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NACCO Industries, Inc.

NACCO Industries, Inc.

5875 Landerbrook Drive, Suite 300
Cleveland, Ohio 44124-4017
U.S.A.
Telephone: (440) 449-9600
Fax: (440) 449-9607
Web site: http://www.nacco.com

Public Company
Incorporated:
1925 as North American Coal Corporation
Employees: 11,600
Sales: $2.78 billion (2004)
Stock Exchanges: New York
Ticker Symbol: NC
NAIC: 551112 Offices of Other Holding Companies

NACCO Industries, Inc., is a holding company whose subsidiaries are involved in lift trucks, housewares, and mining. Its three major businesses are NACCO Materials Handling Group (NMHG), Hamilton Beach/Proctor-Silex Inc., and North American Coal Corporation. NMHG controls nearly 13 percent of the global market for lift trucks sold under the Hyster and Yale brand names. Hamilton Beach/Proctor-Silex manufactures housewares products that can be found in discount department stores, warehouse clubs, and mass merchants. Its Kitchen Collection subsidiary operates as the leading specialty retailer of kitchen products with 188 stores found in factory outlet malls across the United States. NACCO's original business, North American Coal, is the largest miner of lignite coal in the United States and one of the top ten largest coal producers.

EARLY HISTORY

NACCO's story is very much the story of its founder, Frank E. Taplin, who founded the North American Coal Corporation in 1925. A native of Cleveland, Ohio, which today is still the headquarters of NACCO Industries, Taplin was born in 1875 with obvious entrepreneurial talents. When he was only seventeen he became an office boy, then salesman, for the Standard Oil Company in Cleveland. He went on from there to become a salesman for the Pittsburgh Coal Company, and finally, at age 25, he became the sales manager of the Youghiogheny and Ohio Coal Company. Coal was king in the United States at the turn of the century. Virtually all of the country's energy needs were met by it. Not surprisingly for an enterprising young American who had started his career in an oil company, Taplin would turn his energies to the coal industry, and especially to establishing a coal business of his own.

His sales experience paid off: in 1913 he bought the Cleveland and Western Coal Company, an imposing name for a small business that as yet only sold rather than manufactured coal. With war breaking out in Europe, however, business boomed in the United States, and soon Taplin's firm was in a position to expand its business and enter coal mining on its own. With the U.S. in the war by 1917, the demand for coal was high and the time ripe for Cleveland and Western to acquire three mines, to be followed by others. Postwar recession and a national coal miners' strike in 1919 did not make a serious dent in the company's fortunes. In 1925, with the incorporation of the Powhatan Mining Company, operator of Ohio's largest mechanized deep mine, the Cleveland and Western Coal Company changed its name to the North American Coal Corporation, or NACCO.

As long as Frank Taplin was president and chairman of the privately owned company, NACCO expanded, despite labor and legal disputes that troubled the company during its early years. More ominous than these problems was the steady decline in the use of coal as an energy source, even though the country's vast coal reserves were second in the world only to the Soviet Union's.

The company's steady growth continued under Taplin's leadership even during the hard-hit 1930s. Although the company suffered financial losses during the Depression, Taplin was in the forefront in the fight to extend NRA codes to the coal industry that would raise coal miners' wages and reduce their hours of work. Unfortunately, his death in 1938 left NACCO rudderless as well as mired in legal disputes.

POSTWAR SURVIVAL

The outbreak of World War II signaled an end to the Depression and started the upswing of many private fortunes, but NACCO's circumstances were still grim. By 1942, however, a new president had taken the helm: the energetic, able Henry G. Schmidt, who left his engineering position at Goodyear Tire and Rubber Company to guide NACCO back to prosperity during the war years, and to postwar expansion thereafter.

At the end of the war, the future of coal seemed locked into permanent decline. Not only did imported oil become the main American energy source, but so did natural gas, initially abundant but finite in the long run. Significant demand for coal in the postwar years, however, came from utility companies, which were expanding at a dizzying rate to meet Americans' increasing electricity needs. In 1946, only 10 percent of NACCO's coal was used by utility companies; by the late 1950s, this figure rose to over 50 percent. The rest of the coal demand came from the steel, cement, and chemical industries. In the postwar period, NACCO mirrored the tendency of other large mining companies toward increasing consolidation and expansion. This occurred in part because of the few large corporations, primarily giant industries and utility companies, which constituted the company's major customers.

By 1952 NACCO consisted of four large coal-mining subsidiaries that engaged in underground mining. Since the late 1930s, however, bituminous coal extracted from underground mines was giving way increasingly to lignite coal extracted from strip mines. Extraction from strip mining was not only more efficient but also more economical and far less dangerous than deep coal mining. As a result, NACCO acquired its first lignite field in North Dakota in 1957. Indian Head Mine, which contained the richest lignite coal deposits in North America, would be NACCO's most productive mine for decades to come. Five years after the acquisition of Indian Head Mine and other mining properties in North Dakota as well as in West Virginia, NACCO became the ninth-largest coal producer in the United States, with 70 percent of its coal purchased by utility companies.

COMPANY PERSPECTIVES

NACCO's overall strategy is to increase shareholder value by implementing initiatives designed to achieve long-term profit growth. NACCO's long-term perspective is reflected in four guiding principles: secure highly professional management teams; build industry-leading market positions; create sustainable competitive advantage positions; and attain industry-leading operational effectiveness and efficiencies.

Throughout the 1960s, NACCO expanded its coal production and business opportunities with utility companies in New York, Pennsylvania, and Ohio, as well as with the United Power Association in the Great Plains states. In this agreement, NACCO would provide one million tons of coal annually to the power company from its Indian Head Mine. In 1972 NACCO committed itself to provide the Michigan Wisconsin Pipeline Company with billions of tons of coal from its North Dakota reserves, which would be turned into liquified gas. Turning coal into gas for use as a liquid fuel was done successfully by the petroleum-starved Germans in World War II; with natural gas levels in the United States reaching a plateau in the early 1970s, gasified coal seemed to have a promising future. In anticipation, NACCO pledged to build the first major coal gasification plant in the nation, to be completed in 1981. With lignite coal mining playing an increasingly important role, NACCO turned its North Dakota and Texas operations in 1974 into a separate operation, the Western Division. In the early 1970s, NACCO's Western Division acquired the Falkirk Mining Company and Coteau Properties Company in North Dakota as wholly owned subsidiaries.

HOLDING COMPANY STRUCTURE LEADS TO DIVERSIFICATION

While profits could not have seemed better in the late 1970s, despite the passage of strict federal mine safety laws as well as frequent strikes and walkouts by the United Mine Workers, doubts were growing as to whether NACCO could remain profitable in the future. The replacement of coal with nuclear power, and the certainty of stricter environmental legislation that could raise costs even further, made the future of coal seem dim. By then, Henry Schmidt had long since retired, and a new team of managers, headed by Chairman Otes Bennett, Jr. and President/CEO Ward Smith, were at the helm to oversee a drastic alteration of their company.

In May 1986 the alteration was complete: the company would no longer be a coal-mining company with its entire profit derived from the manufacture and sale of coal, but instead would become a holding company. Renamed NACCO Industries, Inc., the new structure enabled the company to diversify. The North American Coal Corporation became a wholly owned subsidiary; although it was the oldest component of NACCO Industries, it would within a few years cease to be the biggest or most important (in 1990 it generated only 23 percent of NACCO's operating profit). The second subsidiary became the newly acquired Yale Materials Handling Corporation, a top-of-the-line forklift truck manufacturer with factories in the United States, Great Britain, and Japan (a joint venture with Sumitomo Heavy Industries, Ltd.).

Market analysts had expected NACCO to diversify into energy-related businesses and, surprised by the dissimilarity of its subsidiaries, forecasted negative consequences. Instead, by 1990 the Journal of Corporate Finance reported that NACCO Industries had become "one of the top performers" on the New York Stock Exchange. No doubt part of the reason for its success was the company's emphasis on decentralization, with each subsidiary operating on its own, with only target-setting and incentives from above.

Only a few years after restructuring, NACCO's coal-mining subsidiary sold off its bituminous coal-mining operations in the East, and concentrated instead on the mining of billions of tons of lignite, surface-mined coal in North Dakota and Texas. Through its long-term contracts with utility companies, the North American Coal Corporation proved to be recession resistant, generating a modest but important cash flow for the holding company's other business ventures. By 1990 the coal company, consisting of its own wholly owned subsidiaries Falkirk Mining Company, Coteau Properties, Sabine Mining Company, and the newest, Red River Mining Company, trimmed its staff by 30 percent and decentralized its operations to its individual mines. With full or partial interest in most of the 37 billion tons of North Dakota's coal reserves, the North American Coal Corporation was the tenth-largest coal-mining firm in the United States, despite trimming off its bituminous operations.

KEY DATES

1913:
Frank E. Taplin buys the Cleveland and Western Coal Company.
1925:
Western Coal changes its name to North American Coal Corporation (NACCO).
1957:
NACCO acquires its first lignite field in North Dakota.
1986:
NACCO adopts a holding company structure and is renamed NACCO Industries, Inc.
1988:
The Kitchen Collection Inc. and WearEver-ProctorSilex Inc. are acquired.
1989:
Hyster Company is purchased; WearEver is sold.
1990:
Proctor-Silex merges with Hamilton Beach Inc.
1995:
NACCO Materials Handling Group acquires the Italian warehouse equipment maker DECA.
1996:
Italy's ORMIC is purchased.
2000:
North American Coal acquires an interest in two lignite mining companies and a stake in 640 million tons of undeveloped lignite coal reserves.

GROWTH THROUGH ACQUISITION

NACCO Industries continued to diversify beyond these two subsidiaries. In 1989 and 1990, the holding company acquired the market leader in forklift truck manufacturing, the Hyster Company, as well as Proctor-Silex, a leader in the manufacture of home electrical appliances. In 1990 NACCO's managers announced the combination of Hyster and Yale to form a wholly owned subsidiary, Hyster-Yale Materials Handling, Inc., which became the biggest industrial lift truck manufacturer in North America (under separate brand names) and a serious competitor on the world market. Hyster-Yale became NACCO's biggest subsidiary, generating 67 percent of operating profit in 1990. The move was hailed on Wall Street as a sign of increased efficiency and long-term profitability. The downside of the merger of the two top-of-the-line lift truck companies was its vulnerability to the vicissitudes of the market: in 1991, profits of the subsidiary fell 14 percent from the previous year, due to 1990's recession.

The year 1990 also saw bold moves on the part of NACCO in the merger of Proctor-Silex, manufacturer of heat-generating electrical appliances such as toasters and coffee makers, with Hamilton Beach, maker of kitchen items such as blenders, mixers, and food processors. NACCO's third subsidiary, Hamilton Beach/Proctor-Silex, became the leader in small kitchen appliances in the United States and, unlike Hyster-Yale, remained very profitable throughout the recession.

NACCO's fourth subsidiary, The Kitchen Collection, acquired in 1988, was a chain of 72 stores (with more planned in the 1990s) located throughout the United States. The Kitchen Collection sold primarily factory-outlet Hamilton Beach/Proctor-Silex appliances and other kitchen items. Though small, The Kitchen Collection expanded continuously and proved to be recession resistant. Together, housewares (Hamilton Beach/Proctor-Silex and The Kitchen Collection) generated 10 percent of NACCO's profit in 1991.

With three subsidiaries acquired in the space of one-and-a-half years, NACCO Industries planned to concentrate on development rather than further business acquisitions. From a venerable coal company to a vibrant and dynamic holding company with dissimilar businesses and global interests (in which coal mining held only a backseat), NACCO became a new company. President and CEO Alfred M. Rankin, Jr., together with Chairman of the Board Ward Smith, acted as the strategists and target setters of the decentralized corporation. Their goal continued to be turning NACCO Industries subsidiaries into the top market leaders in their respective enterprises and globalizing the company. While the 1990s recession dampened profits and resulted in many job layoffs, the worldwide recovery of the market offset these losses. The North American Coal Corporation planned to mine billions of tons of bituminous coal outside of Anchorage, Alaska, for the Japanese market; Hyster-Yale had important interests in Great Britain, Germany (Jungheinrich), and Japan (Sumitomo Heavy Industries), with growing interests in other Far Eastern countries. Cost-cutting and incentive measures had resulted in NACCO becoming an aggressive new competitor on the global market.

1995 AND BEYOND

During the mid-1990s, NACCO began to expand and strengthen its geographic reach. In 1995, NACCO Materials Handling Group acquired DECA, an Italian warehouse equipment manufacturer. A similar company, ORMIC, was purchased the following year to secure the company's foothold in the Italian market. Operations in this business segment were bolstered further with the 1999 purchase of Van Eijle BV, a Dutch importer/exporter of forklift trucks. That same year, the company opened a warehouse in Shanghai, China.

On the housewares front, NACCO acquired the remaining 20 percent of Hamilton Beach/Proctor-Silex from Glen Dimplex. In 1997, production began at a Hamilton Beach/Proctor-Silex plant in Mexico. Two years later, this subsidiary landed a contract to provide a line of General Electric Co. branded appliances to Wal-Mart Stores.

NACCO and its three major business unitsNACCO Materials Handling Group, NACCO Housewares Group, and North American Coalfaced challenges at it entered the new millennium. Conditions began to weaken in NACCO's key markets, which forced the company to adopt a restructuring plan in order to strengthen each of its business units. As part of this plan, NACCO announced a sweeping cost reduction program. A plant in Danville, Illinois, closed and a facility in Mexico was shuttered as NACCO Housewares shifted the majority of its production to China.

Another component in NACCO's strategy was to make key acquisitions in order to shore up long-term profits. As such, North American Coal acquired Phillips Coal Company's 75 percent stake in Mississippi Lignite Mining Company, its 50 percent interest in Red River Mining Company, and its stake in 640 million tons of undeveloped lignite coal reserves in 2000. NACCO's Kitchen Collection subsidiary launched the Gadgets and More retail stores the following year.

Overall, the company posted a $36 million loss in 2001 mainly due to charges related to its restructuring and downsizing initiatives. The company's management team, led by CEO Rankin Jr., was confident the restructuring efforts would pay off in the long run. Rankin Jr. was quoted in a May 2002 Wall Street Journal, claiming, "We have a very good cost structure in place and are in position to benefit as markets for our products improve." Sure enough, the company returned to profitability in 2002 and posted a net income of $42.4 million. Profit climbed even higher in 2003, reaching $52.8 million.

Costs for material products like steel and petroleum skyrocketed in 2004. Weak sales in the retail housewares sector coupled with unfavorable currency exchange rates in Europe forced profits to fall by 9.3 percent that year. Thanks to its restructuring and cost reduction efforts over the past several years, NACCO and its subsidiaries met these challenges head on. In fact, the company ap-peared to be well positioned for success in the years to come.

                                              Sina Dubovoj

                              Updated, Christina M. Stansell

PRINCIPAL SUBSIDIARIES

Altoona Services, Inc.; Bellaire Corporation; The Coteau Properties Company; The Falkirk Mining Company; Grupo HB/PS, S.A. de C.V.; Hamilton Beach/Proctor-Silex, Inc.; Hamilton Beach/Proctor-Silex de Mexico, S.A. de C.V.; Housewares Holding Company; HB-PS Holding Company, Inc.; Hyster-Yale Materials Handling, Inc.; The Kitchen Collection, Inc.; Mississippi Lignite Mining Company; NACCO Materials Handling Group, Inc.; NACCO Materials Handling Group, Ltd.; NACCO Materials Handling, B.V.; NACCO Materials Handling, S.p.A.; NACCO Materials Handling Ltd.; NMH Holding, B.V.; NMHG Australia Holding Pty Ltd.; NMHG Distribution B.V.; NMHG Financial Services, Inc.; NMHG Holding Co.; NMHG Mexico S.A. de C.V.; NMHG Oregon, Inc.; The North American Coal Corporation; North American Coal Royalty Company; Oxbow Property Company LLC; Powhatan Corporation; Proctor-Silex Canada, Inc.; Red Hills Property Company LLC; Red River Mining Company; The Sabine Mining Company; Sumitomo-NACCO Materials Handling Group, Ltd. (Japan; 50%).

PRINCIPAL COMPETITORS

Arch Coal Inc.; CLARK Material Handling Company; Salton Inc.

FURTHER READING

Gerdel, Thomas, "NACCO's Approach May Raise Profile," Plain Dealer, November 28, 2004.

"NACCO Adds to Lignite Holdings With Phillips Coal Acquisition," Coal Week, October 16, 2000.

"NACCO Materials Buys Italian Warehouse Equipment Business," Portland Oregonian, August 1, 1996.

Oihus, Colleen, A History of Coal Mining in North Dakota, 18731982, Bismarck, 1983.

Luxenberg, Stan, "Unearthing Profits from Cleaner Coal: Strikes and Surpluses Have Stung the Mining Companies," New York Times, December 17, 1989.

Lappen, Alyssa A., "A Chip Off the Old Block (NACCO President A. M. Rankin)," Forbes, April 16, 1990.

"Forging a Synergistic Portfolio from a Diverse Combination," Journal of Corporate Finance, Summer 1990.

Levkovich, Tobias M., "NACCO Industries," Smith Barney, October 3, 1990.

"NACCO Industries, Inc.," Wall Street Journal, March 18, 1992.

"NACCO Industries, Inc.," Business Journal-Portland, July 13, 1992.

"Research Bulletin, NACCO Industries," Donaldson, Lufkin & Jenrette, August 19, 1992.

Winter, Ralph E., "NACCO Benefits From Cuts, Restructuring," Wall Street Journal, May 15, 2002.

, "NACCO Says Net in '99 to Trail High '98 Level," Wall Street Journal, May 17, 1999.

, "NACCO Says Power Woes May Help It, But Down the Road," Dow Jones Newswires, May 9, 2001.

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NACCO Industries, Inc.

NACCO Industries, Inc.

5875 Landerbrook Drive
Mayfield Heights, Ohio 44124
U.S.A.
(216) 449-9600
Fax: (216) 449-9561

Public Company
Incorporated: 1925 as North American Coal Corporation
Employees: 9,474
Sales: $1.4 billion
Stock Exchanges: New York
SICs: 1221 Bituminous Coal & LigniteSurface; 3537 Industrial Trucks & Tractors; 6719 Holding Companies Nec

NACCO Industries, Inc. is a medium-sized, diversified holding company consisting of four major operating subsidiaries: the oldest, the North American Coal Corporation, is the tenth-largest producer of lignite (surface-mined) coal in the United States; Hyster-Yale Materials Handling, Inc., which designs and manufactures forklifts for domestic and foreign markets, is the largest forklift manufacturer in the nation; Hamilton Beach/ Proctor-Silex, Inc., is one of the nations leading producers of electric home appliances; and The Kitchen Collection is a highly successful nationwide retailer of home electric products and kitchenware. Because of its great diversity, NACCO Industries, according to Donaldson, Lufkin and Jenrette, is one tough company to analyze. The subsidiaries appear to have nothing in common, and yet NACCO has emerged as a quirky American business success story.

NACCOs story is very much the story of its founder, Frank E. Taplin, who founded the North American Coal Corporation in 1925. A native of Cleveland, Ohio, which today is still the headquarters of NACCO Industries, Taplin was born in 1875 with obvious entrepreneurial talents. When he was only seventeen he became an office boy, then salesman, for the Standard Oil Company in Cleveland. He went on from there to become a salesman for the Pittsburgh Coal Company, and finally, at age twenty-five, he became the sales manager of the Youghiogheny and Ohio Coal Company.

Coal was king in the United States at the turn of the century. Virtually all of the countrys energy needs were met by it. Not surprisingly for an enterprising young American who had started his career in an oil company, Taplin would turn his energies to the coal industry, and especially to establishing a coal business of his own.

His sales experience paid off: in 1913 he bought the Cleveland and Western Coal Company, an imposing name for a small business that as yet only sold rather than manufactured coal. With war breaking out in Europe, however, business boomed in the United States, and soon Taplins firm was in a position to expand its business and enter coal mining on its own. With the U.S. in the war by 1917, the demand for coal was high and the time ripe for Cleveland and Western to acquire three mines, to be followed by others. Postwar recession and a national coal miners strike in 1919 did not make a serious dent in the companys fortunes. In 1925, with the incorporation of the Powhatan Mining Company, operator of Ohios largest mechanized deep mine, the Cleveland and Western Coal Company changed its name to the North American Coal Corporation, or NACCO.

As long as Frank Taplin was president and chairman of the privately owned company, NACCO expanded, despite labor and legal disputes that troubled the company during its early years. More ominous than these problems was the steady decline in the use of coal as an energy source, even though the countrys vast coal reserves were second in the world only to the Soviet Unions.

The companys steady growth continued under Taplins leadership even during the hard-hit 1930s. Although the company suffered financial losses during the Depression, Taplin was in the forefront in the fight to extend NRA codes to the coal industry that would raise coal miners wages and reduce their hours of work. Unfortunately, his death in 1938 left NACCO rudderless as well as mired in legal disputes.

The outbreak of World War II signalled an end to the Depression and started the upswing of many private fortunes, but NACCOs circumstances were still grim. By 1942, however, a new president had taken the helm: the energetic, able Henry G. Schmidt, who left his engineering position at Goodyear Tire and Rubber Company to guide NACCO back to prosperity during the war years, and to postwar expansion thereafter.

At the end of the war, the future of coal seemed locked into permanent decline. Not only did imported oil become the main American energy source, but so did natural gas, initially abundant but finite in the long run. Significant demand for coal in the postwar years, however, came from utility companies, which were expanding at a dizzying rate to meet Americans increasing electricity needs. In 1946, only ten percent of NACCOs coal was used by utility companies; by the late 1950s, this figure rose to over fifty percent. The rest of the coal demand came from the steel, cement, and chemical industries. In the postwar period, NACCO mirrored the tendency of other large mining companies toward increasing consolidation and expansion. This occurred in part because of the few large corporations, primarily giant industries and utility companies, that constituted the companys major customers.

By 1952 NACCO consisted of four large coal-mining subsidiaries that engaged in underground mining. Since the late 1930s, however, bituminous coal extracted from underground mines was giving way increasingly to lignite coal extracted from strip mines. Extraction from strip mining was not only more efficient but also more economical and far less dangerous than deep coal mining. As a result, NACCO acquired its first lignite field in North Dakota in 1957. Indian Head Mine, which contained the richest lignite coal deposits in North America, would be NACCOs most productive mine for decades to come. Five years after the acquisition of Indian Head Mine and other mining properties in North Dakota as well as in West Virginia, NACCO became the ninth-largest coal producer in the United States, with 70 percent of its coal purchased by utility companies.

Throughout the 1960s, NACCO expanded its coal production and business opportunities with utility companies in New York, Pennsylvania, and Ohio, as well as with the United Power Association in the Great Plains states. In this agreement, NACCO would provide one million tons of coal annually to the power company from its Indian Head Mine. In 1972 NACCO committed itself to provide the Michigan Wisconsin Pipeline Company with billions of tons of coal from its North Dakota reserves, which would be turned into liquified gas. Turning coal into gas for use as a liquid fuel was done successfully by the petroleum-starved Germans in World War II; with natural gas levels in the U.S. reaching a plateau in the early 1970s, gasified coal seemed to have a promising future. In anticipation, NACCO pledged to build the first major coal gasification plant in the nation, to be completed in 1981. With lignite coal mining playing an increasingly important role, NACCO turned its North Dakota and Texas operations in 1974 into a separate operation, the Western Division. In the early 1970s, NACCOs Western Division acquired the Falkirk Mining Company and Coteau Properties Company in North Dakota as wholly owned subsidiaries.

While profits could not have seemed better in the late 1970s, despite the passage of strict federal mine safety laws as well as frequent strikes and walkouts by the United Mine Workers, doubts were growing as to whether NACCO could remain profitable in the future. The replacement of coal with nuclear power, and the certainty of stricter environmental legislation that could raise costs even further, made the future of coal seem dim. By then, Henry Schmidt had long since retired, and a new team of managers, headed by Chairman Otes Bennett, Jr. and President/CEO Ward Smith, were at the helm to oversee a drastic alteration of their company.

In May 1986 the alteration was complete: the company would no longer be a coal-mining company with its entire profit derived from the manufacture and sale of coal, but instead would become a holding company. Renamed NACCO Industries, Inc., the new structure enabled the company to diversify. The North American Coal Corporation became a wholly owned subsidiary; although it was the oldest component of NACCO Industries, it would within a few years cease to be the biggest or most important (in 1990 it generated only 23 percent of NACCOs operating profit). The second subsidiary became the newly acquired Yale Materials Handling Corp., a top-of-the-line forklift truck manufacturer with factories in the United States, Great Britain, and Japan (a joint venture with Sumitomo Heavy Industries, Ltd.).

Market analysts had expected NACCO to diversify into energy-related businesses and, surprised by the dissimilarity of its subsidiaries, forecasted negative consequences. Instead, by 1990 the Journal of Corporate Finance reported that NACCO Industries had become one of the top performers on the New York Stock Exchange. No doubt part of the reason for its success was the companys emphasis on decentralization, with each subsidiary operating on its own, with only target-setting and incentives from above.

Only a few years after restructuring, NACCOs coal-mining subsidiary sold off its bituminous coal-mining operations in the East, and concentrated instead on the mining of billions of tons of lignite, surface-mined coal in North Dakota and Texas. Through its long-term contracts with utility companies, the North American Coal Corporation proved to be recession resistant, generating a modest but important cash flow for the holding companys other business ventures. By 1990 the coal company, consisting of its own wholly owned subsidiaries Falkirk Mining Co., Coteau Properties, Sabine Mining Company, and the newest, Red River Mining Company, trimmed its staff by 30 percent and decentralized its operations to its individual mines. With full or partial interest in most of the 37 billion tons of North Dakotas coal reserves, the North American Coal Corporation was the tenth-largest coal-mining firm in the United States, despite trimming off its bituminous operations.

NACCO Industries continued to diversify beyond these two subsidiaries. In 1989 and 1990, the holding company acquired the market leader in forklift truck manufacturing, the Hyster Company, as well as Proctor-Silex, a leader in the manufacture of home electrical appliances. In 1990 NACCOs managers announced the combination of Hyster and Yale to form a wholly owned subsidiary, Hyster-Yale Materials Handling, Inc., which became the biggest industrial lift truck manufacturer in North America (under separate brand names) and a serious competitor on the world market. Hyster-Yale became NACCOs biggest subsidiary, generating 67 percent of operating profit in 1990. The move was hailed on Wall Street as a sign of increased efficiency and long-term profitability. The downside of the merger of the two top-of-the-line lift truck companies was its vulnerability to the vicissitudes of the market: in 1991, profits of the subsidiary fell 14 percent from the previous year, due to 1990s recession.

The year 1990 also saw bold moves on the part of NACCO in the merger of Proctor-Silex, manufacturer of heat-generating electrical appliances such as toasters and coffee makers, with Hamilton Beach, maker of kitchen items such as blenders, mixers, and food processors. NACCOs third subsidiary, Hamilton Beach/Proctor-Silex, became the leader in small kitchen appliances in the United States and, unlike Hyster-Yale, remained very profitable throughout the recession.

NACCOs fourth subsidiary, The Kitchen Collection, acquired in 1988, was a chain of 72 stores (with more planned in the 1990s) located throughout the United States. The Kitchen Collection sold primarily factory-outlet Hamilton Beach/Proctor-Silex appliances and other kitchen items. Though small, The Kitchen Collection expanded continuously and proved to be recession resistant. Together, housewares (Hamilton Beach/ Proctor-Silex and The Kitchen Collection) generated 10 percent of NACCOs profit in 1991.

With three subsidiaries acquired in the space of one-and-a-half years, NACCO Industries planned to concentrate on development rather than further business acquisitions. From a venerable coal company to a vibrant and dynamic holding company with dissimilar businesses and global interests (in which coal mining held only a backseat), NACCO became a new company. President and CEO Alfred M. Rankin, Jr., together with Chairman of the Board Ward Smith, acted as the strategists and target setters of the decentralized corporation. Their goal continued to be turning NACCO Industries subsidiaries into the top market leaders in their respective enterprises and globalizing the company. While the 1990s recession dampened profits and resulted in many job layoffs, the worldwide recovery of the market should offset these losses. The North American Coal Corporation already was planning to mine billions of tons of bituminous coal outside of Anchorage, Alaska, for the Japanese market; Hyster-Yale had important interests in Great Britain, Germany (Jungheinrich), and Japan (Sumitomo Heavy Industries), with growing interests in other Far Eastern countries. Cost-cutting and incentive measures resulted in NACCO becoming an aggressive new competitor on the global market.

Principal Subsidiaries

North American Coal Corp.; The Kitchen Collection; Hyster-Yale Materials Handling, Inc. (97%); Hamilton Beach/Proctor-Silex, Inc. (80%).

Further Reading

The North American Coal Corporation, Western Division and Subsidiaries, North American Coal Corporation; The North American Coal Corporation and Subsidiaries, North American Coal Corporation, 1977; Coal Age, October 1977; Oihus, Colleen, A History of Coal Mining in North Dakota, 1873-1982, Bismarck, 1983; Annual Report: NACCO Industries, Inc., Cleveland, Ohio, 1986, 1990, 1991; Luxenberg, Stan, Unearthing Profits from Cleaner Coal: Strikes and Surpluses Have Stung the Mining Companies, New York Times, December 17, 1989; Lappen, Alyssa A., A Chip Off the Old Block (NACCO President A. M. Rankin), Forbes, April 16, 1990; Forging a Synergistic Portfolio from a Diverse Combination, Journal of Corporate Finance, Summer 1990; Levkovich, Tobias M., NACCO Industries, Smith Barney, October 3, 1990; NACCO Industries, Inc., Wall Street Journal, March 18, 1992; NACCO Industries, Inc., Business Journal-Portland, July 13, 1992; Research Bulletin, NACCO Industries, Donaldson, Lufkin & Jenrette, August 19, 1992.

Sina Dubovoj

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