Beloit Corporation

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Beloit Corporation

1 St. Lawrence Avenue
Beloit, Wisconsin 53511
(608) 365-3311
Fax: (608) 364-7013

Wholly Owned Subsidiary of Harnischfeger Industries, Inc.
1858 as The Merrill and Houston Iron Works
Employees: 7,500
Sales: $712.8 million
SICs: 3554 Paper Industries Machinery

Beloit Corporation is the worlds leading manufacturer of pa-permaking machinery. An estimated 70 percent of the worlds newsprint, writing, and printing-grade paper is produced on machines made by Beloit, as is an estimated 50 percent of the worlds napkins, paper towels, and tissues. Besides manufacturing paper and paperboard machines, the company has a substantial business rebuilding these machines and providing parts and service. Beloit also produces equipment and systems for pulp manufacturing, paper stock preparation, deinking, and recycled fiber and wood chip processing. The company has the industrys largest installed equipment base and operates plants in the United States, Italy, England, Brazil, Poland, and Canada. Beloit licensees also operate plants in Australia, China, France, Italy, Japan, Spain, and India. Beloits machines are considered the Cadillac of the industry; the company is responsible for many major advances in papermaking technology, and its machines hold numerous records for speed.

The company was founded in 1858 in Beloit, Wisconsin, by partners Orson E. Merrill and George Houston. Their firm, The Merrill and Houston Iron Works, principally manufactured a waterwheel that had been developed by George Houston, but it also made iron products including saws, augers, spokes, iron and steel castings, and horseshoe nails. The Merrill and Houston Iron Works got its first order for papermaking machinery from Orson Merrills brother, who owned a paper mill on the nearby Rock River. He had bought his paper machine in New England, but rather than order parts from the eastern manufacturer he asked if Merrill and Houston could make them. Soon other area paper mills also placed orders for parts, and by 1862 Merrill and Houston was building complete paper machines. The company continued to produce its waterwheels and other iron products while it built several paper machines a year, from four in 1862 to 14 in 1884.

In spite of this steady business, The Houston and Merrill Iron Works ran into financial difficulties. The company changed hands several times until it landed in receivership in 1882. The plant continued to operate in order to pay off its debts. The assets of the company were sold to a Janesville, Wisconsin, businessman in January 1885 for $20,000. Later that year, four employees of Merrill and Houston formed an association to lease back from the purchaser most of the plant and property. Under the name Beloit Iron Works, the former employees put the plant back in business. Fred Messer, who had been a superintendent at Merrill and Houston, became president, and the other officers of the new company included a lathe operator, a draftsman, and a former boss erector. These four, along with ten employees, turned the company around. In its first year Beloit Iron Works had sales of nearly $20,000, and by 1889 the company employed 100 people. Beloit filled many orders for paper machine parts and soon advertised that it could build a complete paper machine every 30 days.

By 1889 Beloits officers had bought back all the property of the old Houston and Merrill company. Orders for parts, rebuilds, and new paper machines came from all over the Midwest, Canada, and even Texas. Beloit built and installed a paper machine at the Chicago Worlds Fair of 1893 and won a United States Columbian Award. This exposure bolstered Beloits reputation in the United States, and its name became known abroad as well. The company plowed money back into the plant in order to keep up with changing technology. Its paper machines became larger and faster, and around the turn of the century they sold for between $25,000 and $30,000 each. Beloit sold a machine to Japan in 1897, two to China in 1900, and the company continued to lead the industry over the next dozen years.

The paper industry grew rapidly, and sales at Beloit increased. The company expanded its facilities and modernized its tools and machine shop in the 1920s to make ever larger machines. The first paper machines the company had made had been only 30 inches wide; the machines of the 1920s were wider than 160 inches. As sales surged, Beloit became a large employer, with a peak of 550 workers in 1930. Alonzo Aldrich, one of the original four founders of Beloit Iron Works and president since 1889, presided over the good times. Aldrich died in 1931, and the presidency passed to his son-in-law, Elbert Neese Sr., who had been a manager at Beloit since 1916. The first year of his presidency coincided with the nadir of the Great Depression. Orders were next to nothing, and over two-thirds of Beloits workers were let go. But the company recovered gradually, and by 1937 it employed more workers than in 1930. When the United States entered World War II, Beloit turned its production from paper machines to machines for war materials. It built lathes and boring mills, even engines for the Navy. Beloit workers became unionized for the first time, becoming members of the International Association of Machinists.

After the war Beloit went back to manufacturing papermaking machines. The company added buildings and equipment to make newer machines that broke existing records for speed and production. As Beloit returned to prosperity, it began to expand.

In 1949 Beloit opened a sales office in Paris. About one-fifth of Beloits shipments were overseas in the 1950s, and the company began to acquire plants abroad. In 1957 Beloit bought an Italian operation, which it named Beloit Italia SpA. Further international expansion included a plant in England, Beloit Walmsley Ltd., in 1960; a Canadian branch in 1962; and a Spanish operation in 1963. In the United States Beloit opened sales offices in Portland, Oregon, and Mobile, Alabama, in the 1950s and acquired several paper equipment manufacturers in Pennsylvania.

While continuing to expand internationally in the 1960s with new projects in Poland and India, Beloit began to diversify its product line somewhat. The company changed its name in 1962 from Beloit Iron Works to Beloit Corporation in order to reflect its changing business. Beloit experimented with manufacturing machinery for use in the plastics industry and other nonpaper industries. The company eventually deemed these diversification projects unsuccessful. When the paper industry slowed down between 1970 and 1972 Beloit had very few orders to fill. Though business picked up dramatically in the next two years, surging inflation in 1974 had dire effects. That year the company lost money for the first time since its reorganization in 1885. However, Beloit quickly recovered and entered one of its most profitable periods beginning in 1975.

Elbert Neese Sr. had died in 1961, and he was succeeded as president by Harry Moore. Moore was president until 1974, when Elbert Neese Jr. took the post (Moore was elevated to chairman). Beloit continued to diversify, acquiring a farm, an insurance company and a railroad in the 1970s. Though these were ultimately unsuccessful projects, creating a financial drain, Beloit still made significant advances in its core business paper machinery. Beloits Jones Division in Dalton, Massachusetts, expanded its facilities in order to research new paper industry technology such as refiner mechanical pulp production and newspaper deinking. In 1977 Beloit developed computer-aided drafting and computer-aided manufacturing (CAD/CAM) technology to automate its machinery design process. Because Beloits papermaking machines were custom built, the design process for each order required sometimes thousands of drawings, and so the CAD/CAM development increased the companys productivity enormously. Beloit also acquired more businesses in the 1970s, including the Lenox Machine Company, which manufactured winders and sheeters for the paper industry, and another specialized paper industry manufacturer, the Rader Companies. In 1977 Beloit spent $12 million to acquire the Roll Covering Division of Raybestos Manhattan, which became Beloit Manhattan. This company chalked up about $8 million in sales, but it suffered very little from the ups and downs of the business cycle that affected Beloit, a big advantage. Manhattans acquisition added stability to Beloit, and in less than ten years Manhattans sales were close to $50 million. Beloit also acquired minority shareholdings in some of its overseas plants in the 1970s, and in 1978 it began construction on a manufacturing division in Brazil, Beloit-Rauma.

Elbert Neese Jr. became chairman of Beloit in 1984, with Thomas McKie succeeding him as president. Then, in 1985, Neese announced the Neese family wished to sell the Beloit Corporation. The business had been closely held for more than a century. When plans for the sale were announced, over 30 companies in the United States, Europe, and Japan expressed an interest. After only a few months, a deal was struck with Milwaukee-based Harnischfeger Corp., a maker of mining and earth-moving equipment. Harnischfeger paid $175 million for Beloit Corp. At the time, Beloit had sales of $483 million, with 18 plants in five countries and 6,300 employees. Harnischfeger boasted 1985 sales of $484 million. Harnischfegers president and chief executive officer, William W. Goessel, had spent 32 years as a Beloit executive before he moved to Harnischfeger in 1982, and so he understood Beloits business very well. After the acquisition by Harnischfeger, Beloit restructured its operations to concentrate more closely on pulp and paper industry equipment. Shortly after the sale to Harnischfeger, Beloits Japanese licensee, Mitsubishi Heavy Industries Ltd., bought a 20 percent interest in Beloit.

John A. McKay became Beloits new president in November 1986. The next year, Beloit formed a strategic alliance with Measurex Corp., an industrial process control company, to develop online computer controls and computer integrated manufacturing systems for the paper industry. Paper machine technology was advancing rapidly, and consumers were demanding higher-quality products. The alliance with Measurex allowed Beloit to offer its customers highly sophisticated control systems using artificial intelligence. Beloit also spent millions of dollars on research and development and maintained three research centers: a main one in Rockton, Illinois, another in Pittsfield, Massachusetts, and a third in Bolton, England.

The late 1980s saw a boom in the paper industry. Paper companies were making record profits, and Beloit employed two shifts of engineers to keep up with equipment orders. Because Beloit had so much equipment installed around the world, it also had a large and profitable business in spare parts and rebuilds. The company reinvested much of its profit in upgrading equipment. Harnischfeger spent close to $26 million in 1987, mostly to restructure, retool, and modernize Beloit plants. The Beloit, Wisconsin, plant was gutted and refitted with new machine tools; the Beloit Manhattan facility and a plant in Canada were similarly modernized. Beloit also overhauled its spare parts operation. By 1987 Beloits spare parts storage area was completely computerized and running without a single human worker inside the area. Beloits customers had computer access to the spare parts inventory and could place an order directly with the storage area for immediate automatic retrieval and shipping. The first year this system was in place Beloits spare parts business increased 40 percent. The company installed the system in its Canadian and European plants as well.

Business in the late 1980s was so good that it created a backlog, and orders took 18 months to fill. The price for a new paper machine was close to $50 million, though only a few years earlier the price had been between $10 and $15 million. Not surprisingly, 1988 was a record year for Beloit. Sales increased 42 percent over the previous year, to $697 million. The company handled approximately 45 major rebuild projects and had a similar number of orders for new equipment. Beloit had five divisions worldwide capable of making a complete paper machine, and each was working at top capacity. Beloit had about $952 million in bookings for 1988 and, including Beloits licensees, bookings topped $1 billion. Beloit also handled its first project in the Soviet Union and explored the China market through a joint venture. The company continued to plow money back into plants, investing another $12.7 million in facilities and equipment in Wisconsin. New tools enabled Beloit to produce paper machines over 400 inches wide, as its customers were requiring.

Beloit continued to expand its manufacturing capabilities in the 1990s. In 1991 the company acquired an 80 percent equity in a Polish paper machine manufacturer, which it renamed Beloit Poland S.A. in 1993. Beloit also acquired a Wisconsin manufacturer of refiner plate in 1992 and entered a joint venture in 1994 with a German paper machinery manufacturer, Jagenberg AG. Beloit also acquired a paper machine optical alignment and inspection services company, OASIS Inc., in 1994.

Beloit had experienced trouble with patent infringement from European competitors, and in the 1980s it had filed patent infringement suits. After almost ten years in various courts, the lawsuits were resolved in Beloits favor. In May 1993 Beloit was awarded $17.2 million in damages after a federal court found a German manufacturer, J. M. Voith GmbH, had infringed Beloits paper drying technology patents. And in November 1994 Beloit was awarded $7.9 million in damages in a patent infringement case involving a Finnish competitor, Valmet Corp.

Recycling became an increasingly important part of the paper industry in the 1990s, and Beloit positioned itself to take advantage of this trend. The company began constructing small paper mills, called minimills, to make recycled paper out of used corrugated boxes. Beloit had long been a leader in deinking and recycling technology. The challenge of the minimills was that they generally had to be located in an urban area in order to be close to a used paper source, limiting access to the large amounts of water that traditional mills used for processing. Beloit opened a recycling minimill in Montville, Connecticut, in 1994 and built another near Oswego, New York. Beloit also entered a consortium of three companies in 1994 to construct and operate urban minimills. The consortium pooled the resources of Hoffman Environmental Systems, a company that developed no-discharge water technology, as well as Ogden Projects, which ran the completed mills, and Beloit, which built the recycling machinery. This was expected to be an area of rapid expansion for Beloit in the future.

Principal Subsidiaries

Beloit Canada Ltd./Ltee.; Beloit Industrial Ltda. (Brazil); Beloit Poland S.A.; Beloit Technologies Inc.; BWRC, Inc.; Beloit Italia SpA (Italy); Beloit Lenox Europe GmbH (Germany); Beloit Walmsley Limited (United Kingdom); J&L Fiber Services, Inc.; Optical Alignment systems & Inspection Serv., Inc.; Sandusky International Inc.

Further Reading

Ahn, C. R., Spare Parts and Service Simplified by Computerized Ordering System, Pulp & Paper, September 1987, pp. 107-10.

Alliance: Industry Suppliers Try Unique Approach to Consolidation, Pulp & Paper, August 1987, pp. 172-76.

Beloit Sold for $175 Million to Harnischfeger, Pulp & Paper, April 1986, p. 21.

Beloit Wins Valmet Appeal; Sues Voith, Chesapeake, Pulp & Paper, March 1985, pp. 35-37.

Customized CAD/CAMs Aid Machinery Manufacturers Drawing Ability, Pulp & Paper, September 1987, pp. 72-73.

Evans, John C. W., Beloit-Jones Research Center Boasts Latest in TMP Equipment, Pulp & Paper, April 1976, pp. 116-17.

Harnischfeger Acquires Beloit, Wall Street Journal, April 1, 1986, p. 6.

Harnischfeger Expects Lower Fiscal93 Profit Than Analysts Predict, Wall Street Journal, January 14, 1993, p. B4.

Harnischfeger Industries, Inc.: Beloit Unit Wins $7.9 Million in Patent-Infringement Case, Wall Street Journal, November 29, 1994, p. B6.

Harnischfeger to Sell 20% Holding in Unit to Japanese Concern, Wall Street Journal, October 27, 1986, p. 11.

Harnischfeger Wins Damages, Wall Street Journal, May 25, 1993, p. C22.

Kansas, Dave, Mills for Recycled Paper Head to the Big City, Wall Street Journal, January 21, 1994, p. B1.

Patrick, Ken, Beloits Future Looks Bright, Steady Growth Expected by Harnischfeger, Pulp & Paper, May 1986, pp. 66-69.

Expansion Pace Puts Heavy Demands on Manufacturers, Pulp & Paper, April 1989, pp. 74-77.

TC: Valmet Didnt Infringe U.S. Patent, Pulp & Paper, June 1984, p. 39.

A. Woodward

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Beloit Corporation

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