Monthly Archives: April 2011

America’s Lingering PTSD

It strikes me that Americans are still trying to recover from Post Traumatic Stress Disorder from the 2008-2009 deep recession. Banks are still looking backward at the housing shock and are afraid to loan to good risks, even based on 2001 values. A large percentage of buyers today are cash buyers, often from foreign countries, or first-time buyers who don’t have to sell a house to buy one. Banks are also being closely scrutinized by examiners who have the usual government employee bias—avoid mistakes so everybody covers their behind twice, thus gumming up the lending process.

The press has a strong negative bias. I monitor the editorial choices of several newspapers and Yahoo! Finance almost daily, and the choice of material disseminated is stridently negative. I’m in the news business and I know the choices of articles printed vary enormously. By emphasizing construction’s misery or commodity speculation or Wall Street corruption every day, the press confirms lingering post traumatic stress.

The negative effects of the Japan earthquake will continue from a worldwide economic perspective for much of 2011, but the macro effect of disasters flip over to the positive of rebuilding at some point. Yet I am beginning to see automotive suppliers flinch because assembly is momentarily curtailed by parts shortages. Demand continues to be robust, but some people still get stuck in the nine million-car syndrome of 2009 instead of the probable 14-16 million unit domestic demand likely by 2013. Call it the Michigan strain of PTSD.

I am no stranger to the phenomenon of Post Traumatic Stress Disorder—I still suffer déjà vu every time I go to the doctor. But the people who always profit from shifting market conditions are those who can get comfortable with being uncomfortable from bad memories.

Question: Are you afraid to buy a house or car?

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Lloyd’s Juicy PMTS Blog

PMTS 2011—middle of Passover, beginning of Easter, and spring break, but the machining guys turned out, at least those from the Big Ten area, to see who would make their Final Four if they were buying a lathe (or software or steel or cutting tools etc.).

The PMPA sponsors this assembly of the oil stained with the Gardner Publishing group, and it ran as efficiently as a Japanese commuter train with about the same amount of pizazz. Attendance was much better than 2009, but that’s comparing a parade and a death march.

George Bursac of Star called it a “nice regional show.” The boss of another Swiss importer also viewed it as primarily local but loved the fact that 80 percent of the people who showed up at his exhibit were legit prospects, while at IMTS only one out of 10 knew the difference between a sliding headstock and a slider from White Castle.

The vibe was positive at the show. Marc Klecka, who is one of Citizen’s most successful and relentlessly positive sales agents, was glowing. Off of a record breaking first quarter in the U.S., Marubeni-Citizen is on a 600 machine pace if they can get the inventory out of earthquake traumatized Japan. A big order of 32 mm machines has pushed deliveries out on larger machines and Star’s Bursac echoed the “cupboard is bare” lament. My sense was that higher prices from the strong yen are not really biting into sales. With the March PMPA business index hitting record territory, job shops have good cash flow, and with the capital equipment write-off expiring at the end of 2011, machine buying should be moving from aggressive to frantic by year’s end.

I was looking for hints of a slowdown because of $4 gas, but I never heard it mentioned. Training and luring CNC talent was the bigger battle. I didn’t even hear any Obama bashing. The first person I met at the show was Paul Huber, the tireless advocate of training young people in the machining trades through NIMS. Paul said, “Did you hear about the Chinese sponsoring job fairs for manufacturing skills in London, Chicago, and L.A.?” I hadn’t, but I know that in Shenzhen, the industrial hub of the Pearl River Delta in China, the ex-pat bars are full at night with well-paid foreigners who are making the machining world flatter than a moo-shoo pancake.

For a machinery guy/journalist, a show like PMTS is the best of both worlds, even if they can’t get the schedule right. (“Bad Dates,” like in Raiders of the Lost Ark.) It’s a great time to swap stories, dig for selling clues, spread a few lies, and just be grateful that I can make it to the show.

Jim Otten of Hydromat, who I probably have exchanged 30 words with in the last 30 years, came by and told me at some length about his quintuple heart bypass surgery right after IMTS.

Jim Montague of Paws almost brought tears to my eyes talking about the group home for adult children he and his wife built out of a compelling faith, a profound need, and a commitment to do the impossible—build a privately funded living place for their son Jared and eight others. He and his wife Lois house sit each night and they are exhausted in every way. In spite of that, Jim says he is planning to start another impossible dream group home soon. Jim always thanks me for helping get his group home built because I aided him in getting attention in the press. I laugh because my contribution was inconsequential, but people like Montague are all about crediting others while minimizing their own efforts in accomplishing the impossible.

Despite frequent lapses into cynicism, I really find the people who come to PMTS a wonderful crowd. It seems like they often forget the script that they rehearse for IMTS and just talk to people like human beings. Even Hanan Fishman of PartMaker, who I consider a friend, though he masquerades as a grade-one hard-ass, let down his guard a bit at Columbus after a profane harangue about being “hosed by the PMPA and Gardner” in his booth placement for 2013. PartMaker has been a great success story under Hanan’s gruff demeanor, and I still really like him because I find him so ridiculously real.

I queried in my blog before the show whether any of the smaller Swiss lathe brands would make a challenge at Columbus. Nexturn and Maier did not appear, Tornos did not bring a sliding headstock machine and Nomura folded into the Gosiger display. Hanwha did come with a new crew of people—nice to see Bill Papp (former TMW Sales Manager) has resurfaced with them. But Citizen, Star and Tsugami still rule.

Methods had a solid display for Nakamura, but Mazak and DMG/Mori were absent. Index had a prominent presence and Schutte catered to a small cadre of sophisticated buyers.

The steel guys were there, but I always wonder if they’d rather be golfing or bowling when I see them at shows like this. On paper it seems like metals and machining shows are a good fit, but my sense is most people come to these shows to check out the hardware, not the raw material.

For me personally, the show ended ironically. Jim Graff, Rex Magagnotti and I bid on some Wickman repair parts in central Illinois in a GoIndustry DoveBid Internet auction. A couple thousand people including us had spent a lot of money to come to Columbus to sell and buy, but the only actual business we did over the week was buying some shelves of surplus stuff on the Web.

Perhaps shows are for stories and relationship building, but making money is moving to the Web.

Question: Do you wish you went?

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Walking Around With Screws

The offer of $20 billion being discussed by Johnson & Johnson Inc. to purchase Synthes Inc., based in Pennsylvania, Switzerland and Germany, highlights the value of Swiss CNC machining today.

J & J bought DePuy, the orthopedic implant pioneer, located in Warsaw, Indiana, in 1998. They evidently like the medical device business with millions of aging baby boomers potentially looking for spinal disc surgery and knee and hip replacements. The disturbing diabetes epidemic, fostered by America’s obesity explosion will mean more amputations and usage of Synthes surgical tools.

I have no idea whether J & J is overpaying, but for a company with loads of cash and a mediocre pharmaceutical business, J & J doubling down to buy Synthes, a company with cash generated by foreign operations, must look attractive to its accountants.

The potential Synthes acquisition will make the folks at Swiss CNC firms even happier going in to the PMTS Show because it highlights the massive opportunity available in medical and dental implants.

Question: Do you have a medical implant, and if so, has it worked well for you?

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Questions Going Into PMTS

With the PMTS show coming up next week in Columbus, Ohio, this is what I want to find out:

1. Graff-Pinkert, our machinery business, has noticed a distinct slowdown in both inquiries and sales over the last two months. Is this just us, or is it industry-wide?

2. How narrow is the Japanese pipeline of new machine and automotive components? Can the builders get fresh inventory out of Japan?

3. With the dollar falling out of bed versus the euro, how much are the Europeans raising prices, and are they able to ramp up production to meet demand?

4. Does anybody go to shows anymore besides the exhibitors and students with flat brims on their baseball caps?

5. Is the Swiss CNC lathe market headed more toward the downscale Citizen-A machine or the upscale technical machines?

6. Is the Swiss market going to be completely dominated by Citizen, Star and Tsugami, or will some of the smaller brands wage a significant challenge?

7. Are the Tier One, Two, and Three automotive suppliers going to have the confidence in the future to start really buying heavily again?

Question: I’ll have some answers in a week, do you have comments now?


Boys sporting flat brim hats

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A Health Club for Makers and Geeks

Manufacturing and building things seems to be trendy these days. Reality/documentary shows like How It’s Made, Myth Busters and American Chopper have large followings of people fascinated by the industrial arts in a similar manner to the cooking enthusiasts who religiously watch the Food Channel.

The difference between those programs however, is that the aspiring chefs can conveniently go into their kitchens and try to create the risotto they’ve just seen prepared, but the average American Chopper viewer can only imagine the experience of customizing a motor cycle, because he or she usually does not have the tools, the space or the training necessary for such projects.

But now a place exists for the amateur industrial experimenter to get a crack at emulating what they’ve just seen on TV.

TechShop, located in San Francisco, is a membership based do it yourself fabrication shop and workshop. Mark Hatch, CEO of TechShop, calls it “a health club for makers and geeks and artists and tinkerers.” A fee of $100 a month gets a person access to the facility, which contains all the tools a person would need to make anything they want, including machine tools, woodworking tools, digital prototyping tools, 3D printers, a textiles lab, an electronics lab, an auto lab, a software lab, welding equipment, sewing equipment, and laser cutters.

TechShop also offers classes on how to use the machines, and members have a great community in which to share knowledge and ideas. Hatch says that hundreds of people go there every month to learn how to make things.

From Wired.com

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When to Admit to a Screw Up

Is it always a good idea to admit your mistakes preemptively in business?

Recalls are the thing to do these days—the latest one is from Southwest Airlines, who now must double check the fuselages on all its planes after cracks were found in three of them. Toyota’s recall over a year ago started the recall craze. After its media explosion, everyone wanted to know what their own car brand wasn’t telling them about the potential rattles under their hoods.

I bought a Hyundai Sonata a year ago, not too long after the infamous Toyota recall. Since then, my car has been recalled at least twice. I took it in six months ago for an alleged glitch in the steering wheel. When they alerted me of the recall with a letter, an email and a recorded phone message, the presentation was very matter of fact. The tone of the message portrayed the recall as a positive thing. Hyundai framed it as a service. They shaped the recall as a message that the company cared about the safety of their customers first, that they weren’t like the sly Toyota trying to cover up their products’ defects.

But I have to say, getting to the dealership was a pain. I had to make an appointment, and leave early from work, then wait for at least an hour. Recently I was alerted to another recall on my car, but the issue sounded so benign that I’ve decided it’s not worth worrying about.

Admitting to mistakes, doing the honest thing, generally seems to me like the right thing to do in business, and in life for that matter. But what about scenarios where the customer isn’t endangered or adversely affected, a situation where they likely would never find out about the mistake? What if fessing up to a mistake caused more aggravation and even harm to others than would be caused by just keeping your mouth shut?

Question: Is it always best to admit to mistakes preemptively in business? Have you experienced moments when it was best just to shut up?

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Wisconsin’s Uncivil War

The battle of Madison, Wisconsin and Columbus, Ohio is the first major fight of America’s new Civil War between the Governors and the Unionists.

Wisconsin’s Scott Walker pushed through a law curtailing collective bargaining for state employees. John Kasich of Ohio forced  similar legislation through in Ohio. Now the unions are mounting a counterattack through demonstrations and a full court press in the press.

It is unclear who will win this war. The first sneak attack portrayed the Unionists as spongers who have perverted the political system by co-opting politicians with gluttonous campaign contributions and then exacting tribute from them through opulent pay contracts and pensions that will ultimately bankrupt the States.

The Unionists were surprised by the advance of the Governors, but now are mobilizing their legions under the banner of “saving the middle class.”

The public is just starting to listen. The next election may be the decider of the current war because the early battles will be indecisive. The Courts will dither while the troops skirmish with signs and occasional fists.

To me the big question is how “Middle America” comes to view the fight. The middle class has undeniably taken a beating over the last decade, but whether the voters will see the Unionists, particularly the government worker Unionists, as one cause of the decline is the big question. We tend to like our local teachers and mailmen, even Congresspersons, despite the fact that we loathe them as a group.

We are witnessing more than a food fight in Madison and Columbus. This is not the start of class warfare in America. This is the war for the middle class voter that will decide at least the 2012 election.

Question: Should government workers retain collective bargaining rights?

From pbrcpitterpatter.blogspot.com

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Swarf: Nielsen’s Bakery

by Lloyd Graff

I had a hankering for a croissant and decided to drive over to Nielsen’s Bakery, a local bakery I don’t go to often, but they made nice croissants. All I found was a letter on the window saying they had closed after 21 years. The letter read like a note to a few insider friends and I could not really understand what it said, except that they were closing.

The letter confirmed to me why I had not patronized them for years. I always felt I was an outsider there, a tolerated visitor interrupting a local Kaffeeklatsch (an informal gathering) at the local clubhouse.

Nielson’s was in downtown Homewood, Illinois, next to the commuter train stop. A Starbucks with a drive-through now operates on the other side of the parking lot. The Starbucks does $20,000 a week in business and there are two other Starbucks in the area that do a similar amount of business. My guess is that Nielsen’s was lucky to do $5000 a week. Nielsen’s was a daytime operation while Starbucks is open 5:30 a.m. to 10 p.m.

Another local bakery, Sweet Annie’s, opened three years ago, and in my opinion that was the final blow that killed Nielsen’s. Not only were Annie’s baked goods superior, the ambience of the shop was warm and welcoming.

Another element most likely came into play in the demise of this small business. Homewood, like the rest of the south Chicago suburbs where I live, is becoming a predominantly African American community. Nielsen’s was clearly an old school Homewood institution, patronized mainly by Caucasians—and proud of it. If I felt like an outsider when I walked in, I’m sure a black person would have felt uncomfortable there.

The restaurants and stores in my neighborhood need to feel like they are connected to their customers. Most businesses, even those that do business online or on the phone, need to have a welcoming feel. Airlines with call centers in India lose tons of business because the people who finally answer the phone have no personal touch, are unable to connect with the customer, and are often hard to understand. Cold callers who read from a script rarely get more than a sentence out before I hang upon them.

A machining company owner that thinks he or she is just selling parts with no need for a personal connection with their customers does not understand how business works.

Nielsen’s Bakery didn’t fail because of the recession, though it didn’t help. They failed for many reasons, but the primary one was that they just wanted their little neighborhood bakery to stay the same while the world around them was changing by the day.

There was an interesting juxtaposition of auction sales recently. 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, also in Ontario, 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.

Just a couple of years ago the skeptics saw General Motors as a hopeless joke run by bumbling fools. Today, General motors is a public company that’s making money, almost debt free, with the Volt adding another shift to production. Equally remarkable, the incredibly complex job of sorting out the $275 billion in claims—750,000 contracts and 70,000 claims, has been 85 percent completed.

One of the remaining vestiges of the old GM, known as Motors Liquidations Company in the legal documents, is the Willow Run Transmission Plant in Ypsilanti, Michigan. This gigantic albatross, five million square feet in one building, is on a land site that used to be a Henry Ford-owned farm. It was built in 1942 to make the B24 Liberator bomber. At one point they produced 650 bombers a month.

The assembly plant was passed to Kaiser Motors and then to General Motors, where they made the Chevy truck, the Nova and the Caprice. They also made parts for the doomed subcompact, the Vega, and the illustrious Corvair during the 1960s. During the Vietnam War the plant made M-16 rifles and a 20 mm auto-cannon.

In recent years, the immense facility was devoted to making General Motors transmissions.

Maynards and Hilco Auctioneers have been selling off the machinery over the past year as production tapered off. In six months Willow Run will be a gigantic barn. Already one of the GM plants near Detroit is being converted to a movie studio. Another factory will be used to assemble hybrid vehicles for Fisker Automotive of Irvine, Cal.

Willow Run is interesting because of its sheer size, about 5 million square feet. I can imagine putting a dozen soccer fields laid out end to end, or the world’s largest mushroom farm in it. How about America’s biggest indoor zoo?

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 10th 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 just mad?

Perhaps college 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 lower quality leagues and replaced by aspiring minor league teams. 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 team like 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 Intramurals.

Dear Michael Bloomberg (Mayor of New York City),

Just wanted to alert you that I am available, if the hours are right, to join the stable of writers of your new “Bloomberg View” enterprise. Our views on free trade (pro), taxes (don’t like ‘em) and tobacco (tax it like hell) are congruent. The $500 grand a year you are offering to prominent journalists is a nice round number I could live with.

I could add knowledge about the manufacturing world, which your provincial New York Wall Street-focused crowd could certainly use.

As a fellow magazine publisher I can relate to your comment recounted in the March 1st New York Times concerning your purchase of Business Week. When a bevy of consultants recommended that you pass on buying the money hemorrhaging publication because they said in a good year it would lose $25 million you said, “Do I look like a guy worried about losing $25 million?”

With your net worth pushing $20 billion, according to Forbes, and your age (late 60s) we have at least one thing in common. I was hoping you would run for President in 2012, but it is looking more like you are leaving the Iowa Primary to Romney and Pawlenty and other assorted losers. Apparently you have looked at the Ross Perot approach and figured it was a waste of time for 2012.

Mike, I think I understand where you are coming from. Better to be King than President. Considered it myself.

I’ll FedEx my resumé. Keep reading my blog. You are one of the few billionaires who know what Swarf is.

Lloyd Graff
Owner/Editor

Today’s Machining World

Today’s Machining World Archives April 2011 Volume 07 Issue 03

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