As Californians face rolling blackouts, and other states struggle to meet rising electricity costs, John McFarland, president and CEO of Baldor Electric Company, smiles and waits. His product line—6,500 in-stock industrial motors used in everything from medical equipment to conveyors—is well-known and respected for energy efficiency. The 91-year-old company is an acknowledged leader in producing motors that can earn back their purchase price within a year via reduced energy costs.

According to a recent US Department of Energy study, electric motors account for 63 percent of the electricity consumed by industry and 25 percent of all the electricity used in the United States. Electricity accounts for 97 percent of the lifetime cost of an industrial electric motor, according to Baldor.

Responding to the growing demand for affordable, reliable power, in the fourth quarter of 2000 Baldor acquired the Pow'R Gard Generator Corp, which manufactures portable and standby generators that range in output from 1.3 to 140 kilowatts.

Baldor sells to a wide range of industries, including agribusiness, pulp and paper, textiles, printing, pollution control, and food processing. It has 4,500 employees at more than 14 manufacturing locations and sells its products in more than 55 countries. Sales for 2000 were $621.2 million, up 6 percent.

While times right now are generally tough—sales dropped 5 percent and earnings per share fell 40 percent in 2001's first quarter—no single industry dominates Baldor's client list, a fact which brings diversity and stability, McFarland says. "The majority of industries we serve are down, but oil and gas, power generation, and municipal projects are all going strong," he says. The company also evenly divides its business between distributors and original equipment manufacturers. "That gives us a little bit of security," McFarland says. "People who aren't ready to replace their equipment need to repair it."

The firm specializes in producing custom motors, which account for some 30 percent of its business. The company can design and deliver a 4- to 6,000-pound, 500-horsepower motor in as little as two weeks. McFarland says this turn-on-a-dime ability is crucial to Baldor's success. "Time is much more important to our customers than it has been in the past," he notes. "We're able to do this thanks to software, a lot of good suppliers, and we're highly vertically integrated. We want to go even shorter. We want to reduce by half the time it takes to do everything we do. Then we want to cut it in half again."

Baldor's ability to respond quickly to customer re-quests has bolstered its enviable position as the industry leader, says Scott Alaniz, an analyst with Stephens Inc. "That's how the company has always grown."

Alaniz has high praise for the company. "McFarland is an exceptional manager," he says. "Their management team is very, very good, and they've executed extremely well. But because the macro environment is so poor, their numbers don't reflect that. They're an incredible manufacturing company and they are extremely responsive to their customers."

The firm has risen to No. 1 from No. 30 in the industry, McFarland says, giving managers the pleasant challenge of keeping employees sharp. "Arrogance had no place in that success and has no place today," he says. Every employee, whether white- or blue-collar, is required to take classes on cost, quality, service, and time, the four reasons McFarland says customers choose Baldor products.

The company's only downside, Alaniz says, is the mature industry in which it operates, which results in only modest growth even in the best of years. The company's focus on drive manufacturing is also smaller than it would like, Alaniz adds, partly because Baldor is new to that game. "They're still trying to build up their volume and expertise," he says.

The primary challenge, McFarland says, is educating buyers about the money they can save using Baldor motors. "The cost of operating electric motors can be 20 to 30 times the purchase price, and that's a real opportunity for us." The catch? The people who use the motors—workers on the shop floor—never pay the electricity bills. "There's a real disconnect between maintenance people and the person paying the bills."