Harnischfeger Corp

In: Business and Management

Submitted By mikey2488
Words 2721
Pages 11
I. Introduction In 1984 Harnischfeger Corporation was a leading producer of construction equipment. During the decade of the 1970s the company experienced tremendous growth. Annual sales grew from $150 million in 1970 to $646 million in 1981. However the company began to experience financial trouble in 1979. This was caused by a variety of factors: the company wasted a large amount of resources on an unsuccessful merger, the government of Iran defaulted on a $20 million order of equipment after the fall of the Shah, and the U.S. economy was in a period of recession with double digit rates of inflation. The company posted an operating loss in 1979 for the first time since 1938. The company's financial difficulties continued until 1984. At this time management decided that restructuring was necessary if the company wanted to survive. (Harnischfeger, 1985)

II. Restructuring Strategy The overriding objective of restructuring the company was to return to sustained profitability. The goals of the plan were four-fold: managerial/personnel changes, production cost reduction, change in overall business focus (e.g. in foreign joint ventures, and high technology areas), and a restructuring of debt (Palepu, 2000). The new executive position of Chief Operating Officer was created. Two new members of the executive team were hired in order to help push the company in a new strategic direction. As a result, engineering, manufacturing, and marketing divisions underwent significant changes in order to cut costs and reorient the company’s product offerings toward more profitable markets. (Palepu, 2000). The company started to focus its business on more overseas markets, where demand for mining and construction equipment remained strong. A relationship was established with Kobe Steel, Ltd., in which Harnischfeger agreed to source all of its…...

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