Removed from scheduled maintenance: An inquiry into the problems threatening the survival of United States elevator manufacturers

For many years the $5 billion U.S. elevator industry was dominated by seven major U.S. manufacturers. During the 1980s, three of these manufacturers were sold to foreign competition. This study sought to provide a clearer insight into two of the problems threatening the survival of the four remaining U.S. elevator manufacturers: (1)~pricing construction contracts in a declining market, and (2)~halting the loss of existing maintenance contracts. This dissertation begins with a brief history of the U.S. elevator industry. A critique of existing construction pricing (or bidding) models found in the current financial literature and in practice among the U.S. elevator manufacturers was undertaken. The probabilistic model, predominant in the literature, lacked practical guidance for incorporating the benefits of follow-on maintenance business (where profits for elevator manufacturers are most lucrative). In practice, U.S. elevator manufacturers have ignored the probabilistic model and have left incorporating future benefits of maintenance to the judgment of the bidder. The net present value (NPV) model, widely used in capital budgeting decisions, was proposed as the appropriate model for combining construction contracts with follow-on maintenance business. Use of the NPV model was demonstrated with a selection of fifty bids, taken from the files of a U.S. elevator manufacturer. Quantifying opportunity costs associated with pricing alternatives illustrated an important advantage of using the NPV model rather than probabilistic models, which measure only probabilities of winning the bid. A critique of current customer satisfaction/dissatisfaction literature focused on the importance of customer behavior and attitudes. A callback study, performed on more than five hundred elevators operating in the Baltimore/Washington, D. C. area, showed that although U.S. elevator manufacturers' maintenance proved superior to independent maintenance, customer perception to the contrary has apparently caused the loss of maintenance contracts. With respect to new equipment, design improvements made over the years have not improved elevator performance. U.S. elevator manufacturers have fallen far behind their Japanese counterparts.