Monthly Archives: February 2011

Success After 26 Years of Losing

CalTech has had 32 Nobel Prize winners on its faculty, but in sports they are just a bunch of losers. The college basketball team had lost every conference game for 26 straight years; 310 games of futility against local colleges in southern California like Whittier and Cal Lutheran.

In baseball they have lost 412 conference games in a row. Why do kids even go out for teams that never win? This is the The Bad News Bears to the tenth power.

CalTech finally won a Conference game on January 29th against Occidental (Barack Obama’s alma mater). Should we applaud their fortitude and perseverance, or castigate them for stinking up their league with such pathetic teams?

I do have some sympathy for the CalTechers, being a lifelong Chicago Cubs fan. The Cubs were last in the World Series in 1945 and have not won the Championship since 1908, the days of Tinkers to Evers to Chance.

To fail is human. To fail and fail and fail and keep on trying is heroic, or is it mad?

Perhaps conferences and even pro sports should adopt the incentive system employed in European soccer in which teams that consistently fail to be competitive are dropped to a lower quality league and replaced by aspiring minor league teams. I understand the NBA is considering this idea. If the New Jersey Nets or LA Clippers were to finish last three years in a row maybe they could be replaced by a D-League team like the Idaho Stampede or Bakersfield Jam.

In baseball it could be an incentive for a Pittsburgh or Kansas City to stop living off the luxury tax money from the Yankees and Red Sox and actually develop a team.

As for the CalTech Beavers, hooray for winning a basketball game. If I were them, I’d stick to Intra-murals.

Question: If your business kept losing money, how long would it take for you to call it quits?

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Machining Industry Scuttlebutt

Interesting juxtaposition of auction sales. Corporate Assets sold Die-Matic in Hamilton, Ontario. Gorgeous machinery including a 2004 L-20 Citizen and a 2003 M-20 Citizen . With buyers premium the L-20 brought $115,000 and the M-20 brought $127,000.

Two weeks later TCL Auctions sold a 2004 Star ECAS 20  for $175,000 and a 2006 Star SR-20II , for $180,000. A 2007 Willeman CNC Swiss fetched $275,000.

In late January, J.L. Spear sold off Alessandro Co., an old Acme shop in
Los Angeles. Acme-Gridley 1 1/4” RA6 machines in fair condition of 1970 vintage brought $2-3,000. A  little 2007 Okuma ECLII lathe, sold for $23,500.

I can add that though the prices on Acmes were dirt cheap at Alessandro, the auction was hastily put together and not extensively advertised. My screw machine dealership, Graff-Pinkert, is seeing a renewed interest in National Acmes, but buyers are looking for tight machines at 2009 prices, of which there are virtually none left in dealer inventories.

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Poor judgment by the Precision Machined Products Association to hold its Technical Conference and big PMTS show during Passover. They knew it, but say it was unavoidable. I say, baloney. This was just a dumb choice.

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The cover article on the February 10th Economist magazine was entitled, “Print me a Stradivarius. How a new manufacturing technology will change the world.”

People who have been reading TMW have been reading about printing parts technology using 3-D laser sintering since our cover story in 2006. But it is significant that a general interest magazine puts it on the cover.

To my knowledge none of the major machine building firms have embraced this potentially disintermediating technology.

From Feb. 10th, Economist Cover

From Feb. 10th, Economist Cover


Question:
Do you plan on attending this year’s PMTS show? Why or why not?

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Working Under the Table

I am seeing a lot of anecdotal evidence of people playing the system when it comes to receiving unemployment benefits. We have been seeking to hire a part time worker. The person who we were pursuing turned us down because they do not want to jeopardize their unemployment benefits, and they already have a part time gig where they’re paid in cash. I know of another person looking for a full time sales job, while getting by on unemployment and bar tending. I think one of the reasons unemployment statistics seem so peculiar these days, during this broad based recovery period, is the reluctance of many unemployed workers to give up unemployment benefits, which can last two years and sometimes longer if they are in school.

Another reason for the funky numbers is that older men have apparently dropped out of the active labor force in droves. I know of several 50-somethings who have abandoned the job world and then retired or opted to start off-the-books cash enterprises. Others have taken early social security or part-time jobs.

The excruciating costs of benefits is restraining small business from hiring full time people. The availability of long term, almost endless unemployment benefits is a benevolent social safety net, but it is making the hiring game more confusing than ever.

Question: Should the length of unemployment benefits be cut?

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Happy About Egypt?

Tom Friedman, a superb columnist for the New York Times, asked a rhetorical question while being interviewed a few days ago by Charlie Rose: “Why hasn’t Egypt developed in the last 20 years like Taiwan or Singapore or India?” He could have added Israel or even Islamic Malaysia.

Egypt has mineral wealth, tourism, water and millions of educated English speakers. It has the ingredients for success as a nation, yet it has floundered abysmally with enormous unemployment, corruption and lack of political freedom.

We should be surprised that the revolt by its citizens has not happened sooner. The sparks of anger over the secret police and persecution occur every day, but until January there was no ignition.

The missing ingredient for the revolt until now was probably that critical organizing tool, the Internet. Today’s wide-spread cell phone Web access and social networking outlets enabled the younger generation of Egyptians to mobilize. The entrenched leaders in a country like Egypt are old guys who still think they can control information. Americans worry that Egypt could turn into Iran, but in Iran I’m sure the rulers are petrified that Tehran could become a Cairo. I’m hoping that the next time Iranians try to revolt, America supports the revolution rather than waffling to appease the despots.

Are you happy about the turmoil in Egypt?

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Swarf: Taking the Plunge

By Lloyd Graff

Today’s Machining World Archives January/February 2011 Volume 7 Issue 1

The key question facing American manufacturers, especially contract machining shops in the next two years is, how do you expand? Or, the interesting corollary question, is this the time to cash in?

Let’s be real, American manufacturing has always been cyclical and still is. We are a little past a year into the current upturn. With low interest rates, the 2012 presidential election run-up beginning, the depletion of domestic players and the competitiveness of North American industry, these should be two excellent years.

There is always a strong tendency to fight the last war, so a lot of folks are going to be reluctant to expand for fear of the next bubble burst, a la 2001 and 2008. The dilemma so many of us are faced with is that we cut back so deeply to weather the recession that it is hard both financially and psychologically to put it all on the line again. But some people will make the big bets and a portion of that group will win big.

This is the moment to ask yourself which camp you are in. Visibility of the future is always iffy, but I think the odds are strong that we have at least two fat years ahead. If you consider yourself a player who is in the game for the long term this is the time to plunge. If you can’t take the volatility of the manufacturing game, sell out in 12 to 18 months.

The train from Beijing to Shanghai goes 200 miles per hour. Amtrak’s Acela Express train from Washington D.C. to New York goes half that on a good day. But our erstwhile stimulus package of 2009 has a lot of money designated to make us slightly better than mediocre in rail.

They are upgrading the service between Chicago and St. Louis, Los Angeles and San Francisco, Miami to Orlando and Tampa, and that hot rail market between Albuquerque and Santa Fe, New Mexico.

Train travel is fun. Security is not as annoying as at airports and fares are pretty reasonable. My question is whether we can afford the cost of upgrading a third rate passenger rail system to a second rate one. Our interstate highway system is excellent and air transportation is still high caliber, so do we need to spend billions on passenger rail?

Anyone for buses?

Mike Jackson, the CEO of AutoNation, the big publicly held consortium of car dealers, says pickup trucks are flying out of his stores. He sees this activity as a reflection of the confidence of small business around the U.S.

Jackson is predicting a two or three year ramp-up to the 16 million car build rate, which has traditionally been the standard of automotive well-being. With GM and Ford solidly in the black at 11.5 million units they will be coining money at 16. My question is whether the auto infrastructure can quickly accommodate 16 million. From a precision machining standpoint we are beginning to push the comfortable limits of production now in place. A 40 to 50 percent increase in build rate will strain everybody to meet requirements.

I talked to Kevin Meehan of Hydromat recently about the ability of his clients to expand production. He’s seeing some activity, but he thinks the big Tier Ones in Europe, particularly those in Germany, will be in the catbird seat to provide the sophisticated assemblies that will be in short supply. The Germans maintained their automotive infrastructure, while in North America we allowed the market to gut part of the supply chain.

The opportunity to get fat and happy during the impending U.S. car up tick may be more a bonanza for the Germans than for companies in the New World.

There are at least three cable series currently chronicling the business life of pawn shops. What is then fascination with people borrowing against baubles or selling their junk to professional peddlers for rent money?

I get a kick out of these shows and their genteel predecessor, Antiques Road Show, because the used machine tool racket that I practice is a bastard cousin of the pawn shop. I’m dealing in esoteric machinery which could be fodder for the furnace, or somebody’s stake to a fortune in Turkey or Topeka.

But I’m not only a purveyor of oily, wreaking junktiques from the basements of defunct car making mausoleums. I have my own collections of metal skeletons that have no logical home. Who wants a stock reel for a 4-spindle Conomatic? Who covets orphan bearings for random spindles for who-knows-what machine that used to be made in a now demolished factory in Vermont?
Somebody may want my crusty flotsam and Jetsam, but who buys the pawnbrokers’ crap? If I’m the supposed authority on machine tool dinosaur bones, who’s my pawnbroker?

Once I almost traded an Acme for a yellow Mercedes convertible. Should have done it. Dumb iron is just dumb iron, unless it’s got a Fanuc control.

Goldman Sachs is valuing Facebook at $50 billon and I am still calling my kids on the phone and texting only if I’ve got a magnifying glass available.

Frankly, I don’t care what my third cousin’s niece had for breakfast or if a high school acquaintance just had a prostate biopsy. I’m not particularly social, but I do love media. I know Facebook CEO Mark Zuckerberg is Time’s Man of the Year and his success is legendary, but for a 60-something guy like me, Facebook seems like an Internet tinker toy.

What am I missing here? Are any of you machining brethren, machinery mavens, media types, etc. actually using Facebook either personally or professionally? Or is it just the province of children, teenagers, and Generation X, Y, Zers?

The growth of Facebook has been stunning, and Zuckerberg vows to connect the world. Every Bolivian lithium miner, vodka stained Finnish reindeer rancher, and Polynesian pearl diver supposedly will be clutching their iPhone waiting to connect with a sopping lobsterman from Maine. Six degrees of separation between Osama Bin Laden and General Stanley McChrystal.
Readers, bloggers, actual friends, please tell me about your Facebook divorces, your Facebook reunions, or better yet, your Facebook sales.

With the New Year beginning I wanted to see what the Sunday New York Times, the reflection of the Easternliberal elites, would be writing about. The front section was a montage of pessimism and orneriness about public workers’ pensions under attack, New York state’s financial woes as Andrew Cuomo takes over in Albany, and the inability of young workers to find liveable wage work in southern Europe.

The pieces were well done, but the editorial judgment of The Times was indicative of what I see as the disconnect of the public and business environment at this moment.

The politicians and elites (journalistic, academic and financial) are fixated on a problematic world economy while the people who have weathered the past three years are rearing to make money. You see this in the stock market, where the Gotham hedge funds and mutual funds have generally fought the tape expecting a double dip recession, deflation and more recently stagflation with commodities rising rapidly in price.

Meanwhile the Dow is up 80 percent from the 2009 low and Christmas sales were up twice as much as the consensus predicted.

The recent Purchasing Managers’ Chicago survey showed a stunning burst of industrial activity and almost everybody I talk to in manufacturing is bullish.

A few straws in the wind—I recently heard of two companies that flew heavy machine tools to the U.S. from Europe to get them on the floor in 2010. Also, with demand strong in China, machine tool firms in Japan are rationing supply because they do not want to shut out customers from around the world.

As I look at my Graff-Pinkert used machinery business I am wondering where we are going to find the skills we may well be needing in 2011.
The N.Y. Times is still looking at a 2009 world. Fortunately, we are living in 2011.

As Charles Barkley so eloquently stated in his first memoir, “I may be wrong, but I doubt it.”

Today I’ll put on my Carnac turban and peer into 2011.

I predict—the economy will grow much faster than most economists are forecasting. My number is 5.2 percent for the year. The manufacturing economy is taking off. Auto sales could reach the 14 million rate. Employment will improve with the tax issue settled for the moment and Congress writing the rules on Obamacare. Housing will still be tough, but the big problem children of housing—Florida and California—have both stabilized. Deflation will be off the table as will the dreaded double dip recession. Congress will actually start to seriously discuss the deficit because the Tea Party folk will balk at raising the debt ceiling in April.

I predict—Hilary Clinton will discuss running against Barack in 2012 but decide against it. Sarah Palin will travel to Iowa and decide to run. Mike Bloomberg of New York will look at the field on both sides and decide whether to run for President. I predict—he will decide to run as a Republican and will win the nomination and the Presidency in 2012. Bloomberg never loses. If he wants it bad enough and opts to run, he will become the first Jewish President.

I predict—The Boston Celtics will win the NBA Championship and Philadelphia will win the World Series. The surprise team in baseball will be Washington, but they are two years away from a pennant. The Cubs will finish a close second behind Cincinnati in their division.

Here’s hoping you don’t agree entirely and contribute your own fearless forecasts.

Maybe if you are living under a rock you haven’t heard of GROUPON™. But this two-year-old company allegedly had the chutzpa to reject Google’s $6 billion offer to acquire it.
So what do they do?

They sell coupons for goods and services on the Internet with good writing, a sense of humor, and a cool concept—the deals have a limited time frame and a minimum number of people need to take them before they kick in.

Noah Graff and I heard Andrew Mason, the 29-year-old founder of GROUPON™, at a Wall Street Journal forum on growing your business. We were fascinated by his story and self-effacing demeanor. As he told it, the GROUPON™ idea was not his brainstorm. He was interested in social media and had developed a Web site to attract young people to political meetings. A venture capitalist liked what he was doing and invited him to use the concept of attracting a minimum threshold group for a commercial purpose—i.e. selling discounted goods and services. As Mason recounted it, “he didn’t have anything better to do,” and “somebody was dangling a lot of cash in front of him.” So he went to work on the site with gusto. It caught on like wildfire, and he and his founders realized they had a monster by the tail. Mason started hiring salesmen and building infrastructure immediately, because as great an idea as GROUPON™ was, it was eminently copyable.

Since Noah and I heard Mason speak we have been working on our own version of GROUPON™ for the industrial world, which we call “The Real Deal.” The folks at Trusty-Cook Inc., a manufacturer of wonderful and unique non-marring hammers that replace the primitive lead and bronze hammers, immediately loved the idea and did their first Real Deal email blast in December. They have been very happy with the results and are signed up to do two more in the coming months.

If you think you don’t do discounts, think again. The possibilities are tremendous. If you want to do one give our Sales Manager, Dan Hummell, a call at (630) 715-4318, send him an email at dan@todaysmachiningworld.com, or email Noah Graff at noah@ todaysmachiningworld.com.

See how the Real Deal can grow your business.

I’ve been asked many times over the last 2.5 years since I almost died of congestive heart failure, if I am a changed man because of the experience.

The answer is yes and no.

I got back into my magazine work within days of getting home from the hospital. I was more passionate than ever to write my stories. The machinery business was harder to get into because in 2008 and 2009 business was so awful it seemed like anything I tried failed. I probably would have given it up if I could have financially, but after fighting so hard to live, I didn’t want to give in to financial duress.

Recently, I read a piece in Spirit Magazine, the publication of Southwest Airlines, about happiness. The thrust of the article was that we are programmed for happiness by our upbringing and biology, but on the margins we can decide to be happier if we commit to it.

This has been the case with me.

Since my heart surgery and a laundry list of ailments I actually feel happier and more content that at any other time in my life. At least partially, being happy is an exercise. I have made it a habit to make a mental note of things I’m grateful for every day. This is a regimen and I do it more regularly than walking on the treadmill. I believe it has made a difference in my personal happiness quotient.

I can honestly say I feel happier and more content today, 2.5 years after my Armageddon. Not that I would recommend it.

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Does Your Business Own You?

I’ve survived the Great Blizzard of 2011 in Chicago. Fortunately, I have the money to hire a fellow with a pickup and a plow to clean my driveway. For me, the storm was an event to celebrate, not fear, but I will still have to work around the aftermath for a few days.

Over the last weekend, my wife and I visited friends in Austin, Texas, who have a different approach to Chicago winters–they avoid them. Ricky and Debbie have a home and business in Chicago but also spend lot of their time in Austin. They bought a home there, enjoy the music scene, love the winter temperatures and enjoy the new friends they’ve made there over the years.

Ricky runs his industrial distribution business successfully while he’s away from Chicago. He has a camera matched to his computer in his home office in Texas and his business office in Chicago. People can see him at his desk, and he can see them at work and talk to them. Ricky has managers and sales people who report to him regularly. He will travel to visit key customers or go to meetings that are crucial for the company. He is fully engaged in the company, but not engaged in blizzards.

Ricky is a very smart and organized CEO-owner. To my surprise, and possibly his, too, he is able to successfully run the business without freezing in Chicago in January.

It is the rare small and medium-sized business operator who owns a business rather than has the business own him. Technology may be making it easier to pull off today. Do you think so?

Question: Do you feel like you own your business or that your business owns you?

A dedicated employee stands in the blowing snow. Elgin Ill. Feb. 1, 2011 <em>Chicago Tribune</em>

A dedicated employee stands in the blowing snow. Elgin Ill. Feb. 1, 2011 Chicago Tribune

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Getting By with Temps?

What do you do when business surges after you’ve been in backpedal mode for three years? This is the situation we find ourselves in today at Graff-Pinkert & Co., our used machine tool dealership, and judging by the surge in manufacturing just reported by the Purchasing Managers Index on Monday (the best since 1988), we are not alone.

We have too many machines to get out the door in the next three months than our present shop personnel can handle. The options we are weighing include adding hours, adding employees, hiring part-timers, bringing in temps, and bringing in contract workers.

The bias that pervades our decision making is that we prefer not to hire full time workers who will get the expensive benefit packages that our core workers receive. This probably sounds harsh, but after building a bloated payroll in the ‘90s and early 2000s which we were loathe to trim, we are paranoid about retracing those steps.

If we knew that the rush of orders would continue for a year, we would be inclined to hire two or three people in the shop and office, but visibility is foggy.

So today we are adding a guy for three months at $11.00 an hour and are planning to add office help for 20 hours a week. Hours will also be added to shop overtime. Graff-Pinkert is in the interim stage of hiring where I believe many firms are today.

I wonder what course other firms are taking today regarding adding new workers.

Question: Is now the time to hire fulltime workers, or skate by with temps?

Ryan Howard, Perpetual Temp on The Office

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