Monthly Archives: September 2009

Gas Attack!

By Lloyd Graff

It seems today that the conventional wisdom in business is wrong at least half the time. A few years ago the banking industry was built on the tenet that the price of single-family homes would never go down in price. Missed that one.
Then there was the cardinal principle that the world was quickly running out of oil and the price was headed upwards forever. Missed that one too.

And now it appears that the long-held popular theology that the United States is going to be held hostage by Middle Eastern sheiks for a century is soon to be toppled too.

It may not be the electric car that kills the oil ogre, but the abundance of natural gas, cheaply attainable in North America.
Almost overnight the U.S. and Canada have become the Saudi Arabia of natural gas, a clean fuel that can run power plants, heat homes and fuel cars without a revolution in technology. The natural gas pipeline from Alaska and the incredible gas finds in Pennsylvania, the Dakotas and many other places on the continent are changing the game on fuel.

The plug-in hybrid automobile is an elegant technology but still presents big hurdles in mass production of viable batteries and ultimately, in finding an efficient way to dispose of the spent ones. Developing the infrastructure for recharging batteries, like filling cars with gasoline, will be very expensive.

But if the politics become favorable for natural gas in Washington in the next few years the end of dependence on imported oil is within sight.

With coal and nuclear power doing the heavy lifting on electric power generation, at least until solar becomes readily available, the swing fuel is natural gas for cars. With massive, new supply in our midst the conventional wisdom about long-term dependence on expensive foreign oil may soon be as obsolete as the old axiom about a never-ending escalation of house prices.

Question: Do you think your next car will be powered by a fuel other than Gasoline?

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On the Auction Blog

Chad Arthur stood in his former office at Arthur Machinery Tuesday with his wife as the auction of the bankrupt machine tool distribution firm he had built into a $80 million dynamo droned on.

Haas, Doosan and Star lathes and machining centers, which had been his premier lines, were selling to the highest bidder.

Bob Arthur, who had started the business with the Miyano line after leaving Behr Machinery in Rockford, Ill., two decades ago, was attending the sale but keeping his distance from his son. The big ARTHUR MACHINERY sign lay upside down in front of the building entrance. A plaque dedicated to Abe Rosenbloom, Bob’s old boss at Behr Machinery, had disappeared from the vestibule.

Businesses come and go. They have a lifecycle. Arthur Machinery died from a lender attack when business collapsed and it could not recover. Now Chad has started fresh, representing DMG in Chicago.

The stellar piece in the auction was a Star ECAS 32 mm Swiss-type CNC, new in 2008 and virtually unused. It was bought by Jerry Kozlowski whose shop MTI/Sigmatek Inc. is located about a mile from Arthur’s warehouse in the same town, Elk Grove Village, Ill. This is the first screw machine for the company. He paid $130,000 plus $18,000 for the LNS barloader. Add a 12 percent buyer’s premium to the Ashman Company auction firm and the package cost $165,750, a savings of at least $100,000 from the new price today, assuming some discounting by the dealer.

Doosan Mecatec 300 twin spindle, twin turret new in 2006, brought $62,000 with buyer’s premium. A Doosan Daewoo DMV 3016 L2 CNC vertical machining center, new in 2005, sold for $28,000.

Haas TM2 4-axis CNC toolroom mill, unused, fetched $17,500 and a VF-5/50 5-axis Haas with CAT-50 spindle, new in 1997, hit $47,500.

I was surprised to see two Remstar shuttle storage systems, new in 2008, bring $40,000 each because similar systems at a Dovebid sale six weeks ago brought about $15,000 each. But auctions are always a little goofy, especially for less mainstream items.

Romas Juodvalkis of Allways Precision, a retrofitter of centerless grinders was delighted to buy a $24,000 Staubli robot for $3500. It as an item buried in the brochure, but Romas knew its history and was just waiting for it to surface.

Arthur Machinery of Illinois is gone, but the vigilant folks with cash ended up with some nice deals at the auction.

Question: Do you think you get more value on equipment buying at an auction or from a dealer?

Arthur Machinery Sign

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Machining Timeshare

By Lloyd Graff

The current Fortune Magazine’s cover story is about Zipcar, the car sharing rent-by-the- hour company that is changing the way people look at car ownership in urban areas.

Zipcar has outflanked Hertz and Enterprise in this fast growing segment of the rental business, though the biggies are now pushing to catch up.

The Zipcar approach is 10 years old with 325,000 members who pay $50 per year for the privilege of being a Zipster. Cars are available at unattended parking lots in big cities. People rent them to go to the store, move residence, visit friends, go for an interview etc. Average users claim they save $600 per month on car ownership and drive 44 percent less miles than before shedding their car.
Nice for the environment and all that good stuff. But the Zipcar idea excited me not just for what it means in automotive land, but for what it portends all through the economy.

As I look at my own buying habits today I am growing more and more in sync with the short-term rental—forget about owning—idea.
A week ago I decided on the spur of the moment to go to the Cubs—White Sox game which was the make up for a June rainout. I asked Noah to accompany me to Wrigley Field. I told him I was going to buy the best box seat available, because if I go to a game (which I rarely do) I want it to be the perfect ballgame experience. We sat in the second row behind the first base dugout and loved the game despite the Cubs losing.

My wife Risa and I did the same sort of thing on our 48-hour summer vacation in the city. We booked the cheapest room in the best hotel in Chicago and had a wonderful weekend getaway.

I see the value of ownership of depreciable things like cars and homes to be a less and less attractive concept today.
We may see the same view take over in the machine tool realm. With short-term jobs being the flavor of the day I can imagine machine rental by the hour. The same for attachments. A thread whirling attachment for a Swiss CNC might not be worth the money for a buy, but could make sense for a one-week rental. I can imagine an entrepreneur setting up a shop with big lathes and horizontal machining centers and renting the machine time and the operator by the hour.

Questions:

Have you used the Zipcar service? How was the experience?

Would you be interested in a machine sharing approach in your operation?

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Machining Industry Scuttlebutt, The Acme Bell Tolls

Bob Atherton of RACO Industrial Corporation recently passed away at 82. In the rough world of used machinery dealers Bob always stood out as a gentle but indefatigable player. His company continues under the leadership of Jack Boescher who worked with Bob for many years before buying into the firm.

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We hear that exhibitors are dropping like fall leaves from the upcoming EMO Milano show in Milan, Italy.
EMO has always been a magnificent opportunity to display wares and meet and greet, but this year it is more a conclave of woe. Hard to imagine, but the European market may be more horrible than the American one at the moment. With many builders teetering on insolvency, a significant number have decided to cut their losses.
Hopefully, by September 2010, business will have rebounded enough to justify the huge cost of exhibiting at McCormick Place in Chicago for the upcoming IMTS show.

Question: What are your best (worst) trade show memories?

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A Twisty Tale in the Machining World

By Lloyd Graff

This is the story of a cold saw that tells us how the used machinery business sometimes works and sometimes doesn’t.

Two partners bought a deal with a small assortment of machine tools in Arizona. They chose to auction the equipment off in the worst possible market, the spring of 2009.

The most valuable piece in the sale was a Kaltenbach KMR100AP cold saw, new in 2004. The partners in the auction had figured the circular cold saw would bring $30,000 at sale, but for an assortment of reasons including ineffective advertising, an out-of-the-way location and abysmal market conditions, the machine could only get a $5,000 bid at the sale. The sellers felt that price was ridiculously low in light of its superb condition and $125,000 replacement cost.

The owning partners squabbled after the disappointing auction. One partner, a California machine tool dealer, wanted to put the saw into his working inventory, but the auctioneer wanted to get rid of it as soon as possible. Graff-Pinkert had a customer who was interested in the saw, but his business was horrible because of the automotive downturn. He was too fearful to pull the trigger, even at a low cost.

Then the owners of the saw put it up for sale on eBay. The dealer planned to buy the saw himself if it sold for less than $20,000, but another dealer who specializes in saws won it for $25,000 and shipped it to his Midwest location.

He put a price of $69,500 on the piece and began waiting for the right user to come along and buy it.

Meanwhile, the automotive supplier who had coveted the saw for $20,000 back in April but had had no money for it, has called back all of his layoffs and has renewed interest in it. He also is considering buying a new Japanese saw with a year’s guarantee for $110,000, though his shop lieutenants still prefer the used German one for half the price of the new one.

The Midwestern dealer has told us he would take $50,000 for the KMR100AP cold saw, to which Graff-Pinkert added a 10 percent markup to our client.

Question: What would you do if you were the potential buyer of this machine? What would you do if you were the selling dealer?

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The iPod Doctor

By Noah Graff

In the next issue of Today’s Machining World I interview Demetrios Leontaris, otherwise known as the iPod Doctor. He has a business driving all over New York City in his Aztec, fixing broken iPods, PDAs, laptops and smart phones belonging to everyone from Wall Street guys to construction workers to teenagers. On average, to fix an iPod he charges between $59 and $100 and change—a heck of a lot less then the price of a new one.

What I found so refreshing about the way Demetrios’ runs his business is that he hates to say “no” to people who need something fixed, which he admits isn’t always the best business practice. After the interview, I told him about my external hard drive that stopped working. It had about 700 gigs of memory, mostly comprised of video footage from some of my most important projects. Lacie, my hard drive’s brand, doesn’t even attempt to fix defective drives. They offered me a free replacement, but I didn’t want a new drive, I wanted my data. They suggested I send it to a company that extracts data from busted hard drives, but those services cost thousands of dollars.

Demetrios said he would take a crack at it, so I sent it to him, even though I knew that by letting him open it up my warrantee from Lacie would go bad. A few weeks later he proclaimed that after many tedious hours of attention he had both restored my data and got my drive working again. He charged me $375, which I happily excepted.

Question: Have you ever taken on a customer’s machining issue when rationally you probably shouldn’t have? Do you have trouble saying “no” to a challenge?

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She’s Holding it Together

Doreen Koop is a gutsy young woman with a kitchen dream.

She is an industrial engineer, recently laid off from United Launch Alliance of Decatur, Alabama, where they make parts for Delta and Atlas rockets.

Doreen decided to go into the manufacturing business in her hometown, Pulaski, Tennessee, so she could do work for her old company. She needs ISO certification before United will buy from her. She decided to build a product she knew, a high-end spatula aimed at cast-iron cooking devotees.

Her father had made such a utensil for the family decades ago, and she decided to improve upon it and find a market.
She contacted me looking for a machine to make “Chicago screws” out of stainless steel. After grilling her about the screw and the application, I became intrigued by her story.

Doreen has seven distributors lined up for her spatula, which will sell for $32. She calls it a “Williams Sonoma” type of product. She has local Amish folk cutting her oak handles and another Amish “blacksmith” doing the metalworking. Currently she’s buying her screws from Fastenal for a dollar per piece, but the engineer in her knows they should be much cheaper.

Doreen wants to make rocket parts, but the spatula now appears to be a viable project. She is now working on her next piece, a high-end fork.

If you think you can help Doreen Koop with her quest for American-made stainless steel fasteners email her at kooped@localnet.com.

Before I talked to Doreen, I had never heard the words “Chicago” and “screw” used together in this way.

Question: What does a “Chicago screw” mean to you?

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Wall Street Lemon Pickers

By Lloyd Graff

Richard De Leon is looking for more than a few good men. He took an ad costing several hundred dollars under the “Careers” category in the Saturday Wall Street Journal, searching for lemon and orange pickers to work from September 17 to Jan. 31, 2010, near Yuma Arizona.

I called Mr. De Leon at his firm, Servicios Agricolas Mex Inc to see how many refugees from Wall Street had applied for the $7.95 per hour seasonal job. He was affable and informative.

I asked him why he advertised in the Journal and he said it has a big circulation and a long reach, so he figured something good would come from it. He needs 150 workers for the upcoming season. With the difficulty in getting traditional migrant workers across the border he is looking all over.

He admits that the work is tough. A worker must haul a 40 pound tree ladder from the site drop area. The picker carries a bag for the fruit and clippers. I asked him if he gets many college students to pick. He says he gets several every season but they rarely last more than a few days. The temperature in Yuma yesterday was 110 degrees.

I told Richard that my view of the job was colored by the movie Cider House Rules. He hadn’t heard of it. A few years ago I traveled to Wenatchee, Washington, during the apple harvest. I love apples and have picked apple sauce quantities from nearby Michigan orchards. I know it was “apple picking for sissies,” but I think there is real value for young people to leave the comfortable settings they know and go to Africa or Peru, or Yuma to feel what rigorous manual work is like, and sleep in barracks and carry a picking bag of lemons along with a 40 pound ladder.

Question: What tough, dirty, physical jobs have you had that taught you something important?

This video explains how to harvest citrus fruit. At one point the old farmer says, if you want to carry a 100 pound bag of fruit for a living, “God bless you.”

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