Honeywell's history begins with Al Butz's 1885 invention of the Damper Flapper, a precursor to the modern thermostat that opened furnace vents automatically when necessary. After helping to design the instrumentation and control systems for long-range bombers during World War II, the company adopted its current moniker, Honeywell, in 1964. Today, Honeywell ranks as the world's leading producer of "control" systems - high-tech instruments that gauge conditions, take required action, and give feedback to a variety of industrial mechanisms, from air-conditioning systems to air-traffic control systems. The company's innovations increase productivity, conserve energy, and increase safety levels for its customers.

You've come a long way, Honey

Honeywell divides its business into three divisions: home and building control, which manufactures products that regulate indoor environments; industrial control, which creates products like sensors and process control instrumentation; and space and aviation control, which makes products like the cockpit display for Boeing's 777. The company's space and aviation control division has done especially well in recent years, and Honeywell is moving increasingly into equipment for aerospace companies, with products such as satellite landing systems and airport control.

Honeywell has also expanded through acquisition in recent years. In 1997 it purchased Measurex for about $600 million, and more recently conducted a mega-merger with AlliedSignal in December 1999.

Merger

Honeywell shocked the industry when it agreed to be bought out by AlliedSignal in an all-stock deal worth $14 billion. Although Honeywell effectively became a subsidiary of AlliedSignal, it was decided that the company would be called Honeywell due to brand name recognition. The deal makes Honeywell a Fortune 50 company and one of the five largest industrial groups in the Western Hemisphere. Honeywell's Michael Bonsignore serves as CEO of the new business, taking over the chairman post when Bossidy retired.

The deal is a little less sweet for some than it is for others, however, as the company laid off staff according to the 1+1=1 rule, which means that each merged department will be reduced to the size of the larger pre-merger one. When all is said and done, the deal should eliminate approximately 8,000 jobs between the two companies.

With the merger, Honeywell becomes one of the world's top makers of aerospace and automotive products, chemicals, and engineered materials. Its Engineered Materials sector is the world's largest producer of hydrofluoric acid and third largest manufacturer of nylon in the U.S. The Automotive sector manufactures everything from seat belts and airbags to turbochargers and spark plugs. The Aerospace division develops and produces aircraft collision warning systems.

AlliedSignal's contributions

Under CEO Larry Bossidy, who was hired from GE in 1991, Allied focused on international expansion and acquisitions in the pharmaceutical industry. In 1997, Allied bought Prestone Products and Swiss-based Pharmaceutical Fine Chemicals. It is also optimistic about aerospace sales growth, partly because it recently won a beefy contract for British Airways' new Airbus aircraft plus its new advance warning systems are being widely used by airlines to alert pilots of approaching mountainsides. Allied also recently reorganized its aerospace division, hoping to reduce costs save the company $30-$50 million a year.

You can't always get what you want

However, Allied didn't always gets what it wanted. A $10 billion bid to acquire AMP failed, largely due to a skeptical Pennsylvania legislature and federal court. Yet even in the midst of growth, the company had been conscientiously tightening its belt. Allied eliminated its less profitable businesses and pulled the plug on almost 28,000 jobs. In further efforts to shift their focus towards high growth industries the company sold off its low-margin laminate-systems business and agreed to acquire semiconductor material supplier Johnson Matthey Electronics in the summer of 1999.

Rising profits, but not all good news

Honeywell has seen several consecutive years of double-digit percentage growth in profits. The company's 1998 profits were $572 million, a more than 20 percent increase from 1997. However, the company is not in total control. In December 1998, a federal jury ruled that Honeywell should pay $250 million in damages for illegally monopolizing the commercial airplane guidance and navigation gear. (Because of the way damages are awarded in such cases, Honeywell actually could be ordered to pay $750 million.) That case involves competitor Litton, which in 1995 won a $1.2 billion award against Honeywell for patent infringement. Honeywell is appealing both verdicts.