From Industry to Alchemy: Burgmaster, A Machine Tool Company
By Max Holland
2002/11 - Beard Books
158798153X - Paperback - 349 pp.
Includes almost every aspect of the opportunities and challenges facing American Industry since 1945 and of its inadequacies, as well as the institutional arrangements within which smaller industrial enterprises had to operate.
This retitled book is a reprint of When the Machine Stopped: A Cautionary Tale from Industrial America, a work named by Business Week as one of the ten best business books of 1989. By tracing the life and death of a small machine tool company in California, the author presents the reasons for its failure to innovate and survive fierce competition in a global economy. But it is more than the story of one obscure manufacturer's demise. It is also a disturbing account of how speculation trumps enterprise: Washington gets embroiled in trade politics, while Wall Street engages in financial engineering that rewards a handful of executives and investors.
From the back cover blurb:
This retitled book is a reprint of When the Machine Stopped: A Cautionary Tale from Industrial America, a work named by Business Week as one of the ten best business books of 1989. By tracing the life and death of a small machine tool company in California, the author presents the reasons for its failure to innovate and survive fierce competition in a global economy. But this is more than the story of one obscure manufacturer's demise. It is also a disturbing account of how speculation trumps enterprise: Washington gets embroiled in trade politics, while Wall Street engages in financial engineering that rewards a handful of executives and investors.
From Turnarounds and Workouts
From Industry to Alchemy tells the story of people caught in the middle of global competition, the institutional restraints within which smaller companies had to operate after the Second World War, the rise of Japanese industry, and the conglomeration frenzy of the 1980s. The author's goal in writing this book was to chronicle the decline in American manufacturing through the story of that company.
Burgmaster was the culmination of the dream of a Czechoslovakian immigrant, Fred Burg, who described himself as a "born machinist." After coming to America in 1911, he learned the tool-and- die trade, becoming so adept that he "could not only drill the hole, but also make the drill." A life-long inventor, he designed an electric automatic transmission that was turned down by GM's Charles Kettering; GM came out with a hydraulic version six years later. Forced by finances to work in retailing, after World War II he retired, moved to California and set up a machine-tool shop with his son and son-in-law to manufacture the turret drill, his own design. With the help of the Korean War, and a previous shortage of machine tools, business took off. It was a hands-on operation from the start and remained that way. Burg once fired an engineer who didn't want to handle a machine part because his hands would get dirty. Management spent time on the shop floor, listening to employee ideas. Burg lived and breathed research and development, constantly fiddling to devise new machines and make old ones better. Between 1955 and 1962, sales grew 13-fold and employees from 62 to 272. Burg Tool was featured on Richland Oil Company's broadcast Success Stories.
By 1965, however, Fred Burg was getting old and the three partners knew that Burgmaster needed to fund another expensive, risky expansion to fill back orders or lose market share. Although companies had made offers before, Houdaille, a company named for the Frenchman who invented recoilless artillery during World War I, seemed a good match. The two had similar origins, it seemed. Houdaille had begun an ambitious acquisition program, and saw Burgmaster fitting into an unfilled niche. With a merger, new capacity would be financed, and "Burgmaster would continue to operate under present management, personnel and policies but as a Houdaille division."
What comes next is management by numbers rather than hands-on decisionmaking; alienation of skilled blue-collar workers; pushing aside of management; squelching of innovation; foreign and domestic competition; bitter trade disputes; leveraged buyouts; the politics of U.S. trade policy; Japan-bashing; and the inevitable liquidation of Burgmaster and loss of livelihood of more than 400 employees.
This book was originally titled When the Machine Stopped: A Cautionary Tale from Industrial America," published in 1989. It was named by Business Week as one of the ten best business books of 1989. The Chicago Tribune said that "anyone who wants to understand American business must read When the Machine Stopped…Holland has written the best business book in years."
The author explains trade regulations, the machine-tool industry, and detailed corporate buyouts with equal clarity. This down-to-earth book provides valuable insight into the changes within an industry. It combines fascinating, creative characters; number crunchers; growing corporate disdain for manufacturing; and tangible consequences of Washington and Wall Street gone crazy.
"I found it hard to put down. It is one of the most important and well written sagas of an American industrial enterprise that I have read for a long time and about the only one that tells such a story in detail for an enterprise in the post-World War II years. This history includes almost every aspect of the opportunities, and challenges facing, and the inadequacies of American industry since 1946, and of the institutional arrangements within which smaller industrial enterprises had to operate. It has a most dramatic cast of characters -- both individuals and enterprises... The author handles each set of events, in detail, with great clarity and in an even handed manner.... It is journalism of the highest order.... I think this is a first-rate manuscript."
Alfred D. Chandler, Jr is the author of The Invisible Hand: The Managerial Revolution in American Business, which was awarded the Pulitzer Prize for History in the United States in 1978. He is currently Ilsidor Staus Professor of Business History, Emeritus at the Harvard Business School. Letter dated April 25, 1988. He is also the author of another Beard Book title, Pierre S. Du Pont and the Making of the Modern Corporation.
From BusinessWeek, The Ten Best Books of 1989
The focus of When the Machine Stopped: A Cautionary Tale from Industrial America (Harvard Business School Press) is a small, little-known company. Author Max Holland uses the story of a Los Angeles-area machine-tool maker, Burgmaster Corp., to explore why many U.S. industries can no longer compete. Founded in 1944 by Czech immigrant Fred Burg, the company was a thriving $8 million enterprise in 1965, when it sold out to conglomerate Houdaille Industries Inc. Burg's hands-on guidance was replaced by modern management techniques imposed from afar, with disastrous results. In 1979, Houdaille was purchased in a leveraged buyout led by Kohlberg Kravis Roberts & Co. The LBO, in Holland's view, crippled Burgmaster by creating pressure to generate cash. By 1985, debilitated by debt, competition, and a sickly market, Burgmaster was shuttered.
Holland is highly critical of government policies that encourage LBOs and speculation instead of productive investment. The nitty-gritty of machine tools can be tough going, but this is a provocative, often fascinating study.
From the careful craftsmanship of machine tools to the ingenious crafting of a leverage buyout and the intricacies of a bitter trade dispute, Holland tells the life-and-death story of a machine tool company called Burgmaster. When the Machine Stopped speaks volumes on innovation, foreign and domestic competition, employee relations, leveraged buyouts, U.S. trade policy, and more. "Anyone who wants to understand American business must read When the Machine Stopped-Holland has written the best business book in years."-Chicago Tribune "Fascinating-the fate of Burgmaster and its brethren is crucial to the U.S. industrial economy."
From Amazon, Journalism of the Highest Order, August 16, 2000
After years of working with his father, who worked for Burgmaster for 29 years, Max Holland wrote an (thoroughly) researched book on the American industrial enterprise. It also explains the political value of the American industry and how Americans always attempt to keep out their competitors in new ways. I myself, being Max Holland's nephew, have talked with him many times about the issues of the book. Learning from his father and countless research books, Max Holland writes one of the most down-to-earth books on the American industrial enterprise ever.
This book gives a wonderful view of the changes in American machine tool industry. Tells the story of a retired shoe salesmen who moves to cal. and starts a machine tool business. Machines were his hobby but soon becomes involved in making innovative machine of his own design. The machine where the standard of the Industry. The factory at one time covered two blocks in Cal. The company became the target of buyout by a conglomerate and the new owners were only interested in sales and not quality. At the same time imports were improving all the time. He left the company and it went done fast. Today the older machines still fetch good prices.
Max Holland is a contributing editor to the Nation and the Wilson Quarterly magazines, and a research fellow at the Miller Center of Public Affairs at the University of Virginia. His articles on business and contemporary history have been published widely. His father worked for the Burgmaster machine tool company for twenty-nine years.