No matter what type of industry or business you’re in, at some point, you will need some hand tools to do work on your physical infrastructure. While perhaps not as glamorous as heavy equipment and appliances, hand tools are an important American industry and a staple of construction and contracting work everywhere. In Illinois, the state is providing a $5 million grant to help a domestic tool-making company, Marshalltown, expand its operations by acquiring another tool-making company. The acquisition of Vaughan & Bushnell’s facility by Marshalltown is noteworthy in that it will save at least 100 full-time jobs.
Both companies, Marshalltown and Vaughan & Bushnell, have been major employers in the region for over 130 years. An acquisition plan has been in the works for months, but help from the administration of Illinois governor J.B. Pritzker sealed the deal. The larger Marshalltown, with approximately 600 employees, is planning to keep the 100+ employees of Vaughan & Bushnell working with improved wages and benefits. Representatives of both firms and area economic and trade groups are touting Marshalltown’s expansion as a major benefit for Made in America manufacturing.
Mergers and Acquisitions Can Preserve Domestic Capacity
The jobs and output of domestic firms can be salvaged by rivals willing to acquire or merge with them. In a recent example, steelmaker Cleveland Cliffs offered to buy some steel mills from ailing rival U.S. Steel, which was being eyed for acquisition by Japanese steelmaker Nippon Steel. Although mergers and acquisitions are often controversial, with critics fearful that the purchasing firm will likely lay off many workers from the purchased firm, the concerns are often greater when a foreign rival makes the purchase. Domestic purchasers will face more pressure to keep all or most of the purchased firms in operation, preserving more jobs and industrial capacity, while foreign purchasers will face less pressure.
To preserve this capacity, it is worth it for the federal government and state governments to offer financial incentives to find domestic purchasers. Foreign purchasers can be a national security risk if their control of a domestic manufacturer allows them to gain sensitive information or shut down vital manufacturing lines. As a result, agencies like the Federal Trade Commission (FTC) have blocked some foreign acquisitions of U.S. firms in the past, arguing that these acquired firms were too valuable to national security to be purchased by a foreign party.
Losing Domestic Firms Opens Door to Import Competition
A long-term risk of allowing domestic firms to go bankrupt or collapse is their replacement in the marketplace by imports. If Marshalltown did not acquire Vaughan & Bushnell, the market would lose those domestic goods, and consumers would purchase imported substitutes instead. This would make it difficult for new domestic firms to enter the market and compete. Thus, the $5 million grant serves a valuable purpose for all taxpayers: keeping more American-made goods in the marketplace. Hopefully, federal, state, and local government entities will be open to supporting these business deals in the future and protecting our nation’s industrial base. If we lose manufacturing capacity, it is hard to get it back!
Image credit: mdm.com
