Gould Was Too Star-Struck for Its Own Good

Looks unsettling. A U.S. electronics and computer company is being purchased by a Japanese giant, Nippon Mining Co., which at $6.5 billion in sales ranks No. 162 on Fortune’s list of the world’s biggest firms outside the United States.

The last time something like this happened--when Fujitsu Ltd. tried to buy Fairchild Semiconductor in 1987--the U.S. government stepped in to block the deal and prevent the sale of U.S. technology.

But that’s not likely to happen in the case of Gould and Nippon Mining. The story on the $1.1-billion deal announced Tuesday is that of a Japanese partner buying out a crippled company that was already liquidating itself piecemeal.

Gould’s technology has long been shared with Nippon, an oil refining and minerals company that has been partner to the Chicago-based firm in several ventures. Also, there are signs that Gould’s investment bankers have shopped the company around in recent months, with no U.S. takers.

So Nippon gets to pick up the remaining pieces of a company that in the last 20 years has demonstrated both the creativity of a strong and vaulting ego, and also its destructiveness; both a strength and a weakness of U.S. business.

The story of Gould, once Gould National Battery Co., is the story of William Ylvisaker, now retired at 64, a one-time securities analyst who rose through a series of jobs in manufacturing to become the chief executive of Gould in 1969.

Gould then made car batteries, other engine parts and ball bearings. It had less than $500 million in sales, but it made good products and a tidy profit that it rigorously reinvested in its business.

Profits Didn’t Come

But Ylvisaker was impatient with mundane products like batteries and ball bearings. He was determined to put Gould into high tech, to make the old company future-oriented and to catch the eye of Wall Street and get the stock price flying. So in the 1970s, he sold many of the older industrial businesses and bought electronics companies. “You’ve either got to believe or not believe,” he declared and drove older hands from the company.

By 1980 he had built Gould into a $2.2-billion sales company and to his credit had added several promising product lines to Gould’s traditional electrical lines. But greater profitability failed to follow the buildup in sales. One reason was that Ylvisaker, for all his talk about building for the future, didn’t reinvest in the business the way his predecessors had.

And he made mistakes. When Gould came up with an advanced car battery in 1983, Ylvisaker used the development as an opportunity to sell the battery business. Batteries may have been a decent business, but it didn’t fit with the image Ylvisaker wished to impart to Wall Street and the public--of a high-tech, glamorous company. As part of the glamour he even made Florida’s Palm Beach Polo Club a subsidiary of Gould.

The company became a case study in American industry’s bad habits. “American companies look at their businesses as stars and dogs,” says Kenichi Ohmae, the management consultant and author who heads the Tokyo office of McKinsey & Co. “And they always want to sell the dogs and keep only the stars. That may be logical, but it lacks a time horizon.

“It doesn’t recognize that times and businesses change,” says Ohmae. He might have been describing Gould, which failed to recognize new opportunities in batteries and which in the 1980s became a company furiously buying and selling one business after another and talking about restructuring. It declined in sales and suffered losses--$175.7 million in 1985, $95.6 million last year.

But, surprisingly, despite the chaos Gould came up with a few hotshot products. Its copper foil is one of the standard materials for electronic circuit boards, and it has good products in fiber optics and a powerful super-minicomputer.

Nippon Mining has been marketing those products in Japan. Now it will inherit the good businesses worldwide.

Nippon is no slouch technology-wise. Nippon President Yukio Kasahara, like Ylvisaker, saw that his company had to get into future-oriented business. So Nippon invested in advanced metals, and in optics, biotechnology and electronics. It already owns a titanium company in Michigan and a couple of small high-tech companies in California.

But Nippon didn’t forsake its base in metals or petroleum refining. Kasahara hasn’t sold old businesses to buy new ones. Rather, he has added businesses and invested in them. Thus, Nippon has grown as Gould has withered. Kasahara hasn’t let ego stand in the way of common sense.