Victims of the system Essay

Smash and Grab is the label applied to the act of gangs of big city
terrorists who smash the windows of a car stopped at a traffic light and
grab whatever they can before running in hasty retreat. A recent victim
in our area was a minister who subsequently died of a heart attack
attributed to the trauma of such violence.

While this may be an extreme in senseless violation of the rights
of others, there is growing awareness that our great legal minds have
properly arranged to protect the rights of suspects and criminals from
overzealous cops, yet haven’t done much to help victims who are
smashed, grabbed, battered, and abused.

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Victims are less sensational, but every bit as real in the
manufacturing industries. People who lost their jobs through no
particular fault of their own tend to be bitter than the System was
rigged against them. In recessions many companies have so little
business that they are forced to lay off people with long service and
good records of performance. Machine-tool builders lose skilled workers
every time the nation’s economy takes a nose dive.

During the recovery phase, lack of skilled workers limits the
ability of companies to make timely deliveries and gives their foreign
competitors more advantage. The man in the shop isn’t to blame for
that sad state of affairs, but it makes him all the more vulnerable in
the next down cycle.

Much of the machine-tool industry’s trouble is attributed to
the twin woes of high interest rates and a strong dollar. They make it
hard to sell machine tools both at home and abroad. Yet no individual
I’ve met feels personally responsible for the growth of those twin
woes. Most of us feel like victims.

Then there is merger mania. What do you say to the job applicant
who says she worked well for her former employer, but he sold the
company and she lost her job. She learned what is meant by redundant.
Can you promise that the job you offer is with a firm that is not going
to be sold out?

Professor Michael C Jensen writing “Takeovers: folklore and
science” in the Harvard Business Review would have us believe that
public criticism of the takeover market is largely unfounded and
unproductive. Realizing the controversial nature of this stance, the
HBR editor’s introductory paragraphs include the statement:
“If you accept the assumption that shareholders are the most
important constituency of the modern corporation, then these mergers and
acquisitions make sense because they increase the value of the shares
held in the target company.”

Certainly if the shareholders sell their stock to a takeover artist
for more than they paid they are better off. But what about the people
on the payroll who don’t own a piece of the action? The professor
brushes aside as folklore the statement that consolidating facilities
after a takeover leads to plant closings, layoffs, and employee
dismissals–all at great social cost. He would even have us believe
that to slow down mergers would be to slow innovation.

As a long-time student of the machine-tool industry, I would
challenge the professor to do an academic study of machine-tool
innovation that has followed in the path of takeovers and mergers. What
we have seen is quite the opposite. New product announcements usually
come to a halt. Often the founding family’s talents simply fade
away to Florida’s finest resorts, and the new owners suffer from a
shortage of people with the specialized smarts it takes to design and
build a better mousetrap.

Just because an outfit has money enough to buy a company
doesn’t mean they have the know-how to keep it competitive in a
future filled with higher technology.

In his book, Lee Iacocca grieves for those good people at Chrysler
who lost their jobs in the process of making the company lean enough to
survive in a depressed market that was not of their making. The
unfairnesses he cites are in systems bigger than individual
corporations. His straight talk on buyouts suggests “… we pass a
law that says when you borrow money to buy somebody else and cannibalize him, the interest payments on those loans are not deductible. That
would get the excesses out of the system pretty fast.”

Investment bankers that arranged such mergers have seen an upsurge
of divestiture business. This seems to support the view that takeover
management isn’t necessarily more efficient than those who built a
business. The Wall Street Journal reports that 700 people lost their
jobs in the last big investment-bank merger. There appear to be victims
of the System all around us.


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