International industrial technology solutions provider Danfoss A/S has a long history of solid business results. With its decades-long track record of success in heating, air conditioning and refrigeration, compressors, power modules and motors, it’s been a legacy industry mainstay. Now the company is striking out in a new direction. Its recent move into electrical and hybrid drive units for heavy equipment, maritime applications, and transportation serves as a harbinger of where the marketplace as a whole is headed. That new division of the company’s business, Danfoss Editron, is just a few years old but has the opportunity to make up nearly a quarter of its total sales.
Danfoss was founded by Mads Clausen in 1933 to market his heating and refrigeration innovations. Headquartered in Nordborg, Denmark, it boasts about 28,000 employees today, and remains family-owned. In the first nine months of this year, its sales increased by 4% to €4.8 billion. The company delivered operating profits of €602 million, a 5% increase over the same period a year ago.
In the past several years Danfoss has made a handful of acquisitions in electrification. Those include its 2017 purchase of Finland’s Visedo, an innovator in electric solutions for marine and off-highway applications, and the 2018 acquisition of AXCO-Motors, a similar Finnish firm. This past January, the company bought Colorado-based UQM Technologies, Inc., a developer and manufacturer of high-efficiency electric motors, generators, fuel cell compressors and electronic controllers, substantially increasing its foothold in the electrification marketplace, while firming up its presence in America.
“Electrification is a mega-trend,” said Eric Alstrom, President and CEO of Danfoss Power Solutions. “Cooling, drivetrains, the Industrial Internet of Things – they’re all interconnected to generate more benefits and opportunities.” Joe Mitchell, VP of Danfoss Editron U.S., and previously President and CEO of UQM, agreed. “Electrification is coming much faster than anticipated,” he said.
That pace of change is one of the company’s main challenges. “Everyone wants to go fast, and everybody wants something special,” said Kimmo Rauma, VP of Danfoss Power Solutions and formerly Visedo’s CEO. “There are really no standards, so it requires a lot of R&D to give everyone their vision. But things will get better as the best answers are developed.”
With its wide slate of offerings, Danfoss has opportunities in a number of applications. “All over the world today, legislation is a big driver of the move to electric,” said Alstrom.
“Whether it’s excavators in Norway, or passenger ferries and inner city transportation in China, there are solutions needed.” Rauma agreed. “Lots of ferries and other boats are using diesels 10 years old or older,” he said. “In Hong Kong, 30% of the pollution comes from ships in their harbor. It’s the same in big U.S. coastal cities. India is building a fleet of 100 electric ferries, and New York and Washington are looking at those too.”
Alstrom sees other opportunities ahead as well. “In America, currently all the hydraulic heavy equipment is powered by diesels,” he said. “But that’s going to shift. It’s important for us to build that business in the U.S.”
“There are several companies in the U.S. developing small transport trucks,” said Rauma. “Fed Ex and UPS are looking for ways to be sustainable and clean, and so that could change things really fast.”
And it’s not just legislation that will drive it. “A lot of customers that approach us are surprised at the improvements in productivity that we can bring,” Alstrom said. “Battery costs are coming down, making EVs more affordable. The costs there have really dropped in recent years.”
Mitchell echoed that sentiment. “There are lots of ways those business cases are improving,” he said.
They think they’re in a great place to go after those opportunities. “It’s the Danfoss goal to be #1 or #2 in every market the company serves,” said Mitchell. “Our acquisitions have made us the best-positioned company to serve those markets. Most of our small competitors have aligned themselves with larger companies, but I don’t think anyone else can rival what we can offer.”
“Our range from a product perspective is really unbeatable,” Alstrom added.
Additional acquisitions could help further. “I do see further opportunities in acquisitions,” said Alstrom. “That’s not just in electrification, but in areas like technology too. There’s no huge gap that I see, but small areas where we could pick up more know-how.”
As they move forward there are some core values Danfoss keeps in focus. “For one thing, we want to serve the communities where we work,” Alstrom said. “So far we’ve succeeded at that.” Sustainability is another key value. “Danfoss is a multi-faceted group,” said Mitchell. “But pretty much everything we do plays some part in sustainability. That makes our employees enthusiastic about working here – we’re helping to make the world a better place.”
Rauma agreed. “The manufacturing arena is really the only one that can change the world,” he said. “We just need the investment and focus to make things happen. What I’ve really admired about Danfoss is their willingness to bring those changes to life around much of the world – in the U.S., in Europe, and in Asia.”