Monthly Archives: December 2013

What I Saw in 2013

By Noah Graff

Left to right: Lloyd Graff, Rex Magagnotti, Noah Graff in front of Index MS 32C at Graff-Pinkert

The Graff-Pinkert used machinery business, or the “treasure hunting business,” as I sometimes call it, is often fueled by events which some people would characterize as lucky or serendipitous. We often go into a customer’s shop to sell a machine and end up buying a machine instead. A random tip from a customer or dealer we’ve never met before has led us to a source of equipment or information that altered our business dramatically. But you only find treasure when you’re ready to receive it, you have to make your luck. The following are a few big deals from 2013 in which I believe we made our own luck.

We bought a 2007 INDEX MS 32C at an auction in Australia and shipped it all the way to the U.S. (It cost us $70,000 for the shipping and duty alone). This was a ground breaking deal for us, as we had never paid as much for one machine before and we had never before owned a late model completely CNC multi-spindle screw machine. A few months after its arrival we sold the machine to a customer in Europe, who was found by a dealer of long time acquaintance, but who we had never worked with before. The dealer was totally off our radar. We had never gotten a promising lead from him before. But somehow, he found out we were selling the machine, probably from an email blast or an online advertisement. He called us up and before long the machine was on its way to Europe.

Later in the year, we bought some disgusting looking Acme Gridley 8-spindle machines in a little online auction. The swarf on the end-tool slides of most of the machines was caked on inches thick. They were some of the dirtiest machines we’ve ever bought. The machines were stored so closely together at a rigger’s warehouse that my associate Rex Magagnotti and I weren’t able to get conclusive end-tool slide to stem readings. I also ruined a pair of jeans while climbing on top of one machine to look for snubbers (carrier clamping). We ended up purchasing the machines for modest prices because most people never went to inspect the machines. The other bidders were scared off by the awful photos of the machines online, so they weren’t going to risk the cash. Because we had inspected the machines ourselves we knew they were complete, so we decided that the worst case scenario was that we would get some decent spare parts machines. Yet in the end, we were pleasantly surprised by several of these ugly machines (after all, it’s what’s on the inside that really counts). After our cleaning department worked their magic, scraping away gobs of thick swarf, the machines looked quite presentable. The oily swarf that had been caked on for years had actually prevented the machines from rusting. We were also very happy to find that several of machines had good end-tool slide to stem readings, when we were finally able to test them properly.

One of my favorite recent deals was for a 12-station Hydromat. One of our Hydromat customers had contacted us looking for a specific spare part. We didn’t have the part on the shelf, but we took it upon ourselves to call around to various Hydromat shops we knew of to see if anybody had one they would sell. I reached a shop in Iowa, and the shop manager said he would check for me. In the end, he couldn’t find one, but after talking to him a little while, I found out that his company was phasing out some of its Hydromat work. I asked him if the company had any machines it wanted to sell and he told me that there was a 12-station that had been sitting idle, trapped in a container behind some other iron odds and ends for two years. He said there were few units and he had no idea what the machine’s condition was. After months of persistence, we finally got the company to take the machine out of the container. We drove up to see the machine and bought it that day for modest price. Was that deal lucky? No, I don’t think so.

This year I’ve witnessed that if you put yourself out there and try things, stuff will happen — you will find deals. Go visit a customer, make a cold call, scour the Web, tinker with machining issues in the shop. Then, allow yourself to be in the right state of mind to realize when you’ve discovered an opportunity. You won’t find anything, unless you are ready. Keep your eyes open in 2014. Treasure is out there if you can just recognize it.

Question: Tell us something you will remember from 2013.

Noah Graff has been Features Editor at Today’s Machining World since 2005, and a Treasure Hunter at Graff-Pinkert since 2011.

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It’s a Wonderful Business

By Lloyd Graff

Left to right: Manny Buenrostro, Lloyd Graff, Rex Magagnotti, Brian Crowner looking at Acme RBN-8

Yesterday was an emotional day for me. I gave out end of the year bonus checks to the employees of my used machinery company, Graff-Pinkert, holding impromptu talks with each person after delivering each envelope. I thanked each person for their contribution, asked them how they could improve next year and how I could help them. Paternalistic, very old school.

I found myself holding back my tears during some of the sessions. I scurried to an empty shop office to pull myself together — and wept.

Some context. As I drove to work yesterday, I was wallowing in a sense of futility. I had been working on a dozen deals and they all felt stalled. Some will gel soon I think, but my feeling of frustration was sickening. I had made projections expecting at least a few of them to close by now, but man plans and God laughs. I was defining my year’s work by an accountant’s calendar.

But in a small family business, fulfillment is not just about money. Many of my peers have retired now and wonder why I am still working. I have a hard time explaining my feelings to people who have worked in big organizations, but when I struggle to make the pieces fit together and lose sleep worrying about bank loans and expectations not reached, I start to wonder why I am knocking myself out at 69. My son Noah, who is working very closely with me now, is starting to internalize the emotional roller coaster of business ownership, but until the buck stops with him, it will still be a foreign notion. My Dad, Leonard, lived the business in a totally visceral way, but I never felt it in full Zantac mode until I was in charge.

When I gave out the checks, a couple days after my birthday, I felt the gravity and the gratitude of the moment. I understood in my heart of hearts why I work so hard and feel so passionately about the business. The men and women I work with really care about what they do, and depend on the company.

Hector Serna has worked on the cleaning rack for 30 years. He is a perfectionist about transforming oily, cruddy machines into beautiful, functional mechanical Rembrandts. He is highly demanding of the guys he manages. His adult sons, Joey and Mario, joined him to clean machines several years ago and he wasn’t easy on them. Hector lost his wife a few years ago, and his gallbladder occasionally acts up, but he puts on his shop apron every day and attacks the filthy screw machines. His sons are now apprenticing as screw machine rebuilders in the shop, but Hector still relishes the challenge of turning the ugliest of multis into works of art. Graff-Pinkert has been his life’s work, and mine, too.

Greg and Manny Buenrostro have worked for the company over 20 years and have made themselves into accomplished machinery rebuilders. They are sophisticated in diagnosing problems from anxious clients. They started at Graff-Pinkert knowing nothing, yet today they are respected for their skills around the world and are now training Hector’s sons to do what they do.

Rex Magagnotti has worked for Graff-Pinkert for more than two decades. Yesterday he was prepping a machine himself for an impending inspection, because he wants it right. He is our sales manager, but that hardly describes him. I have to cajole Rex to take a vacation. I depend on him for advice on a myriad of topics and defer to him frequently. He is training my son Noah more than I am, and often I find myself arguing vociferously against both of them. They think I am too soft as a negotiator.

Cathy Heller has been handling our spare parts operation for 20 years. Her relationships with customers have grown to the point where she knows the names of their pets.

Yesterday, I truly felt deep in my heart that the company isn’t only “my business.” When I gave Manny his bonus check, I thanked him for his terrific work ethic and he thanked me for “being there for everybody.” I finally connected with my emotions. I get to do this business. Graff-Pinkert could easily have died five years ago with my heart attack. It could have ended when my brother and I split up last year. It certainly could have folded in the 2008-09 economic debacle. But we all pulled together and now celebrate another year in the life of a small “family” company, 72 years old.

Take a moment to share your own story.

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GM’s Grudge Match

By Lloyd Graff

Stallone versus De Niro in Grudge Match

I’m looking forward to the Rocky redux coming out Christmas day called Grudge Match, starring Sylvester Stallone and Robert De Niro, both playing aged boxers coming back for one more bout.

But just as interesting to me is the sight of the strutting, cocky General Motors, fresh out of bankruptcy, challenging BMW, Ford, Toyota, and even Tesla to a fist fight in the auto arena.

Right now GM is everywhere. I’m waiting for even Mike Tyson to start shilling for them. They have their own Italian stallion (mare) in new CEO Mary Barra, who is on every magazine cover but Playboy. GM is positioning Cadillac as the BMW killer, while dismissing Mercedes and Lexus as over the hill World War II vets.

GM is hyping Cadillac versus Tesla as though it is Eminem slugging it out with sexy little Taylor Swift. GM has noticed Tesla’s $12 billion market cap and wants to knock off the Elon Musk publicity machine with its own.

I think they are pegging the Ford F-150 as a future target with a Silverado attack, but for now it’s Cadillac against the sissy brands and then a comeback title fight against the “Ultimate Driving Machine.”

I’m fascinated by the GM approach, and I think we all can learn from it. Even if you don’t have all the money and the cards, act like you do. Be the Mouse That Roared. Guarantee victory over the favored opponent like Joe Namath did against the Colts in 1969. Play your hand like you have four aces. You may start to believe in yourself and become dangerous.

Question: Will Cadillac ever be “Cadillac” again?

Watch Johnny Cash sing about his Cadillac
in “One Piece at a Time.”

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Happy Birthday?

By Lloyd Graff

My birthday is in a couple days.

Just another day. A number. Just a number.

A day to celebrate. But it haunts me, too. It’s a day closer to my last one.

CELEBRATE, celebrate, celebrate. That’s what “they” say. What do “they” know? Do “they” know how it feels to get to the age that your Mother died? Do “they” know how it feels to suffer from the same health stuff your parents had?

I know I’m supposed to wake up in gratitude, that I survived the night and get to live another day. Often I do, when I can separate from my fear of death and the unknown. The Believers are sure that something good awaits them. They are lucky, I guess. All I am sure of is that some good people will remember me well — for awhile.

I’m sounding rather dark in this birthday essay, I suppose. Oddly, most of the time I’m twinkling brightly, reflecting the light of life, my wife, Risa.

My son, Noah, teaches me something daily, with his questions and his attitude. My two other children, Sarah and Ari, support me from a distance. My grandchildren are a pure energy source.

Still, I struggle to joke about the number that looks the same right side up and upside down — 69. It has special significance because I met Risa in ’69. A very good year.

Yet it seems so old — for a mere boy — waiting to go outside to throw snowballs.

Question: When did you stop looking forward to birthdays?

Birthday Scene from Seinfeld

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Buy a Machine for 179

By Lloyd Graff

Matthew Lesko, That crazy guy on TV advertising “Free Money” from the Government

I normally deal in subtleties — close calls on whether to buy a machine, take a gamble, hire a new person, eat a piece of pie. But occasionally a deal comes along that is so breathtakingly clear you just shake your head and say YES!

We are in one of those odd moments. When the handwriting on the wall is so clear even a blind man can read it.

The investment incentive, Section 179 of the Federal Tax Code, can bring savings of more than a million dollars in taxes in the right situation, and is most likely ending in three weeks. Congress appears to be in no mood to extend it, so unlike milk subsidies and extended unemployment benefits, which are issues that are in play for the politicians, this tax goodie is one of those esoteric ones that really will evaporate at year’s end.

I wrote about this not long ago, but it is worth returning to, because it is truly important. If you own a shop and have taxable income and need a truck or a lathe or robot, the government is begging you to BUY IT NOW.

If you are GM, GE or Google, it is irrelevant because your spending far exceeds the maximums, but if you are a small or medium-sized company, please take note. This tax incentive, which was enhanced during the recession of 2008, is finite. The technicalities of the law are crucial. A buyer needs to have the item purchased, paid for and on his premises before the end of the year. We are hearing that many riggers are all booked up now because companies are rushing to get stuff on the floor before the deadline.

Remember, Section 179 applies to both new and used capital equipment.

This is a wakeup call not a sales pitch. In talking to clients I have been shocked to hear how few of them are aware of the deadline. This is not Obamacare, it’s a law that can help you in a significant way. But it will be vanishing in three weeks.

Question: Do you think it’s the time to buy?

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Do You Care Who Made It?

By Lloyd Graff

DMC America Grand Opening

Recently, I spent a nice few hours with Rory Gintert, head of DMC America Inc., a large, successful Korean machine tool builder just starting to sell machines under its own name in America. Gintert showed us a beautiful array of sophisticated CNC machines at their newly finished facility in South Elgin, Illinois.

How is it that such a large and ambitious machine tool builder like DMC is unknown here?

DMC has been building bread and butter machines for Doosan, Hyundai and Samsung for many years. It kept them busy as they built out their own product line in Asia. Now they want to play in the same arena with the big boys who had previously been their customers and put their own brand and colors on the machines. Gintert is signing up distributors all over North America, with the advantage of having worked in the machine tool industry for 28 years, including a long stint with the Haas Factory Outlet in southern Wisconsin.

Most people do not know that big name machine tool companies often outsource their production to lesser known yet capable firms with extra capacity. I learned this a decade ago when I found out that ZPS, the Italian owned Czech builder of the Euroturn (ZPS, Mori-Say) Multi-spindle screw machines, produced quite a few lathes for Okuma in the Czech Republic. Such reciprocal agreements are fairly common in Asia.

Talking to Rory Gintert got me wondering who the big dogs really are in the machine tool world.

According to the Metalworking Insiders’ Report newsletter, the Shenyang Group of China leads the pack with slightly larger sales than Trumpf of Germany, the king of sheet metal and laser, though Trumpf is bigger in total sales. Shenyang’s major brands are SMTCL, Scheiss, ZJ and Fiyang. (I hadn’t heard of them all either).

Gildemeister ranks third, and Yamazaki Mazak fourth. Mori-Seiki is ninth and Okuma, tenth. Haas is 16th with just under $1 billion in sales behind Hyundai and Doosan. Citizen-Cincom, which owns Miyano, showed $675 million in revenue.

*****

I read a slightly disturbing piece in Bloomberg BusinessWeek about the importance of subprime loans in the current car buying boom, which has almost reached the sacred 16 million unit mark.

Yield starved investors have developed a healthy appetite for subprime auto loans, packaged together and sold as bonds. Car dealers and makers are loving it. This year, investors have bought $17.2 billion. Chrysler has been the big winner with 58% of the loans taken out to purchase Dodge brand vehicles above 4.2% APR according to Edmunds.com. The average Dodge loan carried is 7.4%, and 23% of loans had APRs over 10%. Chrysler has had 43 straight months of rising sales. The company board is eyeing a public offering.

This is how the Fed has helped out business. I’m not knocking it, but if and when Janet Yellin and the Fed allows rates to rise, Chrysler may feel it the hardest.

Question: Would you care if your Ford was made in a Chrysler plant?

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