Engineering a Machine-Tool Industry Coup : Fadal Has Taken Back Its Market From the Japanese
The machine-tool industry--the business that makes machines which make other machines--might call it “Fadal Attraction.”
Fadal Engineering Co., a 33-year-old family-owned business, has bolted out of the blue to almost single-handedly overtake the Japanese in a portion of the market that they dominated for most of the 1980s.
The Chatsworth company makes machine tools in the lower-priced end of the market, what the industry calls vertical machining centers--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. Today, Fadal has an eight-week backlog of orders and is 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 customers range from United Airlines and Jet Propulsion Laboratory in Pasadena 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 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 to parts for McDonnell Douglas aircraft.
Fadal has not only managed to compete with major Japanese machine-tool makers such as Mazak, Matsura and Toyota, but has 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, Fadal’s machines are cheaper.
“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 also breeds concern among Fadal’s owners, the de Caussin family, a tightly knit group of uncles, brothers, cousins and in-laws who run the firm founded by Francis de Caussin in 1960.
“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 makers, such as industry leaders Giddings & Lewis Inc., in Fond du Lac, Wis., and Cincinnati Milacron, in Cincinnati, to take a more aggressive approach in the lower-priced end of a market that was all but conceded 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.”
The low-end market “is an industry waiting to happen,” said Ian Rogers, who follows the industry for Strong/Corneliuson Capital Management Inc. in Milwaukee. He added: “This is one area where Americans are coming back.”
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Analysts credit the comeback to a cheaper dollar, as well as a renewed emphasis on quality by American manufacturers, who are competing in an international market estimated at $8 billion.
Throughout the 1970s and 1980s, the bigger U.S. machine-tool makers continued to concentrate on the 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 its philosophy of 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. While other U.S. manufacturers bought computerized control panels for their machines from the Japanese, Fadal decided instead to make its own.
Fadal panels include an optional telephone modem that allows the company’s staff to analyze a customer’s computer programming from Chatsworth whenever problems occur. However, Fadal is known for making no-frills machines that are reliable, with fewer parts and simpler electronic controls.
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Larry de Caussin estimates that Fadal controls 30% of the lower-priced end of the machine-tool market worldwide. 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.
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.
Recently, the de Caussins moved the company into a 220,000-square-foot, $10-million building in Chatsworth, which they own.
