Harnischfeger Case Essay

In: Business and Management

Submitted By fatality12
Words 10404
Pages 42
Harvard Business School

9-186-160
Rev. August 21, 1997

Harnischfeger Corporation
In February 1985, Peter Roberts, the research director of Exeter Group, a small Boston-based investment advisory service specializing in turnaround stocks, was reviewing the 1984 annual report of Harnischfeger Corporation (Exhibit 4). His attention was drawn by the $1.28 per share net profit Harnischfeger reported for 1984. He knew that barely three years earlier the company had faced a severe financial crisis. Harnischfeger had defaulted on its debt and stopped dividend payments after reporting a hefty $7.64 per share net loss in fiscal 1982. The company's poor performance continued in 1983, leading to a net loss of $3.49 per share. Roberts was intrigued by Harnischfeger's rapid turnaround and wondered whether he should recommend the purchase of the company's stock (see Exhibit 3 for selected data on Harnischfeger's stock).

Company Business and Products
Harnischfeger Corporation was a machinery company based in Milwaukee, Wisconsin. The company had originally been started as a partnership in 1884 and was incorporated in Wisconsin in 1910 under the name Pawling and Harnischfeger. Its name was changed to the present one in 1924. The company went public in 1929 and was listed on the New York Stock Exchange. The company's two major segments were the P&H Heavy Equipment Group, consisting of the Construction Equipment and the Mining and Electrical Equipment divisions, and the Industrial Technologies Group, consisting of the Material Handling Equipment and the Harnischfeger Engineers divisions. The sales mix of the company in 1983 consisted of Construction Equipment, 32%; Mining and Electrical Equipment, 33%; Material Handling Equipment, 29%; and Harnischfeger Engineers, 6%. Harnischfeger was a leading producer of construction equipment. Its products, bearing the widely recognized…...

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