Thursday, November 18, 2010

Saving our way to penury

many years ago, I worked for a 120 year old company producing industrial boilers. At it's apogee, it had over an 80% market share and a reputation for quality products.

Then came the accountants.

During the storm of leveraged buyouts in the late 1970's the profitable old company was bought by an accounting firm along with several related businesses by leveraging its assets. Within a very few years, it had a rapidly declining market share of 2% and a mountain of debt. In another few, it was gone and sold for scrap. Yes, I'm going to make a comparison between the fate of the boiler company and the fate of our nation.

Having been stripped of its reserves, the first of the fatal cost cutting practices so dear to the hearts of conservative accountants was maintenance of the aging production equipment. Soon, quality began to suffer. Advertising was curtailed: "we have to cut costs." The quality control department became overburdened with fixing problems caused by shabby construction caused by failing equipment. "We can't afford them. We need to be a 'leaner' company."

Bad welds, a dangerous thing, began to show up as welding inspectors, which for a short time I was, were eliminated. "we can't afford them." The problem of declining quality and the rising cost of redoing bad construction was blamed on the union although they were willing to bend over backwards to fix the problem and even volunteered for a wage freeze. Necessary design changes that had formerly been made in the quality control department in secret, were deemed "too expensive" although the dedicated guys in QC had been doing them by hand with parts bought at the hardware store and hand tools with their own money.

The quality control department was eliminated. "We can't afford them." We began shipping products that would not work. Field warranty repair costs skyrocketed. Our reputation nosedived.

People just short of retirement were fired to save on insurance and pension expenses "we couldn't afford." Management held the hard line on pricing. "People will spend more for our product because of the quality." Middle management was warned they'd be fired for showing that lower pricing would increase revenue.

Professional cost cutters and business school graduates with no knowledge of the equipment, its manufacture, its uses or the nature of the market were hired to fill the shoes of people who had led the company to its former heights. We had continuing optimistic reports from the new owners predicting that the cost cutting would soon turn things around.

Then came the bankruptcy, the sale, the quick demise, the economic collapse of the town surrounding the plant.

When I watch the antics of the far right, insisting, for instance, that we can't afford to stand up for equal pay for women, I can't help remembering. When we're given endless arguments about cost cutting and austerity being the way to prosperity, I remember. When we can't afford oversight, maintenance, pensions and health care and we deliberately neglect to do anything to improve revenue because it costs money, I remember.


Baltazar said...

that could be an opera

Capt. Fogg said...

And of course the fat lady has not yet begun to sing. . .