Corporate Recovery Plan For Harnischfeger Corporation

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Background: Harnischfeger Corporation was a machinery company based in Milwaukee, Wisconsin. The company had originally been started as a partnership in 1884 and was incorporated in Wisconsin in 1910 under the name Pawling and Harnischfeger. Its name was changed to the present one in 1924. The company went public in 1929 and was listed on the New York Stock Exchange (Palepu, 1985). Harnischfeger was a leading producer of construction, mining and electrical equipment. In 1984, the corporation’s net profit was drawn by $1.28 per share due to the severe financial crisis that the company had faced during the last three years. The worldwide recession in the early 1980s caused a significant drop in the demand for the company’s product starting in 1981 and ended in a series of events that shook the financial stability of Harnischfeger (Palepu, 1985). Harnischfeger Corporation in order to survive in this critical situation had decided to develop a corporate recovery plan. The plan consisted of four elements: changes in the top management, cost reductions to lower the break-even point, reorientation of the company’s business, and debt restricting and recapitalization. The company’s overall goal was to restructure its strategy for upcoming years (Palepu, 1985). Introduction: In 1984, Harnischfeger made some significant changes to its accounting policy that had effect the corporation’s reported profit. They have reported profits during each of the four quarters, ending the year

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