“Historically, machine tool companies were small operations run by people (often descendants of the original founders) who had spent their whole life in the machine tool industry and knew it inside and out. Because of the cyclical nature of the industry, machine tool firms tended to be managed conservatively, and they operated with little debt. … [In] the 1960s, machine tool companies began to be acquired by the latest fashion in US business, the conglomerate: enormous, diversified companies that seemed to make anything and everything as long as there was profit in it. The machine tool industry was on a sales upswing … [and] machine tool firms' high profitability (and low debts) made them attractive acquisitions for the conglomerates. …

“Though the conglomerates enjoyed owning machine tool firms in the boom times when profits were high, they quickly became disillusioned during the lean periods when new orders slowed to a trickle. The new owners’ focus on profits meant that they were reluctant to make the long-term investments in R&D or new equipment needed… Conglomerates were often quick to divest their machine tool holdings when the companies began to struggle, resulting in frequent management changes and organizational whiplash…

“In his history of the American machine tool industry, Albert Albrecht states that “the actions of these larger corporations and conglomerates, under the leadership of financial MBA’s, perhaps more than any other factor, contributed to the restructuring and decline of the US machine tool industry at the end of the 20th century”.”

Bingo.

The article points to cycles of high variance in demand for machine tools. Other commenters have pointed the dominance of foreign companies (eg Japan due to their national standardisation on FANUC), globalization and “more cost-effective to import” more generally, and also suggested America is in a “post-machining” stage of manufacturing.

I think all of these claims have merit, but the real underlying cause is most certainly the humble MBA. To wit: they bought themselves into a cyclic industry, replaced the survivor-mindset management, and effectively took these resilient existing businesses and crystallized them into brittle conglomerates while the industry was on the rise of one such cycle, and when they where wholly unprepared for the inevitable down stage of the cycle, they divested, leaving a wasteland behind.