Fanuc and the tale of two Smith

Fanuc and the tale of two Smith

by Pininvest Analysis

Industrial Robotics on pininvest.com

  • 28 constituents
  • 12.3% 1y performance
  • 32.6% volatility
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Starting life as a wholly owned subsidiary of Fujitsu in 1955, Fanuc  built on its expertise in numerical control (NC) equipment for machine tools, coming to dominate the Japanese NC market by the early 1970’s

As an independent company after the Fujitsu spin-off in ’72, Fanuc broadened its hold on the export market by entering in highly successful license agreements of its NC equipment with industrial manufacturers worldwide (Siemens, Pratt & Whitney)

With 50% of the world market for NC by the mid ‘70s, Fanuc entered robotics, a strategic decision which, though related to its historical NC specialty, but dominated at the time in Japan by Hitachi and Kawasaki, would be profoundly transformative for the company

Rapidly entering the export markets with a string of joint-ventures involving machine tool manufacturers (in Taiwan and in Great-Britain), the company crashed the US market – and radically grew its expertise – with a 50-50 General Motors Fanuc joint venture in 1982

The goal envisioned by Roger Smith, GM CEO and by Seiuemon Inaba Fanuc President, was to robotize the automotive production line, allowing GM to maintain its strong presence on the US market (46% market share at the time) and of course, decidedly for Fanuc, advancing robotics in the premier segment of the premier world market

Though the JV ended up selling equipment to all the American car manufacturers, the partnership remained far from the original ambition to revolutionize automotive production on the American soil and Mr Smith had ultimately to transfer fabrications overseas, in lower cost countries, at the heatedly criticized cost of thousands of jobs in Michigan

We see multiple reasons for the failure of the JV robotics venture to live up to expectations at GM (at the time) - many of which remain very much of concern for industrial revolutions today

  • Time – Fanuc has been wildly successful, recognizing all the while that technological advance needed to mature and would take time
  • Step-by-step implementation of new processes – acceptance (derived from real understanding) on the production line and deep thought about integration both in the existing production framework and between new processes
  • Top management vision – in other words, anticipation along with the liberty to prepare tomorrow’s challenges today
  • In-house politics – radical change, perceived as 'risky', usually does not thrill the board of a public company and lackluster support will make implementation more difficult

We have little doubt that Roger Smith understood all of the above and ultimately failed on politics. His successor, also named Smith (John), sold GM’s share back to Fanuc in 1993. Wrong decision in retrospect...

Where would GM be now... leading the robotics industry worldwide, maybe ?