Giddings & Lewis, Inc. History

Company History:

Giddings & Lewis, Inc. is the leading manufacturer of industrial automation products and machine tools in the United States and ranks as the fourth largest producer of machine tools in the world. The company's major product line includes automated assembly systems, industrial measurement and control systems, programmable industrial computers, high-precision automated machine tools, and flexible inspection systems. Providing its products to manufacturers from 250 different industries, including the aerospace, automotive, construction, defense, appliance, electronics, and energy industries, Giddings & Lewis serves customers in 70 countries.

Giddings & Lewis traces its history to 1859, when John Bonnell established a machine shop in Fond du Lac, Wisconsin, a focal point of agricultural development and industrial activity during the mid-nineteenth century. Fond du Lac was located at the foot of Lake Winnebago, in close proximity of the railroad lines, and was therefore an ideal location for lumbering operations. Logs were stripped and sawed in preparation for shipment to the growing American markets, and a large number of saw mills were established throughout the area. Moreover, the surrounding farmland proved extremely fertile, prompting the establishment of grist mills to prepare grain for shipment to other states. Such industrialization led to the need for machining and repair work, which Bonnell supplied.

In 1866, having successfully run his shop for six years, Bonnell sold it to George and Horace Trowbridge. The two brothers added a gray iron foundry--the first in Wisconsin&mdashø meet the growing demand for repairs and machinery from local saw mills and farmers; they named the business Novelty Iron Works. In 1874, the Trowbridge brothers sold the business to Colonel C. H. DeGroat, A. E. Bosworth, and Walter Bigelow. When Bigelow died in 1877, his share of the investment was placed with his estate, and Bonnell sold his interest in the company to David Giddings, who in turn sold it to a relative, George Giddings. In 1880, Giddings purchased Bigelow's interest after his estate was settled, and subsequently sold it to O. F. Lewis.

During this period, the company changed its name from Novelty Iron Works to DeGroat, Giddings & Lewis. Having continued its saw mill machinery business and having expanded into the manufacture of steam engines, the company was rapidly becoming an industry leader. A standard practice for the firm was to make complete installations whenever it was contracted for business. With an emphasis on the quality of its products and a willingness to serve its customers well, the company soon gained national recognition and made installations in Michigan, Minnesota, Maine, Texas, and Washington, as well as Canada. In 1895, due to failing health, Colonel DeGroat sold his share to Giddings and Lewis. Now in partnership, the two men changed the name of the company to The Giddings & Lewis Manufacturing Company, which incorporated under state laws that year.

In 1897, the lumber industry peaked and began to rapidly decline. By the turn of the century, almost all the lumbering activity in the region had ceased, and the company decided to sell its saw mill machinery operation. Shortly thereafter, Giddings & Lewis began to manufacture other machine tools while continuing its foundry and machine shop businesses. Contracted by the municipal government of Fond du Lac, the company provided the city's casting needs for lamp posts, catch basins, and a variety of other items. The firm's first machine tools were also produced during these years, including 17- and 19-inch engine lathes.

In 1910, a controlling interest in Giddings & Lewis was acquired by the Rueping family. The Ruepings had lived in Fond du Lac for years and had built one of the largest tanneries in the country. Under the new president, F. J. Rueping, the company continued manufacturing machine tools, concentrating on different types and sizes of lathes; in addition, Giddings & Lewis manufactured hydraulically-operated shapers, small planers, and six-spindle vertical turret lathes. During the early years of World War I, the British government contracted the company to make a large amount of shell lathes. In addition, the firm began to manufacture horizontal boring, drilling, and milling machines. When the United States entered the war, Giddings & Lewis were contracted by the American government, and the company's staff increased to almost 300.

Immediately after World War I, Rueping reorganized the company under the name Giddings & Lewis Machine Tool Company. Under his direction, the firm expanded its line of boring mills and horizontal lathes to include floor and table type machines with 2-inch to five-inch spindle diameters. In 1921, Giddings & Lewis purchased the exclusive rights to an automatic internal grinder upon which it made improvements; this product soon became one of the company's best selling items. During this time, H. B. Kraut was appointed general manager and immediately implemented a program for modernizing the plant's equipment and developing several new product lines.

By the end of the 1920s, Giddings & Lewis was the envy of many struggling machine tool companies. Brand new, state-of-the-art machine tools and shop equipment had been installed along with a redesign and expansion of the company's full line of horizontal boring, drilling, and milling machines to include machines with 2-inch to eight-inch spindle diameters, and floor, table, multiple, and planer head types that ranged from approximately 10,000 to 275,000 pounds.

In spite of the company's success, however, the Rueping family decided to withdraw from active management of the company. Kraut's financial acumen and administrative abilities impressed management, and he was asked to serve as board chairperson and president. Under his direction, the company initiated a thorough modernization of its buildings with the construction of a power house and modern assembly facility. As part of this modernization strategy, Giddings & Lewis decided to discontinue its foundry operations since the variation in casting sizes made it more economical to purchase from outside foundries.

The stock market crash of 1929 and the Great Depression of the 1930s had little effect on the company. In 1934, to continue its program of expansion and modernization, Giddings & Lewis initiated their first public stock offering. The additional capitalization helped the company to complete construction on the machine shop and provided the financial resources for updating machine tool equipment. By 1939, the firm was able to introduce an entirely new and modern design of unusually large horizontal machines with main spindle diameters of six and seven inches, available in floor, table, and planer types.

In 1940, the company's old administrative building and several shop buildings were torn down and replaced with newer structures. Even before the United States entered World War II, Giddings & Lewis was asked by the government to expand its facilities in order to prepare for the amount of material necessary for the war effort. When the war started, the government contracted the company to build a War Department Emergency Plant Facility adjacent to its own plant for the purpose of increasing production of large horizontal drilling, boring, and milling machines. One of the most modern and sophisticated machine tool plants in the United States during that time, the plant covered seven acres and had approximately 150,000 square feet of working space. Business boomed for Giddings & Lewis during the war, and by its end there were nearly 700 full-time employees.

The 1950s were successful years for the company. The American economy was expanding, and Giddings & Lewis benefited from the demand for machine tools from the airline, automotive, and agricultural industries. Having purchased the Davis Tool Company in the mid-1940s, sales of its product line of double cutter block-type tools, rotary tool holders, and boring bars began to increase dramatically. Relocated to Fond du Lac from St. Louis in 1957, the Davis Tool plant underwent a major expansion to meet the ever-growing demands of machine tool manufacturing.

Despite a small recession during the late 1950s, Giddings & Lewis entered the 1960s on a very positive note. The company's financial success was indisputable, and Kraut's leadership kept its facilities running at an extremely high level of production. In 1966, the firm acquired Gisholt Machine Company, located in Madison, Wisconsin. A very old and well-known machine manufacturing operation with its own foundry, Gisholt helped Giddings & Lewis to increase its production capacity by one-third, while adding balancing machinery to the company's product line. Kraut also helped the company win larger and larger contracts with airline manufacturers; in 1966, the product line expanded to include aircraft profilers for 747s, DC-10s, and the brand new SuperSonic Transport. Over 4,300 were employed at Giddings & Lewis by the end of the decade.

In 1970, however, the company began to suffer from one of the worst recessions to hit the machine manufacturing industry. The collapse of Rolls-Royce in England hit metal cutting firms hard and, with regular customers no longer buying tools, Giddings & Lewis began to lose money. Inventory and accounts receivable began to increase, but the company could only collect upon delivery. Sales fell to $95 million, a decrease of $8 million from 1969. With a net loss of $3.3 million, 1970 saw the worst annual financial performance in the company's history. For the first time since the Depression, the board of directors was unable to pay a dividend on its stock.

Kraut immediately implemented drastic cost-cutting measures to weather the recession. Manufacturing payroll was almost cut in half from approximately $13 million to $7 million. Salaries for the company's upper management were reduced by nearly 50 percent; sales related salaries were also halved. Reluctantly, Kraut decided to sell Gisholt in order to save over $3 million in overhead costs, and 1,200 people were put out of work. While this move resulted in a decrease of the company's domestic production capacity by one-third, Kraut ensured that primary manufacturing was not interrupted. Widespread layoffs continued at all levels until the work force was reduced 56 percent to 1,900.

The industry-wide collapse of tool manufacturing continued throughout the decade. Moreover, American manufacturers were challenged by overseas competitors, who had more modern equipment available. Attempting to diversify in 1978 with the acquisition of Basic Electronics Manufacturing Company, Giddings & Lewis still struggled to survive. By the time of Kraut's departure, the firm was in deep financial trouble and without the experienced leadership to turn it around.

In 1982, with increasing debt and antiquated machinery, Giddings & Lewis was acquired by AMCA International, Ltd., a Canadian manufacturing firm. While retaining the facilities in Fond du Lac, AMCA management restructured the tool manufacturer and then ran its operations as a division referred to as the Industrial Automation Segment. Giddings & Lewis drew on the financial resources of its parent company and began to update its equipment, and in 1989 AMCA decided to spin off the firm in a public offering. William J. Fife, Jr., chair and chief executive officer, was given the responsibility of reinvigorating the company in order to lead it back to manufacturing competitiveness.

Fife's stewardship was dramatic: he immediately invested in research and development and started an aggressive campaign to expand the company's customer base. From the time he was hired in 1987 to 1991, sales shot up from $125 million to $327 million, and operating income increased from $6 million to over $30 million. New orders rose from $143 million to $410 million. The new CEO even paid the company's entire debt of $16 million within the first eight months of the spinoff from AMCA International. In a significant move to promote the company's international competitiveness, Fife also began to market Giddings & Lewis as one of the world's leaders in heavy-duty metal cutting machinery and automated industrial systems.

The resurgence of Giddings & Lewis was facilitated by a general upturn in the manufacturing industry during this time. Manufacturing productivity in the United States increased at an annual rate of 3.6 percent, nearly triple the rate of growth during the entire decade of the 1970s. However, the United States represented only a little over ten percent of machine tool purchases, while Europe, and especially eastern Europe, represented nearly 45 percent of machine tool consumption worldwide. Giddings & Lewis therefore began a campaign to invade the overseas market. In order to bring this campaign to fruition, Fife decided that he needed to increase the productive capacity of his company; the logical decision to make was to acquire another machine tool manufacturer.

In 1991, the company bought Cross & Trecker Corporation, a tool manufacturing firm nearly double the size of Giddings & Lewis. Located in Bloomfield Hills, Michigan, Cross & Trecker had been losing money for years, but its small lathes and auto-parts machining lines complemented Giddings & Lewis's core products. The combination of the two companies catapulted Giddings & Lewis to a number four ranking in the list of machine-tool manufacturers. With its concentration on custom-designed, high-value machines, and its focus on developing into a "total service" automation company, sales for Giddings & Lewis grew to over $500 million in 1992.

In April 1993, due to a disagreement with the board of directors over his financial decision-making, Fife unexpectedly resigned from his position as chair and chief executive officer and was replaced by Joseph R. Coppola. The new leadership honored Fife's strategy of investing in research and development and moving into eastern Europe in order to expand the company's customer base. Comprised of four divisions--Automation Technology, Integrated Automation, Automation Measurement and Control, and European Operations--sales continued to mount for the company. In 1994, Giddings & Lewis ranked as the largest North American industrial automation and machine tool company and one of the largest firms in the world.

Further Reading:

• "Hard Times Is Their Best Teacher," Business Week, August 14, 1971, pp. 80-1.
• Pouschine, Tatiana, "Give It the Gas," Forbes, September 16, 1991.

Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.

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