Virginia Lee Burton (Houghton Mifflin 1939).
What I remember: Set in the 1930s, it involved Mike and his steam shovel, Mary Ann, who were being displaced by newer diesel models, even though they could do the job just as effectively, possibly even better. I really remember liking the drawings, feeling sad about the steam shovel graveyard, the sense of nostalgia, and enjoying the very appropriate surprise ending.
The rest of the recollection: This was one of my brother's and my favorites. We would go to the old Hild Library and check this book out as many times as we could.
I also firmly recall that sense of sadness of when new technology replaced the old. My mother used to do the typing for one of the companies in the old Rookery Building downtown, and I would drop off the finished papers at the switchboard operator, whose name was Helen. At first, she had an old wire and plug style board, and I used to find it fascinating to watch. But then, one day, it was gone, replaced by a sleek white plastic object with lots of flashing lights and buttons. It wasn't nearly as fun as the old board, and Helen didn't think so, either.
And now: The book still absolutely holds up. I love the drawings of the steam shovels and the sense of flying dirt as they dig the basement, as well as the fact that it's the kid who had the solution. Further, the idea that a steam shovel -- old technology with an old aesthetic -- still has worth in a modern diesel-electric age still resonates (And I kind of want to call Virginia Lee Burton the "mother of steampunk." :-)).
I read this as an omnibus edition, which also included KATIE AND THE BIG SNOW, THE LITTLE HOUSE, and MAYBELLE THE CABLE CAR, which I also remember enjoying, although not as much as MIKE MULLIGAN.