Floor, please? Otis Elevator is headed up. A United Technologies (UTC) subsidiary, Otis Elevator (Otis) accounts for some 20% of UTC sales and is also the world's #1 elevator maker. More than 2.3 million Otis elevators, escalators, and moving sidewalks are in service. The company, which serves more than 200 countries, makes gearless elevators for high-rises, a hydraulic line for mid-rise buildings, and a heavy-duty one for freight, as well as Gen2 and ReGen energy efficient elevators (offering 75% energy reduction). Its people-moving systems carry airport passengers to baggage claim. Otis offers installation, maintenance, and upgrade services, too. More than 80% of its sales are generated outside the US.
Otis Elevator manufactures its people-moving systems in more than 40 facilities dotting the Americas, Europe, and Asia, with additional engineering and test centers located worldwide. Its footprint enables the company to serve an increasingly diverse, global customer base. To this end, the company is investing in developing more energy efficient elevators and escalators. Its Gen2 has been around for more than a decade, touting 50% energy reduction, but in mid-2010, Otis Elevator introduced its ReGen elevator system that claims a 75% reduction in energy compared to conventional systems that don't have regenerative drives. (Regenerative drives feed energy back to a building's electrical center.)
Nonetheless, Otis' core markets, commercial and residential construction, as well as travel, were hit hard by the economic crisis. This reality put a slight dent in the company's 2010 sales (an improvement over a year-over-year 9% decrease in 2009). The company cites static commercial and residential construction activity as causing the market weakness, as well as starting the year with a lower backlog. These conditions were compounded by $87 million in restructuring costs. Mitigating factors that offset a more dismal bottom line included a continued growth in the Chinese market, an increase in new equipment orders, and a bump-up in the company's contractual and maintenance business.
Otis has capitalized on acquisitions to expand its global service portfolio, to date more than 1.7 million units. In mid-2011 it purchased Pittsburgh-based Marshall Elevator, the state's largest privately owned and operated full-service elevator enterprise. The deal marks Otis' twelfth acquisition for the year. However, with the majority of business coming from outside the US, Otis Elevator has focused on acquiring businesses in regions undergoing large scale urbanization, mainly Eastern Europe. Earlier in 2011 Otis took over RSU Number 3, a Saint Petersburg, Russia elevator service company, and Servis Vyathu, in the Czech Republic.
Industry wide, one in every two elevators made is installed in China. The company's manufacturing facilities in China have scored contracts for the Shanghai 2010 World Expo (150 elevators and escalators) and residential and commercial contracts in four Chinese cities, including an elevator designed to transport vehicles to the 94th floor of the Shanghai World Financial Center. Also on the rise, the market for elevators in India is around 40,000 units and is expected to grow to 70,000 in just three years. Besides the need for elevators in high-rise buildings, India's demand for air travel is opening other opportunities for people-moving projects in airports. Otis is expanding its Bangalore factory (scheduled completion is 2012), and has entered into joint ventures with Indian companies Trio in Ahmedabad and Supriya. Further expansion into India includes localizing production, creating more local partnerships, and manufacturing energy-efficient, high-speed, and high-rise elevators to support the needs of taller buildings under construction.
Other regions showing promise include South Korea, where one of Asia's first eco-cities, New Songdo City, is using Otis Elevator products, as is Seoul's International Finance Center. In 2009 Singapore ordered up 1,300 elevators for a housing development.
Otis also won an infrastructure assignment for the 2012 Olympics. In the US, Otis Elevator is supplying more than 20 elevators and almost 50 escalators for the World Trade Center Transportation Hub (including the office towers, the memorial, and the museum) being constructed in lower Manhattan; 250,000 people are expected to use the moving systems each day. Otis has also been contracted to provide about 90 elevators and escalators (40 will be Gen2) to the Los Angeles International Airport, along with five years of maintenance coverage.
The company has boosted its slate of services, as well; it introduced an Elite program that puts more muscle behind its equipment reliability and repair response; so far, customers in more than 10 countries are using it. Accompanying the service enhancements, Otis is offering upgrades to its Gen2 elevator line by installing a branded ReGen drive.
For a company that is more than 150 years old, Otis has come a long way from its beginnings in Yonkers, New York, to be a part of such major attractions as Rio's Christ the Redeemer monument, the Eiffel Tower, and the Sydney Opera House. Otis traces its roots to Elisha Graves Otis, the founder who unveiled the world's first "safety elevator" in 1853. Otis Elevator was acquired by United Technologies in 1976. – less