Monthly Archives: February 2013

Reflections from the 2013 PMPA Management Update

Tim Shuell of Metric Machining, at PMPA Management Update

Two weeks ago, I attended the Precision Machined Products Association (PMPA) Management Update, a three day annual conference where around 200 representatives from manufacturing companies in the association gathered in Arizona to network and go to lectures on the economy and business management. It was a great place to bond with my machining industry peers, find some leads and get a scoop for a blog.

I almost always come away from PMPA events with a warm feeling from seeing how much the members genuinely care about their industry and each other. As usual, one of the main issues on the minds of attendees was the challenge of finding young people to sustain the U.S. manufacturing industry, both on the factory floor and on a management level as well.

At dinner on the first night of the conference, Jerry Eighmy, owner of American Turned Products and a former PMPA president in his 60s, told me I should write about the need for more young people in the manufacturing industry. People tell me this all the time, Today’s Machining World has discussed the topic for years. But it’s a huge issue and very worth discussing again, so I will.

The vast majority of people at the Management Update were were mid-40s and up. That seems logical as the conference is for managers and owners, who naturally have had to pay their dues over time. But still, I’m willing to bet that the same 50- or 60-year-olds on the 2013 PMPA board were attending PMPA meetings 20 years ago.

Walking to the hotel bar the first evening of the conference, I ran into Tim Shuell of Metric Machining (Ontario, California), a very sharp outspoken 39-year-old manager/engineer. He almost immediately began our conversation by confronting me about a feature article I had written for Today’s Machining World in 2011, in which I had interviewed him at the Management Update of that year. He complained that article contained some quotes from him taken out of context. I apologized about the article, and then he told me that I should start blogging more, rather than my father Lloyd writing so much, because we needed to relate better to the younger generation in the machining industry. Although he’s a fan of my father’s writing, Tim said my dad’s blogs were sometimes “too 1950s for him.” Whether I agreed with that or not, I appreciated his confidence in me and his passion for the machining industry. I quickly whipped out my iPhone to record him as he continued to speak his mind. “We (manufacturers) do [stuff] that people can’t do,” he proclaimed. “We make stuff people can’t make. This is the core of everything people hold in their pockets, that they drive on the road, that they put in their house. We make this stuff … there’s something visceral about making these parts. You can’t deny that.”

On the plane home from the conference I got to know David Knuepfer Jr. and his younger brother Bill from Dupage Machine Products, a large shop near Chicago with New Britains, INDEX multi-spindles and Euroturns, among other equipment. Dave Jr. and Bill, ages 30 and 24 respectively, are fourth generation at the company and came to the update without their father, the company owner, David Sr., a past PMPA president. I’m pretty sure they were the only two people at the conference younger than me, which was refreshing — I think. Dave Jr. told me about his experiences working at INDEX in Germany for two months, giving me some interesting insight into the way the Germans approach engineering and business. I had a particular interest in the topic because Graff-Pinkert sold two INDEX MS machines in the past two months. The INDEX MS machines seem to have emerged as the crème de la crème of CNC Multi-spindles worldwide. Dave Jr.’s younger brother Bill talked with me about Dupage’s experiences looking for new employees. He told me about the company’s use of careerbuilder.com and lamented that a great number of applicants “juiced” their resumés. The company’s longest tenured employee brought in from careerbuilder.com lasted nine months.

I was impressed with both brothers’ grasp of their company’s business. It sounds to me like they will successfully carry on their company’s legacy. They represent the future generation of leaders in the U.S. manufacturing business. But what about the children of the other 100 or so owners who came to the conference? Who will succeed them?

Questions: Would you be able to work well with a sibling in a business?

Would you able to work well with your spouse?

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Playing “Not to Lose” Usually Loses

Warren Buffett has been trying to buy Heinz, the king of ketchup, for 33 years. He finally got the deal by partnering with a Brazilian firm named 3G that will do the tough managerial surgery on Heinz, which will make it a cash cow for Buffett’s Berkshire Hathaway.

I have studied Warren Buffett’s approach to business and I try to apply it to my business and my life.

Make the deal. Play to win.

The Heinz deal was out there for many years, but nobody could figure out a way to make it work at the numbers Heinz’s Board demanded. But, Buffett would not give up on the idea of buying the company because it has such a great brand and could throw off a ton of cash if managed well.

Turning around crotchety companies like Heinz is not Berkshire’s strength. Enter 3G. They are good at using the hatchet, which by most accounts the old stodgy Heinz needs. If past performance is our guide, the 3G stormtroopers will swoop into Pittsburgh and cut overhead by 30%. Buffett will get a terrific return on his investment and go on to the next big deal like he did with his investment in Goldman Sachs and GE when Wall Street was falling apart in 2008.

Buffett figures out how to make the deal, because he will accept a deal that isn’t the perfect deal.

If Heinz had wonderful management, the company would not have been on the block. If Goldman wasn’t worried about its survival, it never would have needed Berkshire’s cash.

No deal is perfect. Every deal carries risk.

When I buy flawed 40-year-old National Acme Screw Machines I am taking on a myriad of risks that I can assess, if I do my research properly. I am also taking on product liability risk, which is hard to assess, and market risk, which is very unpredictable. But to me, it comes down to MAKE THE DEAL, if it feels right.

Which takes us to the second lesson from Buffett. PLAY TO WIN. If you play to win, rather than play not to lose, you put yourself on the line. You take on extra anxiety.

When my wife Risa was competing in taekwondo she was in the top four in her age division in the competition to become World Champion of her federation. For several years she could not get over the top because she was afraid to “go all out” to win. Finally, after reading Chuck Norris’s book The Secret Power Within and overcoming her fear of giving it her all yet still falling short, she was able to get her title in 2002.

In business I am constantly fighting my fear of being wrong, of losing money, of being shown up, of just being dumb. This is the attitude that holds me back – that makes me “play not to lose,” which is a good formula for rarely winning.

I think business people must understand that they are in the game to take risk. They must constantly teach their trusted employees that it is ok to be wrong sometimes if they are trying to move themselves and the company forward.

I think most of us struggle with the anxiety of being a loser. We need to find cheerleaders of risk-taking to support us when we take a risk, and when we strike out.

I applaud Buffett for finally making the Heinz deal after 33 years of trying, and accepting the possibility that after all those years of plotting to make it happen, it could still be a stinker.

Question: What in your life has been worth waiting for?

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That’s Entertainment

Jessica Chastain as CIA agent Maya in Zero Dark Thirty

It feels like we are in a golden period of film entertainment that I haven’t experienced in a very long time.

In the last couple of months I have watched the first season of the Showtime serial Homeland, which is absolutely brilliant. Way better than 24, which I loved until it ran out of gas in its later years.

I saw Lincoln, Steven Spielberg’s latest, and it was a terrific flick, even though I admit I slept through some of the first hour.

I also recently saw The Impossible, a film about the aftermath of the Thailand tsunami in 2004, through the eyes of one family desperately hoping to survive and find one another. It’s a “put you through the wringer” masterpiece. The Spanish director, Juan Antonio Bayona should win the Academy Award for best director, but with Hollywood politics, Spielberg probably picks up another.

And finally, Zero Dark Thirty, controversial for a waterboarding scene early in the movie in which American interrogators use torture to acquire an important piece of information which eventually leads to Osama Bin Ladin.

The movie is really not political. It is a brilliant piece of quasi-journalism, fabulous acting, a superb script, and remarkable moviemaking about the finding and killing of Bin Laden. The plot centers on Maya, a fictional CIA agent (likely based on several real agents), who pursues Bin Laden almost maniacally for 10 years and finally finds her man.

Zero Dark Thirty shares some kinship with Homeland, which stars Claire Danes as an obsessed CIA analyst who follows her hunches and U.S. spy data to stop an attack on America she knows is coming. The Danes character in Homeland and Jessica Chastain’s Maya in Zero Dark Thirty are sisters in their single-minded devotion to their similar missions.

These three works are amalgams of journalism and dramatic embellishment. I think we are in a remarkable period of creativity in filmmaking. The proliferation of new platforms to watch drama and reward the artists is working now.

But can somebody please tell me how I can get the second season of Homeland? I cannot wait until it comes out in August. I hear it’s available in Australia.

Question: Is torture justifiable for the defense of the United States?

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My Favorite Shoes (Not Made In China)

Lamar Hawkins, Owner/CEO of NAO do Brazil — Zurich

When I was traveling through Switzerland last fall, I stumbled upon a new Brazilian shoe store in Zurich called NAO do Brazil. I felt a refreshing energy as I walked through the door of the shop that reminded me why I love traveling so much. I was an American in Zurich, shopping at a store selling shoes made in Brazil, from a company owned by a Frenchman. I was given a tour of the shop by the location’s owner, Lamar Hawkins, an African American man from Austin Texas, and the store manager who hailed from England.

Every pair of shoes NAO sells is handmade, each size with its own one-of-a-kind exotic design. If you buy a pair of NAO shoes in the shoe size 44 (U.S. size 11) there will not be another pair with that exact same design in a size 43, and likely there are only a few pairs of the exact same design/size in one shop. NAO shoes are made of 75 percent recycled material, with the soles composed of recycled bottle tops and rubber, making them so flexible they feel like socks. They cost from around $65 to $85, depending on the materials used, to me not an outrageous price for comfortable hand-sewn shoes that are this flamboyant and cool. Lamar also made a point of assuring me that the Brazilian shoe makers receive a fair wage for their labor.

NAO currently has 20 stores spread throughout Europe (one in Dubai) but no stores actually in Brazil. Lamar said the company was going to open its first U.S. store in Miami soon.

Check out the video below in which Lamar explains the process of making one pair of NAO shoes.

Question: Is the current minimum wage fair?

 

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So God Made A Farmer

For me, Chrysler again won the Super Bowl advertising bowl in a rout. The Paul Harvey commercial for Dodge Ram trucks was absolutely brilliant (see the video below). It came in the fourth quarter of the game, after all the awful Coke and Bud Light commercials made you just want to turn the sound off and run to the john. What a dismal group of commercials this year – until the Paul Harvey narration of “on the eighth day God made a farmer,” over a gritty compilation of still photos of farmers doing their work. It followed in the footsteps of Eminem and Clint Eastwood in the two previous years, which helped reestablish Chrysler in the auto and truck market.

Guts, Glory, Ram – we saw it on the field, but missed it in the ads – until Paul Harvey.

Good day.

*******

All signs point to a strong economic first half for 2013 for manufacturing in the U.S. Vehicle sales are running at a 15.3 million unit pace. The stock market is at a five-year high, interest rates are low and staying there for a while longer, maybe two more years if Ben Bernanke calls the shots. Truck sales are strong. Aerospace and agriculture are perking along. Military is down, but hardly out. We are going to have higher taxes and reduced spending, we just don’t know how much of either.

Most people I talk to are doing well, but still hesitate to add a lot of people, though I see industrial properties beginning to fill up. The uncertainty about the impending changes coming from Obamacare is definitely pinching hiring. People I talk to are adding overtime, replacing machinery, outsourcing or trying to stay under 50 employees to avoid the complications of the “Affordable Care Act” in 2013 and 2014. The irony is that most strong companies in manufacturing have reasonably generous health insurance plans because they help in hiring and employee retention in a tight labor market for skilled people. Obamacare may very well push them to pay fines and classify their people in the Federal pool, but this is still unclear. With a lack of clarity there is less hiring and more overtime.

*******

The National Rifle Association, long seen as the big dog of political interest groups, is being shown to be an emperor who has no clothes – at least in some political races. My district, the Second Congressional District of Illinois – Jesse Jackson Junior’s district until he quit this year for “health” reasons – is having a primary election on February 26. Gun laws have emerged as the key issue. One candidate, Democrat Debbie Halvorson, is adamantly “pro gun” and has taken money from the NRA. Mayor Michael Bloomberg of New York and Gabby Giffords of Arizona have been building Political Action Committees to fund “anti-gun” candidates, and have been running ads specifically against Halvorson, which has put her on the defensive. She is also the strongest white candidate in a district with a black majority. It has now come out that one of the stronger black candidates, Democrat Toi Hutchinson, has also taken money from the NRA, which makes for an interesting twist.

This election will be an important test, with major national implications of the strength of the NRA when confronted by an equally determined and well-funded opposition. Halvorson may very well make the gun issue work for her in an election where 25 percent of the vote may win the primary.

Question: Can you make a living as a farmer?

 Dodge Super Bowl Commercial: Paul Harvey’s “So God Made a Farmer”

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Sibling Bowl I

Harbaugh Brothers Jim (coach of the San Francisco 49ers) and John (coach of the Baltimore Ravens) will face each other in the Super Bowl XLVII. Photo courtesy of The Christian Science Monitor.

The Super Bowl – just another football game ruined by the hype and the ads. But not this one, Sunday. This game really intrigues me because it is the Sibling Bowl. The brothers Harbaugh coaching against each other.

If two men ever had football in their blood it would be these guys. Their dad, Jack Harbaugh, head coached at Western Michigan and Western Kentucky. Son John coached running backs and linebackers under his father at Western Michigan for two years.

Father Jack later coached running backs at Stanford under son Jim in 2009.

Tom Crean, now head basketball coach at #3 ranked Indiana, married Joanie Harbaugh, Jack Harbaugh’s daughter, who he met while he was an assistant basketball coach at Western Kentucky.

When Crean was later the head basketball coach at Marquette, Jack Harbaugh was assistant athletic director there.

The most intriguing thing for me about the Harbaugh brothers is the gutsiness and flexibility they have shown late in the season. John Harbaugh of Baltimore fired Cam Cameron, his offensive coordinator, late in the season when Baltimore had to win out to go to the playoffs. Cameron was disliked by the players, and the leaders on the offense felt he could not give them a winning game plan.

Harbaugh replaced him with Jim Caldwell who had been fired last year as the head coach at Indianapolis. It worked for Baltimore.

The Harbaugh family.

Jim Harbaugh at San Francisco had the best quarterback in the NFL – statistically – in Alex Smith. But when Smith was sidelined by a concussion he brought in second year man, Colin Kaepernick, who he had pushed the team to draft in the second round out of Nevada the previous year.

Smith was deemed healthy enough to play after sitting out two games, but Harbaugh liked what he had in the mobile option quarterback, Kaepernick, and played him the rest of the season, right into the Super Bowl.

Most coaches in the conservative NFL would not have made those controversial moves, because if they did not work, they would have been pilloried in the press and scapegoated by their bosses, but the Harbaughs took the risks, following the football instincts of a lifetime in the game.

This is a talent that business people often find beyond their reach. We tend to stick with the mediocre hand that we are dealt because inertia is hard to buck. Safety is more appealing than risk.

So hail to the Harbaughs – father and sons. This will be your day. Will the brothers who share similar DNA be able to somehow surprise one another?

Question: Is nepotism good?

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