American Tragedy

Transcript of An American Tragedy

What went wrong?

government policy

"Burgmaster thrived because the Burgs knew their business"- Holland

1960s

Trade Protection???

In the End

Houdaille went to DC with a petition to withhold the investment tax credit for certain Japanese-made machine tools.

Thanks to deft lobbying, the Senate passed a resolution supporting the position, but President Reagan refused to go along.

Houdaille's attempt to link Burgmaster with a Japanese rival failed, and Burgmaster was closed.

the LBO crippled Burgmaster by creating enormous pressure to generate cash.

Burgmaster pushed its products as fast as possible, it routinely shipped out defective machines.

It promised customers features that engineers hadn't yet created.

In the end, Holland blames the industries decline on government policy.

Targets tax laws & macroeconomic policies that encourage LBO and speculation instead of productive investment.

$1.25

Wednesday, December 3, 2014

Vol XCIII, No. 311

Facts

Burgmaster Corporation

But Blame the Industry, too!!

Blame the Government, yes.

A LA area machine tool maker founded in 1944 by Czechoslovakian immigrant Fred Burg.

By 1965 Burgmaster was a thriving enterprise with sales amounting in $8 million

The company needed backing to expand, so it sold out to Houdaille Industries Inc.

Houdaille was in turn purchased in a leaveraged buyout (LBO) led by Kohlberg Kravis Roberts & Co.

By 1982, when debt, competition, and sickly machine-tool market had battered Burgmaster badly.

Like their brethren in Detroit and Pittsburgh, domestic tool-makers in th 1970s were too complacent when imports seized the lower end of the product line.

The conservatism that had for years served them in their cyclical industry left them ill-prepared for change.

Even now some of the largest US tool-makers are struggling to restructure.

Blame the government, yes. But blame the industry, too!!!

An American Tragedy

How a Good Company Died

Petition...