U.S. Firms <i> Can </i> Make It in Global Markets
Sadly, just as world markets are opening up, self-doubt has replaced self-confidence in America.
Openly and loudly Americans fear foreign investment, while secretly worrying whether U.S. companies can hack it anymore.
But both fear and worry are overdone as the example of a Midwestern family business will make clear.
This is the story of how Hobart Bros., a medium-sized welding company in Troy, Ohio, (population, 20,000) learned to stop worrying and love the global market.
Hobart does roughly $300 million a year in sales of welding equipment and passenger-loading systems for airports--one-third of the sales overseas where it has joint ventures in Europe and Japan.
At home, Hobart plays the world citizen, too. It was responsible in 1987 for persuading Matsushita (Panasonic) to set up a picture tube plant in Troy, which is near Dayton in southwestern Ohio.
“It’s one world market today,” says Chairman William Hobart, 65, the third generation of his family to run the 73-year-old company.
That seems easy for him to say because Hobart is enjoying rising sales and record profits and looking forward confidently to a united European market in 1992 and to new business in Japan, where it has an order to supply passenger bridges for Osaka Airport.
But like most companies in the industrial Midwest, Hobart is more a story of survival than simple success. It’s a company that has come through bad times and learned some lessons, and so it sees the world differently today than yesterday.
Until the recession of 1982, Hobart was almost solely a welding company--meaning it sold electrodes and power equipment for fusing steel at temperatures of 6,000 degrees.
Welding was a secure business, with all of U.S. manufacturing as its customers, from the automobile industry to farm equipment and machine tools. Welding almost never had a downturn.
Yet in the 1980s, the U.S. welding business went into reverse; total industry sales of $1.9 billion are no higher now than in 1981, according to Welding Design magazine--which means that counting inflation they’re lower.
What happened, says Hobart, is that “the whole U.S. economy, maybe the world economy, has gone through turmoil and change. Competition is greater.” The United States got a rude awakening, he says. “As a nation we were living as if we had No. 1 status all to ourselves.”
That all changed with the 1982 recession and the pressure of foreign competition. “The 80,000 rail cars built each year fell to 6,000,” says Hobart. “Many of the companies have never recovered, they’re smaller.”
Why smaller? Some shrinkage resulted from broad industrial change. Cars and other products contain less metal, more plastic these days; big companies farmed out metalworking to smaller job shops.
But some wounds were self-inflicted. “The big capital investors in our business--Dana, Foster Wheeler, Babcock & Wilcox--stopped investing in productivity-increasing equipment,” says Hobart.
“Nonproductive capital movements hurt U.S. industry--you tell me how highly leveraged buyouts helped U.S. companies invest in themselves,” adds Kim Packard, 51, Hobart’s president since 1985 and the first non-family member to run the company.
As customers shrank, so did Hobart’s business. Some U.S. welding companies gave up. Union Carbide and Air Reduction, two companies harried by takeover battles in the 1980s, dropped out of welding equipment. A Swedish company named Esab bought their operations and may now be the world’s largest welder.
Only Hobart--and family-owned Miller Electric of Appleton, Wis., and employee-owned Lincoln Electric of Cleveland--remain U.S.-owned.
But Hobart didn’t wait around for U.S. customers to come back. It acquired some airport equipment makers--adding to one of its own product lines--and sought business overseas.
In welding, it formed a joint venture with Yaskawa of Japan to make welding robots and other automation products. In Europe, it has formed ventures with Swedish, Italian and Swiss companies.
Increasingly, the Ohio company is finding international markets more congenial than domestic. For instance, it is having great success overseas with a new welding technology that cuts power usage by 25% to 30%--although it finds U.S. customers resisting the innovation, preferring to use old equipment rather than make a cost-saving investment.
And Hobart says one of its best breaks in the ‘80s was a sale of welding wire to Matsushita, which fostered the relationship that resulted in the Osaka company setting up in Troy. “They’re bringing good industry, and they’re in for the long-term,” says Hobart. “I’d trust them a lot more than some U.S. investors I know of.”
The lesson, of course, is that the world has changed. And either you see that as cause for worry about U.S. power and influence, or as fresh opportunity. Hobart, seizing the opportunity, has adopted the healthier attitude. Which happens to be the traditional American attitude. So why isn’t it still?
