CHATSWORTH — ThS. machine-tool industry--the arcane business that makes machines that make other machines--calls it Fadal's Attraction.
Fadal Engineering Co. Inc., a 33-year-old family-owned business, has bolted out of the blue to almost single-handedly overtake the Japanese in a market that they dominated for most of the 1980s.
The Chatsworth company manufactures machine tools in the lower-priced end of the market, what the industry calls vertical machining centers--or upright computer-controlled precision machines that grind, shave, cut and drill metal--that they sell through about 50 distributors worldwide.
Fadal Engineering claims that its sales have shot from $5 million in 1985 to about $110 million in 1993 while the number of employees has grown from about 75 to 240, and business is still booming. Fadal has an eight-week backlog of orders and the company is desperately looking for ways to increase the delivery of its machines from 120 a month to 150.
The company sells nine machine-tool models that range in price from $36,500 to $148,000, and their customers range from United Airlines and Ford Aerospace to "a guy in Texas who has one of our machines in his barn," said Dean de Caussin, son of one of the company's owners, who works in the company's marketing department. At Fadal's plant, the company's machines are used to clone themselves. Fadal machines are then sold to make everything from lipstick tubes for Mary Kay Cosmetics and Gillette razors to critical engine parts for Sikorsky helicopters and various parts for McDonnell Douglas aircraft.
Fadal has not only managed to compete with the major Japanese machine tool makers such as Mazak, Matsura and Toyota, but undercut their prices as well. David Shaby, president of CompuMachine, a distributor of machine tools in Wilmington, Mass., said that today, with the rise of the yen and decline of the dollar, Fadal's machines cost less than the Japanese machines, and the company's meteoric rise is bringing rave reviews.
"This was an industry the Japanese said they were taking over, and Fadal is cleaning their clock. If Fadal goes up against a Japanese machining center one-on-one, a buyer would be hard-pressed not to buy the Fadal machine. They're that good," said Donald Norberg, owner of Rotary Technologies in Gardena.
But success is also breeding concern among Fadal's owners, the de Caussin family, a tightly knit group of uncles, brothers, cousins and in-laws who run the company founded by Francis de Caussin in 1960. Many family members live within three miles of the plant.
"We're building a backlog of orders," said Larry de Caussin, 53, Fadal's vice president, and that means "you're only inviting competition."
Indeed, Fadal's success has prompted other U. S. machine-tool manufacturers such as industry leaders Giddings & Lewis Inc., in Fond du Lac, Wis., and Cincinnati Milacron, in Cincinnati, Ohio, to take a more aggressive approach in the lower-priced end of a market that was all but conceded to the Japanese in the 1980s, when Japanese companies were building better and cheaper machines.
Fadal continues to build smaller, more affordable models that one analyst called the "Volkswagen Beetle of the industry" for the industry's "low-end" market. "This (low-end market) is an industry waiting to happen. The market share gain has been made at the expense of foreign competition. This is one area where Americans are coming back. We lost it all in the 1980s and are just beginning to get it back," said Ian Rogers, who follows the industry for Strong/Corneliuson Capital Management Inc. in Milwaukee.
Analysts credit the comeback of the U. S. machine-tool industry to a cheaper dollar versus the yen and, more importantly, to a renewed emphasis on quality and reliability by American manufacturers, who are competing in an international market estimated at $8 billion.
Fadal's success has occurred despite the Southern California recession. Throughout the 1970s and 1980s, the bigger U. S. machine-tool makers such as Cincinnati Milacron continued to concentrate on a high-end market, turning out expensive and cumbersome machines that were tough to sell and cost $750,000.
Beginning in the early 1980s, Japanese companies used their better technology and a cheap yen to grab most of the U. S. market with their low-end machines. Fadal never wavered from the company's philosophy of sticking to a low-end market and making affordable machines that could be used as easily in a mom-and-pop operation as in the machine shops of giant companies.
"Even now, we're still targeting the small shops. It's a much quicker sale and there's more of these shops," said Larry de Caussin.
Through it all, the de Caussins stuck to the edict of the company's founder, Francis de Caussin, to build their machines with only U. S.-made parts. And, while other U. S. manufacturers bought the computerized control panels for their machines from the Japanese, upstart Fadal decided instead to make its own control panels.