Last updated on May 14th, 2019 at 05:23 am
Twin Disc Inc.
N1328 Racine St., Racine
4600 21st St., Racine
INDUSTRY: Power transmission
EMPLOYEES: 830 (nearly 400 in Racine)
It is no secret cyclical markets like oil and gas present major challenges for businesses. One year business is good and the next the new orders have dried up.
Racine-based Twin Disc Inc. lived that reality, going more than two years without a new order for a transmission used in the oil and gas industry. As the price of oil plunged from more than $100 per barrel in mid-2014 to less than $30 in early 2016, net sales plummeted as well, down to $166 million, a level Twin Disc had not seen since the late ’90s.
“Eventually you know the markets will come back,” said John Batten, president and chief executive officer of Twin Disc. “You try to go out and get every piece of business you can.”
Today, however, things have changed and the company is setting records for the number of transmission units shipped in a month. Revenue increased 46 percent in the first three quarters of fiscal 2018, and Twin Disc nearly topped its fiscal 2017 sales in just nine months.
The boom in sales creates new problems, though, as cost-cutting actions taken to survive the downturn, like consolidating warehousing activity in other states to its Racine operations, limit the available space to meet increased demand.
“The oil and gas business is a blessing and a curse,” Batten said.
Twin Disc has been in business for a century and got its start making clutches for farm tractors. It eventually transitioned to parts for Great Lakes fishing boats and transmissions for landing craft in World War II.
Today, the company makes a variety of marine and heavy-duty off-highway power transmission products, including marine transmissions, surface drives, propellers, hydraulic torque converters, power take-offs and industrial clutches.
Part of the challenge, Batten said, is the up and down of the oil and gas business captures so much attention within the company. When things are going well, the loss of some marine or industrial business may go unnoticed, only to leave a smaller remaining business when oil and gas hits an inevitable downturn.
“You can’t take your eye off the ball on the other markets,” Batten said.
Remaining focused on the entire business is a point of emphasis in the most recent upturn in oil and gas.
Paying attention to other markets is not just a cultural thing this time around; Twin Disc just completed the nearly $61 million acquisition of Veth Propulsion, a Dutch firm with no oil and gas exposure. The deal will make Twin Disc’s business more global, increase the focus on marine markets and help with the development of new technology.
“It hyper accelerates our exposure and technologies for hybrid,” Batten said. “It makes all of our products potentially much better.”
Closer to home, Twin Disc is also working to improve its Racine operations, emphasizing continuous improvement efforts and investing in new machinery. The company started with a daily management meeting to review and act on performance metrics in January 2017.
“We went through some struggles, especially initially,” said Mitch Sosnowski, general manager for Twinco operations, of the implementation.
But as the oil and gas market has rebounded, the meetings have allowed Twin Disc to adapt to the increased demand.
“Things have gotten easier just because there’s more communication,” Sosnowski said.
Batten pointed out Twin Disc is now setting shipping records with 65 to 75 percent of the workforce it had in Racine before the latest downturn.
A seemingly ever-tightening labor market is only making the company’s workforce challenges more difficult, and the retirement of longtime employees is another compounding factor. In some cases, Twin Disc is forced to retire certain machinery as those with the experience to run it retire.
“We have a huge capex budget the next few years because the guys that are retiring are taking all of that experience with them,” Batten said.
To make room for additional investments, Sosnowski said the company will work to streamline its assembly and manufacturing areas. Batten said Twin Disc is also actively working to move warehousing work, consolidated from Jacksonville, Florida during the downturn, back outside of the facility