In 1981, Cross & Trecker Corp., a major machine toolmaker, had 4,600 workers. Today, there are 2,600, and the number is dwindling.
For many of those workers the situation is tragic. They will never be rehired by the company. But their predicament is the unavoidable byproduct of necessary change, CT and other industry officials say.
The machine tool industry--which produces the equipment needed to make most of the nation's durable goods--is in trouble. Doing things differently is the only way the industry will get out of that trouble. The alternative is disaster, industry officials say.
The difficulties in machine tools stem from both the recession and increased foreign competition--the same conditions affecting other basic industries, such as auto and steel.
The difference is that many of the 1,285 U.S. tool-making companies are more vulnerable to adversity. They are tiny. Most employ fewer than 20 people, and many of those small shops are not expected to survive.
Total domestic machine tool production in 1982 was 0.12 percent of the gross national product, or $3.6 billion--only about $400,000 more than domestic steelmakers lost last year. But despite its small size, the industry is critical to the U.S. economy because it is the fundamental unit of the nation's industrial base.
There is no guarantee that the toolmakers will do better in a recovered economy. Domestic auto and steel companies and other manufacturers of durable goods don't have to buy from U.S. tool builders--and many aren't.
Foreign toolmakers, for example, accounted for 27 percent of the value of machine tools sold in the United States in 1982. Imports are expected to make up nearly 34 percent of the value of all machine tools sold in America this year, according to Department of Commerce projections.
The possibility of deeper import penetration, as much as a downturn in the economy, is forcing U.S. machine tool builders to become more efficient. And that drive for efficiency means doing more with fewer people at lower costs, industry officials say.
"What we're going to have to do is increase significantly the amount of work that we can do with a smaller number of employes," said Richard T. Lindgren, CT's president and chief executive officer. "The one thing we're learning from the foreign competition, particularly the Japanese, is that they can produce more with very, very flat organizations. They don't have many layers between the bottom and the top."
In that regard, the recession was as much an opportunity as it was a problem, Lindgren said. The bad news was that the value of the domestic industry's net new orders--total new orders less cancellations of unfilled orders--fell from $2.5 billion in 1979 to $481.1 million in 1982, an 81 percent decline. Industry shipments, which mostly reflect the filling of backlogged orders, dropped from a high of $503.5 million in the fourth quarter of 1979 to $266.8 million in the third quarter of 1982--about 47 percent, according to latest available data.
But the "advantage of going through all that is that we were forced to reassess our competitive position," said Lindgren. "We've gone through our organization and taken out levels of management and jobs that we feel we can do without in the future."
At CT, a builder of computerized machine tools and automated machine tool systems headquartered in this Detroit suburb, the layoffs are the future.
Among the first to go were secretaries, whose work largely was turned over to computers. Managers whose duties in the four CT companies overlapped were released. Draftsmen, who once spent long hours at drawing boards, have in a number of cases been replaced--again, by computers.
Now, instead of going to the boards, CT designers go to their screens. Computer-aided design "reduces significantly the amount of time we used to devote to drafting, because it simplifies the job for the engineers," Lindgren said. "We won't need as many draftsmen to do a job."
Nor will CT need as many skilled machinists, which is both ironic and instructive. Machine toolmakers for years have complained about an acute shortage of skilled labor, caused mostly by the frequent boom-and-bust cycles of their industry.
When cars and appliances and other durable goods are selling, manufacturers are ordering new tools, or are repairing old ones. In any case, it means business for the toolmaker and employment for skilled labor.
But when things go bust, the new orders stop coming. Skilled workers are let go, and often move on to other pursuits or towns. That means training new people to meet renewed demand in good times.
Training is doubly expensive. There is the direct cost of teaching skills. And there is the cost of time--orders can't be filled until there is someone, or something, to fill them.
CT and other toolmakers are going the "something" route. Computerized numerically controlled machines, using encoded numerical data, conduct metal-cutting operations, often with more precision than their well-trained human counterparts. Other numerically controlled machines, which require some human assistance, also are important.
"A journeyman machinist with several years' training can be outperformed five-to-one, in terms of production, by a guy with several month's training who is using a numerically controlled machine," said CT spokesman Richard O. Priebe. "That's a tremendous increase in productivity."
CT's sales were $381 million last year, a nearly 7 percent drop from $409 million in 1981. The company's net earnings fell nearly 5 percent, to $39 million last year from $41 million a year earlier. That relatively stable performance at a time when many other domestic machine toolmakers were sinking in red ink came largely from cost-cutting, said Lindgren, whose company is the third largest domestic machine toolmaker in terms of sales.
"Our sales amounted to almost $100,000 per employe in 1981, but we'd like to get that to $200,000 per employe, or higher," Lindgren said. To achieve that goal, CT built new, highly automated plants at Port Huron, Mich., and Georgetown, Ky.
The romance of the industry was embodied in the craftsmen, standing by his lathe, deftly cutting metal that would become a gear or another part of a machine used to produce a car or tractor. He worked amid the noises created by the manual and motorized movement (remember forklifts?) of parts from one work station to another.
Not so at Georgetown. There, 52 computerized numerically controlled machines go about the business of cutting metal. Parts move smoothly from one machine to another, without human help. After reaching their destination, the parts are processed and stored automatically. The conveyor is a crane, controlled by a microprocessor, which automatically stores and moves all parts in the system, and which does the loading and unloading of machines.
Lindgren says his company is pushing for unmanned facilities, such as that operated by Japan's Fanuc Ltd. But, at this point, the conversation becomes political.
Lindgren rejects often-made charges that domestic machine tool manufacturers, like their counterparts in auto and steel, have fallen down on quality and failed to reinvest in research and development, thereby opening the door to imports.
For example, he points out, numerically controlled machines, which produce parts of uniform quality, were developed in this country by the Air Force in cooperation with the Massachusetts Institute of Technology and the domestic machine tool industry.
Flexible manufacturing systems, the machine tool world's newest offering to durable goods producers, came from the United States, too, Lindgren said.
Briefly, flexible manufacturing incorporates the use of robotics and computers in machine tool arrangements, or systems. The system is "flexible" because it allows manufacturers to produce one or many of the same parts with equal efficiency. Also, different parts in different quantities can be machined simultaneously in flexible systems.
Transfer lines, long the workhorses of industrial America, are the opposite of flexible manufacturing systems. Transfer lines are "dedicated" machine tools, geared to produce large volumes of identical parts at high speeds. They are found primarily in the auto industry.
But, mostly because of the changing nature of the domestic auto and farm equipment industries, the demand for transfer lines probably will never be the same again, said Harold J. Wagner, president and chief operating officer of Setco Industries Inc., of Cincinnati.
Wagner's company specializes in producing parts used by other machine toolmakers, including CT, to build transfer lines. "I obviously don't believe transfer lines will disappear. But, honestly, we don't believe that the mid-'70s and the late '70s, relating to the amount of transfer-line business, is going to come back," Wagner said.
"It used to be that you had eight different engines and a half-dozen transmissions you could pick from when you bought a car. You had to build a transfer line for each different engine and each different transmission. But now we're down basically to fewer choices," which means fewer orders for transfer lines, said Wagner, whose company has eliminated its nightshift, knocking out 50 of 160 jobs.
Wagner said his company will now pay more attention to rebuilding and servicing transfer-line components and to producing specialty parts. Setco also is "working hard" to "improve our quality and productivity," Wagner said.
Wagner is concerned about foreign competition, and he supports the National Machine Tool Builders Association's petition before the Department of Commerce seeking an imposition of quotas on imports. The petition was filed March 10.
"I'm not one who believes that Japanese quality is god and that we're second to it," Wagner said. "I've seen their products and used their products, and they're good products. But they've learned a lot of those things from us. Quality-wise, there's nothing exceptional about what they're doing."
But domestic tool builders probably hurt themselves by not using the equipment and techniques they sell to customers, Wagner said, citing flexible manufacturing as an example. If the system is applicable in the production of consumer durables, it can also be used by toolmakers to produce components for transfer lines and other equipment, Wagner said.
"I think we've come a little late to utilize the things we've built for others. But that's being corrected," Wagner said.