Where In The World Is Pittsburg, Anyway?

Three years ago Romesh Wadhwani didn't know anything about robotics. Now he's leading U.S. robot makers' counterattack against the Japanese.

For a few months, he wondered how he could say no to the Rockefellers.

It wasn't every day, after all, that they asked an immigrant from India to revive one of their companies, and Romesh Wadhwani was proud of that. The Rockefeller family's venture capital partnership, Venrock Associates, had watched American Robot Corp., its failing new company, run through a million dollars. After almost two years of operation, says Wadhwani, the company "had no product, virtually no people, and no marketing strategy."

Those lost years put American Robot far behind in a market in which too many competitors were pummeling one another with vicious price cuts.Wadhwani had run his own computer company before, but he knew nothing at all about robots. Nor did he know how to attack the big Japanese robot makers who, like champion sumo wrestlers, threw every U.S. company that took the mat against them. For a while, it seemed that the only way U.S. companies could deal with the invasion of Japanese robots was to sink cargo ships in the Pacific.

Undaunted, Wadhwani accepted the job. Today, three years later, he is not only still on his feet against the sumo wrestlers, but is also scoring some points of his own. American Robot's sales should reach $10 million in 1984, putting it among the top dozen or so U.S. producers, and Wadhwani projected a profitable fourth quarter, the company's first. He has even licensed the company's robot, called Merlin, to Daikin Industries of Osaka, which has agreed to sell at least 350 of them in the toughest market of all, Japan.

The wrestling match is far from over, though. Along with American Robot, more than 50 American and dozens of Japanese companies are struggling for a U.S. market that is still quite small. Although one analyst predicted a growth rate of more than 50% in 1984, the robot market in 1983 amounted to an estimated $170 million to $230 million, less even than Apple Computer Inc.'s quarterly sales.

All that competition for a small market has devastated the industry. For U.S. producers, dollars are walking out the door faster than robots: They had losses equal to 42% of net sales in 1982 and even more in 1983, according to the U.S. International Trade Commission. Only one U.S. company was profitable in 1983, and among the losers were the robot divisions of such giants as Westinghouse, Cincinnati Milacron, and GMF, a joint venture of General Motors and Fanuc, the Japanese robot maker. "I wouldn't be surprised if the number of U.S. robot companies was cut in half," says Gerald Michael, an analyst with Arthur D. Little Inc., the consulting firm. "Out of the 25 remaining, only 7 or 8 will have the lion's share."

Will American Robot be one of the survivors? Wadhwani won't succeed on the strength of his sales to Japan, or even on the capabilities, of his Merlin. He and other American robot makers can't compete with the Japanese in making the robot arm itself. Instead, they are changing the rules of the game to reward brains and agility rather than brute strength.

This strategy requires complex new software that makes robots smarter, able to "talk" electronically with other computerized equipment about what they are doing. It also requires teaming U.S. or Japanese robots with a variety of peripheral equipment, then selling the package as a complete system to perform an entire manufacturing task. "The day of the naked robot is gone," says William Rooney, vice-president of marketing at American Robot. Adds Laura Conigliaro, an analyst at Prudential/Bache Securities Inc.: "It's been a long time since I heard anybody say, 'We're just a robot company."

Ultimately, what is at stake here is nothing less than a share in building the much-heralded "factory of the future," an eerie place in which computerized controllers operate a network of robots, conveyor belts, and artificial-vision systems to produce goods with scarcely any human intervention -- machines capable of going through their paces even at night, with the lights off. "Robot," in fact, is something of a misnomer for what American Robot or any other company that hopes to compete in the future will have to produce. The robot of today is simply an automated machine tool; the robot of tomorrow promises to be a component of what may be the next major chapter in the Industrial Revolution.

If this ambitious software-based strategy succeeds, the downtrodden U.S. industry will capture the most profitable end of the robot business and will leave the Japanese in the unhappy role of commodity suppliers, providing the arms that make up only about 30% of the cost of an installed robotic system. The Japanese are responding by building more intelligent robots of their own, but they operate at a disadvantage under these new rules: Software has long been their weak point, and the installation of complete systems would require them to provide costly support services in the United States.

The man who is trying to make this strategy work at American Robot is a 37-year-old engineer who thrives on the frenetic tempo of high technology in this country. "I couldn't ever run a successful business in India," says Wadhwani. "It's not fast-paced enough." Decisive as well as energetic, he moves with the instincts of a hawk that has spotted quarry on the ground.

In 1983, to expand the capabilities of Merlin, Wadhwani checked out dozens of companies that were developing artificialvision systems. As the "eyes" of a robot, artificial vision utilizes sophisticated software to turn pictures into digital information, then uses additional software to recognize and analyze images and patterns. Wadhwani found the system he wanted at the University of Manchester, in England.

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