The Special Machine Tool Industry and Government

The American special machine tool industry has always been a low profile business, perhaps by the design of the original entrepreneurs. The industry, probably because of its history of private ownership, has had a macho kind of pride that would resist asking for help from anyone for any reason. This fact has been a handicap to the industry, just as that low profile hurts its stature in attracting financing and prospective employees. It also obscures it from the government, except of course the IRS, which then has little reason to be aware of unfair competition or of events or circumstances which in other industries and other countries could trigger assistance.

Our form of government forces the representatives to be sensitive to their constituency’s needs and demands. The American special machine tool industry is relatively small and virtually invisible to the general public (the voting constituency) As a result, the representatives feel little pressure to pay attention to it, if they are even aware of it. The time required to really make a difference would net few votes in the next election. From their view, it is a poor investment of their resources.

It is very clear that in a Midwestern state with a concentration of agriculture or of automobile industry, the representative knows what the constituency needs or wants. It may be to organize a subsidy designed to protect an industry through a short-term crisis. It may be to stop dumping on the part of a foreign competitor, or it may be to get through a year of drought or flood. It should be in place only long enough to diagnose and fix the core problem. Then the industry affected should return to the competitive free enterprise environment at the earliest possible time, like the eagle and for the same reason.

In the late 1970s and early 1980s, there was an effort to develop machine tool industry awareness within the government by an industry group from Rockford, IL. The effort was based on the need that would exist for manufacturing expertise in the event of a national emergency. Mobilization would require a healthy American special machine tool industry. There were government hearings and meetings held over a considerable period of time. It was not taken seriously and eventually, the effort simply faded away as the government seemed to lose what little interest it had. Some of the companies involved in the effort were affected by the industry decline and different priorities required their people’s efforts elsewhere.

This was an example of the fact that, unlike Franklin Delano Roosevelt, recent governments have not recognized the industry for what it is or what it does. In fact, it is unlikely that more than a handful of today’s members of Congress even know of its existence, let alone the part it has historically played in U.S. manufacturing.

Ironically, the special machine tool company most actively participating in the effort, a division of a major conglomerate, was euthanised by its parent not long after this effort collapsed. That company was actually the combination of several old-line American special machine tool companies consolidated as a division of the conglomerate and working to regain respectability. The corporation lost interest since the returns were less than they could realize in other investments. It included a very respectable German division, which was first sold to its employees, then went public, and is now one of the successful German companies competing worldwide with a significant North American presence.

Other countries’ machine tool industries are much higher-profile and are recognized by and have the sympathy of their populace and governments. Their governments paid attention to the plight of those businesses, not unlike the U.S. government with agricultural and other subsidies

Germany will take extreme measures to help or to save companies who find themselves in trouble. The Germans are really trying to save jobs. It makes little difference that the company may have been totally mismanaged or even taken advantage of by previous management, or that it may really bring little value to the market. In conjunction with banking institutions, they give financial aid, they forgive loans, they even take an equity position and then find a buyer for the business for whatever the market will allow and subsidize the difference.

It’s a kind of reverse law of the jungle: the survival of the weakest or un- natural selection. It is a disservice to the successful companies, the future of the industry and, above all, to the consumer. The consumer will ultimately pay the cost of the subsidies and at the same time will be expected to buy the products of businesses that are less than competitive on their own merits and probably offer products of lower value.

The American special machine tool industry has not and is not now asking for government help or intervention. What should be expected, however, is that the local representatives of government, the elected Congressional people, should have an in-depth knowledge and understanding of the businesses in their constituencies. It should be expected that in the event of an apparent problem that involves foreign competition that may somehow have an unfair advantage that the representatives be available to council and advise. The advice should involve finding the way to fix the core problem and not designing a subsidy, thus perpetuating and compounding the problem. This would be difficult if the representatives did not have a working knowledge of the industry and its impact on other industries. In other words, there should be a natural and ongoing brother - sister kind of dialog without specific obligation either way.