The International Marketplace

Four prominent German special machine tool companies now compete from U.S. facilities. Three are in the Detroit area and one is in central Ohio. They are all excellent companies technologically and are worthy competitors. In a sense, they are American companies, as they have American employees and local facilities, although much of their product will come from abroad. Two have facilities in low labor cost countries in South America, from which components, sometimes major components, can be supplied. Those companies receive their direction from Germany, take tactical advantage of currency exchange and low costs from their various locations for their American customers, and serve their transplanted auto customer countrymen with a nationalism advantage.

Two of the companies purchased American companies and two began operations from scratch after supplying initial orders from abroad. The largest is a part of a very large German conglomerate and has been well- known in Europe for many years. Initially, it acquired a small U.S. company and then several years later, it acquired the larger group. It purchased the U.S. special machine tool company that was the result of the consolidation of seven other companies. It is now the combination of eight original special machine tool companies not including any that may have been incorporated in Germany. Also included was the U.S. standard machine tool parent of the acquired company. A mix of people from different locations manage the various parts of the company, but all are machine tool people. While they will have some work to do to re- establish themselves, laying claim to the best aspects of all the new combinations of their pieces, they will likely survive and prosper.

Prior to the American special machine tool industry’s downturn, the leading companies did well in the U.S. market, did a substantial amount of business with vehicle producers in the former Soviet Union, and had some success with the auto companies in Japan. Ford and General Motors had significant manufacturing presence in Australia and utilized primarily American special machine tools until about the mid 1980’s. More recently, they have dealt with Japanese machine tool builders, likely because of favorable currency exchange rates and their geography.

Several American companies established important bases of operations in England and Germany, partly to overcome nationalistic biases. Two of the larger companies of the time were never successful and withdrew, but others did very well until the decline of the industry starting in the late 1990’s.

Today, the European companies have the advantage of serving the U.S. market from Europe, the U.S., or their low cost Third World bases, depending on activity levels and exchange rates. In some ways, they have exchanged competitive positions with the American companies of the 1970s, except that the foreign locations are very receptive to their products and presence.

Until very recently, the Japanese special machine tool companies have not made a serious run at the North American market, except to supply the Japanese automotive transplants extensively from Japan, which by itself a very significant level of business. Some American companies did participate successfully in the first transplant programs as well. More recently, the American auto companies have encouraged the Japanese machine tool companies to become involved and as a result they have supplied major machining systems. It’s too early to assess the results from either side of the new relationships.

Why are the current German industry leaders apparently succeeding, while the American companies are struggling and failing? The basic reasons are outlined in the foregoing discussions. The most important of these was the leadership, ownership, and passion vacuum remaining following the passing of the entrepreneurial generations. It’s entirely possible that the other obstacles to success could have been overcome with the kind of vision and passion demonstrated by the entrepreneurs before the stresses imposed by succession concerns (the find a way mentality).

In Germany and other industrialized countries in Europe and in Japan, the machine tool industries and manufacturing have generally been much higher-profile and are still held in high esteem by the general population, business, and government. With the higher profile, the “rust belt” image was not present. The businesses continue to be highly respected and are able to attract capital and fresh employees. The industry’s apprentice programs have always been highly respected and their ability to attract highly educated engineers and others is good as well. The knowledgeable and committed people do gravitate to the top jobs.

There have been a substantial amount of business failures in the European machine tool businesses as a result of severe economic recessions. Failed business arrangements with Eastern bloc countries in the 1980s and 1990s also negatively impacted that industry. Some companies have survived with the help of government and banking institutions. Those recessions played a major role in those companies’ decisions to have a serious presence in the American market, the largest market for those products in the world.

It is apparent that the German auto industry’s efforts are parallel to their machine tool industry’s efforts. The three major companies have a significant new presence in the U.S. and in the Americas in general, and of course, one has become the owner of the former Chrysler Corporation – now DaimlerChrysler. Where do you think these German auto companies will go for their machine tools for their U.S. operations? It may take some time, but it is likely that even the formerly American division will develop that same bias.

In Chapter 3, it was stated that the American auto industry was far and away the leader in mass production during WWII and that the special machine tool was integral to mass production. The American auto industry is still a leader in mass production, but with difficult competition coming from all directions. The European auto companies are pressing hard, and aggressive Asian competition will continue to be a serious threat ahead. Great, high value products, very innovative manufacturing, and passionate and responsible people create a very serious threat.

Special machine tools are still integral to high volume production and to any specialty manufacturing assignment. At present, the American companies are far less prominent than they once were. The American “find a way,” Yankee ingenuity mentality, along with the client industry’s recognition of dynamic value in their purchases in a free market, can regenerate it. It may turn out to be with the next generation of companies!

Sweet and Sour Grapes
Sweet & Sour Grapes: The Story of the Machine Tool Industry
ISBN: 1587620316
EAN: 2147483647
Year: 2003
Pages: 77
Authors: James Egbert © 2008-2017.
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