Grundfos Group

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Grundfos Group

Poul Due Jensensvej 7
Bjerringbro, DK-8850
Denmark
Telephone: ( + 45) 87 50 14 00
Fax: ( + 45) 87 50 14 02
Web site: http://www.grundfos.com

Private Company
Incorporated: 1945 as Bjerringbro Pressestøberi og Maskinfabrik (Bjerringbro Die-Casting and Machine Factory)
Employees: 12,586
Sales: DKK 13.42 billion ($2.1 billion) (2005)
NAIC: 333911 Pump and Pumping Equipment Manufacturing

Grundfos Group is a world-leading manufacturer of pumps, pump motors and related equipment. The Bjerringbro, Denmark-based company produces a full range of circulator, submersible, and centrifugal pumps for a variety of applications, including water delivery, well-water, irrigation, heating and cooling systems, and industrial operations, as well as wastewater treatment and discharge. Grundfos is the world's leading producer of circulator pumps, accounting for 50 percent of the total global market. Each year the company produces more than ten million pumps. Supporting its pump operations, Grundfos has also developed a range of electric motors and powering systems, using solar, wind, and multiple-source energy supplies. In addition, Grundfos develops and manufactures its own electronic control and related equipment.

While Denmark remains an important component of Grundfos's manufacturing base, the company has begun a process of shifting much of its production internationally. The company has focused its international manufacturing effort especially on Hungary, launching construction of a new factory there in 2006. Grundfos also operates manufacturing and assembly facilities in the United States, the United Kingdom, France, Switzerland, Italy, Germany, Finland, Taiwan, China, and Brazil. The company also operates a network of sales and marketing subsidiaries, with more than 70 subsidiaries in over 40 countries. Grundfos remains a privately owned company, controlled by the Poul Due Jensen Foundation established by the founding family in 1975. The Jensen family itself directly controls a 12 percent stake in the company, which is led by President and CEO Jens Jorgen Madsen. In 2005, Grundfos reported sales of nearly DKK 13.5 billion ($2.1 billion).

FOUNDING A PUMP COMPANY IN
POSTWAR DENMARK

Poul Due Jensen started out in business during World War II, while Denmark remained under control of the German occupation. Jensen's original business involved the installation of water-supply systems, particularly from farm-based wells in the rural Bjerringbro region, in northern Jutland. The war shortages, particularly of electric pumps of reasonable quality, quickly led Jensen into manufacturing. In 1945, Jensen founded a new company, Bjerringbro Pressestøberi og Maskinfabrik (for Bjerringbro Die-Casting and Machine Factory), and began developing his own electric pump in order to fulfill a contract for a complete water-supply system. Jensen quickly showed a flare for innovation, developing an innovative automatic pump that included its own integrated pressure tank. The compact pump system, called FOSS ("well"), became the company's first successful product.

Just two years later, Jensen's company launched its next innovative product, the Dypfoss ("deep well"), which enabled pumps to operate at well depths of seven meters and more below the surface. The new pump became a revolution of sorts for Denmark's rural, agricultural community, bringing running water to the country's farm families.

Jensen's pumps were initially based on the piston system. Such pumps, however, suffered from a major drawback, in that they were quite large and required a high degree of raw materials and production time. In order to overcome these drawbacks, the Bjerringbro plant began developing an in-house engineering team in the early 1950s. By 1952, the company had developed its first centrifugal pump, called the CP. The new pump design produced a smaller pump that could be built from standardized components, a feature that enabled the company to shift its model to mass production techniques. One year after the debut of the CP, Jensen, working with the group's first engineer, introduced the first deep-well centrifugal pump, overcoming a major drawback of the centrifugal design.

In the late 1950s, the Bjerringbro company transition to mass production continued. Boosting the company's reputation on a national level was the introduction of a new ejector pump system, the CPE-3, launched in 1957. The new pump design provided a lightweight and affordable alternative to the company's other designs, enabling lower income farm families to replace hand-pumped systems with in-home running water. The CPE-3 also proved adaptable to a variety of well applications beyond the farm community, providing on-demand pump capacity to even the most remote areas in the Scandinavian region. The company also took advantage of the developing new trend for central heating systems, designing its own centrifugal pump that found application not only in central heating systems, but also in hot water delivery systems. Central heating pumps soon became a core company product, and by the end of the century the company had established itself as the world leader in this pump category.

Jensen formally changed the name of his company to Grundfos in 1967. In that year, the company also made its mark on the national market, becoming the first in Denmark to develop a submersible pump, the stainless steel-based SP. In order to develop the pump, Grundfos had developed its own technology for mass production of stainless steel components.

DEVELOPING INTERNATIONAL
MARKETS

Grundfos began its international expansion as early as 1960, when the company founded a subsidiary in Germany. In the 1970s, the company added to its international growth, opening a new subsidiary in Austria in 1971 and moving into France in 1972. The company later expanded throughout Western Europe, before adding subsidiaries throughout Eastern and Central Europe as well.

The company also continued its record of innovation, launching a new generation of centrifugal pumps, starting in 1971 with the CR30, which featured an inline design, allowing greater flexibility in the installation of pumping systems. Also during the 1970s, Grundfos began expanding its manufacturing capability, notably with the development of its own motor production. This effort started in 1974, and enabled the company to create motors custom built for its pump designs. The ability to develop its own motor designs soon bore fruit, as the company introduced a new portable pumping system, the Jet Pump, which could be used in a large variety of applications.

COMPANY PERSPECTIVES

Grundfos is one of the world's leading pump manufacturers.

It is our mission—the basis of our existence—to successfully develop, produce and sell high-quality pumps and pumping systems worldwide, contributing to a better quality of life and a healthy environment.

Grundfos reorganized its shareholding in 1975, creating a foundation, the Poul Due Jensen Foundation, which became the company's majority shareholder and took responsibility for the firm's continued growth. The move anticipated Jensen's death in 1977. Succeeding Jensen was son Niels Due Jensen, who, at age 34, had worked for the company for 17 years. The younger Jensen did not immediately take over the chief executive role, however. Instead, that position was given to more experienced managers in the company for three years, before being transferred to Jensen. In this way, the company maintained a stable, if conservative course, despite the leadership transition.

Grundfos maintained its tradition of innovation through the 1980s as well. The company turned to the production of systems using alternative energy sources, particularly necessary in remote locations far from any source of electricity. While solar power systems had been available for some time by then, their application in pumping systems was hampered by the need to use inefficient, direct-current based pump designs. In 1983, however, Grundfos solved this problem, developing an electronic-based inverter. The device not only converted the power produced by solar panels to alternating current, it also provided a means of adapting the pump's operation to sun conditions. The new Grundfos system helped boost the company's international profile, bringing running water to villages in many of the world's poorest areas.

Grundfos continued to seek out new areas of operation during the 1980s. In 1984, for example, the company entered the wastewater treatment market, debuting its KP drainage pump. The following year, Grundfos recognized the need to develop its own electronic capability, and formed an in-house electronics division. Starting with just four employees, the company's electronics division rapidly gained a prominent place in the company's overall operation, and in its ability to maintain a position among the world's leaders in the global pumps industry. Part of this success was due to the company's continuing record of innovation, such as the introduction of the industry's first frequency converter, which provided automatic speed-adjustment capability. The X99, as the model was called, was launched in 1990, setting a new industry standard.

SHIFTING MANUFACTURING
BASE FOR THE NEW CENTURY

Grundfos continued to develop its frequency converter technology, leading to the development of the MGE pump motor launched in 1993. The new system enabled automatic speed adjustments, providing cost- and energy-efficient operation. Further innovations through the decade included the UPE Series 2000, which provided remote control and information capability, introduced in 1995. In 1999, the company launched the Grundfos Magna, a circulator pump with a permanent magnet motor. Further development of the Magna added automatic speed control by 2001.

KEY DATES

1945:: Poul Due Jensen establishes Bjerringbro Pressestøberi og Maskinfabrik in order to produce pumps for water supply systems.
1952:: Company launches production of centrifugal pumps, adopting mass production techniques.
1960:: Production subsidiary opens in Germany.
1967:: Company changes name to Grundfos and produces its first submersible pump.
1974:: Grundfos launches development and production of pump motors.
1975:: Poul Due Jensen Foundation is formed as majority shareholder of the company.
1977:: Poul Due Jensen dies and is succeeded by son Niels Due Jensen.
1983:: Company develops solar-powered pump system.
1984:: Company enters wastewater treatment sector with first drainage pump.
1985:: Company launches electronics division to develop its own electronic technology.
1990:: Grundfos introduces X99 frequency converter, setting new industry standard.
1995:: Company develops UPE 2000 series of circulator pumps.
2000:: Company announces plans to shift production focus to Hungary.
2004:: Grundfos strengthens position in water treatment market with acquisition of Hilge, in Germany.
2005:: Grundfos acquires Brisan Turbo in South Africa.
2006:: Grundfos launches EUR 70 million investment to build and expand production facilities in Hungary; acquires PACO Pumps in the United States.

Through the 1990s, Grundfos had grown steadily and had successfully expanded its range of markets. In addition to expanding throughout the Eastern and Central European regions, Grundfos had also entered a number of fast-growing Asian markets, including South Korea, India, Taiwan, Hong Kong, and China, among others. Acquisitions played a role in the group's development, a strategy that continued into the 2000s. In 2000, for example, the company bought up Sweden's JL Pump, based in Gothernburg, strengthening its Swedish subsidiary's operations. The company added to its electronics capability through the purchase of engineering software specialist Dansteel Engineering India, a subsidiary of Dansteel Engineering, in 2002. The new Indian subsidiary then converted its operation to development of software specific for the pump market. Also in 2002, Grundfos bought up a 60 percent share in its main rival in South Korea, Chung Suk. That acquisition boosted Grundfos's position in that market to a 60 percent share.

Acquisitions also allowed Grundfos to expand its operations further into the wastewater management and treatment markets. The company entered the market for large-scale wastewater pumps in 2000, after buying up Finland's Sarlin Pump Co. In 2002, the company bought up Arnold AG, a Switzerland-based specialist in submersible mixers and other equipment used in wastewater treatment systems. By 2004, Grundfos's stature in the market approached a leadership position as it took over Hilge, based in Germany, which specialized in producing pumps for the dairy, food, and pharmaceuticals industries. The company returned to Germany the following year, buying Alldos, which specialized in dosing pumps for the water treatment market.

While building up its operations in the water and wastewater treatment markets, Grundfos also continued to expand its international network with a series of investments. In 2002, the company announced plans to spend more than $12 million in order to build a factory in Moscow to cater to fast-growing sales there. The company added to its capacity in Italy in 2005, buying Tesla, a maker of submersible motors. In Turkey, the company spent EUR 4 million in order to build a new assembly facility near Istanbul. The company also expanded its presence in South Africa, buying that country's Brisan Turbo Pty, a producer of submersible pumps.

Since the early 2000s, Grundfos had announced its intention to shift a significant part of its Danish manufacturing operations to Hungary, in part to cut costs, but also to place the company closer to a region taking on greater importance in its future growth. In 2006, the company's plans bore fruit, as Grundfos announced its intention to spend EUR 70 million to build a new factory in Szekesfehervar as well as expand its existing production facility in Hungary. Meanwhile, Grundfos was also taking steps to boost its presence in the United States, buying up that country's PACO Pumps, based in Texas. The PACO purchase also gave Grundfos new manufacturing facilities in Shanghai, China. Grundfos had successfully established itself as a leader and driving force in the global pump industry in the 21st century.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Bombas Grundfos de Mexico S.A. de C.V.; Bombas Grundfos Espana S.A.; Grundfos (Proprietary) Ltd.; Grundfos Pumpenfabrik GmbH; Grundfos Pumps Corp.; Grundfos Pumps Ltd; Pompes Grundfos Distribution; Pompes Grundfos SA.

PRINCIPAL COMPETITORS

FE Petro Inc.; Pumper Parts L.L.C.; FAST & Fluid Management Srl; Wright Pump Inc.; Nasosenergomash Pump and Power Engineering Works Joint Stock Co.; Beach-Russ Co.; Depco Pump Company Inc.; Shanghai Dalong Machinery Works; Kataysk Pump Plant Joint Stock Co.; MAN AG; Ebara Corp.; SLOVPUMPTRADE S.R.O.; JUNG PUMPEN GmbH and Company KG.