Machinery and Equipment, General Industrial
SIC 3560
NAICS 3332
The general industrial machinery and equipment industry comprises at least four major categories of products: 1) pumps for liquids; 2) fans, filters, and gas pumps; 3) mechanical handling and packaging equipment; and 4) ball and roller bearings. Lesser categories include speed changers, drives, and gears; industrial process furnaces and ovens; and mechanical power transmission equipment. Yet other segments include other types of parts and machines. For information on specialized industrial machinery, see Machinery, Refrigeration and Service Industry.
The products in this industry, and consequently the leaders in this industry, cover a broad range of machines and parts and are applied diversely. Therefore, the industry's fortunes are closely tied to the general health of world industrial production. Those fortunes equally provide an indicator of the level of a country's or region's industrial development. Mature industrialized countries—Germany, Japan, the United States, Italy, France, and the United Kingdom—continue to dominate world production and exports. Emerging countries such as South Korea, China, India, and Brazil have also become important producers and consumers of general industrial machinery and were forecast to fuel much of the industry's continued growth.
China, Taiwan, and India held the top three exporter positions for both pumps machinery and packing machinery in the mid-2000s. According to the Freedonia Group, bearings were expected to experience 4.5 percent annual growth in the United States into 2010, 6.4 percent annual growth in Canada and Mexico, 4.8 percent in Western Europe, and 7.8 percent in Asia and the Pacific Rim.
The use of mass production technologies enabled U.S. manufacturers to master the world market for industrial machinery in the early twentieth century. In the years before World War I, leading U.S. producers rapidly expanded production and marketing facilities, establishing factories both domestically and abroad. In 1914 there were about 20 U.S. machinery firms operating two or more plants in Europe.
In Scale and Scope, Alfred Chandler Jr. described the situation of U.S. industrial machinery producers in this period. U.S. machinery producers dominated the European market, thanks to economies of scale and product-specific sales organizations in marketing and distribution. This was despite the fact that patents did not fully or even partially protect many of the machines. Few European companies could produce machines superior to those of the United States at similarly modest prices, as well as offer the necessary ancillary services of marketing, demonstration, installation, after-sales repair and service, and consumer credit. U.S. manufacturers of industrial machines continued to expand overseas facilities until the Great Depression.
As with many other U.S. industries in the early 1900s, in the non-electrical machinery and equipment industry there was a wave of mergers. These mergers were not so-called horizontal mergers—that is, involving a combination of directly competing firms. Rather, the mergers were based on the establishment of complementary product lines. Thus, the diversification strategies of U.S. firms had them staying within closely related product lines. The Ingersoll-Rand Company, for example, produced pumps, compressors, and engines—all of which were used for mining operations. Early in the twentieth century, Worthington Pump was the largest U.S. producer of pumps, making a wide range of steam and gasoline-pumping equipment, as well as compressors, generators, and meters. In the 1920s Worthington combined these products into systems for transferring water and heat, and later into cooling and air conditioning systems.
From the early twentieth century on, Germany rose to meet American dominance of the industry, becoming the leading European producer of industrial machinery. German producers of heavy industrial machinery were particularly competitive, with extensive international marketing operations and credit and repair services. They also were among the world's largest, with average employment ranging from 3,500 to 5,000 by World War I. Indeed, some German producers of industrial machinery employed more than 15,000 workers at this time.
German manufacturers grew primarily by investing retained earnings. Thus, they were less beholden to banks than German firms in the chemical, metal-making, and electrical machinery industries. Nor had they, like many firms in other industries, made extensive overseas investments before World War II. Thus, they suffered less the burden of reparations after the war. Given the nature of heavy industrial machinery and equipment, competition took place largely on the basis of performance and service, rather than price. As a consequence, the cartels notable in many other German industries did not play an important role in the industrial machinery industry.
German industrial machinery companies were generally more widely diversified across industry lines than U.S. counterparts. Maschinenbau-Anstalt Humboldt was established in the 1850s as a machine shop serving one of Germany's leading mining firms. From this starting point, the firm diversified into other material-handling machinery; locomotives and railroad cars; and air-moving and cooling machinery used in mines, breweries, and slaughterhouses. By World War I, Maschinenbau-Anstalt had diversified—by backwards integration—into the production of steel-making machinery and equipment. The firm claimed that this strategy reduced the manufacturing costs of any given product while still offering diversification.
The German firm Borsig provided another example of the broad diversification strategies of leading German producers of industrial machinery and equipment. Borsig began as one of Germany's pioneering locomotive producers. The firm then diversified into the production of steam engines and boilers; pumps and pump lines for oil...
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