Monthly Archives: May 2014

From Making Bagel Baskets to Thinking Much Bigger

Courtesy of The New York Times. By JOHN GROSSMANN

In the mid-1990s, Drew Greenblatt started dialing his way down a list of 800 brokers, lawyers and accountants, looking for a business to buy. He had sold a security alarm installation company, and he was looking for four qualities in his next venture: an honest seller, a viable market, a rational purchase price, and a business that sold to other businesses. He was through with coddling consumers.

In 1998, after three years of searching, Mr. Greenblatt bought a sleepy Brooklyn manufacturing company with about 18 employees for $600,000. The company made one product, wire baskets for bagels, that it sold for $12 apiece. That first year, sales approached $800,000.

Now based in Baltimore, Marlin Steel Wire Products still makes bagel baskets, but they account for less than 1 percent of sales. The company employs 25 people and manufactures 80 to 100 custom-designed products a month, including precisely engineered wire baskets for the aerospace industry that cost as much as $5,000 apiece. “We’re on a path to do $8 million this year,” Mr. Greenblatt said.

In a recent conversation, which has been condensed and edited, Mr. Greenblatt, 47, talked about the phone call that saved his business and why he’s bullish on small manufacturing in America.

Q. Why did you buy a bagel basket company?

A. It was a time when Christian people, not just Jewish people, started eating bagels like crazy. Chains were opening up — you wouldn’t put one store in Akron, Ohio, you’d put five. We were selling into those chains. We were the bagel basket manufacturer.

Q. Were you worried that it might be a fad?

A. I saw absolutely no end to it.

Q. What happened?

A. We had two huge, horrible events occur. The first was the Atkins diet. Everybody was purging carbs from their diet. Plus, baskets from China started coming into Manhattan for $6 — less than what it cost me for the steel. I was paying $7 and selling the baskets for $12. Suddenly, we were hemorrhaging cash.

Q. Did you have a backup plan?

A. I had no clue.

Q. And then you got a phone call?

A. I got a call from a mechanical engineer at Boeing. He needed 20 baskets that would have to be customized. I said to myself, this would be a pain. Einstein Bagels buys 1,000 to 2,000 at a time. “I’m going to have to charge you $24,” I said, thinking, that’s twice what I charge Einstein, and Einstein yells at me. He said, “O.K., whatever.” That was an epiphany.

Q. But you had to up your game?

A. All a bagel shop owner cares about is that the bagels don’t fall through his basket. He doesn’t own a tape measure. It’s a completely different world with Boeing or Medtronic. They’re making a very high-quality product, and they’re putting very expensive parts in our baskets.

Q. What had to change on your factory floor?

A. When I bought the company, we had minimum-wage employees who would hand-bend each of the four bends at the top of the bagel baskets. They would do four bends on basket after basket, all day long. Straight out of Dickens. To make a better quality product, we brought in $3.5 million worth of robots. We needed different people to learn how to operate these robots and computer-operated lasers and other fancy equipment. We’ve invested a tremendous amount of money in training them, and now, 20 percent of our employees are degreed mechanical engineers.

Q. What had to change for you, as chief executive?

A. I didn’t know what a Boeing or Caterpillar or Cummins engineer would require. I asked them, “How can I help you save money?” They might say, “Right now we’re running at 2 percent scrap. We want to get to 1 percent. That will save us millions of dollars a year.” What if we could design a basket that gave them virtually no scrap?

Q. How does a basket do that?

A. When a basket comes down a conveyor belt, if an employee just tosses the pieces in, they can get broken or scratched, so they may have to rework it and reinspect it and put it back into the bin, where it may get scratched again. We make the baskets articulated in a certain way with a soft landing so every little part has a home and they can’t knock into the part next to it. We also figure out a way that the same basket will work from the beginning of the line to the end of the line. It will go through acid baths, go through ovens.

Q. Tell me another small-manufacturing success story.

A. There’s a company called EJ Ajax in Minnesota. It is a stamper of metal parts and has gone since 1991 without a safety incident. I spent a day with Erick Ajax, one of the owners. He’s an open book. He taught me all his techniques, just so my employees would be safer. Because of his teachings, we’ve gone 1,967 days without an incident.

Q. Is there a resurgence in American manufacturing?

A. In recent months, I’ve been fortunate to work with two Fortune 100 companies. One is closing a plant in Asia. The other is closing their vendor out in China, because they want to buy things only in America. They’re doing this because they need better quality, and they need on-time delivery. They can’t wait for the boat to get here.

Q. Can you compete on price?

A. The price differences are starting to get closer, because companies like mine are so automated that our labor costs as a percentage of sales have plummeted. China’s big benefit was they were paying workers 30 cents an hour at one point, and we were paying $15 an hour. Now they’re paying $3 an hour, and we’re paying $30 an hour, but we’re so automated and our guys are so efficient, that our $30-an-hour guy is way more than 10 times as efficient as their $3-an-hour guy.

Q. Steven Rattner wrote in The New York Times early this year about “The Myth of Industrial Rebound.”

A. One of his points was that a $14 or $15 job in Tennessee or Kentucky is not so hot. Truth of the matter is, if the alternative is a minimum-wage job, $14 or $15 an hour is pretty good. That being said, the average manufacturing employee in America makes $77,000 a year with benefits. Our average is also in the 70s.

Consider one of those Fortune 100 companies I spoke about that’s bringing a factory back to the United States. If I get the job, I could initially need 16 workers, then I’d automate the heck out of it and probably get it down to 10 on the way to five guys. Because I’m going to put so many robots on it, I’m going to work faster. The quality will increase, and I’ll have less rework. So, yes there will be fewer jobs — in China.

Once I’ve got these five or six new employees running a cell, making these components for this large company, we’ll have established a moat — the Chinese can’t beat me. What, you’re better quality than me? You’ll ship faster than me? You’ll have lower freight costs than me? No. It won’t be like the old days where I’ll have the 80 employees doing mundane, carpal tunnel work. But you know what, it’s better, because the six guys are going to be making good money and are going to be sending their kids to the University of Maryland. They’ll be able to go on vacation. It’s going to be good American jobs.

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Demise of White Owner in Black NBA

By Lloyd Graff

Sterling with ex-girlfriend V. Stiviano

Donald Tokowitz, born in Chicago in 1934, is a great American success story. His immigrant parents moved to Los Angeles when he was two years old and changed their name to Sterling. Son, Don, has lived the American dream, of sorts, becoming a divorce lawyer investing in L.A. real estate and then buying a pro basketball team. Back in the early ’80s, late L.A. Lakers owner Jerry Buss, with whom Sterling had real estate dealings, encouraged him to buy an NBA franchise of his own. It was a great chance to have some fun, get good tax breaks, meet women, and make a killing. And Sterling did, first with his San Diego Clippers, then the L.A. Clippers.

I’ve long been fascinated by Sterling because he is the archetype of the brilliant scoundrel who doesn’t care what people write about him. He just goes on about his business, doing it his way — piling up his millions, winning awards from the local NAACP chapter, and racking up a record of sports failures rivaling the Chicago Cubs. His final undoing is almost the perfect tragic ending. His erstwhile mistress, who he claims embezzled $1.7 million, set him up by taping a conversation that sounds flagrantly racist by today’s standards. Ironically, she, herself, is of African-American and Hispanic background. Sterling had been scheduled to get a second NAACP Man of the Year award in a few days. That one was canceled.

Sterling, by most accounts, is a billionaire and a rogue. At 80 he has amassed a fortune, lost a son to a drug overdose at age 32, and now finally — after hiring a terrific black coach, Doc Rivers, also a Chicagoan, to push the State Farm spokesman, Chris Paul, and the Kia symbol, mixed-raced Blake Griffin — he was on the cusp of an NBA Championship. Now he’s forced to sell the team for about $500 million and be a footnote to American racial history.

Race in America is such a colorful issue. I sympathize in a way with Sterlng. I imagine that in his own mind he is a champion of African Americans. As an owner of a team in a league comprised of 76% black players, an employer of a black coach, and having a long list of black acquaintances and a mixed race girlfriend, Sterling could have been a symbol of American racial change in his lifetime. But race in America is not simple.

I’m 10 years younger than Sterling and also from Chicago. Dealing with race in America is extremely complicated and subtle. Sterling was an easy target because his history is public and his utterances so politically incorrect. If he made his remarks at a cocktail party fundraiser for Patrick Leahy, the most liberal Senator in Washington, to whom he contributed money, it might have never surfaced. But an angry African-American former mistress is no Pat Leahy. And at 80 years old you’re not so careful about your words.

Sterling is a 1950s kind of guy, an uninhibited white guy living in a black NBA. It’s a really hard combo unless you are a Zen master from Montana.

America has moved so much in Sterling’s lifetime, in my lifetime. But most old white guys like Sterling still live with the prejudice and stereotypes of childhood. Sometimes on the way to the NAACP fundraiser they can forget who they are supposed to be and revert to the crude L.A. divorce lawyer they started out as. Sterling really wanted to win an NBA title this year, but regardless of what the L.A. Clippers do, his name will always be associated as nothing more than a pathetic anachronism of American racism.

Question: Was it fair for Sterling to have been banned from the NBA for life because of racist comments he made in a private conversation?

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