INTRODUCTION
It has taken almost 8 years to put together this book. To be more accurate, this story started June 7, 1999, almost 8 years ago. If there is anything familiar about that date it is the day Harnischfeger Industries announced their "prompt and decisive action" to declare bankruptcy due to their "impairment of our capital structure."
As a result of the announcement I started to record the history of the events as they transpired. It was obvious to many that this was a story that would remain indelible in our memories. The history document turned out to be a six part series titled "The Beloit Chronicles" which were posted on my Internet website, as they developed. The Beloit Chronicles is now a chapter in this book.
None of us knew (and probably will ever know) if at the time of their announcement selling off Beloit Corporation was part of the Harnischfeger grand plan or if it all turned out later as part of their strategy while going through the process of bankruptcy. Certainly Harnischfeger was well aware that selling Beloit Corporation’s assets would go a long way towards "reversing its deteriorating financial condition".
Naming this book "Sacrificial Lamb" seemed to be a natural. Encyclopedias define sacrificial lamb as a "lamb (or metaphorical parallel) killed or discounted in some way (as in a sacrifice) in order to further some other cause.
THE STORY UNFOLDS
The Beloit Daily News top local news story on June 7th was " Beloit Corporation parent files bankruptcy."
The BDN reported: MILWAUKEE (AP) _ Harnischfeger Industries, Inc., which reported a net loss of $74.3 million for its second quarter last week and several management changes two weeks ago, today announced it had filed for financial reorganization under Chapter 11 of the U.S. Bankruptcy Code.
John Nils Hanson, the company's new chief executive officer, said in a statement; "In light of the adverse impact of the continuing difficult global economic environment on the company's businesses, and the attendant impairment of our capital structure, we concluded that prompt and decisive action was required to preserve the company's assets and reverse its deteriorating financial condition.'' The Milwaukee-based mining and paper-making machinery manufacturer said the voluntary bankruptcy filing had been made in federal court in Delaware, and covered the parent company and its U.S.-based operating subsidiaries.
A quote from a different source stated that "this news does not bode well for Beloit Corporation and puts them in a very vulnerable position."
Harnischfeger Industries found themselves in a grave condition. They had pressing financial obligations and a desperate need for operating capital. They needed money, a lot of money; sooner rather than later.
They probably could get out of trouble the old fashioned way, borrow money and sell off some of their lesser valued assets to get some "wiggle room," tighten their belts, eliminate inefficient programs and do a lot of hard work. This would take time, perhaps years to recover if they ever did.
MISMANAGEMENT
It was reported that Harnischfeger’s Executive Management Group had made some very poor managerial decisions, poor decisions that had dramatic and major negative effect on the company and it’s future.
In the eyes of many they continued making poor decisions when they decided that their "prompt and decisive action" to reverse the "impairment of our capital structure" would be to sell off one of their major subsidiaries, one with the most lucrative assets from the standpoint of cash value. The subsidiary was to be Beloit Corporation.
THE SACRIFICIAL LAMB
Beloit Corporation’s vulnerability was now a reality. It became "the sacrificial lamb." Like the proverbial sacrificial lamb, it was to be dismembered to fulfill it’s prophecy – save the parent company.
BELOIT CORPORATION ASSETS
Harnischfeger selling off Beloit Corporation was an act of throwing out the baby with the bathwater. They sacrificed a viable, successful operating company that grew and survived for 141 years. Their reasons for selling Beloit Corporation were low profitability and that Beloit was considered to be a liability to Harnischfeger. The financial condition of Beloit Corporation however was a result of their own (Harnischfeger’s) management style. They were the "parent company" up in Milwaukee. Parents usually work hard to raise and help their children. They do not normally sacrifice them for their own benefit.
BELOIT CORPORATION PEOPLE
There was one asset they could not convert to cash; the most important asset of them all. The employees that performed so diligently and loyally! The engineers, the sales and marketing people, the thinkers in R & D, the inventors, the office workers that kept everything going smoothly, the craftsmen in the shops, and the erectors that installed and set up the machines and other professionals and specialists to numerous to list.
This was an evolving work force that transformed $ 4,200 and ten men operating in a rented factory back in 1858 Beloit into a growing business that became the world's largest and most respected manufacturer of paper-making machinery.
THE EXBELOITERS
In the process of selling off Beloit Corporation they created a whole new species of people. An instant and endangered species. The Exbeloit species. You can’t tell an ExBeloiter from normal people. They look and act like normal people. The endangered ExBeloit species could lose their livelihood, homes, life savings, severance pay, health insurance and other benefits. The one thing they had in common beside being ExBeloiters, they were all to loose their jobs.
There is a bright side of this sad story to relate and celebrate however.
THE MONUMENTS:
The Beloit Corporation and Merrill & Houston paper machine lists combined total 1,104 paper machines that are now located all over the globe. These Beloit machines will continue to produce paper, board, tissue, toweling, newsprint, fine papers, copy paper, building materials and a whole raft of products that people want and will use for years to come. This is a true testament and monument to Beloit Corporation’s ExBeloiters and Beloit Corporation's greatness. This record will not even be approached by any other machinery builder on this planet for years to come.
THE HISTORICAL RECORD:
Beloit Corporation not only leaves a great historical record but also a significant story of it’s success as a machinery builder, a record of the people and machinery that designed and made it possible to produce the products it manufactured. This historical record of innovation and progress may never be matched again because Beloit accomplished it during the dawn of the industrial revolution when the challenge was the greatest and thereby has more meaning.
THE PEOPLE:
Although Beloit Corporation in it’s final hours left an endangered species, it was it’s greatest triumph. The ExBeloiters spread their experience, knowledge and work ethic around the world. It enriched their competitors and paper mills alike. They created new businesses like Paperchine, LLC right in their own backyard--a new startup company--who's success already threatens to be the successor of Beloit Corporation, the company the ExBeloiters take pride in, miss and loved. One only has to review the messages posted by the ExBeloit species on the ExBeloit Worldwide Network to better understand this phenomena. Some messages are poignant, some encouraging, a few a little whiney but most are encouraging. They are stories of accomplishments and recovery and the act of going on with their lives, showing very little bitterness if any.
A PERSONAL REFLECTION
Many titles were considered for this book. The winner obviously is the present title, "Sacrificial Lamb -The Beloit Corporation Story." It seemed to be such a fitting description when reviewing the condition and circumstances of the time. A close runner-up title was "Rise and Fall of the Corp." Beloit Corporation had several names over time. It’s forerunner names Merrill’s Foundry and Merrill & Houston Iron Works that in time became Beloit Iron Works. Beloit iron Works had a name change to Beloit Corporation on January 1, 1992. After that name change many simply called it "The Iron Works."
The hometown crowd had it’s own solution. They referred to Beloit Corporation fondly as "The Corp." There was no doubt what Corp. they were referring to. It could mean Beloit Iron Works, BIW, Beloit Corporation, The Iron Works or just Beloit, whichever you knew it to be. It was within the purview of the hometown crowd to develop their own favorite name for Beloit Corporation. After all, due to the phenomenal success of "The Corp," the city of Beloit, WI became known as the "Mecca" of the paper industry to the world wide community of papermakers and machinery builders.
It was a great temptation to select the book title "Rise and Fall of the Corp." On a personal note, in the late 50’s when employed at Black Clawson in Watertown, NY, Frank Salerno and Tom Burke of BIW's personnel department visited Watertown to interview Black Clawson employees to join BIW and work for Beloit Eastern Corporation. There was very little hesitation on my part. The people at Black Clawson were in awe of BIW. They were aware that BIW was the world leader in paper machine technology, manufacturing and engineering. They were also aware that the paper industry held BIW in the highest respect. Fortunately for me, I was accepted for employment. I tell this short personal story to demonstrate the kind of awe and respect for BIW that made Beloit, WI the "Mecca" it became.
Luigi Bagnato, September 28, 2006
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