Cycle Time

By Lloyd Graff

The stats from the PMPA (Precision Machined Parts Association) for August confirmed what I’ve been feeling for the past year. Business is really strong for machined parts manufacturers.

It goes pretty much across the board. Automotive, aerospace, medical, even oil and gas and appliance are doing nicely. So is my machinery business that sells to the folks in this section of the manufacturing arena.

This presents a new challenge for me. For almost the last 15 years I have been pushing uphill with only a few respites mixed in. The business trend has been mostly negative for American metalworking companies. The migration of work to China has been a devastating trend. Low-cost Chinese manufacturers have pulled in the generic work and gained competitive advantage with big American firms which are building most of their product in China.

China has not been the only killer for my business. Demographic trends have hurt. The workforce has aged and manufacturers have been unable to replenish a skilled group of baby boomers who are retiring or dying off. For some, the path of least resistance has been to sell or liquidate their businesses. Others have transitioned to CNC Swiss, CNC lathes and CNC mills, leaving long run work to the Chinese. My long successful family business of selling multi-spindle cam operated machines, refurbished to add value, suffered. Market forces killed me. It got bad enough that I even began to think of quitting the game.

In 2015 and 2016, Graff-Pinkert was forced to make the changes that led to a dramatic shift in business. We trimmed people and got more efficient. Noah and Rex Magagnotti, my longtime associate, started traveling more – a lot more – all over the world. We looked for more opportunities in brokering the sale of entire machining companies and buying CNC multi-spindles. We also made new alliances with European dealers.

Then there was the election of Donald Trump in 2016. I’m not a big Trump fan, but almost immediately after the election our machinery business changed for the better. Though Trump has done nothing radical to help business, the signals of shifts in EPA policy and a more aggressive trade stance toward China and Mexico seem to have changed the mood in our customer base. Auto and aerospace had been doing well going into 2017 and have continued to prosper, though the firearms business has faltered because people now don’t have to fear Obama or Clinton abolishing the Second Amendment.

This preamble brings me to my current happy problem. I am so used to doing business in a period of pain and strain that I am at a loss to figure out how to play things in a period of prosperity. Should it be full speed ahead to take advantage of the upswing in business or consolidate, pay off debt, cash in, and count the chips because bad times will come again.

This is not idle speculation on my part. The strength of business is pushing me to expand my workforce, when for many years I have been reducing it.

Should I gamble on buying more inventory or turn inventory (machinery and accessories) into cash when prices are firm? Should I sell off the crap, take losses for tax reasons, or hold on to sell it for higher future value?

At 72 years old should I grow the business or hunker down for the next crisis that hits?

My Uncle Aaron Pinkert used to say to me that his father told him “the dollar is round. Sometimes you are up, sometimes down, but it is always moving along.” I have often remembered that saying, especially when things have been bad. Sometimes it is harder to accept when business is good. Are we still rolling up?

Question: Is the current economic upturn in manufacturing here for a while or a mirage?

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7 thoughts on “Cycle Time

  1. John Bressoud

    Business is strong. Customers are begging to find someone with machining capacity. But it won’t last forever.

     
  2. Bam Miller

    It is easier to save $10,000 than it is to go out and make $10,000. And if you can do both, you are 20K ahead of where you were before.

     
  3. allen

    I’m going to go with “here for a while”.

    Taxes are looking like they’re going to be cut significantly which is always stimulative and not the “snort of cocaine” stimulation of a government spending spree.

    Perhaps even more portentous is the attack on the regulatory state but I’m much more cautious about that than about the tax cut. The regulatory state’s brake on the economy is much less well recognized and is supported by legions of bureaucrats who seem to never visit previous regulations to see whether they’re worth keeping on the books so the regulatory burden just keeps getting greater and greater. If Trump really can hack a bit out that thicket he’ll have made a long term contribution to American prosperity.

     
  4. Keith

    Our business has reflected the slowdown and speedup that you are reporting. I am intending to grow the company and prepare it for sale, maybe 2 good years will fix our EBITDA. I am 76 and would back away if I could!
    Thanks,
    Keith

     
  5. Tom Hogge

    If only Half of Trumps tax bill becomes law. I will celebrate.
    at retirement age I consider selling once in a while. Then I look at my income and think .why?
    And I feel a great responsibility to the 100 plus Employees that got me where I am.
    And The great almighty has blessed me at 68 to still teach and learn everyday.
    I really hope the death tax is eliminated .
    I so wish that Americans made a really good Multi spindle screwmachine.
    Trump certainly is no Jewel. But has made things shine so far in my world.

     
  6. Randy

    Dump the dogs and forget the loss as you are able to replace it with new demand. All of our businesses morph if they are to survive. Someone I was speaking to recently said that by the third generation a business should have reinvented itself or it will not make it thru that transition. We have certainly seen the change in business over the last 12-14 years with screw machine technology and long run demand migrating overseas. So it became more one & done with CNC, shorter runs and lights out technology investments into other types of equipment. We resisted the CNC Swiss entry for a long time, but now realize where we left money and opportunity on the table there as well. We had our operations manager of 35 yrs retire a few years back and I was afraid that we would fall hard but we’ve been doing fine there and even seen opportunities where we never expected because captive shops can’t replace people. I bought two more 1-3/4″ Six Wickmans earlier this year and never expected to do that. But I bought them right, did the repairs in house and am not married to them. So like I said Lloyd, dump the losers that take up floor space and prepare for the “sale” of lots more shops, both captive and job shops as owners retire or pass away. It is a hard market to find new entrants into in screw machine technology. But CNC’s will be making parts for a long time to come, and the key to that is that every designer expects you to be making parts that way now. So they are no longer designing around the screw machine technology. In fact I have customers where the engineers are not old enough to even know what screw machines are capable of.

     

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