Monthly Archives: May 2011

Owning Up to Ownership

David Einhorn, New York hedge fund mogul, is reportedly buying a minority stake in the New York Mets from New York money mismanagers, Fred Wilpon and Saul Katz, because the team is hemorrhaging dough and the Bernie Madoff victims’ lawyer is squeezing them for a billion dollars they entrusted to the Ponzi artist.

I ask this question: Why would anybody buy a major league baseball team, much less a minority stake in one?

The older I get the more I understand that “ownership” of things is ephemeral and usually a losing proposition.

I love baseball, always have, but owning a team would take all the fun of it away. It would become a business, with millions of stakeholders constantly carping about my stupidity in paying $10 million a year to a washed up outfielder like Carlos Beltran or a Jose Reyes, who seems to have lost interest in stealing bases. I don’t even get “owning” season tickets just to get the opportunity to see the Pittsburgh Pirates on a 36 degree night in April. Better to rent a seat for the couple of games a year that excite me.

I’ve had a similar revelation about “owning” a magazine. You can never really “own” your readership. You have to earn it with every issue. Advertisers may delude themselves by thinking that they buy an audience when they purchase a print ad, but I am convinced that most business-to-business magazines are thrown away before they are opened because their content is known to be trivial and boring. Most mass emails are not opened for the same reason.

People want to buy experiences, but I think they cannot readily be packaged and sold. So 42-year-old David Einhorn is going to buy a “piece” of the Mets because he a is huge baseball fan of the Milwaukee Brewers, his home team? I find this reasoning fatally flawed. What he’s doing is acquiring some documents—and the invaluable opportunity of trying to understand Jose Reyes attempt to speak English to his masseuse.

Question: If you were a billionaire, would you buy a sports team? If so, which one would it be?

David Einhorn

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My 41st Wedding Anniversary

No machines in this blog, which probably should be on Facebook, but I don’t do Facebook.

Today is my 41st wedding anniversary with my wife Risa. I think we are the rare couple who can honestly say to each other every day how blessed we are to have one another. I am a hopelessly sappy romantic who cries real tears on the cards I write for such occasions. She is the baker who makes everybody’s favorite dish for their birthday.

Risa is the combination of lover and best friend, who has buoyed me up during life’s insults. I cheered her on as she became a taekwondo World Champion and parented with her through kids’ challenges and triumphs.

We’ve grown side by side. In a way I robbed her of her youth because she married at 19 and moved to Chicago from Charlotte and Ann Arbor. She built a career as an educational therapist and has improved the lives of hundreds of kids from kindergarten through high school.

I am the rare man who met the woman of his dreams and had the luck and intuition to know it from day one.

Happy Anniversary, Risa—love of my life.

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The La Brea Tar Pits of Machines

Lloyd Graff with Auctioneer Robert Levy

Lloyd Graff with Auctioneer Robert Levy at GM's Willow Run Plant

I haven’t gone to an old fashioned open outcry auction at an automotive factory in quite awhile. For sheer drama and boredom the Hilco Industrial four day 7000 lot sale this week was a throwback to the days when men were men and spark plugs were made on screw machines.

The sale was at GM’s old Willow Run transmission plant—6 million square feet under one roof—that used to be a farm owned by Henry Ford in Ypsilanti, Michigan, near Ann Arbor. Today the biggest non-Government, non-University employer in the area is Domino’s Pizza, which is currently spending millions to advertise its fried chicken.

During World War II, Willow Run turned out a B-24 bomber every 45 minutes. GM used to employ six guys full-time to fix the roof, the electric bill was $500,000 a month, and the parking lot could fit a dozen U of M Big Houses. This joint was BIG. It took 10 minutes to travel end to end by electric golf cart. By the end of September when the last Knaack toolbox is gone, this mammoth structure will no longer bleed Lava Soap.

For me it was a kick to hear Robert Levy, the Alex Trebek of the auction stand, warble his “do I hear” doo-wap, selling everything from surface plates to Vidmar cabinets. Robert is 53 now with almost 30 years away from his jewelry making days in London when he indulged in his artistic side more than his deal making acumen. Robert is a virtuoso on the stand, which became apparent when the pretenders stumbled trying to sell grinders with a “privilege.” The “privilege” is a clever ploy to extract more money from the bidders by offering to sell the option to buy multiples of similar items to the high bidder—capitalizing on the fear that the successful bidder might take every piece.

I love the animal instinct that bubbles up in an open outcry sale. The silence of the Web gives way to the belligerence of testosterone bulging egotists who like to posture at sales.

The auctioneer plays on the competitive juices, weighing the facial tells of each bidder, with the added excitement of Internet bidders who are waiting anxiously online.

An auction event like Willow Run has been a year in the making. It was actually the last of three sales to finally quiet the machines that once turned out the components of those Chevy Impala transmissions that used to fall apart after 40,000 miles. That was when cars were cars and Chevrolet was apple pie.

My brother Jim and I schlepped to Ypsilanti because it was sort of the La Brea Tar Pits of screw machines. GM had amassed almost 200 multi-spindle automatics, mostly Acmes, from 9/16″ capacity to 6” RB6 and everything in the middle. Oh, the heavy metal music they must have made. The floor must have rocked when those spindles were turning.

On the two days Jim and I attended, there were more bidders online (about 300) than there were in the audience, though most of the items were bought by attendees. There were many attendees from what we used to call Third World Countries, who now have more money to spend than Americans. A large gaggle of Indians were present, but they seemed to be mostly chatting and playing cards amongst themselves. India is developing a serious automotive business these days with Tata Motors buying Jaguar for some unfathomable reason, self-flagellation I suppose.

Auctions like this bring out odd valuations, like a Ridged pipe threader selling for more than a 11/4” RA6 Acme screw machine, or an EA Cincinnati Centerless fetching $10,000 while the perennial stalwart 220-8 going for $6,000. A 1000 ton press didn’t get a bid because the rigging costs surpassed the value of the machine. Ultimately, the real “vulture” capitalists, the scrappies, will hack away at it and tote it in pieces to the furnaces.

I found the whole thing a scene. It was Schumpeter’s creative destruction in action. Old Detroit is dismantled. New Detroit rises in Saltillo and San Antonio. Detroit—it’s the home of Little Caesars and Domino’s. Add a little extra sauce.

Question: Does this make you sad?

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Auction Blog

On May 12th, an interesting auction took place at Smart Parts near Pittsburgh. Smart Parts used to make paintball guns, until the recession and a big miscalculation about a Wal-Mart order for its equipment put them on the road to bankruptcy.

The management of Smart Parts had been on top of the world as paintball caught fire. Wal-Mart wanted to get in on the fun and Smart Parts ordered two (CNC) Hydromat Epic machines in 2007 to meet the forecast demand. They paid well over $2 million for the two machines—then the bottom fell out and sayonara.

At the sale the two machines brought $920,000 and $550,000, including buyer’s premium.

Hilco Industrial auctioned off the machinery. They sold seven Star Ecas 32 mm machines, as new as 2006, for prices ranging from $255,000 for the newest to $145,000 for a 2003 machine. The one Star SR20II brought $140,000 including buyer’s premium.

The sale highlighted the rising cost and scarcity of 32 mm Swiss-type lathes. An E32 Citizen from the ‘90s brought $80,000 and another brought $40,000, very high for older style machines.

The Smart Parts sale was the right machinery at the right time. On the same day, multi-spindle screw machines were auctioned off at Whirlpool in Benton Harbor, Michigan. RAN6 and 2 RB6 Acmes fetched under $5000 each, and New Britain Model 62 machines in the 1980s with pickoff attachments sold for $15,000 each. Two Hydromat Inline machines, of which very few were ever made, sold for $120,000 each, and a 10-station Pro20 brought $50,000.

Question: Judging by his past dominance and present poor play, do you believe Tiger Woods took steroids?

Paintball Gun

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A Mother’s Day Story

Mother’s Day is one of those Hallmark Holidays I’ve always found confusing. My muddle goes back to my father’s view of the May Sunday. He hated it–probably because he hated his mother, though she was a huge presence in his life.

My grandmother, Ethel Graff, was a sad and manipulative presence for my father, who watched over her for much of his life after his father, Louis, died when my dad was 23. Although, my dad indicated to me that he took responsibility for her at a much younger age because his father just could not deal with her moods. Her most infamous, and to my father, most devastating, breakdown occurred on Mother’s Day. She felt slighted by her husband and children compared to other matriarchs in the extended Graff and Pinkert clans, and raised a gigantic fit. She threatened to take off her clothes and disrupt the Pinkerts’ Mother’s Day celebration. My father was mortified. My grandmother ended up in a psychiatric ward. After that Mother’s Day the holiday became a day to be dreaded and navigated.

My own mother understood my dad’s Mother’s Day woe, but she had a mother she loved and was obviously a mother herself and thought she deserved to be made a fuss over. But for my father it was the day to manage his mother’s jealousies and keep her out of the loony bin.

I observed the spectacle year after year. My mother was the good soldier, usually preparing a big family meal, with my grandma Graff getting premium treatment. The Graff children knew the program and played along with the charade as my grandmother would ask us who we liked better, our mother or our father. It was all so ridiculous, but to the three Graff kids it was just the way Mother’s Day was played.

For my wife, Risa, the Graff Mother’s Day cantata unfolded and she got into the spirit of the holiday after I told her the family lore.

My grandma Graff died in 1985, and my own mother passed away in 1993.

I try to honor my wife Risa every day, and our children are all close to her and loving. Mother’s Day in our family is card worthy, but not too much more. The baggage of Grandma Graff and the great Mother’s Day meltdown of 1938 still lives on and aches in my heart of hearts.

Question: Do you think there should be a Sibling’s Day, or a different new Hallmark Holiday?

Famous Mom's

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Machining to Keep Us Alive

Sometimes it can be difficult for me to explain to people outside of the manufacturing world what the heck I write about. They ask me what the precision machining industry does and they want an explanation of why they should care. The following are two stories from the 2011 PMTS show that brought the machining world to life to me.

At the show, Matt Redder, a sales representative from a Haas Automation distributor in Cincinnati, Ohio, came over to the Today’s Machining World booth. He told us the story of his recent surgery to repair a bad disc in his neck (he attributed it to “getting old”). For his procedure at the Mayfield Clinic in Cincinnati, Ohio, he had four titanium screws, a titanium plate, and bone segments from an organ donor inserted in his neck. Soon after the surgery he received 10 orders for machines from the Schaerer Mayfield production shop, the very shop that produced the components surgically inserted in his body.

The cadaver bone segments were cut on a small Haas Office Mill, and the titanium plate was produced on a Haas 5-axis machining center. As far as the four titanium screws, he told me they were produced with a proprietary secret method.

Brings a new meaning to a salesperson betting his life on the product he sells.

*******************

That same day at the show, I had the privilege of meeting a man by the name of Curtis Spencer from West Virginia. Curtis appeared to be in his mid to late 40s and when I asked what company he was from, he proudly proclaimed he was a student. Curtis told me that for the last 10 to 12 years he has produced 190 guitars (mostly electric), all one-offs, custom made by hand. He said that each custom made guitar takes him roughly 50 hours to create and he sells them for an average of $8,500 each. He has now decided to learn to operate CNC machines so he can produce guitars in half the time or less.

Question: How do you explain what you do in a meaningful way to other people?

Matt Redder's Neck Incision

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Today’s Machining World Goes Strictly Online

As some of you may have heard, Today’s Machining World will be releasing its last printed issue in June 2011. But have no fear, the magazine will continue producing new stories at its Web site: www.todaysmachiningworld.com. If you have friends who love the print magazine but don’t read our content online, suggest to them that they sign up for our weekly email blasts by going to the TMW home page and clicking the “Join Email List” tab.

You can also sign a friend up yourself at the following link, or by responding to this email.

We thank our readers for your support, loyalty, and insights, and look forward to taking this next step with you into our growing digital world.

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Answers to the 7 Questions I asked before PMTS

1. Is there a slowdown?
My impression is that business for the builders is generally good and getting better. High gas prices do not seem to be deterring the high level of buying. The Swiss lathe importers—Citizen, Star, and Tsugami, are crazy busy. For equipment like Hydromats and multi-spindles, which are heavily focused on automotive, there is a bit of hesitancy.

2. Can the Japanese companies get inventory?
Not enough. Toyota is hurting along with the others. Hyundai is out to claim 10 points of market share. In machinery, the importers tend to order far ahead. Certain sizes are scarce, like 32 mm machines. Tsugami claims to be unaffected. If it is a 1200 machine year for Swisses here, deliveries will be strung-out in some models.

3. Are high prices because of the weak dollar hurting sales?
Yes. I talked to the Tajariols, Andrea and Michi, who own ZPS. The $1.45 euro is hurting North American sales. The 32 mm 8-spindle Euroturn, the crown prince of the mechanical screw machine line, used to sell for $450,000 in 2003. Today it’s $750,000 with bar loader and attachments. It causes sticker shock.

4. Does anybody go to shows except exhibitors and kids in flat brim hats?
Yes, the locals. PMTS this year was a Midwestern—especially Ohio—crowd. Most people drove from a 250-mile radius. But there are a lot of good buyers left in the Big Ten. The kids in flat brims were there and I regret the pejorative tone to the original question. The kids may look stupid to the old guys but they aren’t dumb. I think the tide is turning about everybody going to college. College is starting to look like a bad economic buy for a lot of kids and parents now, so we may be getting a more serious group of flat brims into the machining community. Unfortunately, virtually no people of color or women showed up.

5. Is the Swiss market headed more toward the fewer-frill machines like the “A” Citizen? Yes. The price differential between an “A” model Citizen and an “L” model is $100k. Because of the weak dollar, an “A” costs what an “L” used to cost, and it is a very capable machine.

6. Will the Big Three dominate the Swiss market without a real challenge by an outlier? Yes. There was not much buzz about the smaller brands. Tornos is now an afterthought here. Index wants medical, ZPS left the Manurhin in France, Hanwha needs to spend more money on marketing. Eurotech has an entry but they are using stealth marketing. Nomura no mas.

7. Are the automotive suppliers starting to buy?
Yes, but hesitantly. Business is good now, but 2010 was the year to repair the finances and 2011 is the year to begin buying. Hydromat, Schutte, Index and the Swisses are starting to see the serious inquiries, so the orders should come. But the earthquake and $4 gas seem to be slowing the actual POs.

Question: Do you think the administration really wanted Osama Bin Laden dead the last 10 years?

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