We are a leading designer and manufacturer of safe and highly productive mining equipment for the extraction of coal, copper, oil sands, iron ore and other minerals in major mining centers throughout the world. In addition to the manufacture of original equipment, we also provide the aftermarket replacement parts and service for this equipment. We operate in two business segments: surface mining (including the principal products of Terex Mining) and underground mining. All of our products and services, except those acquired as part of the acquisition of Terex Mining, are marketed under the Bucyrus name. We have manufacturing facilities in Australia, China, the Czech Republic, Germany, Mexico, the United Kingdom and the United States, and service and sales centers in Australia, Brazil, Canada, Chile, China, England, India, Indonesia, Mexico, Peru, Russia, South Africa and the United States. The largest markets for our surface mining original equipment and aftermarket parts and service have historically been in Australia, Canada, China, India, South Africa, South America and the United States. We expect these markets to continue to be our largest surface mining equipment markets and we expect growth in the Russian and Indonesian markets. The largest markets for our underground mining original equipment and aftermarket parts and service have historically been in the United States, Germany, Australia and China. We expect these markets, except for Germany, to continue to be our largest underground mining equipment markets, and we expect growth in the Russian, Eastern European and Indian markets.
The market for our original equipment is closely correlated with customer expectations of sustained strength in prices of mined commodities. Growth in demand for these commodities is a function of, among other things, economic activity, population increases and continuing improvements in standards of living in many areas of the world. Market prices for coal, copper, iron ore and oil generally were weak for the first half of 2009. However, the global economic downturn that started in the latter part of 2008 began to improve during the second half of 2009, causing commodity prices to stabilize and then improve during the second half of 2009. Global economic conditions and the conditions of global financial markets negatively impacted capital spending by our customers in both of our segments in 2009.
Our aftermarket parts and service sales tend to be less cyclical than our original equipment sales. Our original equipment is typically kept in continuous operation by our customers for four to 40 years, requiring regular maintenance and repair throughout its productive life. The size of our installed base of surface and underground mining original equipment at December 31, 2009 was approximately $20 billion (increasing to approximately $30 billion with the acquisition of Terex Mining) and $10 billion, respectively, based on estimated replacement value. This installed base of original equipment provides the foundation for our future aftermarket sales. Our ability to provide on-time delivery of reliable parts and prompt service are other important drivers of our aftermarket sales.
Surface Mining Segment
We design, manufacture and market draglines, electric mining shovels, hydraulic excavators, off-highway haul trucks, rotary blasthole drills, hydraulic track drills and highwall miners used for surface mining and provide the aftermarket replacement parts and service for these machines. Based on the assessment of original equipment estimated replacement value, we believe that we have the largest installed base of this original equipment in the world and are the leading market provider of draglines and large rotary blasthole drills. Our products are sold to customers throughout the world in nearly every market where surface mining is conducted with modern methods. Our products are continuously evolving as improvements in design and technology emerge, with the goal of providing our customers maximum productivity and cost effectiveness. We concentrate on producing technologically advanced machines that enable our customers to conduct cost-efficient operations. We utilize alternating current (“AC”) drive technology for both draglines and electric mining shovels and offer advanced computer control systems which allow technicians at our headquarters to remotely monitor and adjust the operating parameters of suitably equipped machines.
Underground Mining Segment
On May 4, 2007, we entered the underground mining business through the consummation of our acquisition of DBT GmbH (“DBT”). As a result of the DBT acquisition, we are a leading supplier of complete system solutions for underground coal mining worldwide. We are one of the world market leaders in longwall mining equipment, which is the result of comprehensive experience and know-how gained over decades of innovative, high-performance engineering. Original equipment sales are closely correlated with the strength of commodity markets and maintain and augment our underground mining original equipment installed base of approximately $10 billion, based on estimated replacement value, at December 31, 2009. This installed base provides the foundation for our aftermarket activities. We have established a global presence with a network of 29 sales and service centers (plus two that are combined surface mining and underground mining sales and service centers) located in all countries where major underground mining operations are located. Our original equipment and aftermarket parts are manufactured in Germany, the United States (Pennsylvania, Virginia and Alabama) and, to a lesser extent, in China, Australia and the Czech Republic.
We have manufacturing facilities in Australia, China, the Czech Republic, Germany, Mexico, the United Kingdom and the United States and service and sales centers in Australia, Brazil, Canada, Chile, China, England, India, Indonesia, Mexico, Peru, Russia, South Africa and the United States. Additionally, we employ direct marketing strategies in these markets as well as developing markets such as Jordan, Mauritania and Turkey. A substantial portion of our sales and operating earnings is attributable to operations located outside the United States.
Original equipment sales in foreign markets are supported by our network of foreign subsidiaries and overseas offices, as well as by independent dealership networks and joint venture partners, that directly market our products and provide ongoing services and replacement parts for original equipment installed abroad. We believe that the availability and
convenience of the services provided through our network ensure the efficient operation of our original equipment by our customers, promote higher gross margin aftermarket sales of parts and services, and provide us with a local presence to promote original equipment orders.
We sell most of our original equipment, including sales directly to foreign customers, in either United States dollars or euros. We sell most of our surface mining aftermarket parts in United States dollars and euros, with limited aftermarket parts sales denominated in the currency of the country in which our products are sold. We sell most of our underground mining aftermarket parts in either United States dollars or euros, with limited aftermarket parts sales denominated in the local currencies of various foreign markets. Both surface mining and underground mining aftermarket services are paid primarily in local currency, with a natural partial currency hedge through payment for local labor in local currency. The value, in United States dollars, of our investments in our foreign subsidiaries and of dividends paid to us by those subsidiaries will be affected by changes in exchange rates. We enter into currency hedges to help mitigate currency exchange risks.
At December 31, 2009, we employed approximately 6,900 persons, approximately 4,000 of whom are located outside the United States. At December 31, 2009, approximately 1,000 of our United States employees were unionized and approximately 1,000 of our non-United States employees were unionized. We consider our relationship with our unionized and non-unionized workers to be good. In the United States, our five and one-half year contract with the United Steelworkers of America representing hourly workers at our South Milwaukee, Wisconsin facility expires in April 2013 and our three-year contract with the United Steelworkers representing hourly workers at our Pulaski, Virginia facility expires in August 2011. Also, one of our subsidiaries is a party to a contract with the United Mine Workers of America and the Association of Bituminous Contractors under which its employees’ employment is governed only if they are working at locations that are operated by the United Mine Workers.
Overseas, substantially all of our employees in Germany are covered by an unlimited contract with Manteltarifvertrag der IG Metall, which is equivalent to union agreements in the United States. Also, our one-year contracts with the Australian Manufacturers Workers Union representing certain of our hourly workers in Australia expire in March 2010 [need update from underground] and June 2010, respectively, and our one-year contract with Základní odborová organizace Bucyrus Czech Republic representing certain of our hourly workers in the Czech Republic expired in December 2009. Negotiations for a new contract are ongoing.
The acquisition of Terex Mining increased our employees by approximately 2,100, approximately 1,700 of whom are located outside of the United States. At February 19, 2010, approximately 50 of our employees at our Dennison, Texas facility were unionized under a three-year contract with the United Steelworkers of America that expires in April 2010. Also at February 19, 2010, approximately 400 of our employees at our Dortmund, Germany facility were unionized under a labor agreement with IG Metall (Bezirksleitung Nordrhein-Westfalen).