Applied Power, Inc.

views updated

Applied Power, Inc.

P. O. Box 325
Milwaukee, Wisconsin 53201
U.S.A.
(414) 781-6600
Fax: (414) 783-3790

Public Company
Incorporated: 1910 as Applied Power Industries, Inc.
Employees: 3,020
Sales: $357 million
Stock Exchanges: New York
SICs: 3492 Fluid Power Valves and Hose Fittings; 3621 Motors and Generators; 3545 Machine Tool Accessories

Applied Power, Inc., is the nation’s leading manufacturer of hydraulic products for use in industry and construction. With four business units, the company supplies a variety of tools and machines to manufacturers in a number of fields. Established around the turn of the century, Applied Power now sells its products in markets across the globe.

Applied Power was founded in 1910 in Milwaukee, Wisconsin. The company got its start as the American Grinder and Manufacturing Company, a producer of hand grinders that sharpened tools used in agriculture and other fields. The company’s advertisements claimed that its products were suitable for use in “Ship Yards, Construction Work, Lumber Camps, Mining and Engineering, Signal and Line Repair Work, Machine Shops, Garages, etc.” When the United States entered World War I, American Grinder began to manufacture water and oil pumps for use in engines that powered trucks and other military vehicles. At the end of the war, the company decided to continue its manufacture of these products, offering them to the general automotive market that was then beginning to take root and grow.

By the end of its first decade, American Grinder had expanded its line to include hand tools as well as pumps, a move made at the behest of the company’s distributor. For this new line, American Grinder chose the trade name “Blackhawk,” in reference to the Blackhawk Army Division, which had fought with distinction in World War I. The line’s logo featured an arrowhead with the silhouette of an Indian and the slogan “Service, Quality, Finish.” Many of the tools sold, such as sets of socket wrenches in different sizes, were designed for use in automobile repairs.

After American Grinder chose to call its engine pumps and mechanic’s tools Blackhawk, this trade name began to establish a reputation in the automotive field. In 1925 American Grinder officially changed its company name to Blackhawk, and, shortly thereafter, the company sold off its line of tool grinders, as it reoriented itself towards the automobile industry. Eventually, however, Blackhawk water pumps were made obsolete, as car manufacturers began to include this equipment in their vehicles as a matter of course. After discontinuing its pump operations, Blackhawk sought out a business to replace them. In 1927 the company purchased a small hydraulic jack manufacturer, the Hydraulic Tool Company, in Los Angeles, California, which fit the bill. After acquiring these operations, Blackhawk marketed the Hydraulic Tool Company’s products under the Blackhawk trade name.

As Blackhawk grew, its products gained a wider reputation, and its trade name became known across the country. In the late 1920s, Blackhawk expanded its line further when a snowplow manufacturer asked the company to help it develop a hydraulic pump to replace the hand winch then used to raise and lower the plow. In response to this request, Blackhawk developed a hydraulic system, made up of a hand pump, a long bending hose, and a hydraulic cylinder, which it marketed under the name Power-Packer. This line was soon expanded to include other remote-control hydraulic systems for use in different kinds of equipment. By the end of the 1920s, the company’s logo— placed on its expanded line of products—had evolved to feature an Indian’s profile in a large feathered headdress, placed inside an abstract representation of an arrowhead.

In the mid-1930s Blackhawk further expanded its product offerings when it used the technology developed for use in snow plows to make products for the collision repair market. Calling this line “Porto-Power,” Blackhawk marketed hydraulic tools to be used in repairing auto bodies. The Porto-Power line featured a set of pumps and cylinders, with a variety of attachments that could be used to perform different pulling, pushing, and straightening tasks to fix damaged cars. In the late 1930s, Blackhawk marketed its Porto-Power line of products to a wider pool of customers, offering them for use in industrial and construction fields, through various distributors. The company tailored its products to different tasks and industries, creating special pumps and cylinders that could be used as building blocks for different applications.

In 1955 Blackhawk sold off its original line of hand tools, as its business evolved away from that area into more complicated systems. Late in that decade, the company decided to further restructure itself to provide more definition for each of its different parts. The two lines of products, Blackhawk and Power-Packer, became separate business units within the company. In 1960 the company’s industrial and construction lines were set apart and given the name Enerpac in an effort to strengthen their identity within their respective markets.

Also in 1960, Blackhawk began an effort to expand its markets beyond the borders of the United States. Although its products had long been sold in other countries through importers and distributors, Blackhawk began to set up its own direct overseas operations, to both sell and manufacture goods. Its first targets for growth were the United Kingdom and continental Europe.

In 1961 Blackhawk changed its corporate name to Applied Power Industries, Inc. in an effort to better reflect the different aspects of its operations. In the 1960s, the company expanded through acquisitions of other companies in its field. In January of 1966, it bought Rivett, Inc., and two years later, Applied Power purchased Branick Manufacturing, Inc. In 1969 the company acquired the Big Four division of the Studebacker Company. In May of 1970, Applied Power added the operations of the Bear Manufacturing Company, and later that year, the company added another business unit to its corporate profile, taking over the Marquette Corporation. This company was a maker of diagnostic systems and service equipment, including products designed especially for use with batteries, for automobiles.

Also in 1970, Applied Power increased its geographical scope further when it opened a subsidiary in the Netherlands. This trend continued the following year, when Applied Power made a number of purchases which increased its international holdings. The company acquired Bear Equipment & Services, Ltd., of Scarborough, Canada, and renamed it Applied Power Automotive Canada, Ltd. In addition, Applied Power bought 80 percent of two French companies, Matairco, which eventually became a separate business unit of its parent company, and Société-Hydro-Air S.a.r.L. Three years later, Applied Power completed its acquisition of these properties, increasing its stake in them to 100 percent. In January of 1973, Applied Power Industries clarified its name to Applied Power, Inc.

Following the simplification of its name, Applied Power also streamlined its corporate structure. In the mid-1970s, the company fine-tuned its operations, shedding businesses that did not fit with its larger corporate identity, or that were not as profitable as others. In 1975 the company sold Hydralique Gury S.A. to a group of French investors for $2.1 million. Five years later, the company divested itself of its Bear Wheel Service and Marquette Engine Diagnostic Equipment Product Lines, reaping $8 million.

In 1981 Applied Power added the last of its major brand groups when it purchased Electro-Flo, Inc. This company supplemented Applied Power’s Power-Packer unit in providing specialized hydraulic products for use in the manufacture of other kinds of heavy equipment. Electro-Flo used electronic controls of hydraulic systems to enable precise movement and positioning of machinery. Electro-Flo technology, which included microprocessors, flow control valves, and electronic sensors, was used in the precise laying of asphalt by road-reconditioning equipment and in the movement of booms on materials-handling machinery.

By 1985, Applied Power’s 75th year in business, the company had become a solid operation closely held by the members of its founding family. Lacking new blood, the company had begun to stagnate. While its operations returned a steady profit, the company had ceased growing. In an effort to remedy this situation and increase Applied Power’s financial returns, company leaders brought an outside executive aboard, hiring Richard G. Sim, a former General Electric Company executive, as president and chief executive officer.

Among the first steps taken in the mid-1980s were a series of acquisitions. The company bought half of the Toyo Hydraulic Equipment Company, of which it already owned the other half, and also added Electro-Hydraulic Controls, Inc., for which it paid $2.6 million in cash. In 1986 Applied Power divested itself of one of its core businesses—and the line of products with the longest heritage of any made by the company—when it sold its Blackhawk automotive division to the Hein-Werner Company for $9.3 million. One year later, in August of 1987, the newly defined Applied Power offered stock to the public for the first time, tendering 1.8 million shares. With the proceeds from this sale, the company moved to reduce part of the debt it had amassed through its long string of acquisitions. At the end of 1987, Applied Power reported a loss of $1.6 million.

In 1988 Applied Power returned to its roots, re-entering the field that had launched the company decades before, when it purchased a manufacturer of hand tools, Garner-Bender, Inc., for $31.4 million. This company was subsequently renamed GB Electrical, Inc. The next year, Applied Power made its most ambitious purchase to date, when it engineered the hostile takeover of the Barry Wright Corporation for $147 million. This purchase doubled the size of Allied Power and increased its debt six-fold. Barry Wright, an ailing manufacturer based in Water-town, Massachusetts, made equipment for use in computer rooms and devices that controlled vibration. The company’s earnings had dropped in the previous year from $8.4 million to $1.3 million as its sales stagnated. Applied Power’s executives hoped that their acquisition could come to dominate certain niche markets profitably. Such previous successes helped Applied Power notch sales of $245 million in 1989, up from $100 million just four years earlier.

In integrating Barry Wright with the rest of its operations, Applied Power faced a challenging task—it sought to streamline Barry Wright’s product line and cut its manufacturing costs. The first of the new acquisition’s units to face the ax was Barry Wright’s specialized office supplies division, called Wright Line. This business was severed from Applied Power in early 1992 at a loss of $33 million. This loss followed a year of lackluster results in 1991, when earnings fell to $12 million, hurt by the overall high costs of absorbing the Barry Wright operations and by a general recession. As a maker of tools for use in construction, Applied Power was hurt in particular by the slump in that industry. While its GB Electrical unit and its Enerpac operations continued to contribute strongly, another company unit, Apitech, which had been recently inaugurated to develop high-tech valves and other equipment to improve automobile suspensions, continued to eat up millions of dollars in research and development costs.

This trend continued in 1992, as Applied Power reported a loss of $24.4 million. In an effort to strengthen its positions, Applied Power reorganized certain aspects of its operations, altering the structure of its Barry Controls division in California and changing the nature of its Power-Packer operations in Europe. In addition, the company moved forward aggressively in foreign markets, purchasing the remaining portions of its joint venture operations in Mexico and Germany. Anticipating dramatic growth in Asia, Applied Power hired a new executive to run its Asian operations in Korea and Japan, with the intention of intensifying marketing efforts in those countries.

This thrust toward foreign markets continued in 1993, as Applied Power entered into a joint project with the Detec Design and Industrie Company in Germany to manufacture hydraulic products. As the company moved into the mid-1990s, its history of solid performance within its niche markets boded well for its continued viability and profitability.