Husco's launch of new hydraulic system likely to result in expansion
Rich Rovito
A new hydraulic system developed by Husco International Inc. could more than double the Pewaukee-based company's business over the next decade.
By the end of 2005, Husco will have invested about $20 million on research and development for the new product, according to company management.
Husco, which makes hydraulic and electrohydraulic controls for the automotive and construction machinery markets, unveiled the initial application of the new technology in March at ConExpo 2005 in Las Vegas. The exposition is the world's largest construction equipment trade show.
"It was probably the most successful show we've ever had in terms of traffic," said Agustin "Gus" Ramirez, chairman and chief executive officer of Husco.
Known as "intelligent control valve" technology, or INCOVA, the product will debut this year on a line of John Deere brand backhoes.
With the new technology, valves are mounted on the boom, arm and bucket of a backhoe. In a traditional setup, hydraulic hoses in the floor of the cab are used to link valves to control levers. The new system minimizes hoses and fittings, which can require high maintenance and also can be a source of hydraulic oil leaks.
The technology is a "radical departure" from conventional hydraulic controls and is designed to provide major productivity and control improvements by merging hydraulic control valves with electronics and proprietary software, Ramirez said.
"Hydraulics are the most crucial part of the operating system for construction equipment," said John Stark, who operates Stark's News Service, a Chicago firm that tracks the farm and construction equipment industries. "Hoses crack and bust. Any time you can reduce the number and length of hoses you improve the reliability."
In the case of backhoes, which tend to be used on home construction sites, dirt and rocks can get into hydraulic hoses and hinder the function of the machinery, Stark said.
Deere is the third-largest producer of backhoes in the United States, trailing Peoria, Ill.-based Caterpillar Inc., the industry leader, and CNH Global N.V., which has operations in Racine and makes construction equipment sold under the Case brand name.
Caterpillar and CNH are among Husco's major customers.
Husco will produce low volumes of the hydraulic system this year, with full-scale production for Deere and other major customers expected in 2006, Ramirez said.
In addition to Deere, Caterpillar and CNH, other off-highway equipment manufacturers served by Husco include Terex Corp., Westport, Conn.; NAACO Materials Handling Group, Portland, Ore.; Daewoo Heavy Industries & Machinery Ltd., South Korea; and The Manitowoc Co., Manitowoc.
Ramirez described the new technology as "the most significant technological breakthrough in the fluid power market achieved in the past 25 years."
Initial applications will be on midsize construction and material handling equipment, such as backhoe loaders and telescopic material handlers, used in construction, agricultural and landscaping applications to transport and lift materials.
Husco ultimately plans to introduce the technology on larger pieces of machinery, such as hydraulic excavators, Ramirez said.
Sales growth
Ramirez expects that sales of the new hydraulics system over the next seven to 10 years will eclipse Husco's current overall revenue.
Husco's sales grew 35 percent in 2004 to about $220 million. Ramirez expects sales to climb another 10 percent to 15 percent in 2005 due to overall industry growth and early demand for the new valve technology.
Husco remained committed to product innovation and continued to invest in research and development during the recent economic downturn. Husco's investment in engineering stands at about 10 percent of total sales, Ramirez said.
"We got out of the recession faster and much stronger," he said.
Husco's growth required the company to add more than 175 jobs over the past year, including 111 at the company's Pewaukee factory, with the rest at Husco's Whitewater plant.
With the added jobs, Husco has 600 employees in Pewaukee and 150 in Whitewater.
The company also has a total of 150 employees at its plants in Runcorn, England, and Shanghai, China. Employment at the foreign plants remained steady in 2004.
Husco plans to add 50 to 60 more jobs in 2005, split evenly between the Whitewater and Shanghai factories.
Husco opened the plant in China in 2002 and completed a major expansion at the Whitewater plant the following year. It's anticipated the plants will be running at capacity by the end of the year. Husco opened the plant in China to serve the Chinese market and to provide low-technology products to the North American and European markets.
The 285,000-square-foot plant in Pewaukee already is "tapped out" in terms of available space, Ramirez said.
The dramatic growth in business has Husco looking at yet another possible expansion.
Although the company continues to add jobs, finding qualified employees has been a challenge.
"We try to find people with some degree of intelligence and train them," Ramirez said.
About 35 percent of the company's hires don't make it through their first year on the job, due to the demands of the job or their inability to learn the work, he said.
Ramirez said he demands a great deal from his employees. Hourly production employees often work an average of 55 hours per week during busy periods.
For those employees who manage to stick around, the rewards can be substantial, with plant-floor employees earning as much as $60,000 a year, Ramirez said.
The Business Journal
