Clark Equipment Company
Clark Equipment Company
Incorporated: 1903 as George R. Rich Manufacturing Company; 1906 as Celfor Tool Company; 1916 as Clark Equipment Company.
Sales: $802.72 million
Stock Exchanges: New York
SICs: 3537 Industrial Trucks & Tractors; 3531 Construction Machinery & Equipment; 3714 Motor Vehicle Parts & Accessories
Clark Equipment Company designs, manufactures, and sells industrial trucks, tractors, and motor vehicle parts as well as construction machinery and equipment. The company’s products, including skid-steer loaders, construction machinery, transmissions for on-highway trucks and axles, and transmissions for off-highway equipment, are sold throughout North America, South America, and Europe.
Clark began in 1903 as the George R. Rich Manufacturing Company, a small company in Chicago owned by executives of the Illinois Steel Company. This side business was named after the mechanic who designed and manufactured a new, more durable drill that Illinois Steel used for drilling holes in steel railroad rails. Despite meeting the needs of the larger company, Rich Manufacturing did not prosper because production volume was insufficient. To increase production, the company needed both a larger facility and a larger client base. In 1904 Rich Manufacturing moved to Buchanan, Michigan where the city’s chamber of commerce was offering free rent and cheap power to attract industry.
Even with a new, larger facility, the company did not perform well. Rich Manufacturing was delinquent on $30,000 worth of bills and only had $3,000 in receivables. The owners believed it was the result of the drill’s metallurgy. They hired Eugene Clark, a 33-year-old Illinois Steel employee and mechanical engineer, as a consultant to determine the product’s shortcomings. Clark conceded that the metallurgy of the drill was poor, but also found fault with both the management and basic operations. Clark agreed to manage Rich Manufacturing if the owners would make him an equal partner.
Clark moved to Buchanan and reorganized the company’s operations. After a year under his management, Rich Manufacturing was paying its bills on time and reported profits of more than 16 percent on sales of its Celfor Drill. In 1906 the company received $25,000 from the partners, which was used to design new drills of tungsten steel. The high-speed tungsten drill bits had three times the work life of their carbon steel bit predecessors and improved workers’ productivity. That same year, Clark changed the name of the company to Celfor Tool Company to tie the product’s name more directly with the company. Over the next few years, Celfor Tool experienced the ups and downs of a company’s first years in business. The company had lost a large supply of drills in the San Francisco earthquake in 1906 and had its plant burned down in 1907. By 1909, however, year-end results were strong enough that the company paid its first dividends to investors.
Also in 1909 Clark traveled to Europe and discovered that superior steel castings were being manufactured by using electric furnaces. Believing there were opportunities in the United States for such a process, Clark and the other investors of Celfor Tool built a second plant called the Buchanan Electric Steel Company. With Clark as president, Buchanan’s objective was to produce high-quality, high-grade castings and new technologies. Buchanan supplied outside customers as well as Celfor, and in 1912 the company recorded its first two consecutive months of profits. Shortly thereafter, the company diversified into other products that utilized its ability to produce steel alloy castings. This diversification enabled Buchanan to become only the second company in the nation to produce steel disc wheels for the automobile industry.
Under Clark’s direction, both Celfor Tool and Buchanan continued to grow. Clark focused his companies’ efforts in the truck industry rather than the automobile industry because he felt that cars were luxury items and that the market was near saturation. In contrast, he perceived the truck as an industrial tool, and predicted that truck use would increase as the country’s economy grew. As a result, Buchanan began producing strong, durable steel truck wheels that replaced the wooden-spoke truck wheels that were fragile and broke down regularly. He also hired R. J. Burrows, a former chief engineer at a local automobile axle supplier, to design a truck axle that would be stronger and more durable than the unreliable chain drives. Burrows designed an internal gear drive axle that became smaller, or had a “final reduction” at the wheel. The new design replaced a majority of chain drives and became the industry standard for truck axles.
In 1916 Clark merged Celfor Tool and Buchanan and formed Clark Equipment Company. With the merger came new ideas for products. Foundry workers built a gas-powered shop buggy with a box fixed on three wheels to assist them in carting sand, supplies, and rough castings around the shop. The design was primitive; the buggy had no brakes (so it stopped only when it ran into something), and required that the driver steer right to turn left. Plant visitors, however, recognized the buggy’s value and asked to purchase the new product. The first redesign included improved steering and the addition of brakes. Introduced during World War I, five of the first ten buggies went to the U.S. arsenal. They replaced the battery-powered towing tractors that tended to stall when hauling trailer train loads of explosives to storage facilities. At the time of the redesign, the product was named Trucktractor. Over the next ten years, the Trucktractor evolved so that the box was made to dump first by gravity then mechanically. A subsequent model consisted of a platform truck with the ability to pick up materials and move them to other areas. Later an innovation allowed the platform truck to lift. In 1927 all of the features were combined to create the lift truck. This vehicle was able to pick up material, move it to another area, and elevate it for stacking or placement.
Throughout the 1920s, the company continued to grow. Clark had four plants that produced drills, reamers, electric steel castings, axles, wheels, and the Trucktractor. In 1927 Clark began producing transmissions for one of its axle customers. While the transmissions were not a natural progression from one of the company’s existing products, Clark adapted by manufacturing the cases itself and purchasing the gears from the Frost Gear Company, a supplier that Clark later acquired. The first contract was for 15,000 transmissions, a daunting order even for more experienced suppliers. Still, Clark was able to complete the order and turn a profit. In 1928 Clark achieved sales of nearly $12 million and net revenue of ten percent. That same year, Clark became a public company, and the initial stock offering yielded $3.5 million in new capital. The following year, the company achieved record sales of $15.5 million.
These successes and the accompanying strong financial results were largely the reason why Clark was able to survive the Great Depression. Company sales declined 42 percent in 1930, 33 percent in 1931, and another 50 percent in 1932. Clark reported its first operating losses in more than 20 years in 1931. By the end of 1932, sales had dipped to $2.3 million, or 14.8 percent of 1929 sales. However, Clark’s capital reserve allowed the company to continue to develop new products and emerge from the 1930s financially viable. Clark developed the Auto-Tram prototype, a fast, aluminum rail car, for the 1934 World’s Fair. While the prototype did not sell, Clark was selected by the president’s commission to develop the undercarriage for trolley street cars and subway systems. Clark supplied these industries with undercarriages for the next 20 years. By 1939 Clark had developed a new line of heavy duty lift trucks and towing tractors that were especially useful to the military during World War II. In the early 1940s, monthly production at the Trucktractor division shot as high as 2,500, up from the 1939 average of about 60. By 1943 sales were $77 million, up from $12.5 million four years earlier. The widespread use of the company’s lift trucks by production workers and the military during the war made the Clark name nearly synonymous with lift trucks by the 1940s.
Eugene Clark died in 1942 and was succeeded by executive vice-president Albert Bonner. George Spatta, the vice-president of manufacturing, became president in 1945 after Bonner’s sudden death. Following the end of the war, Clark focused on improving current product development. By the 1950s, Clark was heavily dependent on the automotive industry for its sales, earning nearly three quarters of its total revenues from axles and transmissions production for six major U.S. automotive companies. In an effort to reduce Clark’s single industry business risk, management actively pursued a strategy of product diversification through development and acquisition. In 1953 Clark acquired Ross Carrier Company, a local manufacturer of large lift trucks, straddle carriers, and cable cranes. Ross Carrier sold its products under the “Michigan” trademark and had a well established distribution network. Using the manufacturing capabilities of Ross Carrier, Clark developed a new line of rubber-tired front end loaders, and marketed the construction machinery under the Michigan brand name. By 1958, Michigan brand sales were $50 million. In 1959 Clark acquired Brown Truck Trailer, through which it entered the highway trailer business.
During the 1960s, Clark acquired several companies to provide more balance among its product lines. In 1961 Tyler Refrigeration was acquired, while Hancock Scraper was added in 1966 to expand the product line in Clark’s construction machinery division. Three years later, Clark acquired Delfield Food Service Equipment Company; this acquisition complemented the Tyler purchase and expanded the company’s commercial food industry product line. Also in 1969 Clark acquired the Melroe line of skid-steer loaders and agricultural products. By the early 1990s, Melroe Company was a wholly owned subsidiary of Clark, selling skid-steel loaders under the Bobcat trademark and its agricultural sprayers under Spra-Coupe.
During 1960s Clark became an international company, first through distribution and licensing agreements in Europe then through direct investments in overseas plants. By the end of the decade, Clark, now under the direction of Walter Schirmer, established a worldwide dealer network through which it marketed its diverse product lines. Clark’s expansions of the 1960s exceeded the company’s ability to fund additional growth. As a result, the company refocused its resources on core businesses and divested product lines without strong long-term potential. Clark sold its commercial refrigeration business, closed its highway trailer division, and ceased operations at several overseas facilities. Following this retrenchment, the company’s efforts were directed to product innovations and product line development. New products such as electric and gas-powered forklifts, advanced loaders and scrapers, and new series of transmissions as well as new models of the Bobcat product line again positioned Clark well in its core industries. By the end of the decade, Clark boasted sales of more than $1.4 billion and operated 15 major manufacturing plants in the United States and ten throughout Canada, Europe, Australia, and South America.
The recession of the 1980s again forced Clark to retrench and cease some operations such as the crane and scraper business. Other consolidation efforts included selling the credit company and service businesses that had previously provided Clark with a more vertically integrated business system. Despite these changes, Clark continued to focus on product development, and product improvements were made in each of the company’s primary business units.
In 1990 Clark sold its finance subsidiary in France, liquidated its finance operations in the Netherlands, and divested all other non-operating finance holding and insurance companies. These actions resulted from management’s strategic plan to focus efforts on manufacturing and expanding the company’s presence in the on-highway and off-highway markets. Also in 1990, management purchased a controlling interest in Hurth Axle S.p.A., an Italian manufacturer and distributor of off-highway axles. The company was made a subsidiary of Clark and was renamed Clark-Hurth Components. The terms of the sale included an immediate purchase of 83 percent of Hurth’s outstanding stock and an agreement to purchase the remaining 17 percent of outstanding stock in four equal installments at the pre-determined price of $27 million. At the end of 1992, Clark owned 91.6 percent of Hurth’s stock.
Despite management’s efforts to strengthen its core products, Clark’s fork lift business was not performing up to expectation. Fork lift sales provided 44 percent of Clark’s revenues but only 12 percent of its profits in 1990. Management dropped its prices to maintain its 20 percent U.S. market share in an industry that had overcapacity and faced increasing competition from other U.S. and Japanese companies. As sales and margins continued to fall, Clark sold its material handling subsidiary to Terex Corporation in 1992. The agreement reduced the company’s overall annual sales but improved its profit margins. Terms of the sale provided Clark with an increase of cash and eliminated $30 million in liability claims against the subsidiary that Terex assumed.
In 1991, after restating for the sale of the fork lift business and excluding a $244.9 million non-cash charge for post-retirement benefits, Clark reported a nearly $93 million loss from its four remaining business segments: Melroe, Clark-Hurth Components, Clark Automotive, and VME, the company’s 50 percent joint venture with AB Volvo. By the 1990s, Clark had internationally integrated each of the business segments. Clark Automotive’s on-highway products were manufactured in Brazil and sold to the nation’s automobile industry and the medium-duty truck industries in South and North America. Melroe’s off-highway products were manufactured in the United States and through licensees in Australia and Japan and sold worldwide under the Melroe and Bobcat names. Clark Hurth products were manufactured in the United States, Europe, and through a licensee in South Africa and sold to construction, mining, and material handling equipment industries throughout the world.
Despite the continued soft world economies, Clark reported a net profit in 1992, due in large part from its $20.2 million profit from its non-joint venture concerns. VME improved its performance, but still reported a net loss due to continued restructuring costs and acquisitions. Melroe was responsible for 51 percent of Clark’s total sales. Its market position remained strong, and its share of world skid-steer loaders was over 50 percent. Sales from Clark-Hurth accounted for 30 percent, and Clark Automotive accounted for 18 percent of Clark’s total sales.
As Clark moves toward the 21st century, it will continue to focus on product development, product improvement, and cost containment. Management will combine business acquisitions with product development to build a product base that is less sensitive to business cycles and consistent with Clark’s core businesses. Clark will pursue maintaining and improving the company’s market position in its core industries at margins that are consistent with capital and investors’ needs and expectations.
Berss, Martha, “Crying Uncle,” Forbes, December 9, 1991, p. 186.
Clark Equipment Company Annual Reports, South Bend: Clark Equipment Company, 1990-92.
Jaffe, Thomas, “Clark’s Cash: Clark Equipment Co. Sells Forklift Truck Division to Terex Corp.,” Forbes, July 6, 1992, p. 128.
McKernan, Leo J., “Remarks at the 1992 Clark Equipment Company Annual Meeting of Stockholders, Part II” May 11, 1993.
—Allyson S. Farquhar-Boyle