Imo Industries Inc.
Address:
1009 Lenox Drive
Building 4 West
Lawrenceville, New Jersey 08648
U.S.A.
Telephone: (609) 896-7600
Fax: (609) 896-7688
Statistics:
Public Subsidiary of II Acquisition Corporation
Incorporated: 1901 as De Laval Steam Turbine Company
Employees: 2,100
Sales: $316 million (1997)
Stock Exchanges: New York
Stock Symbol: IMD
SICs: 3829 Measuring & Controlling Devices Not Elsewhere Classified; 3511 Turbines & Turbine Generator Sets; 3566 Speed Changers, Drives & Gears; 3826 Analytical Instruments; 3714 Motor Vehicle Parts & Accessories
Company History:
Imo Industries Inc. is a multinational industrial manufacturer. The company manufactures a wide array of products through three core divisions: the Power Transmission business segment which designs and manufactures electronic speed motor drives, speed reducers, and various gears; the Pumps business segment which designs and manufactures rotary pumps; and the Morse Controls business segment which designs and manufactures remote control systems and push-pull cables. During the late 1990s, Imo Industries experienced a comprehensive financial and operational restructuring, largely due to legal suits from people who alleged injury caused to them by exposure to asbestos, widely regarded as a cancer-causing substance. In August 1997, the company was acquired by II Acquisition Corporation, whose management immediately implemented a cost-reduction program.
Imo Delaval, Inc., renamed Imo Industries, Inc. in 1989, was created as a public company in December 1986, when Transamerica Corporation, which had acquired the De Laval Steam Turbine Company in 1962, distributed Imo stock to its shareholders on a one-for-ten basis. In 1986 Imo Delaval, with 21 plants in North America and Europe and close to 3,500 employees, had revenues of $358 million. The newly independent company launched an aggressive strategy on several fronts. Through the late 1980s and early 1990s, Imo actively sought to acquire companies involved in related business areas to strengthen and enhance existing product and service lines. Continuing the company tradition, resources were dedicated to development of engineering applications and solutions in a number of areas, including efforts to respond to worldwide environmental concerns.
Imo's long-established reputation and stability had been grounded in the success of its turbines, compressors, pumps, and motion control equipment, which are still produced by Imo companies, including Delaval Turbine, Imo Pump, Warren Pumps, Boston Gear, and Delroyd Worm Gear. The energetic acquisitions campaign of the late 1980s had effected a greater diversity in current activities. Revolutionary night vision and laser systems produced by new subsidiaries Baird (acquired in 1987) and Varo (acquired in 1988) made Imo a major force in electro-optical systems. A one-piece door lock developed by Roltra, a major supplier to Fiat and 100 percent Imo-owned since 1991, attracted attention in European and other automobile markets. Other products such as sensors and pressure switches from Gems Sensors (acquired in 1969) and Barksdale (acquired in 1964), respectively, had been redesigned for detecting leaks in underground storage tanks and piping systems. Likewise, a Gems electronic liquid level switch has been instrumental in revolutionizing Freon gas recycling and recovery systems.
Late 19th Century Origins
The history of Imo Industries begins in Stockholm, Sweden, in March 1890, when Dr. Carl Gustaf Patrik de Laval--known as the "Thomas Edison of Sweden"--founded Gustaf de Laval Angturbin Fabrik to produce his single stage geared turbine. The motivation behind his steam-turbine invention was to find a way to power large versions of the automated cream separators that he had introduced a number of years before and which were being produced in Sweden and, since 1883, in the United States by the De Laval Separator Company in Poughkeepsie, New York.
Dr. de Laval's geared steam turbine generator was the first of its kind in the United States when it was exhibited at the 1893 World's Fair in Chicago. The finished design incorporated an expanding nozzle, flexible shaft, and double helical gears, and initially could be produced in different-sized units ranging from five to 200 horsepower. (This unit and a Baird spectrometer are two Imo Industries products on permanent display at the Smithsonian Institution in Washington, D.C.) Realizing the potential of his invention to increase industrial efficiency while reducing power-generation costs, Dr. de Laval wanted to introduce his turbine to industries in the United States as well as in his home country. His continuing experiments quickly led to new industrial applications for the turbine, including powering outdoor lighting and shipping.
In 1896, in what was possibly the first commercial application of a steam turbine for electric power generation in the United States, the New York Edison Company imported and installed two 300 horsepower De Laval turbines, establishing the first electric generating stations in New York City. While financial setbacks delayed Dr. de Laval's plans to manufacture the steam turbine engines in the United States, other companies such as Westinghouse and General Electric acquired patents and gained a valuable head start.
On December 9, 1900, an article in the Trenton Sunday Advertiser announced that the De Laval Steam Turbine Company would be opening a new plant in New Jersey the following May and was expecting to employ "a large number of skilled mechanics" in the manufacture of steam turbine engines. A group of U.S. investors (who were 30 percent owners) was led by Francis J. Arend, director of the De Laval Separator Company. By the end of 1902, the Trenton plant was producing gears, centrifugal pumps and compressors, and allied high-speed equipment in addition to the steam turbines. The company originated and became a major supplier of city waterworks pumping equipment.
In application after application, high-speed centrifugal turbines were replacing steam driven equipment, and De Laval was an industry pacesetter. Year after year the De Laval engineers made notable advances in engineering achievements in response to the needs of U.S. industry. During World War I, the company was a key supplier of power generating equipment to the U.S. Navy. And during the postwar building program the company supplied precision reduction gearing for 60 destroyers and 11 cruisers. At this time, requirements of the U.S. defense industry led to the lessening of ties between the U.S. manufacturing company and its Swedish parent. Arend was made the company's first U.S. president in 1916; he served until his death in 1942.
In the 1920s, instead of retooling to provide large turbines to drive the central power station generators that were needed to supply power to communities across the United States, De Laval chose to concentrate on marine sales and industrial power generation. By the end of the decade and during the next few years, as the company weathered the Depression, sales decreased and operations were pared down.
In 1932 the company acquired a license to sell three-screw positive displacement pumps manufactured by the Swedish firm AB Imo-Industri. Some of De Laval's most important achievements in the coming years came from efforts to design, produce, and expand applications of these pumps and the design and production of precision gears for marine propulsion. Pump orders took off following the events in Europe in 1939, and when the U.S. Navy began building its Mahan class destroyers, the De Laval double-reduction geared turbines were on board. Those not manufactured in the Trenton plant were produced elsewhere using De Laval designs. One of the few U.S. manufacturers with the experience, staff, and machinery to build the large, complex propulsion equipment needed to power warships and freight carriers, De Laval was awarded the Navy's "E" award for excellence for these vital contributions to the war effort.
The Post-World War II Period
Continuing research and development after the war and through the 1950s concentrated on products for peacetime markets, such as the centrifugal compressor for high-pressure gas pipeline transmission needed to pump natural gas from wellheads to consumers. Domestic and worldwide marketing efforts were expanded to increase sales and to offer licenses to manufacture selected products in remote locations. The Imo pump was still strong, and worm gear products, whose sales had declined, were strengthened through a partnership with the John Holroyd & Co. of Great Britain, known for its worm gearing made to involute helicoid thread form. In the 1960s, Delroyd (a combination of the names De Laval and Holroyd), with some of the most advanced worm gear manufacturing equipment in the world, began operations in a new addition to the greatly expanded Trenton plant.
Two World Wars, the Depression, the Korean conflict, and other world events and trends, such as a worldwide shipbuilding boom in the mid-1950s, had caused De Laval's operations to rise and fall and had influenced product decisions. Swedish control of the De Laval Steam Turbine Company by AB Separator had been diminished although the financial tie remained. By the late 1950s the Swedish firm needed additional funding to grow with Europe's dynamic peacetime economy and began looking for a buyer for its 70 percent of De Laval. It was not until several years later, in April 1962, that an investment group headed by Lehman Brothers became full owners of the newly named De Laval Turbine Company. The following year Lehman Brothers found a buyer for the company: Transamerica Corporation, a large insurance and financial services firm based in San Francisco. Transamerica was looking for a business to complement General Metals, a manufacturing subsidiary that was one of its many industrial holdings.
Although Transamerica's acquisition of De Laval was not unanimously approved, once accomplished the advantages were capitalized upon and turned into assets. Realizing that De Laval's sales and professional personnel (experienced in targeting the marine and utility markets) could benefit General Metals's Enterprise diesel engines (to date a mediocre performer) and Barksdale valve and switch lines as well as De Laval products, Transamerica decided in 1964 to merge General Metals and all of its industrial holdings into one manufacturing operation: De Laval. Fortunately, the new management also recognized that product development was fundamental to the De Laval enterprise and kept it a priority. In fact, within the next few years, as De Laval concentrated on marine, electric utility, gas transmission, municipal, process, and general industrial markets--in other words, not only military--Transamerica saw earnings increase over 90 percent to account for 7.3 percent of the parent company's reported earnings. Under W. J. Holcombe, who became De Laval president in 1965 after having managed Transamerica's western manufacturing companies, sales continued to increase each year and by 1970 had more than doubled, with net income increasing nearly 12-fold. As the company entered 1971 with a $113 million backlog, the future looked bright.
Growth and Expansion during the 1970s and 1980s
In 1971, to accommodate some of its manufacturing divisions' growth, the De Laval corporate offices were moved from Trenton to nearby Princeton. At this time, the company comprised three product divisions (aero components, industrial components, and heavy equipment) and more than a dozen companies. Growth continued through the 1970s, particularly in the area of aero components, with the acquisition of E.B. Wiggins (1975) and Red-Lee Metal Finishing (later Airfoil) (1978) and expansion of production capability. Diverse new products included Imo's geared twin screw pump and, from Wiggins Connectors, a fuel service system that permitted rapid refueling of racing cars and off-road vehicles without contamination-causing leakage. By 1976 De Laval's $22 million net income accounted for almost 20 percent of Transamerica's consolidated income.
Beginning in the 1970s, and extending into the next decade, continuing company growth was accompanied by global outreach. Early milestones included: the opening of a compressor plant in Toronto, Canada; joint ventures in Mexico (EPN-Delaval, SA) and the Netherlands (Delaval-Stork); and the procurement of orders for utility and petrochemical applications from Poland and Yugoslavia. Sales offices were established around the world, from London and Paris and the Hague to Athens and Saudi Arabia to Singapore and Hong Kong. The 1986 acquisition of Imo AB, in Stockholm, the original Swedish patent holder, brought the company full circle as well as supporting its leadership in the worldwide screw pump market.
The growth period of the 1970s and 1980s was also marked by changes in company leadership. W. J. Holcombe moved to an executive position in Transamerica and assumed De Laval chairmanship in 1972 before leaving the company in 1975. Ivan Monk, who had joined De Laval in 1961, presided over the company for two years, followed by Donald T. Bixby, who served as president from 1974 to 1983 and chairman of the board until his retirement in 1985. It was Bixby who broke ground in Lawrenceville, New Jersey, for the new company headquarters in 1979. In 1983 Truman W. Netherton moved from Westinghouse to become De Laval's president. Three years later, in 1986, W. J. Holcombe returned to the newly independent company as chief executive officer and was named president the following year.
Independence from Transamerica in 1986 brought with it many fundamental changes. A loss of $21.8 million--the first in 25 years--occasioned the divestment of several divisions (Enterprise, Texas Forge, and Pumptron) whose business depended on depressed markets like oil, gas, agricultural, and nuclear utilities. At the same time, focusing on companies involved in the manufacture and sale of complementary profit-making product lines, the company began a strategic acquisition campaign. As a means of delimiting the company's course, Imo was reorganized to form its two current primary businesses: Instruments and Controls, and Power Systems. Management was restructured to better coordinate sales and operations and to accommodate future business opportunities. More attention was directed to serving the extensive aftermarket needs of the energy marketplace.
Beginning in 1987, the newspapers were filled with accounts of Imo acquisitions, large and small. Among the largest were Baird (in 1987 for $55.8 million), manufacturer of spectrometers and optical systems; Incom International Inc. (in 1987 for $145.8 million), a group of manufacturers of electronic controls and power transmission devices; and Varo (in 1988 for $117 million), a major supplier of night vision equipment to the military. Less costly but important acquisitions included Warren Pumps and Roltra (1989), Quabbin Industries (1990), an aftermarket service company and producer of retractable seals to increase turbine efficiency, and Opto-Electronic Corp., which was merged with Varo.
The 1990s and Beyond
Earnings at Imo in the early 1990s were depressed. Gross profit margins slipped from 29.1 percent in 1989 to 25.8 percent in 1991. Paying down accumulated long-term debt from its acquisition program and lessened potential recovery momentum. However, the company expected to have some long-term protection from up-and-down behavior in various markets with its carefully developed multiple-niche strategy.
During the early 1990s, company-wide efforts were directed toward increasing the competitive advantage through marketing initiatives and manufacturing efficiencies and diminishing the effects of market fluctuations. The year 1991 saw a nine percent work force reduction as manufacturing processes designed to increase productivity and reduce lead times were implemented. Streamlining strategies also resulted in the integration of like operations such as the combining of Varo and OEC (Electro-Optical Systems) and the consolidation of a new Turbo-Care group. Multi-division marketing such as the recent Pacific-area program based in Singapore exemplified the company's efforts to reach expanded global markets.
Still, the company had difficulties maintaining its financial health and operational viability. Thus, in 1992, Imo Industries implemented a strategy to reduce its outstanding debt through the sale and divestiture of certain businesses. To this end, the company completed the sale of its Delavel Turbine and TurboCare divisions in 1995, sold its Varo Electronic Systems and Baird Analytical Instruments division, and the rest of its Electro-Optical Systems division around the same time. In 1998, the company completed the sale of its Instrumentation business, and Roltra-Morse businesses. The sale of company assets contributed toward paying off a substantial portion of its debt, but the revitalization of Imo Industries and its operations were significantly hindered by lawsuits brought forth by both individuals and the U.S. government.
Specifically, Imo Industries had been identified by the U.S. Environmental Protection Agency as the potentially responsible party for hazardous waste at a number of its facilities throughout the United States, especially in the state of Washington. In addition, legal suits against the company alleging injury caused by asbestos were also filed by nearly 7,000 individuals. Although the company and its subsidiaries had never produced asbestos, the suits alleged that numerous industrial and marine products sold by the company contained asbestos.
Unable to climb out of its increasing financial difficulties, Imo Industries was purchased by II Acquisition Corporation in 1997, whose management immediately implemented a cost reduction program that included the closing of certain company manufacturing facilities, the consolidation of others, reduction of the firm's work force, and a reorganization plan designed to breathe new life into company operations. New management was also brought into the company, including a new CEO, Philip W. Knisely, in 1997.
As it approached the end of the century, the company's focus on products for transportation, industrial, utility and cogeneration, and oil, gas, and process markets that stress efficiency and environmental initiatives underscored management's concern about financial stability and could well contribute to long-term profitability and recovery. Yet Imo Industries had a long road to travel before finding the shelter it sought.
Principal Divisions: Imo Industries Ltd. (UK); Imo Industries Gmbh; Morse Controls SARL; Morse Controls S.L.; Imo Industries PTE, Ltd.; NHK Morse Co., Ltd.; Imo AB; Imo-Pumpen GmbH; Imo Industries, Inc. (Canada); Delsalesco, Inc.; Imovest, Inc.; Baird Corporation; Incom Transportation, Inc.; Boston Gear Industries of Canada, Inc.; VHC Inc.; Warren Pumps, Inc.; Deltex Service, Inc.; Shanghai Dong Feng Morse Control Cable Co., Ltd.; Bombas Imo De Venezuela C.V.
Further Reading:
"Constellation Capital Partners Affiliate Launches Tender Offer for Imo Industries," PR Newswire, July 1997.
IMO 1890--1990: An Industrial Evolution, Lawrenceville, N.J.: Imo Industries, 1991.
"Imo Industries Announces Sale to II Acquisition Corp.," PR
Newswire, June 25, 1997.
"Imo Losses Widen," United Press International, October 11, 1996.
"Imo Reports Earnings of 14 Cents Per Share," PR Newswire, June 17, 1997.
Source: International Directory of Company Histories, Vol. 27. St. James Press, 1999.
