Friday, December 17, 2010

Machines That Make Machines: Giddings & Lewis

My most interesting client in terms of product was Giddings & Lewis, Inc., based in Fond du Lac, Wisconsin.  The company was the largest U.S.-owned manufacturer and marketer of machine tools – machines that make machines – until it was acquired by Thyssen AG of Germany in 1997.  The plant tour alone, where various lathes and machining centers were manufactured, was worth the experience.

Giddings & Lewis (G&L) dates back to 1859, when it opened as a machine shop.  It manufactured its first machine tool in 1902 and became the leader in computer numerical controlled (CNC) products during the last half of the 20th century.  The company went public in 1989 after being spun-off from a Canadian company, AMCA International, and it became an agency client shortly thereafter.

CEO William Fife, Jr. embodied Giddings & Lewis.  He started his career sweeping floors at a steel mill and through brains, guts and determination eventually became the chairman and CEO of a publicly owned company.  Built like an interior lineman and tough as one as well, Fife turned around the newly independent company almost immediately.  He appeared on the cover of Fortune magazine as part of an article on manufacturing in the U.S.  I constantly reminded myself to not be intimidated by Fife and give him my best counsel.  He respected that and so did his other executives, including CFO Dick Kleinfeldt, Bob Kamphius and Doug Barnett.  After growing the business significantly, G&L hired an internal IR executive, Dale Norton, a former securities analyst, who quickly adapted to his new profession, thus limiting my role.

Fond du Lac was almost exactly 150 miles door-to-door from Chicago, which meant driving, not flying.  I always knew if I were making good time if I hit the Wisconsin border in an hour and the pedestrian overpass over Highway 41 north of Milwaukee after two hours.  In order to get a rental car back before closing, I once made it back in 2 ½ hours, on a Friday afternoon no less.

Like I said, the main Giddings & Lewis plant was amazing.  Machines in production had the customer’s names displayed, companies like the Caterpillar and Ingersoll-Rand and the U.S. Government.  I also learned an important civics lesson during a later plant tour.  On my first tour, I was told a machine labeled “Israel Defense Forces” would most likely be used for machining tank parts and take about nine months to build.  A little more than a year later, I saw the machine while walking through the plant and asked why it was taking so long to build.  An executive told me the U.S. Government has the right to requisition any piece of machinery it feels in the best interests of the nation’s defense, which it did in this case.  The IDF would have to wait for the second machine to be completed.

Giddings & Lewis continued to perform well in the early 1990s.  It acquired competitor Cross & Trecker, making the company the largest American-owned machine-tool company.  I was surprised, however, to get a heads-up call from Dick in early 1993: Bill Fife would be resigning and they needed my assistance.  The stock not surprisingly took a big hit on the day of the announcement but later recovered when investors realized the company was still in good shape.  One of the reasons for Fife’s departure involved bookings numbers.  For G&L, order numbers were more important to analysts than quarterly sales because they predicted future sales and profitability.  During conference calls, the company discussed the projected margin in the backlog, which would fluctuate based on volume and product mix.  Fife allegedly kept the order books open to the proverbial 35th day of the last month in the quarter.  Tried as it may, the Wall Street Journal, which ran a front-page story on Fife’s departure, was unable to get too deep into the reasons behind it, even though reporter Bob Rose resorted to stopping unannounced at employees’ homes in the evening.  I have no more to say on the subject.

Because of the sensitivity of Fife’s departure, the company was worried about its annual shareholders meeting.  I drove up the evening before and found a raucous crowd at the Sheraton Hotel.  Fond du Lac was hosting a darts tournament, and the festivities had already started.  A heavy-set woman in a too-tight “Body by Miller” t-shirt already living the High Life virtually blocked the entrance.  The noise literally lasted all night, along with two fire alarms, so I watched a Los Angeles Kings play-off game from the coast in order to be tired enough to fall asleep.  The annual meeting turned out completely uneventful.

Giddings & Lewis unfortunately was one of my two clients that suffered from administrative foul-ups.  The company knew it wasn’t going to meet quarterly analysts projections, so we agreed to issue a news release and conduct a conference call since the setback would be temporary.  All my good work crafting the communications was ruined by an administrative assistant who sent out the news release before the close of trading at 3 p.m. Central.  The stock got hammered, and I felt like an idiot.  That too was patched up by a forgiving management.

I would have one last contact with Giddings & Lewis after leaving the agency in 1996.  One year later, a board member called me and asked about capabilities and requested we meet at the big machine-tool show at McCormick Place.  The head of our corporate practice group, the leader of the public-affairs practice and I found the company was facing a hostile takeover, which it eventually avoided by turning down Milwaukee-based Harnischfeger and being acquired by Thyssen.

Finally, a strange, small-world experience.  I was completing a plant tour with PR Manager Lindsay Ramsak and Ralph Winter, the Dow Jones manufacturing reporter based in the Cleveland bureau.  When told a door was to the loading dock, Winter said jokingly that he’d like to see the loading dock, and I chimed in that I’d worked summers on a loading dock at an envelope company.  Lindsay said, “My father worked at an envelope company in Chicago; which one?”  Right then I sensed something strange and sure enough (to shorten the story), not only was it the same company, but her father was the plant manager who called and told me my father had been rushed to the hospital, some 15 years earlier.   We still had the tour to finish and account matters to address, so finally after about 30 minutes I told her the whole story.  It will be recounted in another post.

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