Carrier Corporation

1930

Public Company

Incorporated: 1930

Employees: 28,000

Sales: $4 billion

Stock Exchanges: New York London Paris Frankfurt Amsterdam Brussels Geneva Zürich Basel Lausanne

SICs: 3585 Refrigeration & Heating Equipment

Carrier Corporation leads the world in the manufacture of residential and commercial heating, ventilating, and air conditioning (HVAC) systems and equipment. Its businesses also include commercial, industrial, and transport refrigeration and cryogenic cooling. Carrier manufactures and sells more than 350 product lines, among them heat pumps, furnaces, window room air conditioners, portable air conditioners, package thermal air conditioners, chillers, ducted and ductless systems, and packaged systems. These products are available in more than 10,000 model configurations.

Commercial air conditioning represented a $1.15 billion market in 1965, with one new industrial plant in three being HVAC equipped.

1876–1991

On July 6, 1979, Carrier Corporation became a wholly owned subsidiary of United Technologies Corporation (UTC), the Hartford-based aerospace giant best known for its Pratt & Whitney jet engine division, in a contentious takeover that drew the attention of the federal government. Today, Carrier is one of UTC's global enterprises: together with the Otis Elevator Company, it forms the parent company's Building Systems division, which in 1991 accounted for 38 percent of UTC's revenues. Carrier leads the HVAC industry in many of the world's fastest growing markets and maintains distribution channels in 118 countries. It conducts about half of its manufacturing activities outside of the United States.

Though incorporated under its present name in 1930, the organization's roots extend back to the beginning of the century when a newly graduated Cornell engineer, Willis Haviland Carrier, started work at the Buffalo Forge Company, Buffalo, New York, on July 1, 1901. The story of Carrier Corporation begins with its founder, who, by being the first researcher to combine air cooling with humidity control, became known as the inventor of modern air conditioning. Born November 26, 1876, on a farm in Angola, New York, a community in rural Erie County, Willis Haviland Carrier was the only child of Duane Carrier--who taught music to native Americans, tried running a general store, served a brief stint as postmaster, then took up farming--and his wife, Elizabeth Haviland, a descendent of a family of New England Quakers. Willis Carrier believed that he inherited his mechanical ability from his mother; she passed away when he was 11 years old.

Carrier graduated from Angola Academy, the local high school, in 1894 in the midst of a financial depression. Despite the problematic economics of his situation, he aspired to attend Cornell University, in Ithaca, New York. Carrier moved in with relatives in Buffalo and spent a year (1896-97) at Central High School in that city. In 1897, Carrier enrolled at Cornell on scholarships he had won through competitive examinations, graduating four years later with a degree in electrical engineering. He worked at odd jobs while in college to earn money for his living expenses.

Upon joining the Buffalo Forge Company shortly after graduation, Carrier was put to work on designs for a heating plant, boilers, and various types of systems for drying materials. He also began early on to pursue valuable research for his employer on the heat absorption of air when it circulated over steam-heating coils. Not surprisingly, the young engineer's first concentration, both practical and theoretical, was on heat, the core of Buffalo Forge's business.

The importance of Carrier's research activities was not lost on his managers and colleagues at Buffalo Forge. The company inaugurated a research program in 1902, with Willis Carrier as its unofficial director. That spring, Carrier's experiments drew the attention of a man who would become perhaps the most important figure in Carrier's career: J. Irvine Lyle, who was involved in sales and management for Buffalo Forge and in 1902 headed up the New York office. Like Carrier, Irvine Lyle was a farm boy; he grew up in Woodford County, Kentucky, and earned a degree in mechanical engineering in 1896. What prompted Lyle to seek out Carrier was a problem brought to Lyle by a consulting engineer working on behalf of the Sackett-Wilhelms Lithographing and Publishing Company of Brooklyn. High humidity levels in Sackett-Wilhelm's plant were causing production problems and the company was looking for a way to control airborne moisture.

Carrier threw himself into research on air dehumidification and by July 17, 1902, had completed drawings for what came to be recognized as the world's first scientific air conditioning system. Designed for Sackett-Wilhelms, the system was installed beginning in the summer of 1902 and continuing into 1903. By October 1903, Lyle was able to report back to Buffalo Forge's home office on the success of the first modern air conditioner. In the words of Carrier's biographer, "Out of Willis Carrier's research and ingenuity and Irvine Lyle's faith and salesmanship, a new industry was conceived and given birth."

Carrier continued to develop is ideas for conditioning air by controlling moisture. On September 16, 1904, he applied for a patent on an invention he called an "Apparatus for Treating Air"; patent number 808897 was issued for the device on January 2, 1906. The "Apparatus for Treating Air" was the first spray-type air conditioning equipment, designed to humidify or dehumidify air by heating or cooling water. It "was to open thousands of industrial doors." The LaCrosse National Bank of LaCrosse, Wisconsin, became the first purchaser of the system in 1904. By 1907, the spray-type air conditioning equipment had been installed fro a number of significant customers, principally manufacturers in such businesses as textiles, shoes, and pharmaceuticals. The Wayland silk mill in Wayland, New York, acquired the first automatically operated modern air conditioning system, which took into account the added heat of the sun. Air conditioning had also found its way overseas to a silk mill in Yokohama, Japan.

1872–1977

At the end of 1907, Carrier came up with another "invention"--a new company. He proposed the idea of creating a spinoff of Buffalo Forge to engineer and market air conditioning systems. In early 1908, Carrier Air Conditioning Company of America, a wholly owned subsidiary of Buffalo Forge Company, was in actual operation. The suggestion that the fledgling venture bear Carrier's name came from Lyle , perhaps with the intention of shielding the parent company if the air conditioning business failed. In any event, Carrier became vice-president of the subsidiary, although he remained in the employ of Buffalo Forge as its chief engineer and director of research, positions he had held since 1905. The sales manager of Carrier Air Conditioning Company of America, with headquarters in New York, was Irvine Lyle; the construction superintendent was Edmund P. Heckel; and the members of Lyle's staff included Boston-based Ernest T. Lyle, Irvine's younger brother and an experienced Buffalo Forge salesman, and Philadelphia-based Edward T. Murphy. In New York, Alfred E. Stacey, Jr., was chief engineer. When Stacey was transferred to Chicago in 1909, L. Logan Lewis joined the company as chief engineer. Murphy had worked with Carrier and Lyle in 1902 on the first air conditioner installation at Sackett-Wilhelms; Stacey an Heckel had worked with them on the Wayland silk mill system. Together, these men--the "original seven"--who had been together on the very first air conditioning projects would later found the organization that was the immediate precursor of Carrier Corporation.

By the end of Carrier Air Conditioning Company of America's first year in existence, the foundation of the air conditioning industry was firmly in place. Between 1908 and 1914, the firm took on one industry after another: tobacco, steel, and hospitality, among others. It sold air conditioning systems to paper mills, breweries, department stores, hotels, soap and rubber factories, candy and processed food plants, film studios, bakeries, and meat packers--more than doubling its sales in the two-year period from 1912 to 1914. Despite this success, however, the Buffalo Forge Company decided in 1914, on the cusp of world war, to confine its activity to manufacturing. This alteration would require major changes at the air conditioning subsidiary. All the employees of Carrier Air Conditioning Company of America were to be discharged except Irvine Lyle, who was to be offered his old job as manager of Buffalo Forge's sales office in New York, and Willis Carrier, who was actually an employee of the parent company.

Although secure in their positions at Buffalo Forge Company, Carrier and Lyle decided that they could not simply let go of the new industry they had built. Moving forward with their air conditioning venture necessitated moving away from Buffalo Forge. On June 26, 1915, Carrier Engineering Corporation was officially formed under the laws of New York State, and the "original seven" were in business for themselves. The founders were Willis Carrier, Irvine Lyle, Edward Murphy, L. Logan Lewis, Ernest Lyle, A.E. Stacey, Jr., and Edmund Heckel; Carrier was president and Irvine Lyle assumed the positions of treasurer and general manager. Carrier Engineering Corporation opened its headquarters in Buffalo and its offices in New York, Chicago, Philadelphia, and Boston on July 1, 1915. The original capital was stock subscriptions totaling $2,500.

The new corporation's first decade saw not only a continuation of the previous success achieved in the air conditioning business (Carrier Engineering closed 40 contracts by the end of 1915), but also a breakthrough in refrigeration technology, another result of Willis Carrier's research creativity. By the early 1920s, Carrier Engineering Corporation had begun manufacturing and selling the centrifugal refrigeration machines that its president and engineers had developed, equipment that represented the first major advance in mechanical refrigeration since David Boyle introduced the original ammonia compressor in 1872. The first sale of the centrifugal refrigeration system was to Stephen F. Whitman & Sons of Philadelphia, a candy maker.

While 1921 was a productive year for the highly promising refrigeration product line, it was a key year in other areas as well. Seeking space for expansion into manufacturing to produce the centrifugal refrigerators as well as for offices to house the company's headquarters, Carrier Engineering bought a building on Frelinghuysen Avenue in Newark, New Jersey. Willis Carrier went to Europe in search of low-cost suppliers of components for the refrigeration system and to help complete the organization of Carrier Engineering Company, Ltd., of England. Much was riding on the success of Carrier centrifugal refrigerating machine, which at that time was barely off the drawing boards.

Once that success was assured, Carrier Engineering set a new goal for the mid-1920s and beyond: to pioneer into a new market--comfort air conditioning. This market began to open in 1924 when Irvine Lyle sold the company's first "comfort job," a centrifugal refrigeration system to cool the J.L. Hudson Department Store in Detroit. However, it was the introduction of the new centrifugal systems to movie houses that truly launched comfort cooling. Carrier Engineering's first such installation was at the Palace Theater in Dallas in the summer of 1924. Perhaps the firm's crowning contract in the new comfort market was its installation, completed in 1929, of the first air conditioning systems in the U.S. Senate and House of Representatives.

The history of the company that operates today under the UTC umbrella dates to the following year--October 31, 1930--when Carrier Corporation was incorporated in Delaware. The new entity was a consolidation of the Carrier Engineering Corporation and its subsidiaries, Carrier Construction Company, Inc., and W.J. Gamble Corporation, as well as several refrigeration and heating companies. Carrier Corporation's growth through the next three decades can be traced in the continuation of its merger and acquisition activities, which brought in, among other additions: Affiliated Gas Equipment, Inc., of Cleveland in 1955; the Elliott Company, a major subsidiary, in 1957; and a significant number of overseas organizations throughout the 1960s and 1970s. By the fourth quarter of 1977, shortly before UTC's unsolicited overtures, Carrier Corporation had more than 38 subsidiaries in locations as far flung as Japan, Singapore, and Australia; it operated, from its Syracuse, New York, headquarters, more than ten million square feet of manufacturing, warehouse, and office facilities in 23 states and 12 foreign countries; and it had diversified into a range of businesses that included energy process equipment (e.g., centrifugal air, gas compressors, and turbines), solid waste handling equipment, potentiometers (i.e., instruments for measuring electromotive forces), large electric motors, chemical specialty products for industry (e.g., inks and paints), and finance.

1964–2000

A "snapshot" view of Carrier Corporation in 1965 shows it riding the crest of the construction wave that swept households and businesses from the cities to the suburbs in the period of rapid economic expansion following World War II. During that year one in every four new houses in the United States was air conditioned, up from one in nine just five years earlier, boosting total domestic home air conditioner sales to a record $1.2 billion. Commercial air conditioning represented a $1.15 billion market in 1965, with one new industrial plant in three being HVAC equipped. Even schools had become potential customers for systems that were now capable of cooling, heating, controlling humidity, eliminating dust, and reducing noise. Carrier Corporation, number one in this burgeoning U.S. air conditioning market in the mid-1960s, reported a jump in sales in fiscal year 1964 to $325 million, up nine percent, as well as a 22 percent increase in new orders and a 58 percent increase in profits during the first quarter of 1965. Exports, particularly to reverse-season continents such as Australia and South America, had helped make air conditioning a year-round enterprise by the 1960s, fueling the growth of all the firms offering HVAC products. Moreover, Carrier Corporation had landed several large, high-profile air conditioning projects, including the Houston Astrodome, the 19-building complex to house New York State's governmental offices in Albany, and the new London headquarters of Scotland Yard.

In the following decade, however, the U.S. growth curve began heading downward, bringing slower activity in the industrial and construction sectors that were so vital to Carrier Corporation's health. In the aftermath of UTC's hostile takeover of the company--a protracted and bitter struggle that finally ended with Carrier's becoming a wholly owned subsidiary of UTC on July 6, 1979--the decade of the 1980s saw Carrier Corporation in a deteriorating competitive position: it lagged well behind the other companies in the industry in new product development, its costs were as much as ten percent higher than the competition's, and it had developed a reputation among dealers for poor quality and service. These problems were compounded by a shrinking U.S. market for air conditioning and heating equipment as new home sales dropped 10.1 percent between 1989 and 1990 alone and the overbuilt office and commercial real estate markets depressed demand for Carrier's products by as much as 30 percent.

After assuming the chairmanship of UTC in 1986, Robert F. Daniell went to work on the Carrier subsidiary as part of his efforts to give the parent company an overhaul. This involved $600 million worth of cost cuts at UTC and the sale of more than $1.5 billion of its assets. By 1990, Daniell ad disposed of unrelated Carrier Corporation businesses such as trout farming and dumpsters and eliminated $100 million in overhead. Carrier president William A. Wilson reduced the number of white-collar employees by 30 percent during his six-year tenure which ended in 1990. He also initiated an updating of Carrier's product line, with the result that in 1990 new or redesigned products represented 75 percent of North American sales. Among the new offerings were a residential furnace designed to cut home energy costs by 45 percent and a home air conditioner featuring a 25 percent reduction in noise. Research and development initiatives included office air conditioning systems to cool the air without releasing the chlorofluorocarbons that deplete the atmosphere's ozone layer, as well as a $100 million investment in a new compressor to be manufactured in a state-of-the-art plant in the United States rather than in Japan, where such components had traditionally been purchased by air conditioner makers.

In 1992, after a four-year slide and despite downsizings and reorganizations, Carrier Corporation remained a troubled subsidiary and a drag on the parent's performance. Nevertheless, UTC cited the end of a lengthy recession and indications of a turnaround in UTC's overall operations as signs that its decision to hold on to its units, including Carrier, was going to pay off. In early 1992 in unveiled an ambitious restructuring plan in which more than 100 plants were to be closed or merged and 11,000 jobs cut. At the Carrier division, the push to add new products and to reduce both inventories and delivery time to customers meant consolidating and reengineering production processes and installing new technology at its manufacturing sites. In line with the plans of many U.S. corporations in the early 1990s, the goal at Carrier was to maintain current output with fewer workers and less space at lower costs. At a Carrier facility in Indianapolis, where assembly lines were reconfigured and component manufacturing was moved nearby, annual inventory was reduced by $12 million and productivity improved by as much as 20 percent.

Looking ahead, UTC expects the world market for HVAC equipment to grow by more than 65 percent, to approximately $40 billion, by the year 2000, with more than half that total market centered in the Asia-Pacific region. The blueprint for Carrier Corporation calls for expansion outside current slow-growth markets to secure a presence in developing areas globally. Quality and customer-satisfaction initiatives also continue to be emphasized, with the result that quality problems, and the accompanying warranty-claims costs, connected with new installations of the company's main line of home air conditioning compressors have declined by half since 1986. To meet its goal of greater responsiveness to changing customer requirements, Carrier is building the add-on and replacement segments of the heating and air conditioning business (both residential and commercial). Research and development is another area in which Carrier is concentrating, spending $100 million on research in 1991 and committing itself to an additional $550 million research and development investment during the five subsequent years. The strategic focus is to be on such core technologies as compression, electronics and controls, refrigerants (particularly non-ozone-depleting alternatives), air management, heat transfer, and indoor air quality.

While UTC's plans envision a more internationally competitive Carrier, they also mandate a still-leaner company. Employment at the subsidiary is targeted for a 1,525-job reduction by 1994, manufacturing capacity is to shrink by 1.7 million square feet, and plant closings will take place in California, Tennessee, Georgia, and at overseas locations. What observers will be looking for in the immediate future are indications that Carrier is finally carrying its own weight within the UTC fold.