Monthly Archives: March 2010

Machining Industry Scuttlebutt

By Lloyd Graff

The BNSF Railroad, Warren Buffet’s recent $27 billion acquisition, is putting 11 miles of railcars back in service after storing them for close to three years in track between Helena and Great Falls, Montana.

The railcars will be handling additional shipping containers, timber and coal.

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General motors is raising domestic production, rescinding the axing of hundreds of dealers, and predicting a profit for the year. An Initial Public Offering is being considered for 2010 to begin to pay off the $50 billion Federal bailout loan.

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I saw Andrew Logan of Logan Clutch who makes clutches for many markets in addition to his original aftermarket screw machine product. He says business is in a V-shaped recovery pattern. The marine market is sizzling for him and energy is picking up strong. He says the lessons learned from selling to the tight fisted screw machine guys have trained him well in the competitive clutch business. He is planning an addition to his building and is going to buy more new Mazak lathes.

I asked him if he would buy a cheap new building and he said he could pick up real estate for a song in Cleveland, yet he would rather pay more to build an addition because he could then keep a close eye on what’s going on.

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Are Machinery Trade Shows Becoming Obsolete?

By Lloyd Graff

WESTEC as we know it is changing. There will be no show in 2011 in Los Angeles. SME (Society of Manufacturing Engineers), which organized the 2010 event, is planning an Aerospace Defense oriented manufacturing show for next April in Anaheim, Cal. In September, 2011 they will host a Las Vegas event which will be a cross between a trade show and a collection of open houses.

SME has found it increasingly difficult to put on a major L.A. show during an IMTS year. It isn’t that the West Coast people are necessarily going to IMTS, but the exhibitors do not have the budget for two big shows in one year.

WESTEC was becoming the Haas Show (Gene Haas came on the first day) but even they were reducing their presence in 2010. There were a lot of small exhibitors but no major ones besides Haas. Attendance was not terrible, but by the time business had begun to rebound the die had been cast for the large displayers.

Question: Are trade shows becoming obsolete?

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Machining Marriage

By Lloyd Graff

The last time I talked about Brad and Jeff Ohlemacher of EMC Precision Machining they were crowing about convincing President Obama to put on safety glasses before he toured their Elymira, Ohio, plant.

Today they are back in the limelight after closing a deal to buy fellow fourth generation machining company—Biddle Manufacturing of Sheridan, Indiana.

The Ohlemacher and Biddle (Myers) families knew each other from the Precision Machined Products Association (PMPA), but their fortunes diverged in recent years.

Biddle gravitated toward high production work, buying Hydromats and developing an in-house capability in plating, heat-treating, and electrochemical deburring. EMC brought in more CNC equipment while honing an expertise in “emergency machining,” for cases such as when customers need a firm to step in when their former supplier fails or suffers an operational blowout.

There is very little customer overlap, but Brad Ohlemacher tells me that Biddle customers seem extremely relieved that a financially strong, technically sophisticated company is taking over the Indiana firm.

Biddle was burdened with big legacy costs, and a bank that was fearful about the sustainability of the company. The selling family was faced with the potential liquidation of Biddle or selling the assets to EMC, which pledged to keep the workforce working—but without the legacy costs.

This could be a great deal for Brad and Jeff, who called me after celebrating with a single malt scotch at the bar in the Indianapolis airport. They’ve been looking to expand and diversify their machining portfolio since the recession took hold. With their strong banking relationships they felt they could pick up a distressed, but viable company that would compliment EMC’s strengths in super fast turnarounds.

I expect to see a lot of deals like this over the next year as the thirst for sparse capital pushes good companies like Biddle into the arms of financially able companies like EMC.

Question: If you were buying an established machining company would you attribute a lot of value to the preexisting skilled workforce?

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Fire Fast, Hire Slowly

By Lloyd Graff

Jack Daly spoke to the Precision Machined Products Association Management Update in March and was inspirational as always. He is a sales guru who speaks all over the world on the fast topic of selling.

Daly made a comment that stuck with me long after the performance. “Fire fast, hire slowly,” he told his audience. My career is pockmarked with doing just the opposite to my great regret.

His gist was that you generally know if an employee is going to be good after you observe their performance for a week or a month. They may not be real productive quickly, but they will show the attitude and the work habits that bode well for success. If employees don’t have it they will send a message, too. I tend to get invested in my hires. Rooting for them to make it. Daly says no to that. Trust your gut. Observe closely. Cut your losses.

Question: Do you agree with the philosophy of “Fire fast, hire slowly”?

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To Your Good Health – Insurance

By Lloyd Graff

First of all, I consider myself an Independent fiscally conservative Republican. I voted for Reagan, Dole and George Bush (both of them). But I am disgusted with the negativity of the Republicans on health care reform. The decision to demonize the Democrats for political gain saddens me. As I read the key features of the final law, it is a lot more centrist than the “sky is falling” GOP partisans have labeled it. There is no public option, it gives help to small businesses and aids less affluent uncovered people. It eliminates the insurance blackball for a pre-existing condition, which has imprisoned so many people in jobs they do not want. This new law could unleash an entrepreneurial rush, because a lot of people will feel empowered to start a practice or a business if they know they can still obtain health insurance.

Am I worried about the unintended consequences of health care reform? Sure. Will the lefties regard this as the nose of the camel under the tent and attempt to expand it into a Canadian system? Of course. But the present system stinks. It begs for reform. The Republicans were cynical Rovians to turn their backs on the process. I fear it will backfire on them—badly.

Question: Do you think the new law will help you or hurt you, personally?

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Brazil: The World’s Hotbed of Machined Parts

By Lloyd Graff

Probably the hottest market in the world for machined parts right now is Brazil. By one account I’ve heard Brazil is using more cold finished bars in the tonnage than the United States. They are even importing some such material from the States. The big headache in dealing with the land of the Bossa Nova is bureaucracy and paperwork. It still takes a visa to enter the country.

But Brazil is swinging. Romi’s offer for Hardinge Corporation is a wakeup call to other people in the hemisphere that the Brazilians are serious people. They have an aircraft business, it’s the automotive center of South America, they have enormous iron ore deposits and now possess a major oil find offshore. Rio getting the 2016 Olympics is recognition that Brazil is here as a world power. Even the Avon lady agrees. The company estimates that 60 million Brazilians have joined the “middle class” in the last decade.

Moment of the announcement of Rio de Janeiro as the host city for the 2016 Olympic Games.

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I No Longer Can Be Uninsurable

By Noah Graff

Hurray! The monumental health care bill has been passed—virtually. It’s been watered down from its original version dramatically, and one could actually make the argument that it’s pretty similar to the bill Republicans proposed. The bill contains hundreds of pages of details that I can’t be very articulate about at this point, but there’s one part of the bill that I can comment on because it significantly effects my life.

I have a preexisting medical condition I was diagnosed with when I was 18. It’s very controlled by medicine and has little effect on my daily life other than me having to take some expensive pills every day. Until now, if I wasn’t employed in a company that provided me health insurance benefits I would be virtually unable to buy health care. I’ve always felt scared that if I lost my job or wanted to start my own business that I would be left in the cold. Until now insurance companies would flat out deny me the right to coverage in a private plan. I would have to live in fear of becoming ill or having an accident, and I’d have to pay hundreds of dollars every month out of pocket for a drug to keep me healthy. In 2014, the new bill will ban pre-existing condition exclusion for all patients in the U.S. Even though that’s four years away, the bill also states that in 2010, it will provide immediate assistance for patients who are uninsured because of pre-existing conditions. So I’m assuming that means I no longer have to fear being uninsurable.

The ramifications of the new health care bill can be debated to death. The bill is far from perfect, but today I feel I have significantly more freedom in my life than I did yesterday. I, with so many others like me, have gained the freedom to switch jobs or start businesses and know we can now buy health care coverage. Hard to argue with that, isn’t it.

Source: Sacramento Bee

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Would you use the product that you create?

By Noah Graff

I hate PCs with a passion and generally love Apple products, my iPhone in particular. It gave me great pleasure to see a recent story in the Wall Street Journal that said 10 percent of workers at Microsoft use the iPhone. The article was inspired after a tactless Microsoft employee used his iPhone to take a photo of Microsoft CEO Steve Ballmer for at an all-company meeting at a Seattle sports stadium.

According to people present at the event, Ballmer snatched the iPhone out of the employee’s hands, placed it on the ground and pretended to stomp on it in front of thousands of Microsoft workers.

When the topic of Microsoft employees using iPhones is broached, Ballmer brings up growing up in Michigan where his father worked at a Ford plant, and that his family only drove Fords.

Lets sit back and ask ourselves now, why should a person buy a Ford or any product for that matter? Is it to benefit the American economy? Create jobs? Because you believe the product is great?

All three are valid reasons, but unless the employees who create that product say the third reason, the company that makes that product is in trouble.

According to the article almost 100 percent of Apple employees only use iPhones (at least at the office). Ballmer, however, to discourage iPhone use in early 2009 modified Microsoft’s corporate cellphone policy to only reimburse service fees for employees using phones that run on Windows Phone software. As I said before, I’m a PC hater and Apple lover, and I smile when I think about Microsoft having to discourage its own employees from using a competitor’s product by force.

Microsoft execs should be scared that they have the urge to create policies like that. If employees don’t believe in what they are creating, if they don’t think what they are creating is great or good enough for their own use, then the only thing they are there for is the paycheck. If they are only there for the paycheck then they are not going to try very hard, or take pride in what they’re doing. They won’t care if the company succeeds or not.

So when a company’s products have fallen in quality, and the world has realized the products have become inferior, it takes a special person to be able to come into the company and convince its employees to believe in what they are doing again. Until employees, and owners as well, truly believe what they are doing is great, their company will not be able to revive itself. But history has shown it’s possible. Apple did it 10 years ago. Hopefully Ford and GM are doing it now.

Microsoft is a special case because of its incredible monopoly. It has been able to remain substandard and still make a lot of money over the years. But if the monopoly becomes depleted, and if the employees stop believing what they are creating, Microsoft may be destined for failure.

Question: Would you use the product or service that you create in your job? Do you or your employees care about what they are doing?

Steve Ballmer of Microsoft

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Machining Industry Scuttlebutt

By Lloyd Graff

Business is improving for shops, but it has not filtered down to the machine tool companies. UCC filings, which track the pulse of machinery sales, indicate that the sales during the first quarter are quite sluggish. On the used machinery side it is a “catfish” market. The bottom feeders are finding a lot to munch on.

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The spare parts business for high production turning—screw machine and Hydromat—is trending up and accelerating. The size of individual orders is expanding as well as the number of orders.

Tony Maglica of Mag Instrument

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We understand Tony Maglica of Mag Instrument Inc. (MAGLITE) is interested in purchasing the bankrupt assets of Eubama, the German rotary transfer company. Mag has a sizable investment in Eubama machines which have a solid reputation for quality and productivity. The weakness of the company has been indifferent, often arrogant treatment of customers. Mag would use Eubama people and technology to produce equipment for the Ontario, California, flashlight plant’s use.

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Sources have leaked that there is a lot of horse trading going on for IMTS space. I hear that Haas sublet some space to YCI to lighten their load. I hear that Doosan will take the premier front position in front of Haas.

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Gary Traisman is a shrewd South African Californian machinery dealer turned auctioneer. His firm Machinery Network Auction has teamed with a fellow South African, Infinity Auctions to liquidate the leftover stock of machining centers of Fadal. Traisman timed the liquidation to coincide with WESTEC, the SME’s yearly machinery exposition in Los Angeles being held March 23-25.

Gary tells me that the action has been furious so far and he expects to move a lot of iron. A Fadal may become an orphan machine, but it will have thousands of siblings.

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Alan Beaulieu of the Institute for Trend Research believes that this is an ideal time to lock in a long-term lease. In his view, real estate has hit a historic bottom and the next six months will be the time to take advantage.

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Who would have believed it last St. Patrick’s Day? GM is cautiously predicting a profit this year. Ford outsells Toyota in the U.S. in February. Eleven and a half to 12 million cars produced is a reasonable expectation for 2010. Chrysler recently tried to buy back its ultra modern heavy stamping plant from bankruptcy, but didn’t offer enough to beat an auctioneering group. Unpredictable times.

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My Road to the Final Four

By Lloyd Graff

Bruiser the Bear of Baylor University

I entered my cave over the weekend. Just me and my 60” TV. I watched 100 hours of college basketball if you include channel surfing and DVRing. I have emerged with a vision of the NCAA basketball tournament etched in my cerebellum. My thoughts.

People are obsessed with the brackets and the matchups. Forget about it. Worthy teams will get to the Final Four with the remote chance that an interloper like a James Madison (Baylor this year) will sneak in so they can be crushed in the semis.

The top seeds; Kansas, Kentucky, Duke, and Syracuse are strong, though I would have replaced Syracuse with Ohio State. It is a pity that Kansas and OSU are both in the Midwest region. With Georgetown a three seed and Maryland a four, the Midwest is so much better than other regionals it’s ridiculous.

The West regional is a layup for Syracuse who opens in Buffalo against Vermont and then probably gets the weakest Gonzaga team in a decade. They will have to beat a Kansas State team to reach the Final Four, a team of great athletes who can’t shoot a three-pointer.

The East regional has Kentucky facing an easy draw except for Bob Huggins’ West Virginia team, which is thuggy and mentally tough enough to beat John Calipari’s phenomenal freshmen. I love the Wildcats’ John Wall, not just because he’s a great talent. This kid has the quality of all amazing players. He will raise his game high enough to win. Evan Turner of Ohio State is my college MVP, but John Wall is the only superstar of 2010. Kentucky prevails.

In the South regional, Duke’s Mike Krzyzewski must have traded his lifetime achievement award to get such a pathetic group of opponents. A fading Villanova as two seed and a fourth seeded Purdue squad without its best player Robbie Hummel, leaves only the three seed Baylor, which has finally recovered from one teammate murdering another in 2003, and the firing of Dave Bliss the most corrupt coach in the college game. I think they could derail the Dukies.

My Final Four predictions—Kansas, Syracuse, Kentucky, and Baylor. And despite an incredible performance by John Wall, in the final Kansas will beat Kentucky because Sherron Collins, its tenacious point guard, will somehow propel them to victory. Collins is the selfless leader who will give Jayhawks coach Bill Self the crown.

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