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Victims of the system.

Smash and Grab is the label applied to the act of gangs of big city terrorists who smash the windows of a car stopped at a traffic light and grab whatever they can before running in hasty retreat. A recent victim in our area was a minister who subsequently died of a heart attack attributed to the trauma of such violence.

While this may be an extreme in senseless violation of the rights of others, there is growing awareness that our great legal minds have properly arranged to protect the rights of suspects and criminals from overzealous cops, yet haven't done much to help victims who are smashed, grabbed, battered, and abused.

Victims are less sensational, but every bit as real in the manufacturing industries. People who lost their jobs through no particular fault of their own tend to be bitter than the System was rigged against them. In recessions many companies have so little business that they are forced to lay off people with long service and good records of performance. Machine-tool builders lose skilled workers every time the nation's economy takes a nose dive.

During the recovery phase, lack of skilled workers limits the ability of companies to make timely deliveries and gives their foreign competitors more advantage. The man in the shop isn't to blame for that sad state of affairs, but it makes him all the more vulnerable in the next down cycle.

Much of the machine-tool industry's trouble is attributed to the twin woes of high interest rates and a strong dollar. They make it hard to sell machine tools both at home and abroad. Yet no individual I've met feels personally responsible for the growth of those twin woes. Most of us feel like victims.

Then there is merger mania. What do you say to the job applicant who says she worked well for her former employer, but he sold the company and she lost her job. She learned what is meant by redundant. Can you promise that the job you offer is with a firm that is not going to be sold out?

Professor Michael C Jensen writing "Takeovers: folklore and science" in the Harvard Business Review would have us believe that public criticism of the takeover market is largely unfounded and unproductive. Realizing the controversial nature of this stance, the HBR editor's introductory paragraphs include the statement: "If you accept the assumption that shareholders are the most important constituency of the modern corporation, then these mergers and acquisitions make sense because they increase the value of the shares held in the target company."

Certainly if the shareholders sell their stock to a takeover artist for more than they paid they are better off. But what about the people on the payroll who don't own a piece of the action? The professor brushes aside as folklore the statement that consolidating facilities after a takeover leads to plant closings, layoffs, and employee dismissals--all at great social cost. He would even have us believe that to slow down mergers would be to slow innovation.

As a long-time student of the machine-tool industry, I would challenge the professor to do an academic study of machine-tool innovation that has followed in the path of takeovers and mergers. What we have seen is quite the opposite. New product announcements usually come to a halt. Often the founding family's talents simply fade away to Florida's finest resorts, and the new owners suffer from a shortage of people with the specialized smarts it takes to design and build a better mousetrap.

Just because an outfit has money enough to buy a company doesn't mean they have the know-how to keep it competitive in a future filled with higher technology.

In his book, Lee Iacocca grieves for those good people at Chrysler who lost their jobs in the process of making the company lean enough to survive in a depressed market that was not of their making. The unfairnesses he cites are in systems bigger than individual corporations. His straight talk on buyouts suggests "... we pass a law that says when you borrow money to buy somebody else and cannibalize him, the interest payments on those loans are not deductible. That would get the excesses out of the system pretty fast."

Investment bankers that arranged such mergers have seen an upsurge of divestiture business. This seems to support the view that takeover management isn't necessarily more efficient than those who built a business. The Wall Street Journal reports that 700 people lost their jobs in the last big investment-bank merger. There appear to be victims of the System all around us.
COPYRIGHT 1985 Nelson Publishing
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Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Title Annotation:view from the top
Author:Keebler, Jim
Publication:Tooling & Production
Date:Mar 1, 1985
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