this, welding 00:10:54.470 --> 00:10:57.470 was often messy and inconsistent. The coated 00:10:57.470 --> 00:10:59.789 rod, it's essentially a protective flux around 00:10:59.789 --> 00:11:03.210 the metal core, shielded the weld pool from contaminants 00:11:03.210 --> 00:11:05.450 in the air. Creating a much stronger, more reliable 00:11:05.450 --> 00:11:08.090 joint. A much stronger joint. And A .O. Smith 00:11:08.090 --> 00:11:11.230 used this key advancement for 40 years, until 00:11:11.230 --> 00:11:14.750 1965, giving them the sustained competitive advantage 00:11:14.750 --> 00:11:16.919 in high pressure construction. And then there's 00:11:16.919 --> 00:11:19.399 the automation achievement. The idea of mass 00:11:19.399 --> 00:11:21.580 production today is common, but A .O. Smith basically 00:11:21.580 --> 00:11:24.159 wrote the book on post -assembly line automation. 00:11:24.700 --> 00:11:26.740 They didn't just automate a factory. They created 00:11:26.740 --> 00:11:29.399 the world's first fully automated automobile 00:11:29.399 --> 00:11:32.659 frame factory. This was an industrial miracle. 00:11:32.919 --> 00:11:35.879 It used a complex choreography of presses, robots, 00:11:36.120 --> 00:11:38.919 and conveyor systems, producing a finished automobile 00:11:38.919 --> 00:11:41.879 frame every eight seconds. Every eight seconds. 00:11:41.899 --> 00:11:44.940 Think about that pace. A high -stress, custom 00:11:44.940 --> 00:11:47.740 -engineered component rolling off the line faster 00:11:47.740 --> 00:11:50.039 than you can pour a cup of coffee. And that speed 00:11:50.039 --> 00:11:53.240 and efficiency were maintained until 1958. What 00:11:53.240 --> 00:11:55.460 was the impact of that level of automation on 00:11:55.460 --> 00:11:58.279 the automotive industry? It drastically lowered 00:11:58.279 --> 00:12:00.980 the cost of producing reliable chassis, which 00:12:00.980 --> 00:12:03.620 in turn enabled the massive post -war expansion 00:12:03.620 --> 00:12:06.500 of the American auto industry. It proved that 00:12:06.500 --> 00:12:08.840 complex, non -standard manufacturing could be 00:12:08.840 --> 00:12:11.220 handled by machines at a speed previously thought 00:12:11.220 --> 00:12:13.240 impossible. And they also pioneered something 00:12:13.240 --> 00:12:16.019 with oil refining. Yes, the first arc welded 00:12:16.019 --> 00:12:19.019 high pressure vessel used for oil refining. It 00:12:19.019 --> 00:12:21.379 replaced the older, heavier, riveted designs. 00:12:21.740 --> 00:12:24.000 They produced these vessels, which were critical 00:12:24.000 --> 00:12:27.620 for the growing energy sector until 1963. So 00:12:27.620 --> 00:12:30.159 we have this industrial titan master of steel, 00:12:30.379 --> 00:12:34.779 welding, automation, defense contracting. How 00:12:34.779 --> 00:12:38.419 does that incredibly high tech, aggressive industrial 00:12:38.419 --> 00:12:41.620 entity pivot toward the everyday task of heating 00:12:41.620 --> 00:12:45.029 water? Where does plumbing even fit into this 00:12:45.029 --> 00:12:47.789 picture? This is the definitive strategic pivot 00:12:47.789 --> 00:12:50.070 of the company. It's a move from sheer strength 00:12:50.070 --> 00:12:53.330 and volume to durability and corrosion resistance. 00:12:53.769 --> 00:12:56.509 And the key was a breakthrough in material science. 00:12:56.750 --> 00:12:59.509 The process of fusing glass to steel. Fusing 00:12:59.509 --> 00:13:02.149 glass to steel. They had mastered precision steel. 00:13:02.230 --> 00:13:04.490 Now they needed to master protecting it. That 00:13:04.490 --> 00:13:06.549 sounds like an incredibly complex high temperature 00:13:06.549 --> 00:13:08.850 process. Why did they even attempt it? Where 00:13:08.850 --> 00:13:10.629 did they first apply it? Well, they needed to 00:13:10.629 --> 00:13:12.830 solve the problem of corrosion in steel storage 00:13:12.830 --> 00:13:15.210 vessels, which could ruin contents or compromise 00:13:15.210 --> 00:13:18.090 structural integrity. And glass, when it's formulated 00:13:18.090 --> 00:13:20.110 and infused correctly, is chemically inert and 00:13:20.110 --> 00:13:22.990 completely corrosion -proof. So they first applied 00:13:22.990 --> 00:13:26.110 this science in 1933 to create large, single 00:13:26.110 --> 00:13:28.429 -piece, glass -lined brewery tanks. Brewery tanks, 00:13:28.610 --> 00:13:31.230 okay. This required incredibly high temperatures 00:13:31.230 --> 00:13:34.009 and precise glass formulation to ensure the glass 00:13:34.009 --> 00:13:36.529 and steel expanded and contracted at the same 00:13:36.529 --> 00:13:39.460 rate without shattering the lining. And the market 00:13:39.460 --> 00:13:42.659 immediately validated this technology. Immensely 00:13:42.659 --> 00:13:45.620 so. Over the next 32 years, they produced over 00:13:45.620 --> 00:13:49.419 11 ,000 of these massive brewery tanks. This 00:13:49.419 --> 00:13:51.919 proved that they could apply this highly technical 00:13:51.919 --> 00:13:54.779 coating process on an enormous industrial scale. 00:13:54.960 --> 00:13:57.620 So from beer tanks, it's a strategic move to 00:13:57.620 --> 00:14:00.899 residential water heating. But wait. The temperature 00:14:00.899 --> 00:14:03.120 and pressure requirements for a massive brewery 00:14:03.120 --> 00:14:05.620 tank are radically different from a small high 00:14:05.620 --> 00:14:08.379 -pressure residential unit. How difficult was 00:14:08.379 --> 00:14:11.179 that scaling process? It was still highly complex, 00:14:11.299 --> 00:14:13.970 but the foundational science was sound. The water 00:14:13.970 --> 00:14:15.889 in a residential tank, especially when heated, 00:14:16.049 --> 00:14:18.350 is highly corrosive. Of course. So the glass 00:14:18.350 --> 00:14:20.730 lining solved the premature failure problem that 00:14:20.730 --> 00:14:24.570 was so common in unlined tanks. In 1936, just 00:14:24.570 --> 00:14:26.889 three years after the brewery tank success, they 00:14:26.889 --> 00:14:29.210 patented the concept of the glass -lined water 00:14:29.210 --> 00:14:31.070 heater. And the mass production followed quickly. 00:14:31.600 --> 00:14:35.039 It did. By 1939, they were mass producing residential 00:14:35.039 --> 00:14:38.279 water heaters. However, that entire production 00:14:38.279 --> 00:14:40.779 capacity was immediately shifted to military 00:14:40.779 --> 00:14:43.799 use during World War II. Which, again, just reinforces 00:14:43.799 --> 00:14:45.779 how easily they could reallocate their entire 00:14:45.779 --> 00:14:49.299 industrial machine based on national need. Exactly. 00:14:49.299 --> 00:14:52.019 So once the war ended, A .O. Smith focused that 00:14:52.019 --> 00:14:56.039 newly freed, massive production capability squarely 00:14:56.039 --> 00:14:58.860 on the residential market, aiming for immediate 00:14:58.860 --> 00:15:00.799 market share. That's when the infrastructure 00:15:00.799 --> 00:15:04.120 really went up. In 1946, they opened a massive 00:15:04.120 --> 00:15:07.220 400 ,000 square foot residential water heater 00:15:07.220 --> 00:15:10.639 plant in Kankakee, Illinois. And this wasn't 00:15:10.639 --> 00:15:13.200 just about their own branding, was it? No, they 00:15:13.200 --> 00:15:15.519 were already positioning themselves as the industry's 00:15:15.519 --> 00:15:18.000 manufacturing backbone. They were making water 00:15:18.000 --> 00:15:20.320 heaters that carried the Kenmore name for major 00:15:20.320 --> 00:15:23.019 retailers. This move signaled they were ready 00:15:23.019 --> 00:15:25.080 for mass market domination. And their growth 00:15:25.080 --> 00:15:27.139 wasn't limited to residential plumbing. they 00:15:27.139 --> 00:15:29.240 immediately targeted the commercial market. A 00:15:29.240 --> 00:15:32.779 critical move. In 1948, they acquired the Berkey 00:15:32.779 --> 00:15:34.759 Company, which immediately gave them a strong 00:15:34.759 --> 00:15:37.139 foothold in commercial water heating and the 00:15:37.139 --> 00:15:39.399 specialized knowledge needed for large facilities, 00:15:39.580 --> 00:15:42.279 schools, hospitals, apartments. And to really 00:15:42.279 --> 00:15:44.980 solidify that glass fused to steel was their 00:15:44.980 --> 00:15:48.299 new defining core technology, they applied it 00:15:48.299 --> 00:15:50.909 to agriculture. Of all things. So far afield 00:15:50.909 --> 00:15:52.750 from bombs and cars. The harvest store silos 00:15:52.750 --> 00:15:56.009 introduced in 1949 are the perfect physical manifestation 00:15:56.009 --> 00:15:58.450 of their new strategic focus. What are they? 00:15:58.549 --> 00:16:01.610 These were massive glass fused to steel silos 00:16:01.610 --> 00:16:04.230 targeted at dairy and livestock operations for 00:16:04.230 --> 00:16:07.090 storing feed, specifically addressing the corrosive 00:16:07.090 --> 00:16:09.710 environment of fermented silage. So this one 00:16:09.710 --> 00:16:12.090 technology, perfected under the demands of high 00:16:12.090 --> 00:16:14.370 pressure oil refining and wartime manufacturing, 00:16:14.669 --> 00:16:17.529 became the reliable foundation for... beer tanks, 00:16:17.750 --> 00:16:20.490 water tanks, and even farm storage. It's an incredible 00:16:20.490 --> 00:16:23.389 trajectory. As we transition into the 1950s and 00:16:23.389 --> 00:16:26.490 60s, A .O. Smith is now a leader in automotive 00:16:26.490 --> 00:16:29.309 frames and a rapidly growing force in water heating. 00:16:29.710 --> 00:16:33.389 But we have to discuss their powerful yet often 00:16:33.389 --> 00:16:37.110 forgotten division that enabled the entire HVAC 00:16:37.110 --> 00:16:40.669 and refrigeration boom of the mid -century, the 00:16:40.669 --> 00:16:42.769 electric motor business. And the motor division 00:16:42.769 --> 00:16:44.690 wasn't exactly a startup. It was built through 00:16:44.690 --> 00:16:47.899 strategic acquisition. Right. Precisely. They 00:16:47.899 --> 00:16:51.240 had acquired Sawyer Electric back in 1940 and 00:16:51.240 --> 00:16:54.240 then consolidated operations by acquiring Whirl 00:16:54.240 --> 00:16:56.580 -A -Way Motors in the 1950s. And what was the 00:16:56.580 --> 00:16:58.600 critical technical achievement that made them 00:16:58.600 --> 00:17:00.600 so indispensable to the air conditioning market? 00:17:00.799 --> 00:17:02.639 The invention of the hermetic motor. Hermetic 00:17:02.639 --> 00:17:05.839 motor. It became the standard for modern HVAC. 00:17:06.220 --> 00:17:08.700 What was the core engineering challenge A .O. 00:17:08.700 --> 00:17:10.980 Smith solved with it? The challenge was leakage 00:17:10.980 --> 00:17:14.250 and maintenance. Older compressors required external 00:17:14.250 --> 00:17:16.369 shafts and seals, which would inevitably fail, 00:17:16.529 --> 00:17:19.029 leading to refrigerant leaks and expensive repairs. 00:17:19.349 --> 00:17:21.890 The hermetic motor solved this by being sealed 00:17:21.890 --> 00:17:24.549 inside the compressor shell, submerged in the 00:17:24.549 --> 00:17:27.630 refrigerant and oil. This eliminated the external 00:17:27.630 --> 00:17:30.869 seals entirely, making air conditioning and refrigeration 00:17:30.869 --> 00:17:33.970 units vastly more reliable and cheaper to operate. 00:17:34.230 --> 00:17:37.730 So without the A .O. Smith hermetic motor, mass 00:17:37.730 --> 00:17:41.380 market. dependable HVAC systems would have been 00:17:41.380 --> 00:17:43.680 significantly delayed. Oh, absolutely. They had 00:17:43.680 --> 00:17:45.960 secured their position as essential suppliers 00:17:45.960 --> 00:17:48.799 to the residential and commercial HVAC world. 00:17:49.019 --> 00:17:52.119 This sounds like a high volume, potentially high 00:17:52.119 --> 00:17:54.960 margin business because every single air conditioner 00:17:54.960 --> 00:17:57.299 and refrigerator needed one. It was a huge driver 00:17:57.299 --> 00:17:59.460 of corporate growth operating in parallel with 00:17:59.460 --> 00:18:01.559 the water heater business. And they continue 00:18:01.559 --> 00:18:04.299 to refine motor technology, even targeting specialized 00:18:04.299 --> 00:18:06.900 difficult environments like swimming pools. Right. 00:18:06.980 --> 00:18:09.049 Swimming pools require special... motors because 00:18:09.049 --> 00:18:11.490 of the moisture and chemicals. What innovation 00:18:11.490 --> 00:18:14.329 did they introduce there? In 1965, the Motor 00:18:14.329 --> 00:18:17.130 Division developed the enclosed canopy two compartment 00:18:17.130 --> 00:18:20.329 motor. This was a dedicated design solution for 00:18:20.329 --> 00:18:23.400 pool pump reliability. How did it work? It physically 00:18:23.400 --> 00:18:25.400 separated the sensitive switching mechanisms 00:18:25.400 --> 00:18:27.559 from the motor windings in their own enclosed 00:18:27.559 --> 00:18:31.000 compartment. This isolation protected those critical 00:18:31.000 --> 00:18:33.519 components from the corrosive moisture, dirt, 00:18:33.619 --> 00:18:36.059 and chemicals of the pool environment, and it 00:18:36.059 --> 00:18:38.859 drastically extended the motor's lifespan. Giving 00:18:38.859 --> 00:18:40.960 them a substantial competitive edge in that market. 00:18:41.099 --> 00:18:43.900 A huge edge. And this motor expertise wasn't 00:18:43.900 --> 00:18:46.279 limited to the domestic market either. It provided 00:18:46.279 --> 00:18:49.920 their first major global footprint. Really? By 00:18:49.920 --> 00:18:52.809 1976, they understood the... international demand 00:18:52.809 --> 00:18:55.930 for reliable hermetic motors. They opened a plant 00:18:55.930 --> 00:18:58.849 in Bray, Ireland, specifically designed to supply 00:18:58.849 --> 00:19:01.230 the European and international refrigeration 00:19:01.230 --> 00:19:04.009 and air conditioning markets. So while water 00:19:04.009 --> 00:19:05.990 heaters were still primarily focused on North 00:19:05.990 --> 00:19:08.470 America, the electric motor division was already 00:19:08.470 --> 00:19:11.490 a powerful, globalized entity. Shifting back 00:19:11.490 --> 00:19:13.809 to the core business, water heating, what were 00:19:13.809 --> 00:19:16.309 the key milestones during the 1960s and 70s? 00:19:16.349 --> 00:19:19.109 This era was about product refinement and demonstrating 00:19:19.109 --> 00:19:22.130 market saturation. Following the Berkey acquisition, 00:19:22.529 --> 00:19:24.650 they launched the first glass -lined commercial 00:19:24.650 --> 00:19:27.910 water heater, the A .O. Smith Berkey B65. And 00:19:27.910 --> 00:19:30.390 on the production side? The scale was truly impressive. 00:19:30.730 --> 00:19:33.849 By 1969, they celebrated the production of their 00:19:33.849 --> 00:19:37.309 10 millionth residential water heater. That is 00:19:37.309 --> 00:19:40.650 a massive volume of reliable units being installed 00:19:40.650 --> 00:19:42.890 across the country. And as the energy crises 00:19:42.890 --> 00:19:45.730 of the 1970s hit, they demonstrated an important 00:19:45.730 --> 00:19:48.960 responsiveness to efficiency. That's a theme 00:19:48.960 --> 00:19:51.119 that remains absolutely central to their products 00:19:51.119 --> 00:19:54.359 today. Absolutely. In 1974, they introduced the 00:19:54.359 --> 00:19:56.680 conservationist line of residential water heaters. 00:19:56.779 --> 00:19:59.420 This wasn't just a marketing name. It represented 00:19:59.420 --> 00:20:02.059 new designs focused on improved insulation and 00:20:02.059 --> 00:20:04.619 burner efficiency to reduce standby heat loss. 00:20:04.799 --> 00:20:07.519 It positioned them as innovators in energy management. 00:20:07.779 --> 00:20:09.079 And it's important to note that they were no 00:20:09.079 --> 00:20:12.460 longer just a steel company. They began diversifying 00:20:12.460 --> 00:20:15.720 their material science beyond that. Classic glass 00:20:15.720 --> 00:20:18.420 fuse to steel combo. They moved into polymer 00:20:18.420 --> 00:20:20.940 and composite technologies. They established 00:20:20.940 --> 00:20:23.859 a glass fiber division aimed at replacing steel 00:20:23.859 --> 00:20:26.339 in applications where corrosion was extreme or 00:20:26.339 --> 00:20:29.180 weight was critical, like oil field pipe and 00:20:29.180 --> 00:20:31.240 service station pipe. Right. Handling highly 00:20:31.240 --> 00:20:34.180 corrosive or flammable liquids. Exactly. This 00:20:34.180 --> 00:20:36.579 division eventually became Smith Fiberglass Products 00:20:36.579 --> 00:20:40.140 in 1986. They recognized that while steel was 00:20:40.140 --> 00:20:42.779 their heritage, the future required mastering 00:20:42.779 --> 00:20:45.559 advanced corrosion. resistant materials. We should 00:20:45.559 --> 00:20:47.700 also mention the continued stability and leadership 00:20:47.700 --> 00:20:50.200 during this period. Yes. Loy B. Smith, a fourth 00:20:50.200 --> 00:20:52.339 generation family member, was elected chairman 00:20:52.339 --> 00:20:55.640 and CEO in 1967. And he ensured continuity of 00:20:55.640 --> 00:20:57.809 purpose and long -term planning. which likely 00:20:57.809 --> 00:21:00.990 facilitated these major decades -long industrial 00:21:00.990 --> 00:21:04.190 shifts. That stability, coupled with their initial 00:21:04.190 --> 00:21:07.750 European expansion in 1972, really set the stage 00:21:07.750 --> 00:21:10.109 for the dramatic strategic realignments of the 00:21:10.109 --> 00:21:13.569 1990s. As we enter the 1980s, A .O. Smith is 00:21:13.569 --> 00:21:16.789 this massive, highly diversified industrial conglomerate. 00:21:16.829 --> 00:21:18.789 You've got the largest producer of car frames, 00:21:18.990 --> 00:21:21.549 a global leader in electric motors, and a domestic 00:21:21.549 --> 00:21:24.410 titan in water heating. What true giant. But 00:21:24.410 --> 00:21:27.000 this diversification, while powerful, led to 00:21:27.000 --> 00:21:29.799 a crossroads and a crucial strategic decision 00:21:29.799 --> 00:21:32.259 that would redefine their identity forever. The 00:21:32.259 --> 00:21:34.380 scale of their automotive business right up to 00:21:34.380 --> 00:21:37.720 the end is almost incomprehensible today. By 00:21:37.720 --> 00:21:40.480 the early 1980s, their automotive products unit 00:21:40.480 --> 00:21:43.799 in Milwaukee had manufactured over 100 million 00:21:43.799 --> 00:21:47.460 passenger car frames and 50 million truck frames. 00:21:47.720 --> 00:21:50.519 100 million. To shed that part of the business 00:21:50.519 --> 00:21:52.559 was, I mean, it was akin to tearing out the company's 00:21:52.559 --> 00:21:57.140 heart. But they did it. In 1997, After 90 years 00:21:57.140 --> 00:22:00.180 in the automotive business, A .O. Smith sold 00:22:00.180 --> 00:22:02.680 the automotive products company to Tower International. 00:22:03.460 --> 00:22:06.299 This was more than just a divestiture. It was 00:22:06.299 --> 00:22:08.339 a clear signal to the market. If you look at 00:22:08.339 --> 00:22:10.799 the financial logic, this pivot suggests that 00:22:10.799 --> 00:22:12.940 A .O. Smith recognized that by the late 20th 00:22:12.940 --> 00:22:15.440 century, the automotive frame business had become 00:22:15.440 --> 00:22:18.380 a high volume, low margin, capital intensive 00:22:18.380 --> 00:22:20.619 commodity business. The margins were shrinking. 00:22:21.039 --> 00:22:22.799 And the capital expenditure required to keep 00:22:22.799 --> 00:22:24.900 up with automotive demands was just massive. 00:22:25.180 --> 00:22:28.380 So instead of being a major but struggling supplier 00:22:28.380 --> 00:22:31.279 in a competitive sector, they chose to focus 00:22:31.279 --> 00:22:33.880 on the one business that offered stable, growing 00:22:33.880 --> 00:22:36.960 and defensible market leadership, water technology. 00:22:37.600 --> 00:22:40.799 Exactly. The reliable glass -lined water heater 00:22:40.799 --> 00:22:43.240 provided better margins and intellectual property 00:22:43.240 --> 00:22:46.059 protection. Maximizing shareholder value in the 00:22:46.059 --> 00:22:49.000 modern industrial context meant focusing expertise. 00:22:49.559 --> 00:22:51.339 They were preparing to double down. They were 00:22:51.339 --> 00:22:53.640 preparing to double down on water heating and 00:22:53.640 --> 00:22:55.839 the specialized manufacturing skills they had 00:22:55.839 --> 00:22:58.839 perfected. Those skills were far more valuable 00:22:58.839 --> 00:23:01.220 in the highly regulated world of eating and plumbing 00:23:01.220 --> 00:23:03.819 than in the cutthroat global auto supply chain. 00:23:04.079 --> 00:23:05.960 And while shutting that domestic auto legacy, 00:23:06.569 --> 00:23:08.730 They were simultaneously starting their global 00:23:08.730 --> 00:23:11.609 manufacturing push, particularly toward key growth 00:23:11.609 --> 00:23:14.410 markets in Asia. The expansion started regionally 00:23:14.410 --> 00:23:16.950 with electric motor assembly operations in Mexico, 00:23:17.109 --> 00:23:20.329 in Ciudad Juarez and Ciudad Acuna. But the real 00:23:20.329 --> 00:23:23.269 strategic push where the future lay was Asia. 00:23:23.490 --> 00:23:26.230 What was the first move? In 1995, they entered 00:23:26.230 --> 00:23:28.630 joint ventures for fiberglass pipes in China 00:23:28.630 --> 00:23:31.809 and, critically, a venture with Yuhan Water Heater 00:23:31.809 --> 00:23:33.869 to introduce residential water heaters to the 00:23:33.869 --> 00:23:36.339 growing Chinese middle class. And their dedication 00:23:36.339 --> 00:23:39.420 to China wasn't a tentative exploration. It became 00:23:39.420 --> 00:23:42.339 a core investment. Oh, by the end of the 1990s, 00:23:42.339 --> 00:23:44.480 the water products company bought out its joint 00:23:44.480 --> 00:23:47.099 venture partner and established a dedicated, 00:23:47.380 --> 00:23:49.920 wholly owned manufacturing plant in Nanjing, 00:23:49.960 --> 00:23:52.630 China. They recognized early that the rising 00:23:52.630 --> 00:23:55.450 economic power and urbanization of China represented 00:23:55.450 --> 00:23:58.430 the single largest untapped market for reliable 00:23:58.430 --> 00:24:01.390 home comfort products. But before becoming the 00:24:01.390 --> 00:24:04.009 pure play water company we see today, they spent 00:24:04.009 --> 00:24:07.130 a good decade aggressively expanding their motor 00:24:07.130 --> 00:24:09.650 division, almost as if preparing it for a grand 00:24:09.650 --> 00:24:12.759 exit. That's a sharp observation. They consolidated 00:24:12.759 --> 00:24:14.740 their position in the motor market with a series 00:24:14.740 --> 00:24:17.680 of massive acquisitions in the late 90s and 2000s. 00:24:17.720 --> 00:24:21.299 They bought UPPCO Inc., which made them the world's 00:24:21.299 --> 00:24:23.680 leading manufacturer of C -frame sub -fractional 00:24:23.680 --> 00:24:26.519 horsepower motors. Wow. Then they acquired General 00:24:26.519 --> 00:24:28.660 Electric's domestic compressor motor business 00:24:28.660 --> 00:24:31.180 and the electric motor division of Magnatech, 00:24:31.299 --> 00:24:34.259 instantly becoming a dominant force in HVAC supply. 00:24:34.519 --> 00:24:36.079 So they bulked up the motor division, made it 00:24:36.079 --> 00:24:38.180 as valuable and market dominant as possible. 00:24:38.339 --> 00:24:40.119 And then they executed the... final strategic 00:24:40.119 --> 00:24:43.960 move. In 2011, A .O. Smith sold its entire electric 00:24:43.960 --> 00:24:46.519 motor business to Regal Beloit. The defining 00:24:46.519 --> 00:24:49.859 final step. This was it. They shed their motor 00:24:49.859 --> 00:24:52.980 and automotive past, dedicating 100 % of their 00:24:52.980 --> 00:24:56.420 focus, capital, and R &D resources to water heating, 00:24:56.640 --> 00:24:59.700 treatment, and purification. They transitioned 00:24:59.700 --> 00:25:02.880 from a diversified conglomerate to a highly focused, 00:25:03.019 --> 00:25:05.960 specialized water technology company. And with 00:25:05.960 --> 00:25:08.099 the auto frames and motors gone, their acquisition 00:25:08.099 --> 00:25:10.579 strategy broadened the scope of water technology 00:25:10.579 --> 00:25:13.420 well beyond just the simple glass line tank. 00:25:13.680 --> 00:25:16.180 Yes, they moved into high efficiency heating 00:25:16.180 --> 00:25:19.859 and purification. The first step was consolidating 00:25:19.859 --> 00:25:22.700 the core heating market. They acquired State 00:25:22.700 --> 00:25:26.359 Industries Inc. and its subsidiary, APC Inc., 00:25:26.359 --> 00:25:28.559 which significantly increased their domestic 00:25:28.559 --> 00:25:31.150 market share and distribution network. And then 00:25:31.150 --> 00:25:33.450 Lock and Bar. Then they targeted the high efficiency 00:25:33.450 --> 00:25:35.890 commercial space by acquiring Lock and Bar Corporation, 00:25:36.329 --> 00:25:38.789 which specializes in high efficiency condensing 00:25:38.789 --> 00:25:41.769 boilers for hot water and hydronic heating. That's 00:25:41.769 --> 00:25:43.609 the modern gold standard for commercial water 00:25:43.609 --> 00:25:45.950 heating. But the most profound strategic change 00:25:45.950 --> 00:25:48.589 in this period was the explicit move into water 00:25:48.589 --> 00:25:51.089 purification. They realized that clean water 00:25:51.089 --> 00:25:53.549 might be a larger, more pressing global commodity 00:25:53.549 --> 00:25:56.369 need than just hot water, especially in Asia. 00:25:56.529 --> 00:25:59.289 This strategic choice defines their current trajectory. 00:25:59.839 --> 00:26:02.440 In 2009, they formally entered the purification 00:26:02.440 --> 00:26:05.619 sector with A .O. Smith Shanghai water treatment 00:26:05.619 --> 00:26:08.720 products. This dedicated focus on purification 00:26:08.720 --> 00:26:12.119 signaled a massive strategic shift toward addressing 00:26:12.119 --> 00:26:15.019 water quality, not just temperature. Because 00:26:15.019 --> 00:26:17.519 in some regions, purification is a necessity, 00:26:17.660 --> 00:26:20.259 not a luxury. Exactly. The global push continued 00:26:20.259 --> 00:26:23.160 aggressively, focusing capital on India and acquiring 00:26:23.160 --> 00:26:25.769 key filtration technology in North America. Right. 00:26:25.910 --> 00:26:28.470 They bolstered their tankless offerings by acquiring 00:26:28.470 --> 00:26:32.220 Takagi's North American operations in 2010. Crucially, 00:26:32.339 --> 00:26:34.680 they simultaneously opened a new manufacturing 00:26:34.680 --> 00:26:37.660 plant in Bengaluru, India. And quickly expanded 00:26:37.660 --> 00:26:39.559 it. Very quickly. They expanded that facility 00:26:39.559 --> 00:26:43.539 to 297 ,000 square feet, explicitly ensuring 00:26:43.539 --> 00:26:46.000 it had capacity for water purification product 00:26:46.000 --> 00:26:48.259 manufacturing, mirroring their dual strategy 00:26:48.259 --> 00:26:50.779 in China. And domestically, they added sophisticated 00:26:50.779 --> 00:26:53.599 filtration expertise. In 2016, they acquired 00:26:53.599 --> 00:26:56.279 Aquasana, a major Austin -based water filtration 00:26:56.279 --> 00:27:00.380 company, for $87 million. Aquasana specializes 00:27:00.380 --> 00:27:02.539 in whole house. house filtration. Whole house 00:27:02.539 --> 00:27:05.220 systems and reverse osmosis drinking water filters. 00:27:05.519 --> 00:27:08.559 This acquisition gave A .O. Smith immediate access 00:27:08.559 --> 00:27:11.480 to cutting edge filtration tech and a direct 00:27:11.480 --> 00:27:13.740 to consumer brand, which let them address the 00:27:13.740 --> 00:27:16.400 growing North American concern over water quality. 00:27:16.619 --> 00:27:18.799 And that commitment to the Asian market and purification 00:27:18.799 --> 00:27:21.799 continues to this day, culminating in a major 00:27:21.799 --> 00:27:24.900 acquisition in late 2024. That's right. In November 00:27:24.900 --> 00:27:27.920 2024, A .O. Smith finalized the acquisition of 00:27:27.920 --> 00:27:30.660 Purite, the water purification business of Hindustan 00:27:30.660 --> 00:27:34.789 Unilever. for about $72 million USD. And Purite 00:27:34.789 --> 00:27:37.349 is a huge player in India. A massive player, 00:27:37.509 --> 00:27:40.170 specializing in affordable, high -volume purification 00:27:40.170 --> 00:27:43.549 systems. This move just cements A .O. Smith's 00:27:43.549 --> 00:27:46.269 transformation from a bomb and car frame manufacturer 00:27:46.269 --> 00:27:49.269 into a true global water stewardship enterprise, 00:27:49.589 --> 00:27:52.029 heavily invested in the vast purification markets 00:27:52.029 --> 00:27:55.349 of Asia. So after this incredible 150 -year journey, 00:27:55.490 --> 00:27:57.470 shedding its foundational businesses to focus 00:27:57.470 --> 00:28:00.130 entirely on water, what does the modern, specialized 00:28:00.130 --> 00:28:03.220 A .O. Smith look like today? Well, they are a 00:28:03.220 --> 00:28:06.160 thoroughly globalized, integrated technology 00:28:06.160 --> 00:28:09.319 company. Their scale is enormous. They operate 00:28:09.319 --> 00:28:12.980 27 locations worldwide with major manufacturing 00:28:12.980 --> 00:28:15.420 facilities strategically placed, not just in 00:28:15.420 --> 00:28:17.859 North America, but in the key growth engines 00:28:17.859 --> 00:28:21.420 of the global economy. Bengaluru, Nanjing and 00:28:21.420 --> 00:28:23.819 in Veldhoven in the Netherlands. And domestically. 00:28:24.220 --> 00:28:26.980 the scale of their original core business water 00:28:26.980 --> 00:28:30.740 heating is still unmatched. Absolutely. The legacy 00:28:30.740 --> 00:28:33.019 of industrial efficiency perfected during the 00:28:33.019 --> 00:28:35.900 early 20th century remains. The Ashland City, 00:28:36.019 --> 00:28:38.559 Tennessee location is home to the world's single 00:28:38.559 --> 00:28:40.680 largest water heater factory. The largest in 00:28:40.680 --> 00:28:42.579 the world. That facility operates with the same 00:28:42.579 --> 00:28:44.819 level of automated precision first achieved back 00:28:44.819 --> 00:28:47.960 in the 1920s with the car frame factory. It confirms 00:28:47.960 --> 00:28:50.160 that even while shifting focus to purification, 00:28:50.519 --> 00:28:53.119 the core heating business remains dominant. Let's 00:28:53.119 --> 00:28:55.640 detail. the product portfolio. It's far more 00:28:55.640 --> 00:28:57.680 comprehensive than just the basic water tank 00:28:57.680 --> 00:28:59.950 in your garage. On the residential side, their 00:28:59.950 --> 00:29:02.809 heating portfolio is exhaustive. It covers every 00:29:02.809 --> 00:29:05.009 major energy source and efficiency standard, 00:29:05.210 --> 00:29:08.089 traditional gas and propane, high efficiency 00:29:08.089 --> 00:29:11.430 hybrid units, electric models, tankless heaters 00:29:11.430 --> 00:29:14.109 and solar assisted systems. They are positioned 00:29:14.109 --> 00:29:17.069 to meet every regulatory and consumer preference. 00:29:17.369 --> 00:29:19.369 And for the commercial sector, where the heating 00:29:19.369 --> 00:29:22.089 demands are exponentially larger and more complex. 00:29:22.309 --> 00:29:24.789 For commercial uses, the product line is robust. 00:29:25.069 --> 00:29:28.200 They manufacture heavy duty oil fired gas. and 00:29:28.200 --> 00:29:31.039 electric water heaters, large condensing boilers, 00:29:31.059 --> 00:29:34.180 thanks to lock and bar specialized storage tanks, 00:29:34.339 --> 00:29:37.359 and these large -scale modular heating solutions 00:29:37.359 --> 00:29:40.500 known as skid systems. These are crucial because 00:29:40.500 --> 00:29:42.819 they offer pre -assembled, integrated heating 00:29:42.819 --> 00:29:45.619 solutions for massive facilities. And the strategic 00:29:45.619 --> 00:29:48.000 emphasis on water treatment and purification 00:29:48.000 --> 00:29:50.779 continues to grow. It does, particularly for 00:29:50.779 --> 00:29:52.460 the Asian consumer market, where they are betting 00:29:52.460 --> 00:29:55.519 big on future revenue. The average consumer often 00:29:55.519 --> 00:29:58.160 doesn't recognize the name A .O. Smith. but they 00:29:58.160 --> 00:30:00.279 definitely recognize the stable of brands that 00:30:00.279 --> 00:30:02.759 fall under their ownership. It's a comprehensive 00:30:02.759 --> 00:30:05.799 multi -brand strategy. That multi -brand strategy 00:30:05.799 --> 00:30:08.099 is essential for market penetration and managing 00:30:08.099 --> 00:30:10.579 different distribution channels, like plumbing 00:30:10.579 --> 00:30:13.200 wholesalers versus retail home improvement stores. 00:30:13.460 --> 00:30:15.900 So who do they own? The stable includes major 00:30:15.900 --> 00:30:19.160 names like State Water Heaters, Lock and Var, 00:30:19.460 --> 00:30:24.509 Takagi. Giant Factories, GSW, John Wood, American 00:30:24.509 --> 00:30:27.450 Water Heaters, and Reliance Water Heaters. When 00:30:27.450 --> 00:30:29.950 you factor in brands like Aquasana and Purate 00:30:29.950 --> 00:30:32.970 for purification, A .O. Smith just dominates 00:30:32.970 --> 00:30:35.569 a vast spectrum of water -related home and industrial 00:30:35.569 --> 00:30:38.170 necessity. Finally, their commitment to the communities 00:30:38.170 --> 00:30:40.250 that built them has been a consistent feature 00:30:40.250 --> 00:30:43.190 for almost 70 years. The A .O. Smith Foundation, 00:30:43.529 --> 00:30:46.490 a private nonprofit, was established in 1955. 00:30:46.769 --> 00:30:48.950 It's an example of enduring corporate commitment. 00:30:49.150 --> 00:30:51.730 The foundation has contributed nearly $50 million 00:30:51.730 --> 00:30:54.630 to charitable, educational, scientific, literary, 00:30:54.750 --> 00:30:57.670 and civic organizations, focusing primarily on 00:30:57.670 --> 00:30:59.450 the communities where A .O. Smith has facilities. 00:30:59.750 --> 00:31:01.869 It demonstrates a reciprocal relationship with 00:31:01.869 --> 00:31:03.970 the industrial basis that sustained them through 00:31:03.970 --> 00:31:06.369 those incredible periods of war production and 00:31:06.369 --> 00:31:08.690 industrial transformation. To bring this narrative 00:31:08.690 --> 00:31:10.609 full circle, we've tracked a truly remarkable 00:31:10.609 --> 00:31:13.430 history. The complexity of A .O. Smith's journey 00:31:13.430 --> 00:31:16.089 reveals a fascinating pattern. Which is? The 00:31:16.089 --> 00:31:18.509 industrial mastery required to build the world's 00:31:18.509 --> 00:31:21.569 first automated car frame factory and to handle 00:31:21.569 --> 00:31:24.049 the extreme technical demands of chemical weapon 00:31:24.049 --> 00:31:27.430 casings proved to be the exact prerequisite for 00:31:27.430 --> 00:31:29.710 mastering the mass production of the reliable 00:31:29.710 --> 00:31:32.710 glass -lined water heater. So their mastery of 00:31:32.710 --> 00:31:35.009 steel. Their initial mastery of steel and that 00:31:35.009 --> 00:31:37.670 breakthrough in fusing glass to that steel. allowed 00:31:37.670 --> 00:31:40.470 them to shed low -margin, high -capital businesses 00:31:40.470 --> 00:31:44.089 like auto frames and motors and ultimately pivot 00:31:44.089 --> 00:31:47.150 to the global, highly defensible market of water 00:31:47.150 --> 00:31:49.490 stewardship. So what does this deep dive mean 00:31:49.490 --> 00:31:52.170 for you, the listener? This history demonstrates 00:31:52.170 --> 00:31:55.710 a profound industrial lesson. That fundamental 00:31:55.710 --> 00:31:58.289 materials science and manufacturing prowess, 00:31:58.329 --> 00:32:01.289 the ability to achieve that perfect, corrosion 00:32:01.289 --> 00:32:04.470 -resistant fusion of glass and steel, is incredibly 00:32:04.470 --> 00:32:07.720 portable and resilient. That core expertise was 00:32:07.720 --> 00:32:09.900 successfully applied across wildly different 00:32:09.900 --> 00:32:13.259 high -value and essential industries, from high 00:32:13.259 --> 00:32:15.440 -tech defense and precision engineering for cars 00:32:15.440 --> 00:32:17.819 to agriculture with the harvest store silos. 00:32:18.119 --> 00:32:21.680 And now providing reliable home comfort and clean 00:32:21.680 --> 00:32:24.190 drinking water across the globe. Right. If we 00:32:24.190 --> 00:32:26.849 look forward, A .O. Smith's major strategic shift 00:32:26.849 --> 00:32:30.269 into water purification, highlighted by the acquisitions 00:32:30.269 --> 00:32:32.809 of Aquasana and Purate and their massive investments 00:32:32.809 --> 00:32:35.650 in Asian purification plants, shows where they 00:32:35.650 --> 00:32:38.009 believe the future growth lies. It's a clear 00:32:38.009 --> 00:32:40.509 signal. It is. So the question for you to consider 00:32:40.509 --> 00:32:43.829 is this. Is the next 150 years of this corporation 00:32:43.829 --> 00:32:46.890 defined less by heating water and more by the 00:32:46.890 --> 00:32:48.950 rapidly escalating global demand for cleaning 00:32:48.950 --> 00:32:51.819 it? What critical commodity facing scarcity or 00:32:51.819 --> 00:32:54.420 quality issues will drive the next great industrial 00:32:54.420 --> 00:32:56.759 pivot for the largest manufacturers of our time?