Modine Manufacturing Company History
Racine, Wisconsin 53403-2552
Telephone: (262) 636-1200
Fax: (262) 636-1361
Sales: $1.09 billion (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: MODI
NAIC: 33635 Motor Vehicle Transmission and Power Train Parts Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing; 336391 Motor Vehicle Air-Conditioning Manufacturing
Our vision is to pursue market leadership by being an innovative, customer-focused, global company delivering exceptional quality and value. We will grow our core business of heat transfer with superior technical solutions in systems, products, and services that we provide.
- Arthur B. Modine establishes Modine Manufacturing.
- The Spirex radiator becomes standard equipment on World War I artillery tractors.
- The company enters the commercial building heaters market.
- Modine secures a contract to produce radiators for Ford's new V-8 engine.
- Modine develops a vehicular wind tunnel.
- Ohio-based Schemenauer Manufacturing is acquired.
- Modine launches manufacturing operations outside of the United States.
- The firm purchases Sundstrand Corporation.
- Germany-based Langerer & Reich is acquired.
- Thermacore International Inc. is added to the company's arsenal.
Modine Manufacturing Company operates as a leading thermal management concern that serves the light truck, heavy equipment, HVAC (heating, ventilating, and air conditioning systems), and electronics markets. The company manufactures engine, charge-air, oil, transmission, HVAC systems, and gas recirculation (ERG) coolers and modulars used in both automotive and truck industries. During 2002, international customers were responsible for nearly half of Modine's revenues.
Origins and Early Growth
Modine Manufacturing Company was the brainchild of Arthur B. Modine, who graduated from the University of Michigan, Ann Arbor, in 1908 with a degree in engineering and became involved in a Chicago-based radiator repair business where he began experimenting with various radiator designs. In 1912, A.B. Modine moved to Racine, Wisconsin, and became a principle partner in Perfex Radiator (a predecessor to a company Modine Manufacturing would later acquire), where Modine was actively involved in research, testing, and design of radiators. Following a business disagreement with a silent partner at Perfex over how that company should be managed and capitalized, Modine decided to establish his own company.
A.B. Modine founded Modine Manufacturing in 1916 to make radiators for farm tractors. He became president and treasurer of the company, which opened a one-room office adjacent to a small workshop in Racine. Soon after opening his office, Modine developed the company's first major product--the Spirex farm tractor radiator--a radiator core with a spiral fin put in the radiator cells which helped with the product's heat transferability.
In December 1916, Modine filed for a patent (issued seven years later) on his Spirex radiator and, in 1917, his radiator was literally called into service by the United States when it became standard equipment on World War I artillery tractors. By the end of 1918, the majority of leading tractor manufacturers were using the company's radiators.
In 1921, Modine Manufacturing entered the field of commercial building heaters after A.B. Modine developed a unit heater--a product enabling buildings to be heated without extensive ductwork--by putting a fan behind an automotive radiator and attaching the assembly to factory steam pipes in order to supply heat. During the early 1920s, Modine Manufacturing tried to market its Spirex radiator to Ford Motor Company, but because of the way the radiator's frame was designed, the Spirex was unsuitable for automobiles. By 1925, though, A.B. Modine had designed an automotive radiator, called the Turbotube, which helped Modine Manufacturing land its first major automotive contract that year when Ford adopted the radiator as standard equipment for the Model T. Ford quickly became Modine's principle customer and its major source of income, a role the auto maker would play in Modine's operations for the next 55 years.
Modine Manufacturing received a patent for its unit heater in 1928. That same year the company--boasting a wide mix of automotive, truck, and tractor customers--went public, issuing 100,000 shares of stock on the Chicago (later the Midwest) Stock Exchange. The October 1929 stock market crash did little to affect company sales that year, which climbed to a record $5.5 million. But the following year, sales dipped below $4 million and by 1932, when revenues had plunged below $1 million, Modine Manufacturing suffered what would be its last annual loss ($165,000).
By the early 1930s, Modine Manufacturing had moved into the home-heating field and was offering a line of convection heaters for homes, including models targeting large, upscale houses. In 1932, the company landed a contract to produce radiators for Ford's new V-8 engine, which helped Modine Manufacturing pull out of the recession. Business continued to increase through 1937 and reached a peak for the decade that year when the company recorded $8.5 million in sales.
In 1940, Modine Manufacturing developed a vehicular wind tunnel and after the United States entered World War II, the company's technology was again enlisted by the government, with the wind tunnel used to test combat vehicles. During the war, while the wind tunnel was working on domestic soil, the company's convectors took to the sea, having been adapted to Naval vessels. The company also produced radiators for military tanks, tractors, trucks, and bulldozers during the war.
In 1946 A.B. Modine gave up his post as president and became chair of the board. Walter Winkel, who had been actively running the company since 1936 while A.B. Modine was involved in research and product development, succeeded the company founder as president. Two years later, Winkel died and C.T. Perkins became president.
Modine Manufacturing benefited from the postwar boom in automobile sales, which helped to push annual revenues above $25 million in 1951. During the 1950s, the company began using aluminum to produce heat exchangers and, with the advent of air conditioning, it began producing all-aluminum brazed air-conditioning coils for passenger cars and trucks in 1956. That year, Modine Manufacturing received a patent for its concentric oil cooler, a device destined to become standard equipment on cars with automatic transmissions.
During the late 1950s and early 1960s, the company doubled its product line by securing new automotive contracts and introducing new applications for heat exchangers. In 1958, a smaller, more efficient prototype radiator helped Modine Manufacturing secure a contract to become the sole supplier of radiators for the new Ford Falcon. About the same time, Modine began supplying American Motors Corporation with a passenger-car radiator. During the early 1960s, the company extended its use of heat exchangers for buildings and introduced products for school heating and ventilation systems.
In 1961, Modine Manufacturing received a patent for its Alfuse chemical process, a means of fusing aluminum to aluminum that was used to produce condensers. That same year the company received a patent for its light-weight louvered serpentine radiator fin, which was bonded to radiator tubes in a serpentine fashion--as opposed to a plate-type fin bonded in parallel rows--and improved the efficiency of a radiator's heat transferring ability.
At the end of 1961, A.B. Modine retired from active service with the company he founded, although he remained on the corporate board as a director. C.T. Perkins was named to succeed Modine as chair beginning in 1962.
In 1963, Modine Manufacturing became the prime oil cooler and radiator supplier for Rambler. Ford, during the 1960s, steadily increased its production requirements, and Modine responded by producing an ever-growing list of truck radiators, aluminum heat exchangers, and aluminum oil coolers. The increased use of aluminum, which required separate production facilities, as well as the increased business from Ford and other auto makers, found the company facing the need to expand production capabilities. That expansion was led by E.G. Rutherford, who became president in 1963. During the next 11 years, Rutherford guided the steady growth of the company, which climbed from $34.5 million in sales to $110 million, while the number of its employees was doubled to 3,500 as production facilities grew from six to 13.
In order to facilitate such growth, in 1967 the company engaged in its first long-term borrowing. A.B. Modine, who was still a director, was adamantly against the company taking on debt, but the company's top management convinced the founder that the loan was necessary in order to accommodate the company's growth.
In 1969, Modine Manufacturing received a patent for its Flora-Guard unit heater for greenhouses. That same year the company made its first acquisition, Schemenauer Manufacturing, a privately-owned Ohio maker of unit ventilators and rooftop air-conditioning units.
In 1971, Modine introduced its BT Unit oil cooler, a more efficient type of cooler named after the British Thermal Unit. Two years later, the company received its first patent on a Donut oil cooler, originally designed for John Deere tractors but later finding successful applications on high-performance European automobiles.
Modine Manufacturing had been serving the aftermarket business informally for a number of years and, in 1972, established the subsidiary Modine Auto-Cool to produce and sell complete replacement radiators. In 1974, E.E. Richter was named president and Rutherford began a short stint as chair before dying unexpectedly the following year and leaving the position vacant.
Diversification in the Mid-1970s
Beginning in the mid-1970s, Modine began diversifying away from automotive radiators and entering new vehicular heat-transfer markets. During this period, the company introduced new products for heavy-duty trucks, as well as construction, industrial, agricultural, and drilling and mining equipment. During the latter half of the decade, Modine also expanded its production of oil coolers and condensers and evaporators for vehicle air conditioning.
In 1979, Modine established an international marketing group for export purposes and began leasing a New Berlin, Wisconsin, plant in order to manufacture automotive air conditioning condensers. By the end of the 1980, fiscal year annual sales were $200 million and Modine was the leading supplier of air-conditioning condensers for Japanese automobiles imported to the United States.
With nearly half of Modine's sales volume going to Ford, the automotive giant decided in 1979 to begin making its own light-truck radiators, which represented nearly 20 percent of Modine's product volume then. At that time, Modine's top ten customers accounted for up to 88 percent of Modine's sales, with much of that being geared to the original equipment automotive market. Ford alone was the source for 40 percent or more of all revenues.
During the 1980s, the company made a series of moves to lessen its dependence on the cyclical and recession-prone automotive original equipment market. In 1980, the company made its first aftermarket acquisition, Lake Auto Radiator Manufacturing Company, and entered the market for replacement radiator cores. Sales and earnings dipped slightly for the company's fiscal year ending in March 1980, and in October of that year Modine borrowed $10 million from the Wisconsin Investment Board. Sales continued to fall in the fiscal year 1981, and revenues dropped to $7.4 million, down from $14.4 million two years earlier.
In 1982, after years of research and development, Modine introduced its heavy-duty Beta-Weld radiator, the first radiator to feature welded tube-to-header joints. That same year, Modine began manufacturing operations outside the United States and established a joint venture in Canada to produce radiators for the aftermarket. In 1983, the Canadian venture, Ontario Limited, became the company's first wholly owned non-U.S. facility.
In fiscal 1983, Modine's sales followed the "double dip" recession and slid more than $30 million as profits dropped from $8.7 million to $3.8 million. In late 1983, having weathered the worst of the early 1980s recession, Modine restructured its management into a four-man executive office headed by Richter, as president and chief executive. Alex F. Simpson, Richard T. Savage, and B.K. Jacob were named group vice-presidents and members of the executive team. In early 1984, Modine switched its stock listing from the Midwest Stock Exchange to NASDAQ.
During the mid-1980s, Modine stepped up its market diversification and international expansion efforts and purchased joint or minority interests in several foreign producers of radiators and other heat exchangers. In 1984, Modine Manufacturing established the Holland joint venture NRF Holding B.V. and took 45 percent ownership in the overseas company designed to produce radiators for automotive aftermarkets and original equipment markets. Another joint venture was established that same year in Austria to produce aluminum condensers and evaporators for sale to European passenger car manufacturers.
In 1984, Modine also began a four-year program of acquiring North American aftermarket companies involved in the radiator core and distribution businesses. Acquisitions in 1984 included West's Radiator, Inc. of Indianapolis, a distributor and retail radiator repair shop, and Beacon Auto Manufacturing Company, Inc., a regional replacement radiator core maker and warehouse distributor.
The additional businesses, along with record auto and truck production and aftermarket sales, helped accelerate sales, which topped $300 million in 1985, while earnings soared to $21.5 million, 50 percent higher than ever. Acquisitions in the 1985 calendar year included Eskimo Radiator Manufacturing Company and Perfex Radiator Group of McQuay Inc., a heat-transfer business with sales to vehicular and industrial markets, with about $30 million in annual sales.
In 1985, the company also entered a joint venture in Germany with Windhoff G.m.b.H to produce heavy duty vehicular and industrial heat transfer products. That same year Modine established another joint venture in Mexico to produce radiators for the Mexican original equipment market.
The company received a patent on its Beta-Weld technology in 1985 and the following year introduced and received several patents for its PF (parallel flow) family of products. The PF condenser, a passenger car heat-exchanger, was designed to use less refrigerant and to reduce or eliminate the use of Freon, a chlorofluorocarbon that damages the ozone layer. In 1986, Modine sued the Allen Group's G & O Radiator for alleged infringement on its Beta welded-radiator technology.
An unusually cool summer, increased price competition in radiators for the automotive aftermarket, and the cost of assimilating Perfex into Modine operations contributed to a $1 million dip in earnings in 1986. A $1 million settlement with the Environmental Protection Agency over alleged violations of the Clean Water Act pushed earnings down almost another $1 million in 1987. A lower tax rate in 1987, along with a big boost in sales coming from acquisitions, helped put Modine's earnings back on the upswing the following year.
Acquisitions in the Late 1980s-90s
During the late 1980s, Modine acquired numerous manufacturers and distributors of radiator repair parts in its efforts to reduce dependency on original equipment markets. In 1987, the company purchased Stuart-Western Inc., a California manufacturer and distributor of automotive radiator cores, and Heatex Division of Howden Ltd., a Toronto-based manufacturer of radiators and radiator cores primarily for the Canadian automotive aftermarket. The two acquisitions brought Modine an additional $40 million in annual sales.
Additional acquisitions in 1987 further solidified Modine's growing radiator and radiator core manufacturing and warehousing operations. Added to Modine's operations that year were Durafin Radiator Corporation, Central Radiator, Inc., Carolina Cooling Supply Company, Inc., and Octagon Cooling Systems Distributors, Inc. By 1988, when Modine acquired NAYCO Distributors, Inc., the company's replacement radiator and radiator core businesses were the fastest growing markets for the company, representing a third of sales volume.
In 1987, Modine established a joint venture in Japan with Nippon Light Metal Ltd. The venture, Nikkei Heat Exchanger Company, was designed to manufacture and sell automotive heat exchangers to original-equipment manufacturers in the Japanese market. The following year, Modine acquired complete ownership of Windhoff, G.m.b.H. and in 1989 gained entire control of the joint venture it had established in Holland.
In February 1989, Richter was named chair and Savage became president and chief operating officer. That same year, Modine began a two-year acquisition program designed to expand its heating business and acquired Ted Reed Thermal, Inc., a Rhode Island-based heating equipment manufacturer with annual sales of $10 million. In the fall of 1989, Modine's commercial heating business unveiled a line of gas-fired, separated-combustion unit heaters. The following year, the company acquired Industrial Airsystems Inc., a St. Paul, Minnesota, manufacturer and marketer of heating and ventilating equipment for commercial facilities.
In 1990, Modine--in its largest acquisition ever--purchased the $60 million heat-transfer business of Sundstrand Corporation, a manufacturer of refrigeration and air-conditioning coils, secondary heat exchangers for high-efficiency residential furnaces, and copper and aluminum tubular components with operations in Michigan, Missouri, and Mexico. Sundstrand, which became the commercial products division in Modine's off-highway products group, brought with it customers that included original-equipment manufacturers of residential and commercial air conditioners, commercial refrigeration equipment producers, and residential heating systems producers--all representing new markets for Modine.
After five years of litigation, in 1990 Modine received an $18.6 million settlement from the Allen Group over the infringement lawsuit on Modine's Beta-Weld radiator technology. In 1991, Savage assumed the additional duties of chief executive officer when Richter retired from active employment after 44 years with Modine. By the time of the company's 75th anniversary in 1991, Modine's sales totaled nearly $500 million, stemming from more than 50 locations around the world.
In late 1991, Modine filed a lawsuit against two firms with parent companies in Japan--Mitsubishi Motor Sales of America, Inc. and Showa Aluminum Corporation--charging the companies with infringement of Modine's patents on its PF condensers. In April 1992, an International Trade Commission judge ruled in favor of Mitsubishi Motor Sales and Showa Aluminum, interpreting Modine's patent as covering only a narrow range of product types. Modine filed an appeal and, in November 1992, with that appeal still pending, the company announced it had licensed its PF condensers to a third Japanese firm, Nippondenso Company Ltd., a major competitor of Showa Aluminum. The deal added less than $10 million in annual sales. In July of 1993, the U.S. International Trade Commission reversed its earlier ruling, upholding Modine's patent but excluding the specific condensers used by Showa and Mitsubishi from Modine's patent coverage. The company planned to appeal the court's exclusion of the subject condensers at the Federal Circuit Court of Appeals for Patents.
During the late 1980s and early 1990s, Modine extended its Beta-Weld line of radiators to include new models for off-road construction and a variety of engine packages. It also introduced a long-life bus radiator core featuring Beta-Weld technology and a variety of charge-air coolers for trucks and vehicles with turbocharged or supercharged systems. Modine's expanded product mix, and its continued penetration into markets in heat-transfer businesses, helped the company break the half billion sales level for the first time in fiscal 1992.
Modine entered fiscal 1993 having, since the late 1970s, successfully cut much of its dependence on recession-prone major automobile manufacturers and broadened its share of the replacement radiator business. In its 1992 to 1993 fiscal year, Modine's top ten customers accounted for only one-third of its sales, down from three-quarters of all sales in 1977 when the company relied heavily on Ford and other major original equipment manufacturers for the bulk of its business. Since 1979, when Ford took its light truck radiator business in-house, Modine had not only diversified its automotive operations but also strengthened its nonautomotive operations as well, specifically in the field of commercial building activities.
However, as noted in a 1992 Forbes article, Modine remained "focused" on the business with which it began--heat exchangers. The company expected its cutting-edge leadership in heat-transfer technology--such as that which led to the development of PF condensers, light-weight aluminum radiators and parts, and Beta-Weld radiators--to pay ongoing dividends. To this end, in July of 1993 Modine acquired Langerer & Reich, a German limited partnership that produced charge-air coolers, oil coolers, radiators, and other heat-exchangers for the European market with sales in 1992 of $120 million.
1990s and Beyond
Modine's strategy for the remainder of the 1990s was to seek diversification and growth in heat-transfer and closely related fields, both in North America and abroad. Much of the company's expansion during this time period stemmed from its continued acquisition efforts. During 1995, the company acquired Signet Systems, a climate control systems supplier, and Radiadores Montana S.A., an automotive supplier based in Spain. It also purchased full ownership in its Mexican joint venture Radinam S.A. Modine sold off its copper tubing business that year, signaling the company's strong commitment to its core operations.
In 1996, Modine secured a 45 percent stake in Constructions Mecaniques Mota S.A., a French company with a lucrative European vehicle manufacturer customer base. Core Holdings Inc. was added to the firm's arsenal two years later. During 1999, Modine's state-of-the-art $30 million Technical Center began operations in Racine, Wisconsin. The facility housed a new wind tunnel designed to simulate real-life conditions. "This major investment strengthens Modine's reputation as a technological leader and helps position us for future growth opportunities," Donald R. Johnson stated in a 1999 Aftermarket Business article. Johnson was named president and chief operating officer of Modine in 1996 and became CEO in 1998.
Modine entered the new century intent on strengthening its position as a leading thermal management concern. The firm entered the exhaust gas recirculation (ERG) cooler market in 2000 and anticipated considerable growth from this new product area. Modine also gained a foothold in the electronics sector with its 2001 acquisition of Thermacore International Inc., a manufacturer of thermal management products used in the computer, telecommunications, networking, and semiconductor markets. The deal bolstered sales and gave the company access to growing markets.
During this time period, Modine focused on emerging technologies related to fuel cell development for automobiles. The firm also began to explore the possibility of utilizing carbon dioxide in air conditioning and heat pump systems. The company's focus on environmentally friendly products gained industry attention, and during 2002 Modine made Business Ethics magazine "100 Best Corporate Citizens" list for the third consecutive year. The firm took 62nd place based on a series of criteria related to its actions dealing with stockholders, employees, customers, the community, the environment, minorities, and women. Modine tied for first place in the environment category of the ranking.
David B. Rayburn was named president and CEO in 2003; Johnson planned to retire from the chairmanship in June of that year. While management had been shuffled over the past years, Modine's strategy had remained constant. The company continued to look for strategic, valuable acquisitions in order to expand its operations. With a focus on its core businesses and on new thermal management applications, Modine appeared to be hot on the trail of new growth opportunities.
Principal Subsidiaries: Industrial Airsystems Inc.; Manufacturera Mexicana de Partes de Automoviles S.A. (Mexico); Modine Inc.; Modine Acquisition Corp.; Modine Aftermarket Holdings Inc.; Modine Asia K.K. (Japan); Modine Austria Ges.m.b.H; Modine Holding Ltda. (Brazil; 99.9%); Modine of Canada Ltd.; Modine Climate Systems Inc.; Modine Export Sales Corp.; Modine Foundation Inc.; Modine Manufacturing Company Foundation Inc.; Modine of Puerto Rico Inc.; Radman Inc.; Modine Holding GmbH (Germany); Modine Transferencia de Calor S.A. de C.V. (Mexico; 99.6%); NRF B.V. (The Netherlands); Modine Climate Systems GmbH (Germany); Thermacore International Inc.
Principal Competitors: Delphi Corporation; Lennox International Inc.; Visteon Corporation.
- "$30-Million Modine Tech Center Houses Wind Tunnel," Aftermarket Business, November 1999, p. 38.
- Byrne, Harlan S., "Modine: Record Share Net Is in Sight," Barron's, October 5, 1992.
- Byrne, Harlan S., "Modine Manufacturing Co.: Maker of Radiators Puts Its Trust in the Junk Out There," Barron's, May 28, 1990, pp. 53-54.
- Carey, David, "Using Its Strengths to Best Advantage," Financial World, November 14-27, 1984, pp. 83-84.
- Cochran, Thomas N., "Modine Manufacturing Co.: Radiator Maker Loosens Ties to Auto Industry's Cycle," Barron's, November 7, 1988, pp. 106-107.
- Foran, Pat, "Acquisitions Fire a Hot-Growth Period at Modine Manufacturing," Milwaukee Business Journal, August 27, 1990, p. 8.
- Gordon, Mitchell, "Modine's Move: Acquisitions, Lower Tax Rate Put Company Back into Record Territory," Barron's, June 1, 1987, pp. 61-62.
- "Modine Intends to Acquire Core Holdings," Aftermarket Business, September 1998, p. 19.
- "Modine Manufacturing Co.," Business Journal-Milwaukee, January 7, 2000, p. 35.
- "Modine Manufacturing Co.," Business Journal-Milwaukee, December 29, 2000, p. 28.
- Modine Manufacturing Company (75th Anniversary) Annual Report 1990-91, Racine, Wis.: Modine Manufacturing Company, 1991.
- "Modine's President Picked to Replace Chief Executive Officer," Milwaukee Journal Sentinel, December 18, 1997.
- "Modine Starts Year With New Logo," Aftermarket Business, February 1999, p. 16.
- Rees, Matt, "Staying Focused," Forbes, April 27, 1992, p. 136.
Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.