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When the Machine Stopped: A Cautionary Tale from Industrial America.

When the Machine Stopped: A Cautionary Tale from Industrial America Burg Tool Manufacturing Company was founded in 1946 by Fred Burg, a Czech immigrant with a yen to tinker and dissatisfaction with his job in dry goods in Illinois. The company's location in Gardena, California, was a shock to some observers of the machine tool industry, but its first major product, a turret drill called the Burgmaster, was a winner. To draw people to his machine tool business away from jobs in the California aeronautical industry, Burg devised a highly personal management style in which everyone felt interested, committed, and respected. Burg himself was a flamboyant salesman, who made a good number of decisions on instinct. Although he clearly made his share of mistakes (including a flawed multipurpose tool called the 20T with which he burdened his successors), Burg is a hero to author Max Holland, as he was to Holland's father, who worked for the company in this era.

The villain of the piece is Houdaille Industries, a Buffalo conglomerate that absorbed Burgmaster (as the tool company was then called) in 1965. More broadly Holland has Houdaille represent certain trends in American management--particularly a tendency to manage by numbers and reports and by crying for political protection against Japanese competition--that he considers unhealthy. Thus the "cautionary tale" in the title.

The book clicks off and analyzes the problems one by one. Houdaille top managers tended not to be familiar with the machine tool business and were subject to the bromide that a good manager could manage anything. This tendency was reinforced by the needs of the Houdaille central management (and by the personal style of its chief executive through much of the period, Jerry Saltarelli) for uniform reports, creating, according to Holland, a "culture of reporting." The reporting requirements themselves added costs and made the Burgmaster division less competitive. Houdaille was busy acquiring and took its eye off the ball in developing its existing divisions. Finally, in 1979, the parent company was the subject of a pioneering leveraged buy-out by its managers that put the entire focus for a time on cash flow to the detriment of other factors.

Meanwhile a Japanese company, Yamazaki Machinery Works, moved from friendly licensee to competitor. One of the best sections of the book, from the perspective of pure "insider strategy," is Holland's accounts of the legal maneuvers of Houdaille attorney Richard Copaken, who through expert use of publicity was able to make an appeal by a single company through a tiny government agency (Office of U.S. Trade Representative) into a national bout of Japan-bashing. The final result, despite this campaign, was that Ronald Reagan curtly dismissed the charges about a Japanese cartel. This led directly to the demise of the remains of Burg's business in the mid-1980s.

Holland's book is footnoted history written in a journalistic style. It is based heavily on interviews and magazine material, and it is notably lacking documentation through internal company archives beyond the annual report level. His clear sympathies make the reading lively, but probably result in some unfair characterizations of Houdaille, which was successful overall as a business. Occasionally it seems Holland is making too much of a story that starts out almost as a Chamber of Commerce plaque for Burg, and is, after all, the history primarily of one less-than-giant company. However, the specificity leaves no question that the story is a real case study, not an interpretation in the abstract. It has the virtue as well of connecting the recent past directly with the present and of identifying a watershed in American business history in the 1960s that is likely to become ever more clear as further studies of the last few decades appear.

Craig Miner is the Willard Garvey Distinguished Professor of Business History at Wichita State University. He is the author, among other publications, of "The New Wave, the Old Guard, and the Bank Committee: William J. Grede at J. I. Case, 1953-1961," Business History Review (1987).
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Author:Miner, Craig
Publication:Business History Review
Article Type:Book Review
Date:Jun 22, 1990
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