Lovat: History of a global Canadian brand APRIL 2008
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t was something of a bombshell when news came through in 2008 that Lovat had been sold. A brand that personified Canada’s place in the international TBM tunnelling industry and a family business that was passing from the founding generation to the next had been sold to the giant construction equipment manufacturer Caterpillar. TunnelTalk interviewed the owners of the company to know the reasons for the change of direction. “Acquisition by Caterpillar secures our future without compromising our legacy,” is how Rick Lovat described the move announced in April 2008. “As President and CEO of the company, I could see that within five-ten years we would need to be twice as big, if not bigger, to keep pace with demand, in terms of capacity, resources and staff. This was going to be difficult from our footprint here in Toronto, and would take substantial capital. With Caterpillar we gain these resources. What is there not to like about this deal?” Richard Lovat, founder of the family business in 1972, is also pleased with the change. After emigrating as a mechanical engineer from Italy to Canada, Richard built the company to a world-recognized name with a loyal customer base and a reputation for sticking with the toughest of projects to a successful end. Lovat Senior said: “I could see things coming for the market, for the company, and to be selected by the industry leader as their tunnelling partner is the highest recognition of our efforts. They wanted the best and we have joined with the best.” Globally, the TBM supply business is estimated at US$1 billion plus per year (in 2008). With no slow down in sight, this could double over the next five years and could continue to grow to multi-billions or trillions. Getting a slice of this lucrative action prompted Caterpillar to begin investigations about how to enter the market. According to Rick Lovat, “they approached us about 18 months ago saying that, of the investigations they had made, it was us they wanted to partner with.” And there is much to credit the union. The two companies are North America based and therefore operate under the same basic ethos and business management model; they are under similar legal systems; they speak the same language; they will operate their international efforts from the world’s leading economy; they have the same experiences and evidently share a common goal. “With Caterpillar, we can draw on the company’s dynamic R&D department; on its purchasing power; and on its international servicing network,” said Lovat. As a private company, Lovat did not publish annual accounts, but with more than 250 TBMs delivered globally and support companies in Europe and China, Lovat employed today more than 450 and
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“our order book through 2008 reflects the demanding state of the business”, said the CEO. Publicly-traded CAT accounts reported sales and revenues of $45 billion for 2007 with expectations to increase that by 5-10% in 2008 and increase profit per share by 5-15% on 2007. In the acquisition statement, Mining and Underground Products Vice President Chris Curfman said, “we intend to leverage our global business with continued investment in the Lovat product line”. This however was not to be. Five years later, in May 20013, Caterpillar announced it was to phase out of civil tunnelling, explaining that the tunnel boring business no longer represented a strategic growth opportunity. Over the five years of its ownership Caterpillar found out that the TBM tunnelling market is highly competitive and unpredictable. One of the Caterpillar sales was the machine delivered to the troubled New York Harbor Crossing water tunnel project for the OHL/Tulley Spanish/US Joint Venture. In a disastrous set of circumstances, the starter shaft of the project, along with the beginning of the undersea drive by the TBM, were completely flooded out during Superstorm Sandy in November 2012. Flood water has since been pumped out, but rehabilitation of the saltwater damaged TBM became part of wrangling between the contractor, the client and the project insurers. A strategy to standardize TBM components and sizes to promote a more cost-effective range of off the peg TBMs by Caterpillar also failed to take shape. The unpredictable nature of tunnelling and the particular features needed on a TBM to cope with varying geological conditions continually defeats efforts to standardize machines as Atlas Copco found out to its cost after its failed attempt at owning the USA Robbins TBM manufacturing company in the 1990s. Then in February 2014, Caterpillar announced sale of substantially all of its assets to its Chinese manufacturing partner Liaoning Censcience Industry Co Ltd (LNSS). “For the past year, LNSS has been a
manufacturing partner for the sale of TBMs in China,” said Paul Clark, Caterpillar General Manager with responsibility for tunnelling. “Given the relationship, this was a natural next step for both sides.” Financial details of the transaction were not released. One of the first TBM delivery contracts for Lovsuns, as an overseas subsidiary of LNSS based in Toronto, was a 3.9m diameter EPBM for two wastewater tunnels in Istanbul, Turkey. Confirmed one month after Caterpillar sold the tunnelling assets to LNSS in November 2014, the machine was designed by experienced ex-Lovat engineers and was manufactured in the Chinese facilities of LNSS. “We designed and engineered the tailor-made TBM for Istanbul in Toronto and produced it completely in the facility in Liaoyang China,” explained Hongyu Xue, Managing Director of Lovsuns Tunneling Canada Ltd. “In doing so, we successfully united the best practice, knowledge and technology of both companies for the highest advantage of our customer.” In 2017, Lovsuns closed manufacturing operations in Toronto to concentrate on strengthening production potential in China and improve logistics worldwide. Hongyu Xue explained that the company will continue to hold a base in Toronto to strengthen its engineering, sales and after sales services for international customers with orders for new or refurbished Lovsuns TBMs fulfilled by the company’s headquarters and factory facilities in China. Since then, Lovsuns has continued to straddle both markets, gaining new orders in North America, the Middle East and beyond. “From a global perspective the China/ Canada synergy will allow us to grow faster both in China and overseas. Global customers are looking for cost-effective, high-quality TBMs and the LNSS strategy offers safety of operation and productivity. We will continue to innovate, broaden and improve our product line, offering machines for special applications to help our customers overcome their challenges” said Xue. n
Toronto TBM homebase first for Lovat, then for Caterpillar and now Lovsuns
