Tooling and machining is, by and large, an industry without an identity. The National Tooling & Machining Association (NTMA) has broken it down into five sectors: tools, dies, and fixtures; molds; special machines; general precision machining (excluding aerospace); and aerospace machining and fabrication. But it is nearly impossible to categorize these companies, since so many of them cross over into other sectors -- the federal government has about 100 different standard industrial classification codes that could legitimately be assigned to any company in the industry.

The information that the NTMA has gathered reveals a very cyclical industry. Some 12,000 to 14,000 companies, most of them small, have annual sales that total $20 billion to $30 billion. In 1984, the average company employed 30 people and did $2 million in sales; sales per employee averaged $67,000. Barry Miller, principal consultant of Barry E. Miller Co., in Reading, Pa., and an analyst for NTMA, says that while the exact number of company failures is unknown, the 1981 to '82 recession and increased offshore manufacturing have taken a toll on the industry.

Those companies that have succeeded over the past 10 years, big as well as small, have one thing in common: Rarely are their operations the same as the original business. According to John A. Bell, training manager at NTMA, the key to success these days is the ability to respond quickly to changes in the market, since both offshore manufacturing and increased foreign competition have been chipping away at the traditional customer base. "There's always a certain amount of flux in their customers and in the type of work they do -- that's how they survive," Bell says.

Bruce Phelps can vouch for that. In 1959, when he first started Fulton Tool Co., in Fulton, N.Y., the shop specialized in making tools for industry. Today, the $3.5-million company makes precision machine parts, and 80% of its business relies on government contracts. "We've tried to get customers in various industries, but there isn't a lot of commercial work out there -- a lot of those customers are buying offshore. I think our whole industry is really relying on government contracts." It worries Phelps that so much of his business is dependent on one customer; he was recently burned by the bankruptcy proceedings of Storage Technology Corp., to which he had been shipping $28,000 worth of goods a week. But like many companies, especially the smaller ones, Fulton has to grow by exploiting whatever market is most accessible at any given time. The typical machining/tooling shop -- about $2 million in sales -- can't afford to shell out huge amounts of capital to purchase the new equipment that is often needed in order to move outside traditional areas of expertise.

Such larger companies as $34-million Detroit Tool & Engineering Co., in Lebanon, Mo., are better able to implement aggressive diversification strategies. "We started out strictly as a tool-and-die shop," says chairman of the board and chief executive officer Dick Carr. "But the tool-and-die industry is now only 49% in real dollars what it was 15 years ago, and it's been necessary to diversify. Our markets are disappearing." Carr says the company's most promising market is labor-intensive parts that require extensive engineering coordination between a shop and a customer -- the kind of communication that would make overseas manufacturing virtually impossible. Detroit Tool & Engineering, which now has only one government subcontract, serves markets as diverse as household appliances, over-the-road trucking, and lighting.

While the work going through the shops changes, one thing remains constant in companies that are considered to be industry leaders -- their emphasis on training. "We've done a lot of things right and have had a little luck along the way, but like any business, it really boils down to good people," say Bill Saul, chairman of $30-million Remmele Engineering Inc., an automation-equipment manufacturer in Minneapolis. While most companies train apprentices right on the shop floor, Remmele has its own 6,000-sequare-foot training center, where up to 20 students spend a year in classroom training and work on some of the less difficult jobs the company has landed. "When we have lots of students in there, we can actually make a profit," says Saul. But if the center itself isn't always profitable -- it now has only 10 students and has been kept open for as few as 4 -- Saul is convinced there are greater rewards down the line. "There is no question in my mind that it is profitable to train people. Our sales per employee are $100,000, so every time we bring in a new, well-trained employee, he can theoretically bring in $90,000 in sales. It doesn't take that long to recoup the cost of training." "The Lord of Discipline"