This classification comprises establishments primarily engaged in manufacturing passenger or freight elevators, automobile lifts, dumbwaiters, and moving stairways. Establishments primarily involved in manufacturing commercial conveyor systems and equipment are classified in SIC 3535: Conveyors and Conveying Equipment, and those manufacturing farm elevators are classified in SIC 3523: Farm Machinery and Equipment.
333921 (Elevator and Moving Stairway Manufacturing)
The elevator and moving stairway industry manufactures a series of products designed for the vertical transportation of both materials and passengers. Machines manufactured for the exclusive purpose of moving materials, such as freight elevators and automobile lifts, comprise a small niche of the wide-ranging materials handling market. The majority of company revenues are generated by manufacturing passenger elevators and escalators, producing parts required for elevator renovation and modernization, and servicing elevators.
The livelihood of this industry is based mostly on the well-being of the construction industry, since new buildings need new elevators. The demand for elevators in the United States in the late 1990s was fairly high, as the strong economy fueled the construction of new commercial and public buildings. In 2000, industry shipments were valued at $1.82 billion, up considerably from 1996 shipments of $1.1 billion.
One hundred ninety-five establishments were engaged in manufacturing elevators and moving stairways in 1997. Elevators and moving stairways accounted for 79 percent of total shipments, while parts and attachments produced for separate sale represented 21 percent. Electric and hydraulic passenger elevators—40 percent of the industry's total 1997 shipments—were the largest product groups within the industry. Automobile lifts—16 percent of the total figure—were the next largest group, followed by freight elevators, other types of non-farm elevators, and moving stairways and escalators—which each comprised less than 6 percent of total shipments.
Establishments in the elevator and moving stairway industry employed an average of 48 people each. Of the 195 companies operating in 1997, 58 percent (112 firms) employed fewer than 20 workers. However, 38 percent of all employees in the industry were concentrated in establishments employing more than 50 people. The greatest concentration of industry employees was in the Midwest and the East. Indiana was home to some 1,590 employees, followed by New York with 783 and Illinois with 761. Combined, these three states employed over one third of the industry's total work force, and housed over 17 percent of all companies.
In 1997, this industry as a whole spent more than $849.0 million on raw materials, which translated to about $4.4 million per establishment. New capital expenditures totaled $38.8 million for the industry as a whole, approximately $199,000 per establishment.
The application of modern technology to the elevator industry has also fostered greater competition among major contractors (who engaged in manufacturing new elevators as only a part of their operations) and smaller independent firms (who derived their business exclusively from the service market). In an effort to guarantee future service and renovation contracts on elevators they manufactured, many of the larger companies in the industry attempted to guard the technical data governing their elevators so that outside contractors lacking proper access codes would be unable to service their product. Although this form of proprietorship was frowned upon by governing organizations such as the National Association of Elevator Contractors (NAEC), the profit margin on new elevators—about 5 percent—encouraged companies to protect their large capital investments in this manner.
The genesis and evolution of the elevator industry closely paralleled the historical development of the Otis Elevator Company. The company was founded by Elisha Otis, the inventor of the first "safe" hoist—a technological development that generated public confidence in the elevator for the first time and laid the foundation for the elaborate vertical transportation systems of the twentieth century. An innovative advertiser as well as a skillful engineer, Otis brought his new invention to the Crystal Palace Exposition in New York City in 1854. During the middle of his demonstration, Otis stunned the crowd by cutting the rope that held up the hoist platform on which he stood, only to be kept securely in place by the release of the wagon spring safety mechanism he had invented. While Otis himself died before he was able to realize the financial rewards of his inventions, the company he founded reached the $1.0 million mark in sales in 1870 through the leadership of his sons, Charles and Norton.
As technology made the construction of taller buildings possible, the Otis-dominated elevator industry kept pace with developments of its own, introducing the hydraulic elevator in 1878, the electric elevator in 1889, and the gearless traction electric elevator in 1903. These innovations would later become the backbone of the industry, enabling passengers to be transported safely at greater speeds and to greater heights in buildings such as the 102-floor Empire State Building and the 110-floor World Trade Center.
With increases in the volume of passengers and the construction of taller buildings, the need arose for federal safety codes regulating the industry. In 1922, the American standard safety requirements for elevators were established, codifying the informal laws that had previously governed the industry. By keeping such concerns at the forefront, the industry was able to maintain an excellent safety record, strengthening consumer confidence and paving the way for the public acceptance of new technologies in future years.
As elevator speeds reached 700 feet per minute, the need for an automated control system became more evident. Consequently, in 1924 Otis developed the Signal Control System, which took the guesswork away from the operator by automatically slowing down the elevator as passengers on various floors pushed call buttons. The system was further refined with the invention of Peak Period Control, a control device which automated the job of the elevator starter, further increasing efficiency.
The widespread use of electronics in World War II ushered in a new era of technological advances in the elevator industry. In addition to providing improvements in safety devices, such as the development of a sensor that automatically returned the elevator doors to the open position when a person occupied the doorway, electronics technology finally eliminated the need for elevator operators and starters. With Otis's development and refinement of Autotronics, a system that electronically controlled when elevator doors should be opened and closed, most commercial elevators were fully automated by the mid-1950s.
The next two decades were marked by continued refinement of the automatic control systems developed in the 1950s. By 1970, for instance, solid state circuitry, which contained hundreds of printed circuit boards per system, was applied to the elevator industry. This innovation significantly reduced the size and weight of the control system, while improving its reliability and ease of maintenance in comparison to earlier models. New methods of production were introduced as well, such as the concept of the pre-engineered elevator, which brought forth the mass production of uniformly designed elevators. This manufacturing philosophy not only lowered production costs, but, by providing the architect with the exact hoistway dimensions and other elevator specifications, eliminated much of the arduous work required in designing elevators to fit individual construction projects. Such innovations enabled the industry to surpass the $1.0 billion mark in shipments by 1982, more than twice the total of a decade earlier.
As the 1980s progressed, however, the pattern of growth characteristic of earlier years was not sustained. An increased demand for escalators in shopping malls and other public buildings throughout the country was not enough to overcome the slowdown in the elevator market, a direct result of the severe decline in multi-story buildings. At the close of 1991, total shipments of $1.2 billion were recorded, reflecting only a 5 percent increase over the previous 10 years. In a similar fashion, new capital expenditures fell from $31.2 million to $16.3 million, nearly a 48 percent decline.
While the future of the industry largely depended on the condition of the real estate and construction markets, it would also be influenced by firms' abilities to sell clients on new technological developments, particularly those implementing the use of computerized control systems, which promised to revolutionize the industry in the 1990s. With the advent of various types of new computer technology, the future of the industry would largely be determined by the ability of elevator manufacturers to convince consumers that extensive modernization projects were indeed necessary. Without the support of a strong U.S. economy in the future, it appeared doubtful that such expenses would be justified by companies attempting to cut costs.
The value of U.S. shipments rose each year from 1991 to 1996. In an attempt to combat the unfavorable economic conditions of the early 1990s, the elevator industry attempted to fill the void in new elevator contracts by shifting its attention to the renovation and modernization of models installed 20 or more years ago. By replacing old control panels with new machinery and computer technology, the elevator industry hoped to survive the effects of the glutted real estate market. Elevator manufacturers also looked to take advantage of the new opportunities for renovation made available by legislation passed during the early 1990s requiring that elevators be updated to provide greater handicapped accessibility in public and private buildings.
From 1990 to 1995, the demand for elevators and escalators fell from 90,000 units annually to 70,000 units. Large international firms and small local companies all suffered. They responded to the crunch by cutting costs, decreasing the number of employees, simplifying designs, and consolidating. In 1991, there were 175 companies operating in this industry; by 1997, there were only 34—with the industry leaders consisting of subsidiaries of larger, diversified corporations.
In 1996, the elevator industry faced increased competition, and a slow construction industry made business difficult. Large European companies were in financial straits, such as the Swiss engineering firm Schindler. Their 1995 profits were one-half the preceding year's. Kone, a Finnish company, closed several of its factories. The American firm Otis, which controlled about one-fifth of the market, saw a 20 percent rise in operating profits in 1995; with $5.3 billion in sales, the company made $511.0 million in profits.
Historically, the servicing of elevators has been the privilege of the manufacturer, but the servicing of elevators has become a fiercely competitive market of its own. Servicing contracts are of great importance because generally, in the first twenty years of its life, an elevator will cost its owner as much in repairs as the initial cost. To offset this, Otis started installing elevators equipped with electronics that allowed engineers to remotely monitor elevators for faults and upcoming problems. The remote monitoring enabled engineers to spot problems, and elevators can be serviced before breakdowns occur.
The U.S. market recovered in the late 1990s. Commercial building construction boomed, as vacancy rates in office buildings were at their lowest in a decade. Demand for elevators in office buildings was high. An overall strong economy boosted construction of public buildings—many of which also needed elevators—as well as new football stadiums and other sports arenas. As a result, the valued of shipments increased each year between 1997 and 2000, growing from $1.607 billion to $1.823 billion.
However, the rising need for elevators and moving stairways in the United States was undercut by the precipitous drop in demand in Asian markets. Damaged by currency devaluation and widespread financial panic, construction projects in Asia slowed dramatically in the late 1990s. American elevator companies were not immune to the crisis. For example the industry's worldwide leader, Otis Elevator Company, had depended on Asian nations for over 19 percent of its sales in the late 1990s; as a result, the company was forced to restructure its Far Eastern operations.
Farmington, Connecticut-based Otis Elevator Company has historically been the leader of elevator companies. This status quo continued through 1998, as Otis achieved total sales of over $5.6 billion. A wholly-owned subsidiary of United Technologies Corp. since 1976, Otis employed 63,000 people in more than 1,700 locations worldwide. The company claimed that over 1.2 million of its elevators were in service, and dispatched an army of 22,000 mechanics to service them. Otis also produced escalators and moving walkways. In 1998, over 80 percent of its revenue was derived from exports.
Other key players in the elevator industry included Dover Corp., a multi-national conglomerate, which owned a successful elevator division. This subsidiary—Dover Elevator International Inc.—was headquartered in Memphis, Tennessee, and reported $4.0 billion in sales in 1998. Dover Elevator employed 23,350 workers. Schindler Elevator Corp. of Morristown, New Jersey, achieved $700.0 million of sales in 1998, and had a work force of 6,200 employees. With 1,100 workers, the El Cajon, California-based United States Elevator Corp. had sales of $170.0 million in 1998, while rival Amtech Elevator Services of Whittier, California reported sales of $74 million.
Total employment in the elevator and escalator industry encountered a period of gradual decline in the early and mid-1980s. After reaching a decade high of 13,000 total employees in 1982, employment figures declined to 10,200 in 1987 and to 8,400 in 1996. However, by 2000, employment had increased to 10,515, of whom 7,175 are production workers earning an average wage of $14.99 per hour during a 40 hour week.
As elevator and moving stairway establishments continued to work to accommodate the shift towards modernization and renovation and away from the manufacturing of new units, the education requirements for working in the industry promised to change as well. As evidenced by the NAEC's early campaign to improve the training of field personnel and recruit more people with computer experience, the industry's introduction of more sophisticated computerized technology demanded a larger percentage of workers with a strong college or trade school background in computers.
While the Japanese centered their efforts on the production of faster elevators during the 1990s, U.S. companies focused on making them run "smarter," or more efficiently, in relation to the needs of their patrons. One of the most promising developments in domestic elevator technology came in Otis's introduction of a new type of computer software that used "fuzzy logic" to decide upon the best way to accommodate the various traffic needs of a modern office building. This type of artificial intelligence software distinguished itself from the standard computer logic governing conventional modern elevators by its ability to process uncertainties of information more efficiently. Rather than simply sending the closest elevator when a patron signaled, fuzzy logic took into account the number of people waiting for elevators throughout the building, hoping to avoid the common problem of sending an elevator to service one individual at the expense of several left waiting somewhere else. This innovative system by Otis, first installed in Japan in 1993, encountered some problems, but it held great potential for the future of the industry.
In 1996, Otis introduced the Odyssey, a multidirectional system of transistor elevator cabs, which could take a person from parking lot to penthouse, even in structures more than 1,000 meters high.
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United States Census Bureau. "Elevators and Moving Stairway." Available from http://www.census.gov/prod/ec97/97m3314c.pdf October 1999.
United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .
"World of Otis—Who Are We?" Available from http://www.nao.otis.com/whoweare.htm .
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