The Great American Revival

While the pundits debate how to restore U.S. industrial competitiveness, thousands of small, flexible, market-driven manufacturers are already doing it

WILFORD D. GODBOLD JR.'S FATHER didn't raise his son to be a metal bender. Since their arrival on South Carolina shores in the 1640s, the Godbolds have produced distinguished attorneys, judges, and legislators, but hardly a man of trade. It was much the same on Wilford's mother's side of the family, where the Ehlerts in this century claim three generations of physicians.

So, in 1982, when Wilford "Woody" Godbold announced his intention to leave his partner's chair at the top-drawer Los Angeles law firm of Gibson, Dunn & Crutcher in order to take a job as executive vice-president of a metal-fabrication company, the reaction among family and friends ranged from disappointment to bewilderment. Those who did not think him crazy thought perhaps it was merely a stage Godbold was passing through. "Caution: Keep Out Midlife Crisis" read the sign that hung, only partly in jest, over his law office door.

Now, nearly six years after leaving his comfortable place in the booming service economy, Godbold's decision seems anything but insane. Godbold has since become president and chief executive officer of Zero Corp., his former law client, and under his direction it has increased its sales 73% to $138 million. During the same period, earnings have doubled to an estimated $13 million. With factories now in southern California, Florida, Massachusetts, Minnesota, and the United Kingdom, the company has established itself as a leader in metallic packaging for industries as diverse as aerospace, electronics, medical instrumentation, and photography.

Zero is typical of a new breed of industrial growth companies in the United States. In sharp contrast to the mass-production-oriented giants of the last industrial era, the new stars of manufacturing are small, highly focused companies whose fortes are flexibility, customization, and market sensitivity. They rely neither on one product nor one customer, prefer short production runs over long, and aim for high margins rather than high volume. Productivity is invariably high. And while others decry the effects of foreign competition, these firms seem to thrive on it -- as competitors and even as suppliers to companies around the world.

Yet even as these companies distinguish themselves from the old industrial giants, so too do they distinguish themselves from the sleepy small manufacturers of an earlier generation, which seemed content to get by by relying on one product or one major customer. Zero Corp., for instance, currently boasts more than 17,000 different customers, with no one account representing more than 3% of sales. At Zero's Burbank, Calif., factory, teams of workers craft everything from cooling equipment for supercomputers to frames for disk drives to housings for the Stiner missile systems. Company-wide, 40% of Zero's sale comes from specially customized products.

"Big production runs are an anathema around here," Godbold explains. "We don't even bother bidding on the IBM PC jobs, fighting over a tenth of a cent or running the machinery to go a tenth of a second faster. The revenues are great, but the profit isn't. We feel better solving a customer's problem -- adding our value -- and getting a 9% or 10% return instead of the 3% most metal fabricators get."

Those are margins old Henry Ford would have admired. And he probably wouldn't have turned his nose up at the take-home pay, either. Woody Godbold points out that his 1987 compensation nearly equals the six-figure income he would have earned as a partner at Gibson, Dunn & Crutcher. And what's more, he's having a ball.

"I was tired of the advisory role. I wanted to build something. That is more important to me than the money."

The emergence of such small, high-growth manufacturing companies as Zero represents a dramatic break with the traditional notion of industrial America. For years, pundits and politicians have bemoaned the decline of the giants of American manufacturing, and constructed around it a general theory of deindustrialization. Yet even as these behemoths have fallen, as much from the onslaught of foreign competition, new companies -- most of them far smaller even than Zero Corp. -- have quietly been picking up much of the slack.

Indeed, rather than dying, America's industrial base has actually been restructuring itself -- painfully, at times unevenly, but ever so surely. Since the mid-1950s, the actual number of manufacturing jobs and the roles of manufacturing companies have increased even as manufacturing's share of the gross national product has gradually declined. But within the manufacturing sector, even greater changes are taking place. Between 1974 and 1984, large companies shed themselves of some 1.4 million manufacturing jobs, but during the same period 41,000 new manufacturing companies created enough new jobs to offset virtually all of those losses. As a result, companies with fewer than 250 employees now account for 46% of the manufacturing work force, up from 42% a decade ago. If the trend continues, small-scale manufacturing should pass the 50% mark by the 1990s.

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