While many American manufacturers have failed to develop strategies for competing in the global marketplace, Modine Manufacturing Co. and chief executive officer David Rayburn have found a path that is working for them.
And how.
Modine, which was named to the Forbes 400 List of Best Big Companies in America in 2004, expects to grow its revenue to $1.5 billion in 2005.
Rayburn has a straightforward global strategy: either acquire competitors to gain market share in current or new geographic regions or create growth by acquiring companies with complementary technologies.
That strategy has enabled Modine to evolve from being a global player to being a global company.
"Sometimes companies want to make an acquisition to gain market share or to be in a certain region. We prefer to have an acquisition with synergy, where we create the opportunity beyond just buying that business, that volume, that sales," Rayburn said.
Rayburn has created a global footprint for Modine with acquisitions that reflect both defensive and offensive corporate strategies at the same time.
He is defensive by opening locations worldwide to support his global customers.
He is offensive by moving into fast-growing markets in one of three ways: (1) acquiring a competitor; (2) launching a 50/50 joint venture with a similar company; or (3) opening a new location in a rising market.
The company has aggressively expanded into Brazil and South Korea under the leadership of Rayburn, who became the company’s president and CEO two years ago after holding various executive positions at the firm since 1991.
Modine bolstered its presence in Asia last July when it finalized its acquisition of Automotive Climate Control, a division of WiniaMando Inc. of Seoul, South Korea. Automotive Climate Control designs and manufactures heating, ventilating and air conditioning (HVAC) systems for vehicles, as well as other heat transfer components.
By acquiring Automotive Climate Control, Modine gained manufacturing facilities in Asan City, South Korea; a facility in Shanghai, China; and a facility in Hefei, China, now the location of Modine’s Asia headquarters.
Modine originally acquired Automotive Climate Controls’ 50 percent ownership of a joint venture with Anhui Jianghuai Climate Control Co. Ltd., at the Hefei location. Modine finalized the purchase of Anhui’s half in October.
With the acquisition, Modine expects $330 million in net new original equipment business over the next five years.
"We have a philosophy that we are not going to be overly dependent by any one customer or any one market," Rayburn said. "We are not a holding company. We are not a portfolio company. We are a thermal dynamic company, and heat transfer is our core competency. We are going to play in the markets we are good in, and we are going to evaluate markets we have yet to be in to see if we can bring something to the table to differentiate ourselves."
By being available worldwide, Modine’s customers can get the same product with the same design and quality locally instead of shipping merchandise from North America or Europe.
When a company owns a manufacturing plant in another country, it can better serve its customers in that country, Rayburn said.
"I think to be a global player and to be globally competitive, it is important to source appropriately on products from low-cost countries to complement and supplement your capabilities," Rayburn said. "We make heat transfer parts, but many times our assemblies require other components that if we can get equal quality, it makes us more competitive and actually protects jobs instead of losing jobs. It is just part of being part of a global environment."
Modine currently manufactures components for the agricultural, construction, automotive and truck markets, but Rayburn is seeking other industrial applications for its advanced heat transfer technology.
Rayburn recently looked into the electronics industry and the possibility that Modine’s heat transfer devices could replace the aluminum excursions that currently cool electronic devices such as computers.
Meanwhile, Modine’s engineers are working with fuel cell technology for automotive and stationary applications, Rayburn said.
"We are building relationships, and we are creating a portfolio of intellectual property so that when fuel cell technology breaks loose, Modine will be known and will have the technology to then be a commercial success," Rayburn said.
Looking ahead, Rayburn expects continued growth, although the Chinese market may soften some in 2005 and 2006.
"I don’t see China going backwards next year, but we won’t see the rate of growth to continue this year as we did in past years," Rayburn said. "I think our economies are fragile. If we had another political crisis, whether in this country or any other country, I think our economies are fragile enough that there would be an immediate contraction like we had after Sept. 11. I think a lot of people have optimism for 2005, but I would say it is guarded."
INFOBOX:
Company: Modine Manufacturing Co.
Industry: Manufactures thermal management systems and components, bringing heating and cooling technology and solutions to diversified global markets. The company’s products are used in vehicles, HVAC equipment, industrial equipment, refrigeration systems, fuel cells and electronics.
Projected fiscal 2005 sales: $1.5 billion
Corporate headquarters: 1500 DeKoven Ave., Racine
Domestic locations: Buena Vista, Va.; Camdenton, Mo.; Clinton, Tenn.; Emporia, Kan.; Ferris, Texas; Harrodsburg, Ky.; Jefferson City, Mo.; Joplin, Mo.; Lancaster, Penn.; Lawrenceburg, Tenn.; Logansport, Ind.; McHenry, Ill.; Pemberville, Ohio; Richland, S.C.; Trenton, Mo.; Toledo, Ohio; Washington, Iowa and West Kingston, R.I.
Overseas operations: 17 locations in Europe, South America and Asia.
Web site: www.modine.com
Founded: 1916
Leadership: David Rayburn, president and chief executive officer
INFOBOX:
Modine momentum in 2004
* The company posted record annual sales of $1.2 billion for the past fiscal year.
* The company’s stock moves to the "Big Board," switching from the Nasdaq Stock Exchange to the New York Stock Exchange.
* The company is named to the Forbes 400 List of Best Big Companies in America.
* The company lands contract to manufacture oil coolers for Dodge Ram trucks.
* The company lands $3 million contract to develop new HVAC systems for the U.S. Army.
* The company signs letter of intent to spin off its Modine Aftermarket business and merge it with Transpro Inc. to create a new publicly traded company. Modine will acquire Transpro’s heavy-duty original equipment business in Jackson, Miss., for $17 million in cash. The new company will have annual revenues of more than $400 million.
* The company acquires Automotive Climate Control, a division of WiniaMando Inc. of Seoul, South Korea.
* The company begins production of new parts for BMW automobiles in Wackersdorf, Germany.
* The company, through its Electronics Cooling Group, Thermacore International Inc., expands its Taiwanese facility to more than double the production of its high performance heat pipes.
The company lands a $15 million order to manufacture thermal management components for Peugot Citroen, France’s top-selling automobile manufacturer. The deal is the largest condenser order in Modine’s 88-year history.
January 21, 2005, Small Business Times, Milwaukee, WI
