Fadal Vision : Family-Owned Chatsworth Company Experiences Boom, Overtakes Japanese Competitors in Machine-Tool Industry

ThS. machine-tool industry--the arcane business that makes machines that make other machines--calls it Fadal’s Attraction.

Fadal Engineering Co. Inc., a 33-year-old family-owned business, has bolted out of the blue to almost single-handedly overtake the Japanese in a market that they dominated for most of the 1980s.

The Chatsworth company manufactures machine tools in the lower-priced end of the market, what the industry calls vertical machining centers--or upright computer-controlled precision machines that grind, shave, cut and drill metal--that they sell through about 50 distributors worldwide.

Fadal Engineering claims that its sales have shot from $5 million in 1985 to about $110 million in 1993 while the number of employees has grown from about 75 to 240, and business is still booming. Fadal has an eight-week backlog of orders and the company is desperately looking for ways to increase the delivery of its machines from 120 a month to 150.

The company sells nine machine-tool models that range in price from $36,500 to $148,000, and their customers range from United Airlines and Ford Aerospace to “a guy in Texas who has one of our machines in his barn,” said Dean de Caussin, son of one of the company’s owners, who works in the company’s marketing department. At Fadal’s plant, the company’s machines are used to clone themselves. Fadal machines are then sold to make everything from lipstick tubes for Mary Kay Cosmetics and Gillette razors to critical engine parts for Sikorsky helicopters and various parts for McDonnell Douglas aircraft.

Fadal has not only managed to compete with the major Japanese machine tool makers such as Mazak, Matsura and Toyota, but undercut their prices as well. David Shaby, president of CompuMachine, a distributor of machine tools in Wilmington, Mass., said that today, with the rise of the yen and decline of the dollar, Fadal’s machines cost less than the Japanese machines, and the company’s meteoric rise is bringing rave reviews.

“This was an industry the Japanese said they were taking over, and Fadal is cleaning their clock. If Fadal goes up against a Japanese machining center one-on-one, a buyer would be hard-pressed not to buy the Fadal machine. They’re that good,” said Donald Norberg, owner of Rotary Technologies in Gardena.

But success is also breeding concern among Fadal’s owners, the de Caussin family, a tightly knit group of uncles, brothers, cousins and in-laws who run the company founded by Francis de Caussin in 1960. Many family members live within three miles of the plant.

“We’re building a backlog of orders,” said Larry de Caussin, 53, Fadal’s vice president, and that means “you’re only inviting competition.”

Indeed, Fadal’s success has prompted other U. S. machine-tool manufacturers such as industry leaders Giddings & Lewis Inc., in Fond du Lac, Wis., and Cincinnati Milacron, in Cincinnati, Ohio, to take a more aggressive approach in the lower-priced end of a market that was all but conceded to the Japanese in the 1980s, when Japanese companies were building better and cheaper machines.

Fadal continues to build smaller, more affordable models that one analyst called the “Volkswagen Beetle of the industry” for the industry’s “low-end” market. “This (low-end market) is an industry waiting to happen. The market share gain has been made at the expense of foreign competition. This is one area where Americans are coming back. We lost it all in the 1980s and are just beginning to get it back,” said Ian Rogers, who follows the industry for Strong/Corneliuson Capital Management Inc. in Milwaukee.

Analysts credit the comeback of the U. S. machine-tool industry to a cheaper dollar versus the yen and, more importantly, to a renewed emphasis on quality and reliability by American manufacturers, who are competing in an international market estimated at $8 billion.

Fadal’s success has occurred despite the Southern California recession. Throughout the 1970s and 1980s, the bigger U. S. machine-tool makers such as Cincinnati Milacron continued to concentrate on a high-end market, turning out expensive and cumbersome machines that were tough to sell and cost $750,000.

Beginning in the early 1980s, Japanese companies used their better technology and a cheap yen to grab most of the U. S. market with their low-end machines. Fadal never wavered from the company’s philosophy of sticking to a low-end market and making affordable machines that could be used as easily in a mom-and-pop operation as in the machine shops of giant companies.

“Even now, we’re still targeting the small shops. It’s a much quicker sale and there’s more of these shops,” said Larry de Caussin.

Through it all, the de Caussins stuck to the edict of the company’s founder, Francis de Caussin, to build their machines with only U. S.-made parts. And, while other U. S. manufacturers bought the computerized control panels for their machines from the Japanese, upstart Fadal decided instead to make its own control panels.

Fadal panels include an optional telephone modem that allows the company’s staff to analyze a customer’s computerized program from Chatsworth whenever problems occur. However, Fadal is known for making no-frills machines that are reliable, with fewer parts and simpler electronic controls.

Norberg called the Fadal machines “your basic models that happen to work very well. They have been able to produce a high-quality, simple product at a very reasonable price.”

Larry de Caussin estimates that Fadal controls about 30% of the lower-priced end of the machine-tool market worldwide. Currently, there are more than 6,000 Fadal machines in shops throughout the world, including China, Japan, Great Britain and 16 other foreign countries. Fadal officials estimate that 90% of their machines are sold in the United States, while international sales have dropped to 10% because of a weakening European economy.

Shaby of CompuMachine said Fadal’s success is also due to “simple Yankee ingenuity. Fadal makes a high-speed, well-balanced spindle for their machines that’s better than the competition. As the industry went to lighter metals, the de Caussins anticipated a need for a spindle that ran faster and smoother and developed it for their machines.” Shaby sells Fadal machine tools and other brands to customers throughout New England. Spindles rotate at 10,000 r.p.m. and hold the cutting tool that in turn shapes and forms the material that is being worked on.

The company began in Francis de Caussin’s garage in the 1950s. The elder de Caussin moved his family to Van Nuys in 1953 from Detroit, where he worked as a tool maker. After working as a machinist for a local company, Francis de Caussin opened his own shop in North Hollywood in 1960, working mostly on small contracts from local aerospace companies. As the company grew, the de Caussins were renting 11 buildings to handle the increasing work orders.

Although the company’s name sounds Middle Eastern, Fadal comes from the first names of Francis de Caussin and his sons, Adrian, David and Larry. Francis and Adrian have died, and today the company is headed by David de Caussin, 56, who is president, and Larry de Caussin, vice president.

In 1974, Fadal began supplementing its machine shop contracts with sales of its first machine, an automatic tool changer--a computerized robotic arm that automatically changes a cutting tool on a spindle when a job is completed--to put on existing equipment, and also began building its first machine tool as a sideline.

In 1984, the company stopped taking machine shop orders from private manufacturers and “we began making machines full time,” said Larry de Caussin. “At the time we were shipping about 20 machines a month.”

Since then, the company’s sales have grown more than twentyfold. Recently, the de Caussins moved the company into a 220,000-square-foot, $10-million building in Chatsworth, which they own. The company’s new quarters are so big that employees need bicycles to get around the building.

Fadal has about 240 employees, some have worked there for 25 years, and it is not unusual to find three generations from the same family working for Fadal. The company also counts nine members of one family among its employees.

According to de Caussin, shop workers earn an average of $12 per hour, plus benefits, and because of the large number of orders, there is plenty of overtime to go around, so some workers will earn $40,000 or better this year. The plant operates 23 hours a day Monday through Friday, plus 10 hours on Saturday.

Although they run a multimillion-dollar company, the de Caussins still dress for work in jeans and work shoes, whether they are meeting with executives from a Fortune 500 company or talking with employees on the shop floor.

Fadal is still small enough to allow the de Caussins to know many of their employees by their first name and they make no-interest hardship loans to their workers. A Fadal employee recently told a visitor about how a co-worker approached Larry de Caussin on the shop floor recently and asked for a $1,000 loan. After listening to the man’s story, de Caussin told him payroll would have a check ready for him at the end of the shift.

Several de Caussin family members play key roles in Fadal’s operation, heading various departments including machine design and the staff that designs the computer software for the company’s machines. However, no family member has ever attended college. Dean de Caussin, 29, who is expected to play a key role in running the company when his father, Larry, and uncle David retire, said each of the younger de Caussins has “learned the business by a hands-on style.”

Larry de Caussin said the family regularly receives offers from investment bankers and buyers who want to take the company public.

“We’re not interested. We want to keep control of the company and pass it on to the next generation,” he said.