Family, Customer Values Fuel Growth Of CMW

Ditch Witch has been a well-known and -respected name in the underground construction industry for decades.

The world’s first small, service-line trencher carried the Ditch Witch name, and over the course of nearly 70 years, the product line has steadily evolved and expanded to include not only trenchers, but a wide variety of equipment designed specifically to place pipe and cable in the ground.

Ditch Witch is owned by The Charles Machine Works Inc. (CMW), located in the small, northern Oklahoma community of Perry, but the Charles Machine Works name never has been widely known or recognized. That is changing.

Over the last few years, CMW has quietly built a family of companies that offer a broad selection of equipment used for installation, maintenance and rehabilitation of underground pipe and cable. Because CMW is a privately held company and its stock is not publicly traded, the business press pays little attention to it and its growth. But utility providers and the underground construction industry are becoming aware that Ditch Witch is one of several CMW companies, all focused on underground construction.

Becoming the Underground Authority

“Today, Charles Machine Works offers the most- advanced equipment and solutions for underground construction and service in the world,” said Rick Johnson, CEO. “We are the only company in the market focused exclusively on providing solutions over the complete life cycle of underground pipe and cable.

“Through our family of market-leading companies, we offer solutions for small to large new installation methods, a range of same-path repair and rehab technologies, underground obstacle awareness and pipeline inspection electronics, used and reconditioned equipment, after-market tooling and emerging-market solutions.

“Today our companies work together with customers to do what others cannot do. We consider Charles Machine Works to be ‘The Underground Authority,’ and that is how we want to be recognized.”
To accomplish that goal, CMW has acquired companies that provide underground services and technologies that complement and go beyond those of Ditch Witch:

  • Subsite Electronics – underground awareness and inspection electronics
  • American Augers – large horizontal directional drilling and auger boring equipment
  • Trencor – large trenchers
  • HammerHead – pipe bursting and cured-in-place-pipe lining
  • Radius HDD – after-market HDD tooling for all brands
  • MTI Equipment – seller of reconditioned HDD equipment of all brands
  • DW/TXS – a joint venture that produces basic HDD models in China for emerging markets that do not require technology demanded in North America and Europe.

Each company continues to operate under its own name and remains where it was located before being acquired by CMW.

Vision

“I’m not sure whether some are confused by retaining names of established companies we’ve acquired,” said Johnson, but the industry didn’t really know Charles Machine Works, and it does know American Augers, Subsite Electronics, HammerHead, Radius, MTI, TXS and, of course, Ditch Witch.”

Johnson said CMW believes there is a value in allowing what made each company successful to continue to represent its leading brand in its niche market, and that it is important to keep the existing brand names in front of customers and the marketplace.

“When we have the opportunity to tell customers our story,” he explained, “we walk through the family of companies, highlight their capabilities, focus on the opportunities they provide, and we find they appreciate the fact that we are right there beside them every day working in the dirt.”

The role of CMW in operations of the individual companies focuses on leadership and guidance, along with market experience and capital investment.

“Recognizing that each of the companies was quite successful prior to Charles Machine Works, we want to maintain their focus and allow them to do what they do best within the structure of the family,” Johnson said. “It is our role to ensure each company has the opportunities and resources to be successful and keep it challenged, and by providing opportunities for our companies, to work together to benefit our customers.
“It also is sharing technologies across company lines, or putting together equipment packages, and finding answers for equipment life-cycle needs, such as parts or trade-in deals. Our companies are capable of doing more because they are part of this family, with a shared common goal: underground pipe and cable construction.”

Surviving hard times

At the end of the 20th Century, Ditch Witch was firmly established as a leading manufacturer of underground construction equipment offering not only trenchers, but HDD equipment, electronic tracking systems, vibratory plows, vacuum excavators, compact excavators and skid-steer loaders, and support equipment and tools for the complete product line.

Ditch Witch had pioneered development of vibratory plowing and multi-use equipment  employing specialized, interchangeable attachments. In 1989, Ditch Witch brought to the ICUEE show the first compact horizontal directional drill (HDD) specifically designed for utility work, and led in the development of HDD technology, which became a primary and often-preferred underground construction method.
HDD sales peaked in 2000. Then came the telecom “bust.” Contractor workloads dropped and demand for new equipment all but disappeared.

For the first time in its history, CMW posted a loss and laid off employees. Without telecom work, contractors struggled to find new sources for directional drilling; many went out of business, as did some industry suppliers. A glut of quality, used directional drills flooded the market with most offered at pennies on the dollar.
Before the industry could recover, another recession came in 2008.

“These were very difficult times for all of us,” said Johnson, “times that Charles Machine Works and the Perry community did not soon forget. But the situation also made evident the need to diversify.
“The whole industry had been so enamored with telecom, we knew we had to look for ways to diversify, especially with HDD. Many of our customers had the same issues, and they helped by beginning to do other work with their HDD equipment. Today, drills do many different types of work, not just telecom.

“We looked at some different things and tried some that didn’t work out, but, at the end of the day, we followed our hearts and our passion – underground construction.”

Reflecting on that period, Johnson believes the keys to getting through those challenging times were a committed and stable ownership, a strong balance sheet and a dedicated workforce.

“We protected the distribution channel, continued to invest in new product development, and never doubted we would come out the other side,” he said.

After the most difficult period in the history of CMW and Ditch Witch, expansion began in 2008 with the DW/TXS joint venture in China.

All about family

When Rick Johnson talks about Charles Machine Works, the word “family” occurs often.

From its origins as a blacksmith shop, growing to a machine shop that served agriculture and oil industry customers, and then to a modern manufacturing company, CMW has been owned by the Malzahn family and its employees.

Ed Malzahn, grandson of the blacksmith who started the business before Oklahoma became a state, designed and built the world’s first service-line trencher in 1949 in his father’s machine shop. Malzahn came to personify Ditch Witch and guided the company for 66 years through Ditch Witch’s success, growth and beyond. Malzahn died in December 2015.

“Ed’s death left a huge emotional hole at Charles Machine Works and in the Perry community,” said Johnson. “He had such a presence in the company and the community, and that presence is greatly missed. Personally, I miss his paternal guidance. However, Ed had done an excellent job of planning for the day when he would no longer be here and preparing for the transition that would follow.”

Malzahn had stepped back in 2003 when his granddaughter, Tiffany Sewell-Howard, assumed the role of CEO. Malzahn remained president and chairman of the board of directors and continued to be active in the company.

When Ed died, said Johnson, Tiffany was in place as the leader, and a strong management team had been built to allow the company to continue to grow, thrive and move forward.

“Today,” he continued, “Tiffany is executive chair of the board and more involved from that level. I would say she is a very informed executive chair and family owner. She plays the role of liaison between the company, the board and the family ownership.”

Pipeline rehabilitation

Rehabilitation of buried infrastructure has become a growing segment of underground construction. Expanding its role in this area could be CMW’s next step.

“We see the opportunity,” Johnson said, “and feel like it fits very nicely with our focus on the life cycle of the pipe.

“We got into rehab with HammerHead’s pipe bursting product line. Pipe bursting is an important and growing rehabilitation technology. Now HammerHead has added equipment for cured-in-place-pipe (CIPP) lining, also a primary rehabilitation technology.”

Another example is Subsite Electronics’ recent acquisition of the assets of R.S. Technical Services, a designer and manufacturer of remote closed-circuit television pipeline inspection and monitoring cameras. Pipe inspection is a critical element of the pipe rehabilitation process.

Going forward

“We will continue to be a strategic buyer,” said Johnson. “However, you won’t see us acquire anything just for growth. We will continue to search for opportunities that fit our vision, strategy and culture.  Any acquisition must add value to our customers.”

During its rapid successes and growth through the 1970s and ‘80s, Ditch Witch became an attractive target for acquisition. Ed Malzahn rejected all offers out of hand. However, there remained speculation and concern among some employees about what would happen “when Ed is gone.”

Is The Charles Machine Works Inc. open to being acquired?

“That question has been around for a long time, and we remain family and employee owned,” concluded Johnson. “With Ed passing, I get to answer this question quite frequently. “We continue to be happy and quite successful with our current ownership structure.”

FOR MORE INFORMATION:
Charles Machine Works, (580) 572 3344, charlesmachine.works

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