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Trane

Trane

One Centennial Avenue
Piscataway, New Jersey 08855-6820
U.S.A.
Telephone: (732) 980-6000
Fax: (732) 980-3340
Web site: http://www.trane.com

Business Segment of American Standard Companies Inc.
Incorporated:
1913 as The Trane Company
Employees: 27,100
Sales: $6.02 billion (2005)
NAIC: 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; 334512 Automatic Environmental Control Manufacturing for Residential, Commercial, and Appliance Use

Trane is a leading global manufacturer of commercial and residential heating, ventilation, and air conditioning systems and comprises the Air Conditioning Systems and Services Segment of its parent, American Standard Companies Inc., accounting for nearly 60 percent of American Standard's revenues in 2005.

WISCONSIN ORIGINS

The Trane story begins with James Trane, who emigrated from Norway to La Crosse, Wisconsin, in 1864. After working in the plumbing trade, Trane opened his own store in 1885. According to company lore, he was a stickler for quality and good service from the beginning.

Trane was also a product innovator. Trane Vapor Heating, a new kind of low-pressure steam heat, was introduced in 1913. Around this time, Trane brought his son, Reuben, into the business, which was incorporated as The Trane Company. Within a couple of years, they had dropped the plumbing business to concentrate on heating products.

Reuben Trane had studied mechanical engineering at the University of Wisconsin in Madison, and he is credited with coming up with the idea for the convector radiator in 1925. The device circulated hot water or steam through a coil, rather than the heavy cast-iron used in radiators of the day. Reuben Trane also started the company's training program for engineering graduates.

193050: A NEW INDUSTRY

The Trane Company became a pioneer in the new field of air conditioning (though credit for the industry's birth goes to competitor Carrier). The Trane Unit Cooler, introduced in 1931, blew air over coils containing well water. While midwestern movie theaters were famous early users of Trane products, the general economy and home starts were at a standstill during this time due to the Great Depression. Nevertheless, notes the company, Trane survived and was able to develop a number of innovations that would be used in commercial heating and cooling applications for decades to come. One of these was the first hermetic centrifugal refrigeration machine, called the Turbovac.

The Allied war effort made use of Trane's ingenuity during World War II. The company's heating and cooling technology was used in industries ranging from armament production to food dehydration. Trane outfitted thousands of naval vessels and produced a critical component for fighting aircraft called the intercooler. This lightweight and efficient new heat exchanger allowed Allied piston engine performance to match that of the Germans.

POSTWAR EXPANSION

Following the war, Trane benefited from the domestic building boom. The company expanded vertically, making its own reciprocating compressors since 1950.

Until the mid-1950s, Trane's business was focused on applied air conditioning systems, which were custom designed and assembled on site. In the latter half of the decade, the company found success in unitary air conditioners, which were delivered to the customer mostly assembled.

At the time, Trane did not make window units, but the residential market for central heating and air conditioning units would take off at the end of the 1950s. Until then, most of the home HVAC market in the United States was dominated by subsidiaries of industrial giants such as Borg-Warner, Chrysler, General Electric (GE), General Motors, and Westinghouse. According to Forbes, of the three remaining major independents, Trane was a distant second to Carrier Corporation (annual sales $250 million) but was growing. Its sales of $81.6 million for 1958 were up 237 percent in ten years. The U.S. air conditioning industry as a whole was valued at $3 billion and had scarcely begun to be penetrated. Only 7 percent of homes built in 1959 included air conditioning. Central heating and air then cost an average of $1,500.

The 1960s were a period of global expansion. In 1958, Trane had acquired a minority stake in CEMAT of Epinal, France; it was later renamed Société Trane. Trane built new plants after acquiring a controlling stake in 1964. The company also added plants in the United States, in Lexington, Kentucky, in 1963 and in Rushville, Indiana, in 1972. Trane's production and research and development (R&D) facilities in La Crosse, Wisconsin, were also expanded. Trane began manufacturing in Great Britain in 1971 at a site in Colchester.

Most of Trane's business was in large industrial and commercial units. The company thrived in the booming construction market of the 1960s. Sales reached $253 million in 1970. One-fifth of this was in exports, mostly for industrial applications. Trane was reaching new heights in other ways: a version of the company's intercooler was used on the Apollo 15's lunar rover in 1971.

ENERG Y CONSCIOUS: 197080

Trane was led through most of the 1970s by Thomas Hancock, who became CEO in 1966. He was succeeded in 1978 by William G. Roth.

In a period of high energy costs, commercial customers often chose to install new, more efficient equipment, noted Barron's. Such capital outlays were easier to sell if they could pay for themselves in three years. Trane provided economic analysis of potential savings through its TRACE computer program, introduced in 1973. Sales reached $427 million in 1975; net income was $15 million. Trane spent heavily on research and capital improvements in the last half of the decade, preparing a slew of energy-conscious products for the residential and commercial markets. By 1979, sales were up to $658 million, and the company's $250 million backlog had grown to $355 million.

A couple of acquisitions during the 1970s broadened the company's offerings. Arctic Traveler Corporation, a maker of truck refrigerators, was acquired in 1970. It soon expanded into cooling devices for buses and trains. Trane bought controls company Sentinel Electronics Corporation in 1978. In the same year, it also added Charlotte-based compressor remanufacturer ServiceFirst.

COMPANY PERSPECTIVES

Your comfort is at the center of everything we do. It's that refreshing coolness when you walk in on that hot and humid day. It's the reassuring warmth on the coldest winter night. It's Trane air conditioning and heating: designed, tested and manufactured to last.

MERGERS AND ACQUISITIONS: 198090

Though the commercial construction market was cooling, Trane's plants were running at near capacity as the company entered the 1980s. In a foreshadowing of the acquisitive decade, in 1979 the company had bought back a $14 million block of shares from Tyco Laboratories, Inc., a notorious takeover artist. At this time, Trane was maintaining a slight lead in the large commercial air conditioner market.

Trane underwent a couple of major deals in short proximity in the environment of a rapidly consolidating industry. In 1982, the company acquired GE's central air conditioning department in a deal worth $135 million (the window unit business was not included). With $325 million in annual sales, GE's central units were a leader in the residential and light industrial market, an area where Trane's marketing and distribution lagged. GE was getting out of air conditioners since it did not have a commercial offering to help weather the highly cyclical residential market, according to Business Week. While the deal was strategically shrewd, it was risky because of the debt it involved. The GE unit brought with it three plants in Tyler, Texas; Trenton, New Jersey; and Fort Smith, Arkansas, as well as access to a network of 5,500 GE dealers.

Trane was itself acquired by American Standard Inc. on February 24, 1984. The moved saved Trane from a hostile takeover from IC Industries, Inc. and others who had been circling the company for years. American Standard was a familiar name in the plumbing business; it also had a unit that produced truck brakes. According to Business Week, American Standard had unsuccessfully tried to enter the air conditioner market in the 1960s.

Meanwhile, Trane continued to roll out new products. The Model CVHE CenTraVac®, which was evolved from the company's Turbovac, was a three-stage centrifugal water chiller introduced in 1981. The efficient new design became an industry standard. It was updated with the Series R® CenTraVac® in 1987, which was supplied by a new plant in Pueblo, Colorado.

Trane launched or acquired a number of overseas plants in the late 1980s and early 1990s. Locations included Malaysia, Taiwan and Egypt. The company had opened domestic sites in Louisiana and Georgia and bought Texas heat pump business Command-Aire. Trane was also upgrading its information systems.

CHALLENGES: 199099

Trane had a new CEO as it entered the 1990s, American Standard veteran Tom Smith. He described the challenges facing the company to Air Conditioning, Heating & Refrigeration News: "The change in our industry is substantialin environmental issues, consumer demands, energy needs, ad infinitum. Responding to the rate of change will drive us into the next century." Sales were nearly $2 billion in 1990 in spite of a subdued market.

In 1995, Aire Systems, a Fort Smith, Arkansas producer of custom air handlers, was acquired. This was followed three years later by the purchase of Rockingham, North Carolina's Industrial Sheet Metal and Mechanical Corp., which made customized industrial HVAC systems.

Trane began offering a temporary cooling service in 1996. Called ChillerSource, it allowed businesses to maintain operations if their regular air conditioning failed or if they needed additional cooling for industrial processes.

SHIFTING PRODUCTION IN 2000 AND BEYOND

The early years of the millennium saw layoffs in several states and strikes at the Fort Smith, Arkansas, and Lexington, Kentucky, plants over rising employee healthcare contributions. Slow sales were one reason for the cutbacks, however the company was also standardizing the production of its coils at a location near Columbia, South Carolina. Trane was soon opening facilities in North and South Carolina, while shifting some production to Mexico and China.

KEY DATES

1885:
James Trane opens plumbing store in La Crosse, Wisconsin.
1913:
Trane Vapor Heating is invented; The Trane Company is incorporated.
1925:
Reuben Trane develops the convector radiator.
1931:
Trane introduces its first air conditioner.
1938:
The Turbovac hermetic centrifugal refrigeration machine is introduced.
1958:
Success of unitary air conditioners prompts construction of a new Trane plant in Tennessee; global expansion begins.
1970:
Sales exceed $250 million.
1978:
Controls manufacturer Sentinel Electronics Corporation and the ServiceFirst compressor rebuilder are acquired.
1982:
General Electric's central air conditioning unit is acquired in $135 million deal.
1984:
Trane is acquired by American Standard.
1995:
Company joins Chinese manufacturing joint ventures.
2006:
CleanEffectsT central air cleaning technology is launched.

Overseas markets were expected to be a source of growth, including China, where Trane had annual sales of $100 million. In 2001, Trane joined Daikin of Osaka, Japan, in what was billed as the world's largest air conditioner manufacturing alliance. Japan Consumer Electronics Scan reported the aim was to stave off new low-cost competitors from China and South Korea.

In 2004, Trane consolidated its three Chinese factories into one site in Taicang in the Jiangsu province. The company also had 26 service centers in China. The fast growth theresales rose more than 30 percent in 2003was coming from newly affluent consumers, a government willing to upgrade public buildings, and foreigners investing in new properties, an executive told Air Conditioning, Heating & Refrigeration News.

Trane was seeing a renewed interest in absorption chillers, a cooling technology that ran on natural gas or steam. Trane had been offering the technology since the 1950s; it had been popular in the late 1980s when gas was cheap. Large institutions were again studying them as electric rates hit new highs. Absorption chillers could use excess heat from other industrial processes. An official told Contract Business that China was Trane's largest market for them at the time.

Following great consumer demand for air cleaning products, in 2006 Trane rolled out its Clean EffectsT line. This used technology similar to ionic air cleaners but was incorporated into the central heating and cooling system. It was billed as the most effective way for circulating clean air throughout a home.

PRINCIPAL DIVISIONS

Commercial Systems; Residential Systems.

PRINCIPAL COMPETITORS

Carrier Corporation; Johnson Controls, Inc.

FURTHER READING

Brim, Risa, "Lexington, Ky., Heating Systems Plant Workers End Strike, Accept Contract," Knight Ridder/Tribune Business News, March 24, 2001.

, "Air-Conditioning Systems Maker to Lay Off 200 Workers in Lexington, Ky.," Lexington Herald-Leader, December 6, 2002.

"Daikin, Trane Create Biggest Air Conditioner Alliance," Japan Consumer Electronics Scan, November 26, 2001.

"Forecast: Fair and Cooler," Forbes, October 15, 1959, p. 32.

Gertzen, Jason, "About 350 Trane Workers in La Crosse, Wis., to Lose Their Jobs," Milwaukee Journal Sentinel, October 30, 2003.

"Hot Spell at Trane: Grabbing a Bigger Share of Commercial Air Conditioning," Barron's, February 25, 1980, pp. 41, 48.

Klump, Edward, "Strike Ends at Heating and Cooling Unit Maker in Fort Smith, Ark.," Arkansas Democrat-Gazette, April 14, 2002.

Metz, Robert, "Trane's Deal for G.E. Unit," New York Times, October 14, 1982, p. D10.

Miller, Mike, "A Visit with Trane's President: Tom Smith," Air Conditioning, Heating & Refrigeration News, August 19, 1991, pp. 26ff.

Norton, John, "Air Conditioning Maker American Standard's Chief Foresees Continued Growth," Pueblo Chieftain, May 22, 2002.

"Ohio DSO Hosts IAQ Rollout," Air Conditioning, Heating & Refrigeration News, January 23, 2006, p. 22.

"Operations at Trane Heat Up as Orders Rise," Barron's, November 21, 1977, pp. 37-38.

Powell, Peter, "Trane Factory Targets Growing China Market," Air Conditioning, Heating & Refrigeration News, September 6, 2004, p. 10.

Radding, Alan, "The Trane Co. Combines Old, New for Tech Overhaul," InfoWorld, December 5, 1994, p. 76.

Stakes, Valerie, "Absorption Chillers: Here to Stay," Contracting Business, January 2005, pp. 65ff.

"Too Hot? Too Cold? Trane Loves It," Financial World, February 21, 1973, pp. 24, 27.

"Trane Has Finally Found a Refuge," Business Week, December 19, 1983, p. 33.

"Why Trane Expanded Its Cooling Capacity," Business Week, July 26, 1982, p. 25.

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