The distributors told him recalled Delaney We think as a group we can do a

The distributors told him recalled delaney we think

This preview shows page 271 - 273 out of 408 pages.

less than any Japanese machine on the market. The distributors told him, recalled Delaney, "We think as a group we can do a helluva lot of volume for you folks." All Burgmaster had to do was come up with a bargainbasement machining center. 23 Within six months, the first machines were ready to go into production. Burgmaster's engineers had met or exceeded all the specifications, and at $77,500, the machine was well under the upper limit suggested by the distributors. Delaney then asked the distributors how many they wanted to order. "When we went back to the group, it was gone," recalled Delaney. Because of the slump, several distributors were unwilling to risk buying a machine without a firm customer. Others had jumped the gun, and had already signed up to represent Kitamura, a Japanese builder. 24 Undaunted, Delaney ordered a dozen of the machines built anyway. He reasoned that "if those [dealers] felt that way, what do we have to lose?" But when the time came to find buyers, Delaney was shocked to find that the price of equivalent Japanese machines had fallen from about $80,000 to the midsixties. And if Burgmaster cut $2,500 off its price to come closer to a Japanese bid, the next day the prospective customer would call to say the Japanese had lowered their price by a comparable amount. There was simply no way Burgmaster could undersell its foreign competition. Panic set in, because if there was one thing Delaney knew that Burgmaster could not do, it was carry unsold machines. It ruined cash flow. The standard machines that were to bring a measure of salvation to Burgmaster were torn apart, reengineered, and rebuilt as specials. 25 Once again, Burgmaster was a victim of economic circumstances beyond its control. Japanese builders could beat any Burgmaster price because they had an unfair advantage: the Reagan dollar. An allegedly conservative Republican administration had simultaneously cut taxes and increased military spending. One consequence of this yawning gap between economic means and ends was a rapid, upward appreciation of the dollar against the yen because the United States had to offer high interest rates to attract the foreign funds necessary to underwrite Reagan's military Keynesianism. Thus, no matter how inexpensively Burgmaster could build a machine, or how willing it was to reduce its profit margin, Japanese competitors could beat any deal. If the least expensive U.S.-
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built machining center sold for $85,000, the Japanese would sell theirs for about $80,000. If they had to protect market share by lowering prices another 10 percent, that posed no problem whatsoever because of the dollar's inflated value. The Reagan administration's shortsighted management of the economy affected Burgmaster in other ways too. Not only were Japanese builders given an artificial advantage, but all foreign manufactured goods gained new markets because American products were suddenly more expensive than the competition.
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