Monthly Archives: May 2015

Is McDonald’s Broken Today?

By Lloyd Graff

Old McDonald’s is under siege these days. Demonstrators at the Oakbrook headquarters for $15 per hour minimum wage. Flagging sales. Franchisees are unhappy with the company. The stock is sinking. Burger King, of all competitors, is gaining share with fried chicken french fries advertised by talking roosters. The world doesn’t like McDonald’s at the moment so they fired the last CEO, who had just gotten his feet wet in the job.

Do they deserve a break today? I doubt it.

I visited a McDonald’s today to buy a biscuit and coffee, something I very rarely do, but I was in a biscuit mood, and I like theirs.

I decided to negotiate the drive-through, but I did not understand the signage because there was more than one ordering station, so I had to go around twice. I ordered my biscuit and coffee and was forced to make a decision on cream and sugar by the anonymous order taker. I got rattled by the question. Did I want one sugar, one cream? I didn’t know, because I wing it, so I said one of each by default.

Decisions. What a way to start my day.

Then I drove to the pay window. Why not pay when I received my food? What if I wanted to order another biscuit?

More overhead, less efficiency for McDonald’s, which was empty at 8:15am.

Then I rolled to the window to collect my food. A surly young woman passed me my coffee and addressed a question (I think) to me. Unfortunately, I found her one word question incomprehensible. This was embarrassing. I looked inquisitively at her and she repeated her word again, and I still could not understand what she said.

“What did you say?” I asked. “Jelly?” she said. I thought to myself, why did she make this an uncomfortable moment?

She was a young African American woman who spoke with an inflection that was difficult for an older white guy with mediocre hearing to understand.

Yet “jelly” should not have come between us if McDonalds or a local manager had coached her on how to address me in a way I could more easily understand her.

“Sir, would you like strawberry jelly with your biscuit?” she could have asked. And I would probably not be writing this column.

McDonalds, please train your people. Teach them to smile. Instruct them how to address a customer, politely, rather than building in contention.

I took my bag with my biscuit and found that there was no butter, but two packets of jelly – one grape, one strawberry — I didn’t even want, and coffee with the wrong amount of cream and sugar for my taste. One little encounter, yet they messed up my experience, even though the biscuit was quite tasty.

We all have several encounters every day with coworkers, customers, suppliers, family, and friends. We probably screw many of them up because we do not see or hear ourselves the way others do. For McDonald’s, which has a million encounters each day, training is crucial. The “jelly” woman had no idea she was annoying me today, but a well trained manager, monitoring her counter people could easily correct the problem.

Steve Easterbrook, the new CEO at Oakbrook headquarters, probably has no idea that the “jelly” woman just irritated a client. He does know that “jelly women” are demonstrating in front of his office for $15 per hour and his 29,544 franchises are angry because the company stores just announced a $1 hour raise above the national minimum wage. Nobody’s happy with McDonalds these days.

Question 1: Do you go to McDonald’s?

Question 2: Is McDonald’s broken today?

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Controlling Education

By Lloyd Graff

For a century public education was the channel for students to access knowledge that would enhance their lives in many ways. It was the path to middle class lives for tens of millions, the Americanizer for immigrants, the building block of successful democracy.

But today the conventional model of top down primary and high school education is rightfully doubted by many in America. The doubt cuts across race, educational background and economic status. Public education with calcified Boards of Education, unionized teachers, politicized curriculums are doubted. With the doubt comes a determined counterattack from those who currently control most of the education money pool.

The rebellion against the status quo starts in daycare, graduates to nursery school, and gains momentum in grade school. Parents want more for their children than old school schools can give them. It may be as basic as more hours, or better lunches, or freedom to experiment with bugs, or snails, but for many parents yesterday’s education does not suffice for Little Johnny today.

The Charter School movement, which has blossomed, then withered, and mutated into home schooling and Co-op efforts is one aspect of shifting ideas about the public schools. Big educational institutions like city public school and large Catholic educational systems are struggling to compete for students and dollars. Charter Schools have been an end run around the stagnation. They are usually hated by unions and barely tolerated by entrenched educational hierarchies. Around the country there is ferocious competition for students and tax money. Charter schools are usually the enemy of the status quo. Wars are always being waged in Court and legislatures over them.

Home schooling, with the support of Internet initiatives like the Khan academy, are enabling parents to educate competitively at home, but the huge number of single parents and the need for two incomes makes home schooling a tough option for most people.

Education is generally controlled locally, and individually, but it strikes me that it could be an opportunity for a Republican presidential candidate to separate him or herself from the field by supporting “freedom of choice” in education vouchers to subsidize the opportunity to choose the education a parent desires for their kid. I would have no objection to these funds being used for parochial education, though purists and atheists will mount a gigantic fuss. Even if the funds were just for “secular” education, they could radically change the current stranglehold of calcified Boards and protective unions over American education.

I see businesses all over inject themselves into the vocational educational arena, because public schooling usually doesn’t “get it.” I see firms start training programs for machine operators and programmers because they want to develop talent to fit their businesses and understand what the best ways to bring along that talent.

Businesses will find a way to regenerate themselves or they will die. We have a client who is buying Hydromat rotary transfer machines to put into local technical schools where their factories are located to build their skills pool.

I do not see public education as a lost cause in the United States. It is just caught up in an enduring war between those who want control of the money and those want control of how their children gain knowledge of the world. It is a tug of war with each side winning a few inches and then losing it back. I wish the 2016 election would give voters a national forum to take sides on paying for education.

Question: Were you well-educated? Your kids?

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I’m Not Moving

By Lloyd Graff

The house across from Lloyd Graff’s house. It has been on the market since 2012 for $182.500 and is currently pending.

It was refreshing to read about U.S. home prices rising 7.4% over the prices of one year earlier. Of metro areas, 22% showed double digit increases. The median family home price was $205,000 versus $191,000 one year earlier. Homes are selling at an annual rate of 5,000,000.

But not where I live.

I get to watch the best and worst of times as I observe the moribund market for the large beautiful homes in my village of Olympia Fields, Illinois, and compare it to my daughter’s neighborhood of small 60-year-old homes in Palo Alto, California, the center of Silicon Valley and home to Stanford University.

The contrast is amazing to observe. Directly across the street from my house two homes have lingered on the market for years, both spacious 4-bedroom houses on 15-20,000 square foot lots. Squatters lived in one before they snuck out in the dead of night 6-months ago.

In my daughter’s neighborhood, potential buyers launch campaigns to endear themselves to sellers to enhance their buying position. Houses usually sell in one week, often with overbids.

In my neighborhood a 2500 square foot house might sell for $175,000. An 1800 square foot house on a 7500 square foot lot in Palo Alto brings $2 to $3 million depending on location and amenities.

It’s supply and demand to the nth degree playing out. People from all over the world flock to Silicon Valley for high paying jobs. In Olympia Fields the baby boomers who bought 35 years ago are leaving for warmer climates, buying a condo in the city or just dying off. It seems like very few folks want to live in my community, even though it has lovely parks, good access to commuter trains and expressways, and minimal crime.

The simple answer is that affluent white people do not want to buy into an Olympia Fields that is comprised of about 50% African American people. But the interesting corollary is that not enough African American people want to live in Olympia Fields to fill the existing homes and push up the prices. It appears that upwardly mobile black people do not want to move to an area that seems “too black” for them.

I grew up in the bad old days on the south side of Chicago next to Jackson Park where the new Obama Library may be built. I used to practice my 5 irons and putting on the 6th green of the golf course across from our house. It was a lovely neighborhood back in the 1950s and ’60s, populated by caucasians adjacent to an African American neighborhood. There were no integrated neighborhoods then. When black people moved in, whites moved out. I observed white flight dramatically. In my public grammar school, Parkside School, there were 48 kids in a class, taught mostly by veteran Irish lady teachers who assigned seats arbitrarily. Black kids were mostly on one side of the classroom, whites on the other.

My high school was the University of Chicago Lab School, a private school for the U of C faculty’s kids, which expanded to take in kids from the surrounding areas. Many students were like me–they had parents who would not send them to the almost all black public high school, Hyde Park, that my residence would require.

My wife, Risa, is from Charlotte, North Carolina, where she went to Myers Park High, an almost all white school, just before Charlotte became the test case for school integration in the South.

We both wanted to live in a place that was different than the places we came from, so we ended up in Olympia Fields, rated one of the best places to live in the Chicago area back in the 1970s. It was integrated racially, had a small but vibrant Jewish community, and good though not great schools.

We stayed. And we stayed. And now many of our neighbors are African American, homes are vacant, schools are primarily African American kids, and home prices are one third of comparable dwellings in Northern and Western suburbs of Chicago.

This is race and real estate in Chicago in 2015. As a writer it is a fascinating story that I have seen unfold. As a real estate owner it is depressing to see the values drop so low.

I know many of our friends who have left the area wonder why we stayed in Olympia Fields.

The simple answer is that we do not want to leave. We love our house. My wife has her practice in the house, I live 12 minutes from our factory. We have a gorgeous view of a leafy park and a soccer field. We still have good friends in the area, and Risa thinks the local Starbucks makes a darn good mocha Frappucino.

A condo in the city would cramp us and feel stale. We have lilacs blooming now and we’ll be planting tomatoes in a few days. And that condo would cost us three times what we might be able to sell our home for.

So we stay and see how it plays out. Race and real estate are permanently intertwined in Chicago. I accept it, even if I hate it. Maybe it will change in 50 years, although I doubt it.

Question: Do you wish you could move?

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Industry Scuttlebutt

By Lloyd Graff

Mitch Liss, President of Edsal Manufacturing, being photographed by Today’s Machining World for an interview in September 2010.

Mitch Liss of Edsal Manufacturing, who I interviewed at length for TMW five years ago, is moving his shelving manufacturing company out of Chicago to beautiful Gary, Indiana. I was shocked when I saw the announcement because Liss is a lifelong Chicagoan, whose employees came largely from the city. But Gary provided incentives. Chicago taxes were brutal, and Liss needed room for expansion, which Chicago made prohibitively expensive. If you hit business people in the nose long enough they will eventually walk out of the ring.

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I spent a lot of time at the recent Columbus PMTS Show talking to people who have assorted Swiss-type CNC lathes. It struck me that allegiances to each manufacturer were surprisingly fragile and fluid. Star users were switching to Citizen, Citizen fans switching to Tsugami, Swisstek getting into Tornos houses, etc.

Loyalty was tissue thin. Usually the brand switching was not because of sweet deals by a competitor, but because of irritation over the old brand’s service. The friendly, efficient, knowledgeable service person who showed up on time and finished the job quickly was the reason to stick with a manufacturer. Repeated repair snafus killed relationships over time.

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The Mayweather Pacquiao story just gets worse and worse. It evidently was a boring fight for those who paid $100 for the privilege of watching two aged boxers jab each other for 12 rounds. But now we learn that Manny had a damaged rotator cuff that he neglected to report. Oh, the power of a $120 million guarantee. Pacquiao has already had surgery. Anybody want to watch the re-match?

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The candidates just keep on coming for the Republican primary race for president. Carly Fiorina just announced. She evidently thinks her business credentials as the head of Lucent and then Hewlett-Packard will propel her to prominence. Lucent stock dropped to $2 a share with her brilliant moves. At H-P she paid a fortune for Compaq Computer, which nearly wrecked the giant firm. Well, she has not committed a felony or inhaled, as far as we know, so I guess she’s a legit candidate for now.

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California communities are faced with very hard decisions to make about the drought that has hit over the last few years. Weather patterns change. El Niño could switch quickly to La Niña, which could end the drought. Big snows later this year in the mountains could quickly rebuild the local water supply. The Greens are trying to capitalize on the dry conditions by proclaiming it a manmade event.

Some communities like Carlsbad, California, just north of San Diego, have decided to build desalinization plants. The one in Carlsbad will cost $1 billion. It may be money well spent, but 20 years ago Santa Barbara, California, spent a few hundred million to build one and then mothballed it a couple years later when the rain and snow came back. It could happen again. Water conservation, including holding back water from the enormous almond groves that were planted when the almond milk craze hit several years ago, might make more sense than huge capital investments in desalinization right now. I remember when Lake Michigan was going to go dry. Now it’s overflowing.

(Click here to read the interview from 2010 with Mitch Liss)

Question: Do you feel loyalty to your machine tool brands?

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The Europeans are Coming! The Europeans are Coming!

By Lloyd Graff

Matthew McBride and Arnaud Clerc, of French firm, Bouverat Pernat

The economic numbers these days indicate a relatively weak first quarter of business in the U.S. The indicators I see in the machine tool business verify this, except automotive still seems strong.

The strength of the American dollar and the weakness in oil and gas account for much of the slack in manufacturing. At the recent Precision Machining Technology Show (PMTS) in Columbus, Ohio, I talked with several European machining firms who are searching for business here. Their reasoning is that the shift in the dollar over the last several months gives them the opening they have been waiting for to land business here.

Noah and I had a long talk with Matthew McBride and Arnaud Clerc, two representatives of a French firm, Bouverat Pernat, located in the Haute-Savoie region near Geneva, Switzerland, where the tradition of watch manufacturing has spawned generations of super skilled machinists and machining companies.

What I found fascinating in talking to these folks and other people from companies in Germany, Spain and Italy, who are also searching for work in America, is their confidence that they can compete successfully in the U.S., despite the impediments of distance, language, and high labor costs. They really view the American market as a goldmine if they can just find the “secret sauce” that allows them into America’s “machining club.”

We have discussed the barriers to entry in the U.S. with several machinery buying Graff-Pinkert customers. Like many clients they really want to discuss their equipment and skills. What we stress to them is that their prowess is a given. We know they are impressive machinists to survive and prosper despite high labor and ancillary costs in the expensive European manufacturing world.

American buyers are interested in price, reliability, and consistent follow-up. Being close to the buyer is helpful, because the supply chain is still imperfect. The long dock strike in California is a constant reminder to buyers who believe in a  “just in time” world, despite all of the impediments that the real world drops in their path.

Recently, we have been asked by several foreign firms to introduce them to big American turned parts buyers, as if we had a magical key to their purchasing departments, but there is no magic, no secret sauce. You work the phones, the Internet, knock on doors, build your network piece by recalcitrant piece.

The Chinese had a 15-year window to build market share here with killer pricing and slow-reacting American companies. Those days are definitely over. It feels like everybody is pretty even on pricing after the big washout of manufacturing firms. So when you have a sudden shift in the value of the euro and yen as we’ve had in the last six months, it feels like the gyroscope of business has shifted mightily.

I think the weak numbers of the first quarter reflect much more than the awful winter in the Midwest and East coast. The oil components folks have hibernated, pushing metals prices into the toilet. Oil and gas is not a huge piece of the machining world, but when it goes from hot to cold almost overnight it is significant. Agriculture pricing is soft, so the tractor makers are in the barn. Add in the aggressive and capable survivors in Europe and Japan who smell blood with the strong dollar and have connections with European and Japanese OEMs entrenched here already, and you have a more challenging environment on the ground in America.

The euro has strengthened a bit in the last two weeks, but we do not know if it will stick.

Meanwhile, do not be shocked if somebody contacts your company on behalf of a European client who is interested in buying a shortcut into the American market.

Question: Has business in the first quarter been good for your company?

Lloyd Graff is owner of Graff-Pinkert a used machinery dealership specializing in screw machines, Hydromats and CNCs, as well as the owner and chief space filler of Today’s Machining World.

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