Motors and Generators

SIC 3621

Companies in this industry

Industry report:

Establishments primarily engaged in manufacturing turbo generators are classified in SIC 3511: Steam, Gas, and Hydraulic Turbines, and Turbine Generator Set Units and those manufacturing starting motors and battery-charging generators for internal combustion engines are grouped in SIC 3694: Electric Equipment for Internal Combustion Engines. Establishments primarily engaged in manufacturing generators for welding equipment are classified in SIC 3548: Electric and Gas Welding and Soldering Equipment.

Industry Snapshot

The motor and generator industry recorded more than $12.5 billion in 2008 sales, up from $11.5 billion in 2006. As the global economy struggled, industry shipments fell to an estimated $11.1 billion in 2010. The industry can be divided into four primary product groups: fractional horsepower motors, integral horsepower motors and generators, land prime mover generator sets, and parts and supplies for motors and generators. Other products manufactured by the industry included land transportation motors and fractional and integral motor generator sets.

Of these products, fractional horsepower motors represented 33 percent of the industry's shipments, followed by prime mover generator sets, which accounted for 30 percent. Integral horsepower motors and generators accounted for another 15 percent of shipments, while parts and supplies for motors and generators represented about 10 percent. Electric motor-driven generator sets accounted for an additional 13 percent.

Motor and generator manufacturers are heavily dependent on the health of several industrial markets to sustain their growth. Fractional horsepower motors are used in various household appliances, including refrigerators, freezers, air conditioners, automatic dishwashers, and microwave ovens, as well as other products requiring a small horsepower motor, such as computer disk drives. Falling prices in electronics and stable economic conditions for consumers were a boon for this sector in the early years of the first decade of the twenty-first century. However, the value of shipments fell sharply in this segment by 2003, dropping from $4.76 billion in 1999 to $2.67 billion, a decline of 44 percent.

Integral horsepower motors are best suited for industrial uses, where greater horsepower is required. Integral motor power vehicles are used in large construction projects and provide the necessary power for many different types of manufacturing facilities. Any significant changes in nonresidential construction activity or capital expenditures in the industrial sector generally have parallel effects on integral motor production. A strong economy helped bring about a 25 percent increase for this sector between 1992 and 1997. By 1999 shipment values totaled $1.8 billion, but steadily declined 31 percent over the next four years to $1.24 billion in 2003.

In addition to these market dependencies, motor and generator sales are affected by the vacillating costs of raw materials. Steel, which is an essential element in the production of motors, generators, and their related parts and supplies, is subject to pernicious price swings that could impinge on the industry's profit margin. Overall steel prices were elevated during the early and middle years of the first decade of the 2000s, causing price pressures and narrowing of profit margins. Other materials, such as wire and brushes used in the manufacturing of motors and generators, also demonstrated a propensity for erratic jumps in price that had an appreciable effect on the motor and generator industry. Government regulations requiring premium efficiency motors, rapid technological advancements, and intense foreign competition also were major factors affecting the motor and generator industry in the middle of the decade.

Organization and Structure

Revenue from the motor and generator industry is predominantly generated by medium and large-sized companies employing more than 100 people. Although small companies that employ less than 10 account for 52 percent of the nearly 1,426 establishments within the sector, they only generate approximately 20 percent of the industry's revenues. Accordingly, the largest companies accounted for 80 percent of the industry's income, and the top three companies--Emerson, General Electric, and AO Smith--account for nearly 80 percent of the entire industry's totals.

Geographically, motor and generator production occurred throughout much of the nation, according to the 2002 Economic Census, but was particularly concentrated in California, Texas, Minnesota and New York.

The relatively expensive nature of conducting business in the motor and generator industry tends to discourage the entry of small manufacturing companies. Manufacturers frequently encounter expensive retooling costs, such as when a particular product becomes obsolete and is replaced by a new product or when a significant technological advance dictates the implementation of a new production process. As a result, many companies manufacture a diverse line of products, some of which are excluded from the boundaries of the SIC 3621 classification. This diversity helps to insulate companies from potentially deleterious financial conditions affecting the motor and generator industry.

Background and Development

The principle of the electric motor was first developed by Michael Faraday in 1821, but a diverse group of scientists and lay innovators quickly followed Faraday's lead and began experimenting with amended designs. Improvements on Faraday's design followed in quick succession, as inventors of the nineteenth century were swept up by the inspiring and momentous technological advances that characterized the era. This work helped pave the way to the development of the type of electric motor that became an integral component in twentieth century factories, stores, and homes.

Sixteen years after Faraday first announced his discovery, Thomas Davenport, a blacksmith from Vermont, developed a motor that successfully powered a printing press. This invention marked one of the earliest uses of the electric motor for commercial purposes, and Davenport was granted Patent No. 132. Not to be outdone, Moses Farmer, another Yankee pioneer in the development of the electric motor, created a miniature electric railway as an exhibit for country fairs. Charles G. Page used this application of the electric motor on a larger scale in 1857 when he made an experimental run with a full-sized locomotive from Washington, D.C., to Baltimore.

While these developments were encouraging and marked significant technological advances, the design of these early motors limited the ways in which they could be used. Since they derived energy from large, expensive batteries, these early versions were essentially suitable only for demonstration purposes--to utilize them in a commercial or industrial setting on a daily basis was still impractical--but this shortcoming disappeared with the advent of practical dynamos, or direct-current generators. No longer fettered by cumbersome batteries, early models of these smaller, inexpensive-to-operate motors appeared at the Electrical Exhibition and National Conference of Electricians in Philadelphia in 1884. These were electrically driven rather than battery powered motors, and their development greatly increased the potential applications for the electric motor. By 1887 there already were 15 well known manufacturers of small electric motors in the United States, and more than 10,000 electric motors of 15 horsepower or less had been produced.

The development of direct current generators greatly enhanced the economic feasibility of electric motors in the workplace and the home. However, while the technology was in place, the fledgling industry's growth suffered from the shortsightedness of some business leaders. The individuals spearheading the movement toward electrification focused their efforts on employing electricity to generate light rather than on the vast industrial and commercial applications for the electric motor. The majority of early electric utilities were established as lighting businesses. As a result, other uses for electric motors were lost in the rush. The incorporation of the first practical dynamo into the operation of the electric motor slowly drew the attention of more than a few enterprising individuals, and the industry formally began to experience a substantial demand for its products.

As the new century began, two companies became established as pioneers in the industrial and commercial development of electric motors. General Electric Company (GE), created to market and manufacture the innovations developed by Thomas Edison, entered the electric motor field through mergers and acquisitions. Emerson Electric Manufacturing Company, formed to explore applications for the newly developed alternating current electric motor, entered the market with manufacturing processes it had developed specifically to use electrically driven motors.

Growing from a storied past, GE became one of the handful of behemoth corporations dictating the health of the national economy. GE's history charted some of the most significant technological discoveries and advances of the twentieth century. From Thomas Edison's development of the light bulb to advances in turbine engines, to the refinement of nuclear power production processes, GE has stood as a pioneer in the engineering and manufacturing world for more than 100 years.

Emerson Electric also figured prominently throughout the course of the industry's history and helped to catapult the use of electric motors and generators toward the pervasive levels of the 1990s. Founded in 1890 in St. Louis, Missouri, by Judge John Wesley Emerson, Emerson Electric at first engaged in the production of alternating current electric motors. The company enjoyed considerable success well into the twentieth century by incorporating electric motors into sundry household appliances.

Emerson and GE were joined by many other manufacturers of motors and generators during the pre-World War II decades, as the relatively new technology beckoned entrepreneurs into the market and expanded the size of the industry. Rural Electrification Administration crews were constantly stringing transmission wire, convincing observers that electrification of the entire nation was inevitable. For those contemplating a foray into the electric motor and generator industry, this development translated into encouraging prospects for the future. Manufacturing facilities mechanized their processes to be powered by electricity, if they had not already done so, and appliances used in the home increasingly depended on electricity for power.

The nation slowly became electrified during the first half of the twentieth century. It took until the 1950s for certain segments of the country to install the necessary electrical wire to enable the transmission of electricity. GE manufactured a broad assortment of electric motors and generators to run cement, paper, and steel manufacturing facilities and also spent considerable effort on developing electric powered locomotive engines. Meanwhile, Emerson concentrated on producing electric motors for use in home appliances like sewing machines, water pumps, and fans, and also carved a niche in the growing market for electric motors within products intended for business offices.

When the postwar economic boom of the 1950s exponentially increased consumer spending and invigorated both residential and nonresidential construction, the motor and generator industry gained a solid foundation. Every homeowner in the United States aspired to own at least two modern appliances, which marked the dawn of a new era and infused motor and generator manufacturers with increased business. Manufacturing activity in general increased as well, with electrically driven production lines becoming the norm.

The lucrative conditions characterizing the market attracted more and more manufacturers, and by the end of the decade, competition became intense within the industry. In addition, the nature of the competition changed during this period, as the smattering of small companies that had proliferated before World War II began consolidating into large conglomerates.

In the 1960s, Emerson and GE competed for market share against such manufacturers as Reliance Electric & Engineering Co., Wagner Electric Co., and Westinghouse Electric Corp. This competition resulted in a significant decline in the price of fractional horsepower motors, the primary product within the motor and generator industry. Exacerbating the effect of the shrinking profit margins was the increasing cost of raw materials used in the production of fractional motors, particularly of magnetic wire. By the middle of the decade, a majority of the leading companies raised their prices for fractional motors in an attempt to stave off the debilitating effects of rising raw material expenditures.

At the time, there were approximately 325 companies competing in the industry, operating more than 400 establishments and employing slightly more than 100,000 workers. Despite the shrinking profit margins and other problems associated with the rapid pace at which the industry was maturing, the demand for electric motors continued to increase, attracting more and more competitors. Growth of the industry primarily stemmed from demand for fractional motors, which far outpaced other motor and generator products in terms of proportional representation of industry shipments. Fractional motors accounted for more than 36 percent of total industry shipments by the mid-1960s--up from less than 30 percent in the 1950s--and this percentage would increase in the coming years. The reasons for this growth were as numerous as the different types of household items and appliances that were sold to consumers. Fractional motors were used in such diverse items as electric lawn mowers and hedge trimmers, electric toothbrushes, refrigerators, and washing machines.

Other products classified in the motor and generator industry recorded respectable sales figures, but their growth was less dramatic than the growth for fractional motors. Products like small generating sets powered by diesel and other internal-combustion engines benefited from stable demand from the farming and transportation industries, while shipments of integral horsepower motors spiraled downward during the late 1950s and early 1960s. Integral motors could be reconditioned, whereas fractional motors were rarely rebuilt. This in part accounted for an increasing disparity between fractional and integral motor shipments. In 1958 the value of shipments for fractional and integral motors was approximately even at $430 million. Six years later, the value of shipments of fractional motors had soared to nearly $600 million, while integral motor shipments had fallen to roughly $375 million.

Foreign manufacturers increasingly were encroaching on the U.S. market during this period in the history of the motor and generator industry. In 1963, 5 million motor and generator units were imported into the United States, but this figure nearly quintupled four years later when more than 23 million imported units were sold. This growth in total imports was occasioned by significant increases in the value of shipments recorded by two countries--the United Kingdom and Japan. The United Kingdom increased the value of motor and generator product shipments to the United States from $1.5 million in 1963 to $18.4 million by 1967. However, this was a one-time surge for U.K. producers as five years later, shipments dropped to $12.6 million, and by the end of the 1970s, U.K. imports had slipped below $10 million. Japan, on the other hand, went from negligible shipments in 1963 to more than $15 million four years later. This continued to increase to $27.8 million by 1972 and $67 million by the end of the decade.

High inflation in the early 1970s negatively affected manufacturers of motors and generators, as residential and nonresidential construction declined and many consumers delayed appliance purchases. The total value of industry shipments declined 5 percent between 1974 and 1975 to $3.12 billion, while production worker employment within the industry decreased from 77,700 to 60,600. Hoping to escape the rising costs of materials and supplies occurring at this time, many manufacturers overstocked their inventories. This led to a later downward adjustment in production, further eroding the industry's profit margins. Once consumer appliance purchases returned to normal levels and construction picked up in the late 1970s, however, the industry again exhibited robust growth. Shipment values increased by 12 percent between 1977 and 1978 to $5 billion and approached $6 billion by the beginning of the 1980s.

At the beginning of the 1980s, however, high inflation continued to inflict damage on the motor and generator industry, particularly due to reduced capital expenditure programs initiated by other industries. In the absence of vigorous, nationwide plant expansion and the consequent orders for motors and generators, the industry was forced to look elsewhere for money. Since major retooling of production machinery was prohibitively expensive, many manufacturers streamlined their operations, relying on more efficient production procedures to help them withstand the decline in business. Part of this effort to economize resulted in a reduction of the industry's labor force. From 1981 to 1982, employment of production workers dropped from 93,400 to 84,100--the latest of a series of significant declines from the 107,000 high recorded in 1979.

In the meantime, the value of import shipments entering the United States continued to increase dramatically during the 1970s, and by the early 1980s foreign competition stood as a formidable force. The value of all import shipments classified in the motor and generator industry in 1972 was $181 million, but this figure ballooned to $801 million 10 years later. U.S. manufacturers, however, had simultaneously intensified their efforts to increase exports in order to combat escalating material costs and declining business. Consequently, domestic exports, a majority of which were shipped to Canada and Mexico, also grew substantially. Between 1979 and 1981, the value of export shipments increased from $887 million to nearly $1.4 billion, maintaining a favorable trade balance for U.S. manufacturers.

A recession in the early 1990s led to flagging consumer spending and a decline in housing and industrial construction, which compounded the existing difficulties associated with foreign competition, excess industry capacity, and cascading prices. Escalating energy costs, coupled with federal regulations requiring new energy efficiency standards, made the development of new technology and manufacturing processes intrinsic to any manufacturer's future profitability. The motor and generator industry had made progress in this direction during the 1980s, including the development of a highly efficient fractional motor in 1985 that enabled appliances to operate more quietly and at lower cost. However, the industry needed further advances in the 1990s to ensure its viability.

In the late 1990s, due to slowing growth rates in the motor and generator industries, mergers and acquisitions became a crucial means for individual manufacturers to maintain profitability and market share. A case in point was Pennsylvania-based AMETEK Inc., which in 1997 purchased Rotron Inc. for $103 million, bringing it into the top tier of motor and generator manufacturers. The movement of production units into Mexico, Canada, and Brazil also put pressure on U.S. makers to stay competitive by increasing operating margins or by offering greater customer service. For example, in all areas of the motor and generator market, manufacturers were pre-engineering motors for specific applications, according to the needs of a particular user.

According to Energy User News, "Between 30 percent to 40 percent of all fossil fuels burned are used to generate electricity; two-thirds of that electricity goes to run motors." Those statistics helped drive the passage of the 1997 Energy Policy Act (EPACT), which affected nearly 70 percent of the integral horsepower motor market, according to analysts at Frost and Sullivan. The act set a minimum energy efficiency rating for all squirrel-caged, T-frame polyphase induction motors with 1 to 200 horsepower. Analysts predicted that in the long run, manufacturers with limited funds for research and development would be most affected.

During the late 1990s the linear motor emerged as a competitor for market share. While this was a comparatively small segment of the market compared to multibillion dollar shares for fractional and integral horsepower motors, growth was expected to continue at a rapid pace, as applications for the motor began to catch up with the technology. In addition, the price of linear motors dropped at a rate of 30 to 40 percent per year, making them a more viable alternative to traditional rotary motors. In a February 1999 report in Design News, Mark Sabine listed the benefits of such a motor, saying, "Obviously speed is one main advantage. The technology is ideal for applications that require high position accuracy and repeatability. Using linear motors, designers can also gain more travel in the same envelope--they can even have two different motors go to the same area." Major manufacturers who have developed linear motors include General Electric Co., Baldor Electric Co., Krollmorgen Corp., and Ingersoll-Rand.

Conditions in 2001 and 2002 remained flat as supply outmatched demand, pushing prices and sales downward. According to Purchasing, "Motor makers are in agreement: Corporate buyer demand for their products started to fall off early in 2001 and remained flat throughout the year. And, there aren't too many industrial sectors that they are describing as 'bright spots.'" Although the economy edged toward recovery during 2003, no significant increase in commercial and industrial growth took place in the middle of the decade.

The motor and generator industry was suffering under the effects of a sluggish economy in the early and mid-years of the first decade of the 2000s that resulted in a significant decrease in commercial and industrial activity. The lack of demand for products was exacerbated by tariffs imposed on steel imports (designed to help the severely ailing steel industry), which caused significant price increases in steel. Although the prices for raw materials rose for motor and generator manufacturers, demand was not strong enough to support product price increases, resulting in razor thin or negative profit margins.

Despite a difficult beginning to the decade, by 2004 commercial and industrial construction showed positive, albeit small, gains that year. According to Construction Equipment, both commercial and industrial construction--which were down year-on-year 2 percent and 5 percent, respectively, during 2003--posted positive gains in 2004. In 2008 the industry shipped approximately $12.5 billion in goods, up slightly from the previous year's total of $12.4 billion.

The industry will continue to struggle to maintain a reasonable profit margin until the price of steel declines and demand improves. Inexpensive imports also vie for the consumer's dollar. New motor and generator designs, emphasizing smaller size, greater efficiency, and advanced technology, could be the ticket for U.S. firms to remain competitive in the marketplace.

By the middle of the first decade of the 2000s, fuel cells, which draw energy directly from a fuel source without the need for combustion systems, were becoming increasingly important in the marketplace. Although fuel cells are not expected to completely replace traditional motors in the foreseeable future, the market for them was expected to increase substantially because they were environmentally friendly, renewable, and not dependent on foreign oil to operate. Other advances were being made in microstepping technology, which allows small, incremental changes in the phase currents that promote smoothness of operation and quietness of the motor operations.

Current Conditions

Following a slow period between 2006 and 2008, demand for motors and generators began to gradually improve, and by mid-2009 motor manufacturers reported a 14 percent increase in shipments. The industry generated an estimated $11.1 billion in revenues for 2010, while gross profit was approximately 25.63 percent. The United States imported $7.6 billion in motors and generators from 96 countries, while exporting $5.5 billion in motors and generators to 183 countries. total U.S. consumption of motors and generators was $13.1 billion in 2010.

Demand for motors increased for the fourth consecutive quarter that ended on June 2011, rising 16.4 percent between April and June 2011, followed by a 13.1 percent increase for the first quarter of 2011. Since the second quarter of 2009 when the economic recession took its toll on the overall manufacturing sector, motor shipments grew 55 percent. In 2010 and the first half of 2011, demand in the fractional horsepower sector outperformed the integral horsepower sector and that trend was expected to continue.

Industry Leaders

Ranked according to sales volume, the two largest companies engaged in the motor and generator industry were General Electric Company and Emerson Electric Company. These companies began competing for market share before the turn of the century and have managed to lead the motor and generator industry through much of its history.

Emerson Electric Company
Emerson Electric, with about 140,700 employees, reported $24.8 billion in sales in fiscal 2008, up from 127,800 employees and $20.1 billion in 2006. Despite the weak economy of the early years of the first decade of the 2000s, which caused some setbacks in corporate revenues, Emerson has continued to expand its operations, primarily through acquisition. The company's employee base increased nearly 20 percent between 2004 and 2006 and continued to grow through the end of the decade.

Emerson Electric's net sales fell to $20.1 billion in 2009, a reflection of the struggling global economy. For 2010 net sales grew 5 percent to $21.03 billion and rebounded to $24.2 billion in 2011, an increase of 15 percent.

Following the Great Depression in the 1930s--when sales plummeted, stock dividend payments were halted, and hotly contested labor disputes threatened to bankrupt the company--Emerson Electric's financial condition was buoyed by military contracts obtained during World War II. The company manufactured a variety of war-related products, including gun turrets installed in Air Force bombers such as the B-17, B-25, and B-26. Combined with its other contributions to the war effort, these products infused the company with $100 million annually.

Defense-related work continued to support Emerson Electric following the war, although during the immediate postwar years, military contracts dropped to as low as $1.5 million. But defense-related work picked up again in the 1950s when the Air Force modernized its bomber fleet, elevating sales from military contracts to 30 percent of the company's total. To supplement its armament production, company management also decided to branch out into the engineering and development of electronics and avionics.

By the end of the 1950s, however, Emerson Electric's management grew fearful of the company's dependence on the military for such a considerable portion of its revenues. To address this, they began an aggressive acquisition program in the 1960s, averaging one acquisition per year throughout the decade. Acquisitions and diversification continued into the 1970s and 1980s, as Emerson Electric became a leader in both consumer and industrial markets. By the 1990s, Emerson Electric's products were sold to commercial and industrial businesses involved in a wide assortment of factory automation and process control enterprises. In the middle of the first decade of the 2000s, Emerson had a balanced portfolio, with 47 percent of its sales going overseas, primarily to Europe and Asia.

General Electric Company.
General Electric (GE) posted a record $182 billion in sales in 2008 with more than 323,000 employees, up from the previous record of $163 billion in 2006. General Electric's revenues plummeted to $155.2 billion in 2009 and $150.2 billion in 2010 as the economic recession took hold worldwide. The company employed approximately 300,000 workers around the world in 2010. While its impressive past elevated the company into the upper echelon of international business, GE's more recent achievements, especially in the motor and generator industry, have been comparatively dismal. During the 1970s and 1980s, the company suffered increasing losses from foreign competition, labor disputes, and "indirect imports," finished products that were assembled with electric motors already included. These mounting difficulties forced GE to close several motor and generator manufacturing plants in the late 1980s and to lay off a considerable percentage of its workforce. Harder hit by these market-wide developments than rival Emerson Electric, GE began to slip from its almost unassailable position atop the motor and generator industry in the late 1980s and early 1990s. While still a leader in the industry by the early years of the first decade of the 2000s, motors were not one of its high-profile businesses, which included NBC and GE Capital Services, a financial concern. In 2004 GE sold its motor manufacturing unit, a division of GE Industrial Systems, for $141 million, announcing that it wanted to spend more energy on higher-tech enterprises.


Total employment in the motor and generator industry decreased through much of the 1980s. This trend continued into the 1990s as a nationwide recession weakened the motor and generator market. Beyond the negative effects of market fluctuations, manufacturing industries as a whole continued to streamline their operations by eliminating layers of managerial staff and altering production processes to reduce the number of workers required to perform certain tasks. This general movement toward fewer employees per manufacturing facility made future reductions of the motor and generator industry employment base likely. This trend bottomed out temporarily in 1992, when employment in the industry reached a low of 67,900. By 1995 the number of workers was back up to 77,300, but dropped to 74,720 by 1997. In 2001 employment in the industry had fallen to 60,952.

Numbers continued to fall in 2002, dropping to a then two-decade low of 54,112. Employment continued to suffer in the middle of the decade, declining to 47,580 in 2006 before reaching a low of 43,420 employees in 2007, who earned just over $1.7 billion. Of that total, approximately 23,600 were production workers who earned $1.1 billion. Managerial, administrative, and technical employees comprised the remainder of the industry's workforce. As companies continue to outsource production to foreign soil, where labor expenses are significantly lower, the outlook for production workers is fairly bleak.

America and the World

The trade gap between U.S. manufacturers of motors and generators and their foreign competitors widened throughout the 1990s. Exports from the United States totaled $2.2 billion in 1991, $15 million greater than the import total. In 1996 that gap was calculated at $717 million. The trade imbalance continued to climb in the first decade of the 2000s. In 2002 U.S. exports of motors and generators totaled $621.5 million, compared to $2.6 billion in imports. In 2003 exports increased slightly to $675.5 million, and imports grew to nearly $2.9 billion, causing a trade deficit of $2.2 billion. That deficit only widened in the middle of the first decade of the 2000s as imports outpaced exports, $8.25 billion to $5.23 billion. A trade deficit continued into 2008 with imports totaling $8.8 billion while exports totaled $6.2 billion. The primary markets for motors and generators manufactured in the United States were Canada, Mexico, and Asia.

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