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Growth was largely the result of an economic upswing and increased demand from defense and aerospace industries during the mid- and late 1980s. Woodward Governor’s sales leapt 13 percent in 1987 to $275 million as net earnings rose 37 percent to $24 million. By the end of the decade, moreover, the company was generating more than $300 million in revenues annually. Although Woodward Governor was helped by strong markets during much of the 1980s, its success was also attributed to its proven management style, which was getting increased attention within American industry as a result of the company’s ability to compete with Japan and other countries. As it turned out, Woodward Governor had long been practicing management techniques (such as employee empowerment and performance-based incentives) that were emerging as major trends in the 1980s.

For example, the company’s president received only $247,000 in total salary and bonuses in 1986, in keeping with the company rule of not making more than ten times the amount of the lowest job category. Likewise, new Woodward Governor employees were brought into the company by way of a solemn ceremony; other employees attended, and even joined in prayer, as the new employees were inducted into the Woodward “family.” Finally, while Woodward Governor’s workers received only about 80 to 90 percent of the salary of their U.S. industrial counterparts, their bonuses consistently placed them well above the national average in compensation. Early 1990s Setback

Woodward Governor entered the 1990s with record sales and profits; revenues hit $362 million in 1991. Unfortunately, waning defense and aerospace markets were beginning to take their toll on the company’s bottom line. Woodward Governor had been trying to reduce its dependence on the aircraft market since the mid-1980s, when over 60 percent of sales were attributable to that sector. But by the early 1990s the company was still getting more than 50 percent of its revenues from the aircraft market and was scurrying to beef up its activity in other sectors. Similarly, the company had seen the percentage of its sales attributable to defense markets fall from 20 percent in 1990 to less than 15 percent by 1993. To make up for the shortfall, Woodward Governor began concentrating on its industrial controls division, its only major segment other than aircraft controls.

Despite setbacks going into the mid-1990s, Woodward Governor continued to research and introduce new products. It brought out innovative new digital controls in 1992 and 1993, for example, and had several advanced devices for both aircraft and industrial markets under development. Acquisitions were also completed, including the purchase of HSC Controls of Buffalo, New York, which made electromechanical devices for integrated control systems, especially for aircraft engines; and a small maker of fuel injection nozzles based in Kelbra, Germany, which became part of Woodward Governor Germany GmbH. In 1995, the year of Woodward Governor’s 125th anniversary, the company bounced back, posting net income of $11.9 million on revenues of $379.7 million. Growing Steadily, Late 1990s Through Early 2000s

Woodward Governor enjoyed steady growth from the late 1990s into the early 21st century, growth that was fueled by continual expansion of the product line, strategic acquisitions, and alliance formation. In July 1996 the company acquired Deltec Fuel Systems Holding B.V., a Netherlands firm specializing in fuel control systems for natural gas engines. The purchase was part of a company push to grab a share of the burgeoning market for natural gas engines. In October 1996 Woodward Governor and Mountain View, California-based Catalytica, Inc. created a joint venture called GENXON Power Systems, LLC to market an aftermarket emission control system for industrial gas turbines. Early in 1997 Woodward Governor executed a four-for-one split of its stock. The increased liquidity set the stage for the company to take what many observers considered to be a long-overdue move: listing the stock on the NASDAQ. The move brought a heightened awareness to both the stock and the company because the company’s shares had previously traded only via over-the-counter “pink sheets,” a trading area usually used only for small start-up companies.

The move to the NASDAQ, along with the company’s increasing emphasis on acquisitions and alliances, highlighted a shift from the more conservative management style of the past to a much more aggressive approach. In June 2000 Woodward Generator received the largest single contract in its history, a five-year deal with GE Power Systems valued at more than $500 million. GE Power Systems was a unit of General Electric Company, which had long been Woodward Generator’s largest customer. Under the contract, the company would supply GE Power Systems with fuel and combustion control systems and components for GE’s array of industrial gas turbines for the power generation, oil and gas processing, and marine markets. At the time, power generation was considered a particularly key market as growing demand for power was leading to utilities building new generating plants. Woodward Generator also completed one acquisition during 2000: Hoeflich Controls, Inc., a maker of ignition systems for industrial gas engines, purchased in November. In June 2001 the company acquired the Bryce diesel fuel injection business of Delphi Automotive Systems, which included a plant in Cheltenham, England.

For the fiscal year ending in September 2001, Woodward Generator posted record profits of $53.1 million on record sales of $678.8 million. Hoping to get in on the ground floor of a potentially burgeoning new sector, the company announced in December 2001 that it was entering the market for fuel cell control systems. Many of Woodward Governor’s initiatives in the early 2000s were aimed at bolstering the firm’s industrial control operations, thereby continuing the drive to lessen dependence on the aircraft market. By 2002 industrial controls were generating about 60 percent of overall revenues. This trend became particularly important with the slump in the airline and aircraft industries that followed in the wake of the events of September 11, 2001. Despite the dismal economic conditions that prevailed into the following year, which were also slowing demand in the power generation sector, Woodward Generator managed through the first nine months of its 2002 fiscal year to post slightly higher profits and revenues. The company seemed well positioned to survive the turbulent economic times and to thrive in the long run.