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Ingersoll closes U.S. factory doors, files for chapter 11 protection.

When president and CEO George Dorkhom took the reins of privately held machine-tool builder Ingersoll International Inc. (Rockford, Ill.) last August with his background in equity funds, he immediately set out cutting costs and setting up its sale, signing on Merrill Lynch & Co. to help with the financing. Over the next several months a dozen prospective buyers emerged, and a January deal to sell Ingersoll to a Boston-based equity investment firm was nearly in place by late last month. But in the course of due diligence the unnamed firm had second thoughts, especially on re-examining the builder's debt and pension fund according to one report, and the transaction became unraveled.
 On April 15 Ingersoll abruptly closed its
 American plants, and two days later it filed
 for Chapter 11 protection in U.S. Bankruptcy Court.


The legal move affects six of Ingersoll International's U.S. subsidiaries including Ingersoll Milling Machine, repair and spares, contract manufacturing, automation operations in Rockford and a crankshaft-machining operation in Midland, Mich. Not part of the bankruptcy filing is the company's wholly owned subsidiary, Ingersoll Maschinen und Werkzeug G.m.b.H. (Burbach, Germany), with its Waldrich Siegen, Waldrich Coburg, and Ingersoll Funkenerosiontechnik works. The European subsidiary employs 1200 workers and traces back to a Waldrich firm founded in 1840. In contrast, the U.S. company was cut back to fewer than 400 employees just before the shut-down, the result of three rounds of layoffs in the last four years; a decade ago there were more than 2200 workers.

A crisis-management firm, Morris-Anderson & Associates, Ltd. (Des Plaines, Ill., 847-768-4400), has been hired by Ingersoll. It's the same consulting company that helped steer Goldman Industrial Group (Boston, Mass.) through its 2002 bankruptcy and subsequent sale of its operating units, including Bridgeport Machines, Bryant, and Fellows.

CEO Dorkhom reportedly has told Ingersoll's board that he would relinquish his post and let others who are expert in bankruptcy handle the process. If the company emerges from bankruptcy, he told the Rockford Register Star, "I will be ready again the lead it."

In his short tenure at Ingersoll, Dorkhom has reduced staff in Rockford by nearly half and started streamlining operations to reduce costs. Under his plan for the company--one that included a large infusion of cash with its sale--Ingersoll would have paid off creditors and acquired technology to diversify its product mix away from dependence on very, very expensive, high-end capital goods.

Even as he was lining up a prospective buyer, Dorkhom was continuing work started by others to reduce Ingersoll's debt, including presiding over the October 2002 sale of automotive transfer-line division Ingersoll Production Systems to Dalian Machine Tool Group (Dalian, China) for an undisclosed price. That was only the latest in a series of asset sell-offs. The previous April, the company sold a plant to the city of Rockford for around $2-million. Also in 2002, it cut loose its money-losing Naxos-Union crankshaft-grinding-machine business in Germany, allowing it to fall into receivership (it was later picked up by EMAG). In 2001 there was the sale of controlling interest in cemented-carbide-tool producer WI Hartmetall in Germany to tool-grinder producer Walter A.G. And in 2000 there was the sale of the Ingersoll Cutting Tools division to Israel-based tooling producer Iscar Ltd.
 Ingersoll reportedly had revenues of $358-million
 in 2001 and lost $17-million, though a
 recent corporate statement describes a return
 to profitability this year. Debt in recent years
 has been reduced to around $50-million.


Ownership has been almost entirely within the Gaylord family, and a trust established by brothers Clayton and Edson Gaylord a few years back intended to keep it that way: Beneficiaries couldn't sell or transfer their individual shares until 2021. There's been some speculation the trust worked against allowing top management the flexibility it needed: One beneficiary tried to have restrictions on her partial ownership lifted. However, a top manager not connected to the family dismissed the notion, saying that the trust created little hindrance on policy decisions.

Ingersoll International traces back to 1891, when founder Winthrop Ingersoll, who had bought a stake in machinery builder W.R. Eynon & Co. (Cleveland, Ohio) four years earlier, acquired control when its owner died. Relocated to Rockford, Ill. after a loan from local businessmen there, Ingersoll Milling Machine Co. employed 19 workers and went after contracts from General Electric. By 1917, wartime production swelled the workforce to nearly 600, and one new employee, Robert M. Gaylord, married Ingersoll's daughter, Mildred.
 Winthrop Ingersoll, who has been selected to the Machine Tool Hall
 of Fame (www.americanprecision.org), designed and executed several
 innovative products, including a 1909 automated milling machine for
 engine blocks produced at Henry Ford's legendary Highland Park
 plant and the first U.S. transfer machine in 1924.


When Winthrop died in 1928, Robert Gaylord took over as president. He was succeeded by his son Clayton, who retired in 1984 and turned management of the company over to his brother Edson.

Under Edson Gaylord, Ingersoll moved into the top five of U.S.-owned machine-tool companies. He continued a paternalistic management style set by his grandfather and launched several innovative research projects, including moves into aerospace composite fabrication and an early parallel-axis machine, the Octahedral Hexapod, which proved controversial. Edson Gaylord died in 2000, and control of the company passed to Dieter Feisel, who had started with the German subsidiaries. A subsequent corporate reorganization attempted to build closer internal ties within automotive-oriented sections of the company and at the same time increase contract-manufacturing activities.

Last summer, Feisel told the board of directors he wanted to revert to his previous job of running just the German operations, and a search for a new CEO was started. U.S. factories continued under Rod Drummond, once head of the cutting-tool division and now named to the new post of president of North American operations under that 2000 reorganization. When Feisel returned to Germany, Drummond was in effect CEO while the board sought Dieter Feisel's replacement, turnaround specialist George Dorkhom. As Dorkhom came in, Drummond left to move back into the cutting-tool business and now heads Valenite.
 The next step depends on decisions by the bankruptcy court and by
 the board of directors, headed by John Doar, a longtime friend of
 the late Edson Gaylord. It's possible that one of the other
 potential suitors could step up and acquire Ingersoll International.
 With an injection of capital the company could emerge stronger than
 before. It's also possible that a reorganization plan could involve
 further sale of portions of the company.


Ingersoll International Inc., Rockford, Ill. 815-987-6416.
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Publication:Metalworking Insiders' Report
Geographic Code:1USA
Date:Apr 22, 2003
Words:1091
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