Chapter Four: New Standards Created

In wake of these changing times, many international corporations devoted a great deal of time towards reigning in as many of their worthy competitors as possible. Those very cunning leaders endeavored to eradicate as many small to medium sized companies before anyone in the business world fully understood the impact of what had just transpired. Nearly everyone engaged in big business viewed acquisitions and mergers as one of the fastest and perhaps safest ways in which to achieve that economic and financial supremacy they so desperately needed and wanted especially in the volatile 1980s and 1990s. The old business axiom to the victor goes the spoils certainly applied here.

In fact, most conservative business leaders seldom considered the long-term economic and financial effects that such across-the-board actions might have on determining their-own future prospects or how the federal government might respond if that highly aggressive conservative element should suddenly create new monopolies. Rather than trying to come to terms with the many economic inconsistencies that might result from such unorthodox business actions, most international leaders attempted to use acquisitions and mergers as a way of creating some kind of new global order out of the business chaos so evident in the 1980s and 1990s. The irony in this was not lost to astute observers in that those conservative minded business leaders advocating such controlled order were essentially on another level willfully destroying their-own carefully contrived new business agendas. They intended those new business schemes to continually grow and prosper within current chaotic conditions that aspired to create and then sustain an even more freewheeling open market setting in the years ahead. Sensible accounting methods of that era challenged the economic validity of such actions. It was counter-productive at best and ludicrous at worst. Like the famous cartoonist Walt Kelly once quibbled in his popular Pogo comic strip “we have met the enemy and he is us.” Somehow that seemed very applicable here.

Some conservative leaders, especially in the late 1980s and early 1990s, repeatedly argued that those maverick corporations ascribing to what they so impolitely referred to as “undisciplined” business principles might want to make a more concerted effort to observe the long-established corporate norms accepted worldwide. What those conservative spokespersons really meant was that new global leaders, from all walks of life, should blindly follow traditional business ideals derived from commonly upheld ethical and moral values. In point of fact, widely acknowledged economic and financial standards, still an intricate part of most international business deals, had served as the foundation for much of their thinking. First introduced at the Breton Woods Conference in 1944, many of those once highly prized economic and financial ideals were rapidly being abandoned or watered down by allegedly “progressive” Fortune 500s. Apparently, those corporations wanted to pursue their economic destiny free of interference from what they considered to be little more than meddlesome outsiders.

During the late 1970s and early 1980s many conservative business leaders expressed growing concerns about the unparalleled economic and financial interdependency occurring globally. A multitude of economic and financial advances, many promulgated by computer-related business breakthroughs, increased those growing worries. Conventional business leaders claimed that this sudden flood of mutual assistance that showed up in nearly every facet of their endeavors would not only engender huge price increases for nearly all commodities sold on the market; but also, herald the end of many high paying jobs currently a part of the traditional business sector.

In terms of determining future national policies favorable to business, those same conservative leaders contended that if federal lawmakers, regardless of their political affiliation, should willfully discarded many of the tried-and-true business safeguards of the most recent past including such things as rigidly enforced tariffs and mandatory quotas that would portend high unemployment and rising inflation. Using the economic and financial devastation wrought by the Recession of 1974 as ground zero, conservative-minded leaders made it quite clear to all doubters that sustained economic and financial losses in the future, caused by the impingement of radical ideals on traditionally approved economic practices and financial principles by those same global renegades, would not be tolerated.

In reality, that growing economic and financial interdependency among major international conglomerates did not, in any meaningful way, adversely affect the domestic economy of the late 1970s and early 1980s. If anything that economic and financial dependency emboldened the U.S. business community to proceed ahead with a variety of maverick ideas. It also encouraged those many trendsetters to welcome into their fold a large number of very insightful entrepreneurs specifically bred for this new, highly complex international job market. Such brazen actions by this nation’s long established business hierarchy, at that most crucial occasion in our country’s history, accounted for many of the prominent economic and financial advancements made in the U.S. during the last two decades of the 20th century. Fortunately, future domestic growth was not limited to that highly praised economic attribute. The simultaneous nurturing of an equally large number of skilled workers well-versed on the multifaceted business makeup of this fast-developing, new world order aided U.S. business immeasurably in its quest to attain phenomenal new business goals and objectives with only minimum expenses.

Yet, all during the 1980s and 1990s, many conventional Fortune 500 leaders continued to oppose any kind of revolutionary economic or financial changes that did not begin or end with them. They contended that this new, highly praised universal experience might well spark major trade deficits on the home front in the very near future. Those same conservative heads feared that such ruthless actions, in all probability, would not only encourage wage stagnation for thousands of employed Americans; but also, widen the ever growing gap that existed between the rich and poor in this country. Those grim economic prospects might have occurred just as predicted had they flourished unchecked. Weighed down by innumerable economic and financial exceptions and restrictions caused primarily by a highly explosive international market prevented that from happening directly. During the late 1990s, President Clinton’s very innovative free trade policies gained an even greater following especially among incredibly shrewd consumers virtually everywhere. Many of them believed that those initiatives would ensure a freer flow of reasonably priced goods and services from foreign as well as domestic market sites for many years yet to come. Its staunchest allies further suggested that over time those same carefully articulated policies might prompt further business efficiency in the mist of even wider, new distribution networks that were being developed by many affluent global manufacturers.

In spite of the many possible economic and financial benefits awaiting corporate heads, which strongly sanctioned those new trade prerogatives many Fortune 500 leaders continued to lambast its very sound guiding principles. They claimed that Canada and Mexico, and not the U.S., benefited the most from what they viewed as a one-sided deal. Many of those same corporate heads mistakenly blamed those same doctrines for the 3,600,000 manufacturing jobs losses that occurred between 2007 and 2009. In reality, free trade policies did not play any direct role in those job losses.^[1]

An informal, mid-1980s economic study on future prospects within the Cleveland business community insinuated that the negative, prevailing economic conditions equated with older centers, such as Cleveland, would only worsen in the immediate years ahead especially if that growing economic and financial interdependency among large corporations continued unchecked. In reality, it was those new, universally mandated developments and not new federal initiatives such as NAFTA that demoralized the economic security of many local Fortune 500s. A comparison of the Cleveland Fortune 500 listed in 1970 and 1980 lends some credence to that supposition. Only the Eaton Corporation, the Lubrizol Company, the Midland-Ross Steel Company, the Parker Hannifin Corporation, the Sherwin-Williams Company, the Standard Oil Company of Ohio and TRW were found on both lists.

However, that finding falls short in that it does not explain what exactly happened to the numerous other local Fortune 500 businesses over that exceptionally difficult ten year stretch or how global economic gains and losses might have radically changed their respective rankings. That growing negativity, which first surfaced in the mid to late 1970s, should have been of paramount concern to the growing number of Cleveland’s harshest critics rather than the economic impact that short-term, global monitored financial gains and losses might have had on present business advances or retreats. Such studies, innately limited in their dimension and scope, proved to be of minimal valuable over time. Inevitably, the majority of them failed to provide the general public with any additional insight as to how the international economic phenomenon actually worked or how worldwide business leaders directly influenced the course of business development within key cities such as Cleveland during the second half of the 20th century. That crucial business connection, if it really ever existed, remained in the imagination of local business leaders many of which could not begin to fathom the prodigious changes that were sweeping across the whole world at that interval.

The addition to the Fortune 500 list in the late of 1980s of several other, large Cleveland enterprises including the American Greetings Corporation, the Ferro Corporation and the North American Coal Company did very little to silence the city’s growing number of troublemakers. In fact, those critics believed that Cleveland would not be able to preserve its status as a premier Fortune 500 city for much longer. The bleak business prospects facing Cleveland in the late 1980s and early 1990s lent a certain degree of credibility to their highly bias arguments. However, those disparagers whether they admitted it or not knew full well that nothing occurring within the business world is long lasting. The unsettling nature of the global economy with its unpredictable market highs and lows guaranteed that volatile changes were going to occur on a precise, regular basis. Extremely dangerous business swings have the capability of altering a city’s economic fortunes without any visible warning upfront. International business cycles continually swing back and forth similar to a pendulum in a grandfather clock with each swing of the pendulum symbolizing a new, particular economic high or low. Those easily identifiable highs and lows characteristically occur within a highly charged business environment that is both controlled and at times manipulated by acknowledged governmental controls based on tightly imposed economic and financial guidelines from the outside.

Significant business changes and fluctuating consumer preferences over the course of time often proscribe the best course of action for a specific business to follow. Fluctuating customer demand on the open market often decides the dimension, extent and magnitude of the rivalry transpiring among worthy competitors as those individual enterprises pull out all the stops in order to secure an even larger percentage of the buying public’s disposable income. Frequently, customer needs and wants not only determine the cost and quality of the many items and services sold by those many competing firms on the open market; but also, what are the best marketing techniques when it comes to peddling their wares.

Cleveland’s harshest critics readily recognized that the city was experiencing a noticeable business slowdown during the late 1970s and early 1980, in which economic lows repeatedly predominated over market highs. What most concerned those disparagers, at that juncture, was not whether Cleveland would rally from those sustained losses or how those incurred losses might adversely affect future prospects; but rather, how soon the city would rebound from those economic setbacks. An increasing number of cynics expressed grave concerns as to whether top political leaders at Cleveland City Hall possessed the kind of business cunning and political fortitude necessary to not only protect local Fortune 500s interests; but also, attract new ones should the opportunity present itself.

Those anxieties regarding the city’s ability to handle such elementary issues noticeably increased when Addressograph Multigraph Corporation filed for bankruptcy in 1982.^[2] Established by Harry C. Gammeter (1870-1937) and Henry Chisholm Osborn (1878-1961) this Chicago firm relocated to Cleveland in 1930. A profitable company for the next four decades, ultimately that manufacturer failed to keep pace with the leading companies within its respected field. Its revenue losses in the late 1970s continued to skyrocket topping the $245,100,000 mark by 1981. The bankruptcy of Addressograph Multigraph Corporation was followed three years later by the $400,000,000 acquisition of the Scott Fetzer Company by a very prominent U.S. based conglomerate called Berkshire Hathaway.^[3]

The business community’s growing apprehensions regarding the possibility of additional prospects moving to Cleveland only intensified when Revco Company officials announced that their high profile chain of drugstores was about to go private. The year was 1985. Fortunately, much of that stress proved unwarranted as municipal officials repetitively met many of the challenges placed before them in the years ahead.^[4] That being said, Cleveland City Hall officials and the local business community were disheartened to learn about the staggering financial losses incurred by the Midland-Ross Company over the past several years.^[5]

A press release in July 1986 announced its pending sale. Founded by Elroy J. Kulus (1880-1952) and originally called Parish and Bingham, the Midland-Ross Company first produced steel parts used in the manufacturing of safety bicycles, carriages and streetcars. Following a March 1923 merger with the Detroit Pressed Steel Company, this well run plant changed its name to the Midland Steel Products Company. The acquisition of the J.O. Ross Engineering Company in 1957 led to the modern-day Midland-Ross Company. Through a series of strategically important acquisitions and mergers many with locally held operations such as the Rayon Corporation and the Cleveland Malleable Iron Company this steel producer posted a new high sales record of $137,000,000 in 1962. Corporate sales at Midland-Ross continued to grow to reach a new, high watermark of $344,000,000 by 1965.

The 1970s signified a period of major belt-tightening for this much valued steel manufacturer. Merging its numerous subdivisions, while also divesting itself of some of its assets temporarily reversed its recent sales slump. In fact, Midland-Ross experienced a surge in corporate sales topping $900,000,000 in 1981.^[6] Had its sales volume continued to grow at a steady rate over the next several years, the Midland-Ross Company might well have become one of a select group of manufacturers catering to the growing business needs and wants of the aerospace industry and electronics fields. Regrettably, that did not happen. The number of orders placed for its metal castings and heating equipment plummeted in the early 1980s as foreign competitors met the many formidable economic and financial challenges placed before them in those crucial years in their development.

In a last ditched effort to save that company from bankruptcy, its Board of Directors sold its valued holdings. One of those deals involved transferring the Midland Brake Company to a Branford, CT firm called the Echlin Company. Unfortunately, that sale did not begin to reduce Midland-Ross’s mounting expenses. With no other substantial prospects on the horizon, Midland-Ross merged with New York, NY based Forstmann Little & Company in 1985. A wealthy private equity investment firm specializing in leverage buyouts, the Forstmann group negotiated a special $45,000,000 stock transfer agreement in which Midland-Ross shareholders received roughly $28 per share. The Honeywell Lighting & Electronics later purchased its remaining subsidiaries.^[7]

Private equity groups gained significant importance during the financially unsettling decade of the 1980s. It enabled struggling companies such as Midland-Ross to raise much needed capital by enabling them to go far beyond the bounds imposed on them by the market. Made up mostly of wealthy investors, those groups generally invested in privately owned and operated corporations or purchased publicly-traded enterprises. Their tightfisted negotiation processes resulted in the delisting of public equity. Many on Wall Street considered such actions as being very advantageous in that equity firms provided economically struggling corporations with additional forms of capital, which, in turn, markedly lessened the economic stress placed on a struggling company’s quarterly performance results. One of the potential difficulties in relying on private equity groups to bail a corporation out concerned their unique evaluation process. It was not determined by prevailing market forces.

The addition of Banner Industries, the M.A. Hanna Mining Company, NACCO Industries and the Sudbury Holdings to the prestigious Fortune 500 list during the second half of the 1980s offset the recent loss of the Midland-Ross Company.^[8] Those well-established business concerns brought the total number of Fortune 500s in Cleveland to 11 by 1990. Both the M.A. Hanna Mining Company and NACCO Industries had been well respected local holdings for years while the recently reorganized Sudbury Holdings, with its various affiliated manufacturers, afforded this traditional Midwestern community with a new, viable business image as a leading Fortune 500 center. That new business optimism, enormously improved by the addition of those highly solvent, new entities, enabled Cleveland business leaders to forget their many economic and financial woes.

Unfortunately, that hard-won enthusiasm so cherished by corporate leaders in that Midwestern city was quickly lost. Even though the Recession of 1990 was over in only eight months, its negative economic impact on Cleveland’s economy lasted much longer. An unexpected increase in the price of energy, made even worse by a temporary acceleration of the national debt at the end of the George H.W. Bush administration greatly troubled local corporate leaders. It took a balanced federal budget along with additional incentives such as further business deregulation, resurgence in the national building industry and renewed sense of confidence from an increasingly more affluent buying public before Cleveland’s economy could rebound to pre-1985 level. Reoccurring economic and financial downturns coupled with an uncertain local banking industry stymied those rebound efforts as the future prospects for many locally wed Fortune 500s remained dismal. That pessimism persisted in some corners into the new Millennium.

Fierce new business rivalries instigated by exceptionally clear-headed competitors many originating from overseas, in conjunction with an unusually high number of profitable acquisitions and mergers in the late 1970s and early 1980s, temporarily soured the future economic prospects for many local enterprises that had started to rebound. The Federal Reserve Bank’s manipulation of interest rates to dissuade future recessions was welcomed by all in big business. It enabled them to remain competitive in the worldwide market. However, smaller companies with only limited resources to rely on did not necessarily enjoy the same kind of massive profit gains afforded their larger, wealthier competitors.

The problematic nature of the U.S. economy persisted into the late 1980s and early 1990s. It compelled many local Fortune 500 firms to reexamine, and when necessary, completely rework traditional economic goals and financial strategies. Corporate executives viewed their actions as critically important especially if they hoped to overpower the many new business challenges presented to them by their exceedingly vocal, freshly expanded consumer-base. At the same time, a growing number of anxious investors both at home and overseas added to this new, unheralded economic and financial doubt. Specifically, they pressured many struggling corporations to accept more clear-cut accounting methods in order to safeguard for their future success.

Regularly employing new, computer generated informational services epitomized a new and effective way in which to achieve their latest business aspirations very quickly. It not only consolidated their many, far-flung business aims and objectives; but also, encouraged them to recondition their bookkeeping system to meet new 21st century standards. Unfortunately, the mushrooming expenses derived from the recurring use of those information retrieval services forced many Fortune 500s to question whether the economic and financial advantages derived from employing such advanced technology truly justified the added cost. That financial predicament astonished many of Cleveland’s best Fortune 500 firms as they worked feverishly, throughout the 1980s and 1990s, to ease themselves of the swelling pressures being placed on them by demanding consumers and investors alike. Everyone wanted them to refurbish their operations as soon as possible. Bottom line expenses and not the strong will of corporate officials normally regulated the final outcome.

The vast majority of large firms that invested heavily in these technological advances soon discovered that their judicious actions largely resulted in very convincing, positive returns. Specifically, it empowered them to better cope with the contradictory number of new economic and financial problems affecting them on a daily basis. It realized that specific business goal in two remarkable ways. First, in using the latest, state-of-the-art technology large enterprises often replaced their older, slipshod business methods with newer, more complete economic and financial objectives very quickly. Second, such bold actions encouraged them to take a more proactive approach towards operating their businesses especially when it came to the ever pressing problem of managing the many multifaceted new problems that crossed their desks habitually. Unlike the older, less amorphous economic and financial tactics, promoted in the 1930s and 1940s, these more convoluted, newer business methods were better equipped to serve a company’s exceptional economic and financial needs.

Directed by some of that era’s most enlightened business attitudes, those well composed new strategies not only bullied many slow moving corporations into speeding up the decision-making processes; but also, putting to rest any obsolete, personally fueled economic biases and prejudices they might have leveled towards their principal competitors throughout the world. That kind of lucid, practical thinking that had so charmed the international market, throughout the 1980s and 1990s, rapidly changed the ground rules for international business in ways few could have predicted earlier.

One example of how that played out in real time occurred when one of the leading Cleveland Fortune 500 companies Banner Industries revealed its latest business strategy in the fall of 1990. A key supplier of the airline industry its Board of Directors suddenly found itself facing a most unwarranted situation. Utilizing the latest manufacturing technology came with a stiff financial price. Banner Industries had accumulated a whopping debt of $1,200,000,000. After assessing the immediate options, its Board of Directors wisely decided to accept the worthwhile offer made by the Fairchild Industries of Washington, D.C.

Prior to the 1970s, Banner Industries officials would have probability relied on a series of traditional business cures to reach their findings. However, with the introduction of the new computer age everything changed suddenly. In the case of Banner Industries, its top leadership carefully reviewed its corporation’s latest computer findings, which among other things, accurately projected future potential gains and losses based on current profit advances, escalating overhead costs and rising debt. Apparently, its board concluded that the high amount of debt owed by that company far overshadowed any profit potential it might be able to accrue at least within the foreseeable future and that finding a suitable buyer expeditiously would best serve its needs.

Banner Industries executives might have reached a similar deduction without trusting the latest computer-generated models. However, that decision-making process might have taken a great deal longer and its accuracy might have been questioned. In this instance, time was not a friend to Banner Industries. Fully understanding the financial difficulties facing that Cleveland business played a large part in Fairchild Industries’ acquiring it. The press release in October 1990 not only announced that forthcoming $265,000,000 merger; but also, that Banner Industries intention to move its corporate headquarters from Cleveland, OH to Washington, DC.^[9] In 2020, a private equity firm called Middleground Capital purchased it. Banner Industries projected value, at the time of its most recent sale, stood at $100,000,000.

On February 1, 1992 The Plain Dealer proudly reported that Cleveland ranked 4th in the number of Fortune 500 companies behind New York City, Chicago and Los Angeles.^[10] TRW (#58) led the crowd with general sales of $7,900,000,000. The Eaton Corporation (#128) and the Sherwin-Williams Company (#196) followed suit with inspiring records of $3,600,000,000 and $2,500,000,000 respectively. Other Fortune 500s such as American Greetings (#279) and Ferro Corporation (#364) also posted considerable gains of $1,400,000,000 and $1,060,000,000 that same year.