Acme-Cleveland Corp.

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Acme-Cleveland Corp.

1242 East 49th Street
Cleveland, Ohio 44114
U.S.A.
(216) 432-5400
Fax: (216) 432-5401

Public Company
Incorporated: 1904
Employees: 1,105
Sales: $107.87 million
Stock Exchanges: New York
SICs: 3661 Telephone and Telegraph Apparatus; 3829 Measuring and Controlling Devices, Not Elsewhere Classified; 6719 Holding Companies, Not Elsewhere Classified

For over a century, Acme-Cleveland Corp. was a leading producer of machine tools, the heavy implements used by other manufacturers to shape metal into useful parts. But after a devastating drop in machine tool demand in the early 1980s, the company transformed itself into a significantly smaller high-tech firm with interests in telecommunications, industrial sensors, and quality assurance. From the early 1980s to the early 1990s, Acme-Clevelands annual revenues shrunk drastically, from nearly $500 million to just over $100 million, as the company shed its historic focus.

Acme-Cleveland was created through the 1968 merger of the Cleveland Twist Drill Company and the National Acme Company. At that time, the manufacturers combined interests included machine tools, foundry equipment and electrical controls. Acme-Clevelands earliest predecessor, The Cleveland Twist Drill Company, was founded in 1876. Founder Jacob D. Cox, Sr., used $2,000 borrowed from his father to buy a 50 percent stake in C. C. Newtons small twist drill factory in western New York. Later that year, Cox convinced his partner to move the company to the bustling Great Lakes port city of Cleveland, Ohio. Armed with eight years of experience in that areas steel mills, Cox hoped to parlay his connections there into increased business.

The partnership split up after four difficult years. Cox bought Newtons stake and was left with $9,000 in debt and few prospects. Nonetheless, he soon invited a nephew, Frank F. Prentiss, to take a 40 percent equity position in the firm and become Cleveland Twist Drills first true salesman. The presence of Prentiss freed Cox to design and build tools and machines and attend to the companys bookkeeping.

Cleveland Twist Drill remained highly leveraged throughout its first decade in business. For example, Cox once told his sons of a $2,000 loan that went totally unpaid for six years in the 1880s. The founder noted that it took him 14 years to pay the obligation during these lean early years. At one point, the business deteriorated so much that Cox tried to sell it for $75,000 in 1886. When he could find no investors, he decided to struggle on.

In spite of a major economic depression in 1893, Cox was able to eradicate Cleveland Twist Drills debt in the early 1890s. By the turn of the twentieth century the companys steady growth had necessitated the ten-fold expansion of its manufacturing floor space. Cleveland Twist Drill incorporated in 1904, and Jacob Cox, Sr., retired the following year. He was succeeded as president by Frank Prentiss, described as an optimistic foil to the founders conservatism in a 1976 corporate history. Prentiss has been credited with expanding the companys manufacturing capacity during his tenure.

In the meantime, the company that would later merge with Cleveland Twist Drill was undergoing birth pains of its own. After more than a decade of great difficulties, Edward C. Henn and Reinhold Hakewessell built and patented their first multiple spindle automatic lathe in 1894. Acme-Clevelands centenary history noted that the basic principles used by Henn and Hakewessell in their first machine still stand today as the foundation for the economical, reliable, mass production of accurate interchangeable parts. A friend contributed the cash necessary to found Acme Machine Screw Company of Hartford, Connecticut, and begin production, but the company continued to struggle.

When the partners ran out of money again just three years later, Edward Henn sent his brother A.W. to Cleveland in search of an investor. His successful efforts gave the company a new lease on life and a stake in a joint venture; Henn traded 25 Acme machines for a combination of cash and a 50 percent stake in a new Cleveland-based firm called the National Manufacturing Company. The infusion of cash and confidence sustained Acme through the remainder of the nineteenth century, and in 1901 the two enterprises merged to become The National Acme Manufacturing Company. By 1914, it had grown to become one of Clevelands top employers.

Bored with retirement, Jacob Cox, Sr., rejoined Cleveland Twist Drill as president in 1910 and served in that role until 1919, when he advanced to chairman. He continued to provide guidance to Cleveland Twist Drill until his death in 1930. After just eight years with his fathers firm, Jacob Cox, Jr., was elected president in 1919. The new leader, who had studied and written about social economics, put these theories to work at Cleveland Twist Drill. In 1915 he established an employee profit sharing plan.

National Acme continued to grow during the early twentieth century. It was boosted in part by the 1915 acquisition of the Windsor Manufacturing Company, a Vermont firm that produced Gridley brand multiple spindle automatic machines. The machines were named for their designer, George Gridley; they became known as Acme-Gridleys after the acquisition. Demand for multiple spindle automatic machines and their output skyrocketed during World War I. National Acme expanded accordingly, adding on to existing plants and even building a new one to accommodate defense needs. As a leading-edge manufacturer, the company was left in the lurch at wars end; it was overstocked, had overcapacity, and was undercapitalized. A company history noted that National Acme was almost wrecked in the postwar period. After a massive contraction, the company was able to get back on its feet on the strength of product redesign and vertical diversification, but only barely survived the Great Depression that followed soon after.

Many years of research at Cleveland Twist Drill culminated in the patent of Mo-Max brand high speed steel, the first successful molybdenum-tungsten high speed steel. This development proved especially important in the Depression and World War II years, when the material helped Cleveland Twist Drill cut costs and avoid chronic shortages of tungsten steel.

Support of the Allied effort during World War II drove increased production at both Cleveland Twist Drill and National Acme. A company history asserted that more than 90 percent of all the 30- and 50-caliber bullet cores produced ... for the United States and Canadian military were made on Acme-Gridley machines. Ironically, future partners National Acme and Cleveland Twist Drill received Army-Navy Star Awards for wartime production excellence on the same day.

National Acme emerged from World War II in a much better strategic position than from the previous global conflict. The company made important design changes in anticipation of shifting postwar demand. When the conflict concluded, National Acme was not handicapped by the excess capacities and inventories that had weighed it down after World War I.

Arthur S. Armstrong was elected president of Cleveland Twist Drill in 1952 after Jacob, Jr., advanced to chairman and chief executive officer. Jacob died the following year. Armstrong led the establishment of a Scottish subsidiary as well as the acquisition of Bay State Tap and Die Company in Massachusetts. The company expanded manufacturing into Canada and the Netherlands in the 1960s, and acquired Eastern Machine Screw Products Co. in New Haven, Connecticut.

National Acme was on the acquisition trail as well during the postwar era. In 1959 it purchased Shalco Systems, a six-year-old California producer of foundry shell and core mold machines. These tools were vital to the production of heavy-duty metal parts like engine blocks and heads, and enjoyed high demand from the automotive and heavy equipment industries.

The 1968 merger of the Cleveland Twist Drill Company and the National Acme Company created Acme-Cleveland Corporation. The new corporation had interests in the machine tool, foundry equipment, and electrical controls businesses. The firms primary markets were the automotive, capital equipment, and screw machine products industries. Cleveland Twist president Arthur Armstrong was selected to lead the unified corporation.

The 1970s brought more acquisitions. In 1972 Acme-Cleveland acquired LaSalle Machine Tool, Inc., a 36-year-old producer of total manufacturing systems. The companys products included systems for the automated production of many internal combustion engine parts. The target markets for this machinery were the automotive, farm, and construction equipment industries. At the time, the total manufacturing concept was the vanguard of the machine tool industry. These systems were intended to increase productivity through automation and thereby cut costs, especially in the area of labor. At the time of its acquisition by Acme-Cleveland, LaSalle had nine plants in the United States, Canada, and Italy.

Problems within and without Acme-Cleveland hounded the company throughout the 1980s. External forces in the early 1980s, including an economic recession, brought on the machine tool industrys worst years since before World War II. From 1982 to 1983 alone, total annual shipments of metal cutting machine tools plummeted from $5 billion to less than $3 billion. Acme-Cleveland was especially dependent on cyclical industries like auto and steel makers, which were hit hard during these years. To make matters worse, imports rose from ten percent of the U.S. machine tool market in 1974 to 41.5 percent by 1984.

At the same time, rising demand for precise, flexible automated systems required ever-increasing investment in research and development. After wasting desperately-needed funds on what CEO B. Charles Ames called costly but unproductive research and development programs, Acme-Cleveland acquired and formed joint ventures with firms that could provide it with less cyclical, higher-margin niches within the machine tool market. The company bought into laser and water jet machining, high-tech coatings, and remanufacturing during the early 1980s.

Under the direction of Ames, Acme-Cleveland made drastic efforts to cut costs from 1981 to 1987. From 1981 to 1984, the company slashed its work force from 6,300 to 2,600. It closed, wrote off, or consolidated 15 manufacturing facilities, thereby eliminating over half (1.4 million square feet) of its 2.5 million square feet of manufacturing floor space. Acme-Clevelands sales dropped proportionately, from well over $400 million in fiscal 1980 to $164 million in fiscal 1983their lowest level in a decade. In February 1984 CEO Ames told Tooling & Production magazine that, while these actions were painful, a less aggressive course would have risked allowing the whole business to sink deeper into a hole that might have made recovery impossible.

Ames and his management team initially believed that they had successfully executed a dramatic restructuring effort in 1984. But by the middle of the decade it became clear that Acme-Clevelands leaders had begun to lose faith in their companys traditional business. A second, decade-long, reorganization utterly and irrevocably transformed the company. The LaSalle division was the first important divestment. Its 1984 loss of $15.7 million was a major factor in that years overall net shortfall of $11.4 million, and its spin-off in 1985 helped free Acme-Cleveland from dependence on the auto market. Acquisitions provided the cornerstones upon which Acme-Cleveland hoped to build a stable new business. Purchased in 1984, Communications Technology Corp. (CTC), a Los Angeles-based manufacturer of industrial communications equipment, was expected to be an important brick in that foundation. Although the subsidiary floundered in its first few years with Acme-Cleveland, by 1993 the telecommunications market accounted for almost 75 percent of the companys operating earnings.

Other issues plagued Acme-Cleveland during this trying period. The companys top two executives vacated within a twelvemonth period in 1986 and 1987. President James T. Bartlett was first to go, then B. Charles Ames resigned to take a new position. David L. Swift, who had previously served as a vice-president, was appointed as president, CEO, and director in 1987. Strikes in 1986 and 1989 also disrupted the company as workers registered their resistance to wage and benefit concessions. In the latter year, the company lost a $10 million lawsuit brought against it by Vickers Inc., a subsidiary of TRINOVA Corp. The plaintiff alleged that Acme-Clevelandthrough then-subsidiary LaSalle Machine Tool Inc.had reneged on a 1983 contract to deliver a fully-automated flexible manufacturing system. Acme-Cleveland appealed the federal court decision, then settled with Vickers for $4 million in cash and an additional $4.5 million in machine tools.

The sum of all these factors was decidedly negative. From 1982 to 1992, Acme-Cleveland lost $45.5 million more than it made. Sales dropped from nearly $500 million to $112.67 million over the same period. Nonetheless, the company recorded its third successive fiscal year of profitability in 1990, and was proclaimed Turnaround of the Year by the Turnaround Management Association in 1991.

The true climax of Acme-Clevelands drawn out reorganization, however, actually came three years later, with the late 1994 divestment of the companys primary metal working subsidiary and the acquisition of several telecommunications firms. Although Cleveland Twist Drill was Acme-Clevelands founding business, accounting for two-thirds of overall sales, it was sold in the fall of 1994 to longtime rival Greenfield Industries Inc. for $45.2 million in cash. Acme-Clevelands leaders reasoned that since the cutting-tool industry in general was gearing for an upturn and the divestment of Cleveland Twist Drill was inevitable, this was the best time for an asset sale. At the same time, the company boosted its telecommunications interests with the purchases of TxPort Inc. (pronounced transport) and Phoenix Microsystems Inc., thereby adding about $25 million in annual sales to its Communications Technology Corp. subsidiary.

While Acme-Clevelands annual sales declined steadily in the early 1990s from $125.5 million in 1990 to $107.9 million in 1994, Wall Street clearly registered its approval of the companys strategy. In January 1995 alone, the companys stock spurted from about $10.50 to $16, and a jubilant CEO Swift told the Cleveland Plain Dealers that shareholder equity had more than doubled to $75 million. Having overseen the companys historic transformation, Swift planned to shore up Acme-Clevelands competitive position with what he called good acquisitions and overseas expansion in the late 1990s.

Principal Subsidiaries

Communications Technology Corporation; TxPort, Inc.; Namco Controls Corporation; M&M Precision Systems Corporation; The National Acme Company.

Further Reading

Acme-Cleveland Continues its Return to Profit Lane, Cleveland Plain Dealer, January 26, 1990, p. B9.

Acme-Cleveland Selling Twist Drill, Cleveland Plain Dealer, September 2, 1994, p. C1.

Acme-Cleveland Settlement Erases $10 Million Judgment, Cleveland Plain Dealer, April 2, 1991, p. 5D.

Acme-Cleveland: We Tried to do Too Much, American Metal Market, January 28, 1985, p. 8.

Acme-Clevelands Chairman Thrives on New Challenges, Cleveland Plain Dealer, January 12, 1992, p. E3.

Armstrong, Arthur S., The Persistence of Struggle: The Story of Acme-Cleveland Corporation. New York: The Newcomen Society, 1976.

Clifford, Mark, Slow Recovery for a Vulnerable Giant, Financial World, October 17, 1984, p. 24.

Freeh, John, Acme-Cleveland Turning Profitable Again, Cleveland Plain Dealer, January 27, 1989, p. B7.

Gerdel, Thomas W., Acme-Cleveland Loses Suit, Cleveland Plain Dealer, October 5, 1988, p. G1.

On Corporate Darwinism, Tooling & Production, February 1984, p. 14.

Sabath, Donald, Acme-Cleveland Moves in a Brand New Direction, Cleveland Plain Dealer, January 27, 1995, p. C1.

Solov, Diane, Holding Its Own: Acme-Cleveland Evolving to Meet the Times, Cleveland Plain Dealer, January 12, 1992, p. E1.

Twist Drill Sold to Rival Tool Maker, Cleveland Plain Dealer, September 14, 1994, p. C1.

Weiss, Barbara, Reshaped Acme Assessed by Departing Bartlett, American Metal Market, March 17, 1986, p. 16.

April D. Gasbarre

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