Monthly Archives: November 2009

Emergency Machining

I recently had a long conversation with Brad Ohlemacher of EMC Precision Machining, the new name and incarnation of an Acme screw machine shop in the Cleveland area, called Elyria Machine Corporation. Brad and his brother Jeff are two of the most studious and innovative job shop owners I know, constantly attending seminars, conferences and learning from proponents of the black art of plant productivity. These guys are always on a mission to make their company not just profitable but a group with an identity and team spirit.

Brad and Jeff utilize Verne Harnish’s Rockefeller habit of the morning huddle to stoke the production fire at the start of the day. Brad told me that they are intrigued by a peer rating approach to filter the chaff from their staff as they continue their relentless push for manufacturing brilliance.

I asked Brad if his desire to build a gem in the contract machining world would ultimately be thwarted by the ubiquitous bidding process which continually pushes prices lower and margins to zero. He says his firm’s answer is to position itself as the company you call in a crisis. By continually honing their skills in the just-in-time world and machining creativity Brad feels EMC has found a niche market where price is not the primary determinant. When a company is down because a supplier just went Chapter Seven, or they had a fire, or a dog ate their software, the Ohlemachers want to be Batman to the rescue. If their plan comes to fruition, the company name, EMC, would become synonymous with “emergency-manufacturing-capability.” It is an audacious effort but it plays to the strengths of flexibility and teamwork they have been working on for years.

Brad told me that the company was started by his grandfather, who began the business by repairing potato harvesters out in the fields to rescue farmers’ crops after a machinery breakdown.
EMC is returning to its roots.

Question: Can a job shop attain pricing power?

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Howie Long GM’s Hero

Call me crazy, but General Motors’ shift in advertising from the pathetic Chevrolet and Apple Pie image campaign to a frontal assault on Honda and Toyota, using specs like fuel economy and vehicle value protection, is giving the company real credibility. Howie Long, ex-football bully is a curious choice as the face of the Chevybrand, but no more weird than Mike Rowe of Dirty Jobs by Ford. The tribute film to Howie Long below proclaims that he was as brutal as caveman on the field. John Madden is quoted, lauding Long’s exceptional toughness, and another commentator is quoted saying, “Howie Long’s greatest asset was his insecurity. He always was trying to prove that he was [good].” GM is now trying to personify itself as a fighter with something to prove, and now it’s finally doing it smartly.

All of a sudden GM and Ford look like the aggressors—shrewd aggressors—while the Japanese brands are backpedaling into the pocket. I guess we just had to move the Federal bureaucrats to Detroit to push General Motors into fighting shape.

Question: Does Howie Long make you want to buy a GM Vehicle?

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Is Risk Averse Risky?

I had a long talk today with Miles Free of the Precision Machined Products Association (PMPA). Miles has heavy experience in understanding the technical problems machining companies have in the hostile world of perfect competition which relentlessly drives prices down for even the most proficient contract shops.

Quality and delivery are just the price of admission to the poker game of job shop survival.

In Miles’ view, the blood sport of contract machining makes the participants risk averse to a fault in venturing out of their area of expertise—making parts. The bidding process they live in everyday is unforgiving of even the smallest goof-up.

A missed tolerance, a botched UPS shipment, shoddy material and a dozen other possible missteps can kill a job and sabotage a relationship.

With this view of the business world it is completely understandable that metalworking folk do not want to try crazy new ideas or develop their own products. The world they live in is endlessly demanding, but at least it is the devil they know.

The sad fact is that with global competition and free flowing machining expertise it is an excruciatingly hard time to make money in contract work.

Everyday I observe brilliant metalworking technicians with millions of dollars invested, struggling to survive, and I wonder why they don’t spend more time and effort on products and brands.

To me, the biggest lesson from this awful recession is that most businesses need a distinctive presence in the marketplace to get some relief from the bludgeoning of one on one price competition.

Question: If you came up with a brilliant idea for a new product, would you have the guts to try to bring it to market?

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Today’s Swarf

It has been 25 years since folk singer/song writer Steve Goodman Died at 36, yet his popularity is still growing. “Go Cubs Go,” his ode to the Chicago Cubs is still sung at Wrigley Field after each Cubs victory. A 778 page biography of Goodman came out recently, and his albums and songs are popular on iTunes.

He wrote a song that feels like a perfect fit for these tough business days. When I saw the latest dreary statistic on the lack of growth of industrial production on the front page of Monday’s Wall Street Journal, it confirmed Steve Goodman’s classic, “The I Don’t Know Where I’m Going But I’m Going Nowhere in a Hurry Blues.” According to CPB, Netherlands Bureau for Economic Policy Analysis, industrial production grew by 67 percent in developing countries from the March lows through August. In advanced economies growth was 3.3 percent, but the big drag was the U.S., which grew industrial production by 0.1 percent during the period.

I expect the last four months to be somewhat better, but in the arena of machining I still see misery.

Many Machine tool builders have seen a 70 percent drop in sales in 2009. The rampant discounting off of the list price is indicative of a price war orchestrated to keep the factories open and the distributors solvent.

Steve Goodman’s song is funny and current as we try to navigate the swirling rapids. Should you look for the exits or get as much leverage as possible to take advantage of the bargains? Is this recession the first lap of a long slog or the dip to buy on?

Maybe the real insight comes from Steve Goodman’s Life. He was diagnosed with leukemia at 22 years old. According to his wife, he looked at every day as borrowed time and lived it as if it was a gift.

Enjoy the music!

Question: What is your song for the day?

“The I Don’t Know Where I’m Going But I’m Goin’ Nowhere in a Hurry Blues” by Steve Goodman

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Feeling Groovy

Productivity in manufacturing rose an unprecedented 13. 5 percent in the third quarter. It means business is rising but the number of employees isn’t. The inflation vigilantes do not accept these numbers. But I’m feeling groovy about productivity gains which will give a big chill to the dollar killers and gold hoarders. Sell your bullion unless you’re going to make soup.

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After discussing murder in the workplace, Tuesday, how about some good news?
Chrysler is breaking even now despite its third grade styling. Costs have been pared to the femur. Fiat’sMarchionne is a serious guy and he has brought in a young, aggressive team to turn the joint upside down. With money in the bank (taxpayer’s) and minimal cash burn, Chrysler has a fighting chance to make it when its Chef Boyardee Italian-American line hits the market in two or three years.

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Ford made a billion dollars last quarter and gained market share. They have 23 billion in cash. GM gained market share in the quarter. Toyota made money in the quarter after predicting a loss. Automotiveland is producing at the rate of 10.5 million units per year and making some money. At 12 million they will feel good. The emasculated supply base will need to rebuild capacity.

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Ninety yen to the dollar, and a 1.45 Euro will make American suppliers tasty dollops for acquirers. The Canadian dollar has risen .80 to .93 to the U.S. dollar. We are seeing Canadians in Ontario stepping up for CNC lathes here because they look like bargains with the almost 20 percent swing in the relative value of the respective currencies and because of the upswing in automotive.

Question: Are you feeling happy today?

533-fiat

Jerry Seinfeld’s 1967 (Summer of Love) Fiat 500 that he crashed in 2008

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