Monthly Archives: April 2017

Machine Tool Scuttlebutt

By Lloyd Graff

As a dealer in used machinery I get to hear a lot of things if I ask the right questions and have the good sense to shut up and listen.

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Today, as we begin the PMTS show in Columbus where a lot of new machines are on display, the price quote you get may not be the final price. Importers of machinery have had the advantage of a strong Dollar for almost three years versus the Euro and Yen. If they have not dropped their list prices they may have room to throw in options or take trade-ins. They are under a lot of pressure to make their numbers by the foreign machine tool builders and may get concessions from them to move the iron.

American builders like Haas Automation are really putting the pressure on their distributors now. We hear Gene Haas, who owns the company, is telling his top lieutenants that they must sell at least 1400 machines per month, and he recently let go several top employees who had been with the company for a long time, to emphasize the urgency of the goal.

F1 Haas team drivers Esteban Gutierrez of Mexico, left, and Romain Grosjean of France pose during the official presentation of the new Ferrari-powered VF16 car at the Catalunya racetrack in Montmelo, just outside of Barcelona, Spain, Monday, Feb. 22, 2016. (AP Photo/Siu Wu)

There are rumors about Haas Automation finally going public as one reason for the jump from 1200 machines a month, but those have been around for a long time. Gene Haas has also gone into Formula One Racing, a very costly hobby, while continuing his Nascar racing team.

Haas dealers, I have been told, are now very aggressive in taking in trades in order to hit the ambitious sales targets. This aggressiveness trickles down through the machine tool industry. A Haas Factory Store is now akin to a Ford or Toyota dealer. They are eager for trades that they will quickly cash out with used machinery dealers who serve a bit like Carmax does for the new car dealers. A VF-2 Haas machining center is not quite as easy as a Camry to cash out, but not too far off.

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The Precision Machined Products Association figures are showing that March was one of the best months ever for companies in the group. Most of the reporting firms showed improvement over the previous month and March of last year. The “Trump Bump” was definitely in evidence. My sense is that people in the industry are finally changing their mindset from cautious to “beginning to get more confident.” I have recently noticed auction prices bouncing up on multi-spindle screw machines, even National Acmes like 1 ¼” RA6 models from the near scrap value we saw last year. At a recent auction of Brown & Sharpe automatics in Dayton Ultramatic Ram Slide machines brought $7000. Last year $4-5000 would have been strong.

Returning to the Haas strategy, I think the top brass in Oxnard, California believe that the market is robust enough today to support the aggressive sales push. It is a good piece of knowledge to have if you are a potential buyer of a Haas machine or a competitor’s.

Question: Is business really getting better?

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One Company’s Life Cycle

By Lloyd Graff

Jeff Pedu called Graff-Pinkert to find a new home for three Schutte screw machines, an SD32, SD50 and SD80, that his dad bought new in 1967 for the family’s machining company, now called Placid Industries. They don’t need them anymore because they sold the company recently, and the new buyer doesn’t want multi-spindles. The machines may have no value, but Jeff’s story of a small American manufacturing plant, started 62 years ago by his father on Long Island, is the stuff I love about working with machining people.

The company started as a job shop after the Korean War. It was growing in the mid-‘60s but Alex Pedu didn’t like the economic climate of labor unions and high wages around New York City and decided to move the business to upstate New York, little Lake Placid, which is famous for only one thing, the Winter Olympics of 1980 when the American hockey team beat the Russians in the Miracle on Ice. It is slightly miraculous, too, that the tiny 10-person shop of the Pedu family has survived profitably since then.

The United States hockey team celebrating the victory over the Soviets at the 1980 Winter Olympics in Lake Placid, N.Y. Courtesy of the New York Times.

Soon after the Olympics Jeff’s dad, a tinkerer and lover of mechanical things who fell asleep at night reading machinery catalogs, developed a clutch and brake product for specialty applications. Son Jeff had just come into the business, and he had no taste for the insecurity of the job shop world so father and son focused on the clutch business. They kept the three big Schutte multi-spindles partly because their loyal employee from Switzerland who set them up and ran them made the move to Lake Placid with the Pedus. He worked there until he retired ten years ago.

The clutch and brake business developed into a highly profitable cash producer. It was a low-volume, high-margin product with long-term clients who valued American quality and reliability. Jeff’s brother Jason came into the business in the 1990s.

Jeff and Jason’s father died in 1987, but the business continued to prosper under the sons’ ownership. With a staff of 10 including the owners they could make a nice living with around $2 million in sales.

But every business has a cycle. Jeff’s two children are now launched in careers outside of Placid Industries. Jeff’s wife is spending much of her time in Florida dealing with her ailing mother. Jason’s daughter is only 10 now. The Pedus’ 91-year-old mother, who owned 8% of the stock, lives in Florida, too. When Jeff and Jason Pedu made the decision to sell the company, they called everybody they knew in the clutch and brake business and many they didn’t know. They ultimately figured out a price that made sense to a buyer and would satisfy them. For a closely held business with a profitable product line like theirs the price was probably about 4-5 times EBITDA (earnings before interest, taxes, depreciation and amortization). Jeff is now headed to Florida; Jason is sticking around Lake Placid.

The buyer of Placid Industries is SEPAC, Inc., a privately held 40-person firm whose owners are refugees of the old Bendix plant in Elmira, New York. They are moving the operation. They do not need three 1967 Schutte multi-spindle screw machines with a thousand collets. They bought a product, a brand and a reputation that they believe they can grow.

After 62 years, the Pedus are walking away comfortable and happy. Anybody need a big Schutte in a hurry?

Questions: Do you want to sell your business? Would you like to buy one?

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Beds, Banks and Beyond

By Lloyd Graff

The economy is always hard to figure out, but we seem to be in an especially baffling period for both professional economists and amateur business people like me. The Federal Reserve has given the banks two .25% rate hikes recently, yet the 10-year U.S. Treasury has fallen back to 2.25%. This number dictates the mortgage rate and many other interest rates. The dollar has been steady versus other currencies. Unemployment is supposedly at 4.5%, yet there seems to be no upward pressure on wages, an apparent anomaly. The real estate market is steady generally. Home prices are going crazy in Toronto, but in Chicago, Detroit and Miami, not much movement.

Capital equipment is not doing much except in aircraft. Machine tools are scuffling. The oil and gas market is rebounding while cars and trucks are softening a bit, making things generally decent but nothing to have a party about.

I am looking forward to the Precision Machining Technology Show in two weeks in Columbus, Ohio. I hope it will give the precision machining folks a good excuse to issue some big orders.

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How do you find a bed you love and a pillow that doesn’t crimp your neck? I’ve been struggling with sleep issues for many years. I fall asleep fairly easily, but a 3 a.m. bathroom call can often mess up the rest of my night’s sleep. I also tend to wake up at first light and struggle to fall back asleep. Add to that a case of sleep apnea to my slumber issues to complicate a night’s snooze.

I really crave a comfortable mattress and pillow to make my night less wakeful.

My wife Risa and I currently sleep on a Sleep Number bed. In my opinion, the bed’s real number is 3 out of 10. I sleep well on maybe 3 out of every 10 nights. Besides not really being able to calibrate the hardness of the mattress, my big beef with the Sleep Number is that I slip off the sides when I play Words With Friends on my iPad before going to bed, or when I try to tie my shoes in the morning. The Sleep Number company replaced the foam on both sides of the bed but the slippery slope problem persists. I cannot sit up in bed without getting back and neck pain, so I have to sit on the side of the bed to read my phone or iPad. Maybe I need to put pine tar on my sheets to stick on the bed.

The pillow is also a pain in the neck. Conventional pillows are always too hard or too soft. A hard pillow tends to make my neck crooked, culminating in numbness in my fingers. A soft pillow makes me feel submerged. I have a gel pillow now that cost $200, but it seems to be the best remedy for neck pain that I have found. The gel in the center of the pillow is depressed and is a good compromise between firm and “give.” The only negative is that I need to stay in the center of it to really get its benefits, which can be tricky for a side sleeper in the middle of the night.

The mattress market is now in a period of disruption by lower-priced, mail order entrants. I relish the competition for the old cartel of overpriced bed makers, but it is extremely difficult to pick one off the Internet. I look forward to your comments about success or failure in finding a mattress and pillow that really works (or fails) for you.

Question: Do you have a mattress and pillow you like?

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Our Crunchy New Car

By Emily Halgrimson

About two weeks ago my boyfriend bought a 2013 all-electric Nissan Leaf while I cheered him on. Steve had been driving a 2005 Chevy TrailBlazer he bought used at Carmax for the past eight years, and was tired of the $50-$70 in gas money he burned up each week commuting 26 miles each way on a semi truck-heavy stretch of I-94 in Northwest Indiana. I planted the idea of an electric car in his head months ago, and after lots of Internet research and discussion we decided to go test drive one. We were impressed with the surprisingly powerful acceleration, smooth handling, interior space and comfort of the car. After the dealer accepted a price just above our seriously low-ball offer, Steve decided to roll the dice and go for it.

It’s very exciting to get a new car, but we do feel the nervous uncertainty of being early adopters. The U.S. is definitely setup for gas engines, and stepping outside the norm means a learning curve, challenges and some sacrifice. People’s reactions have been fun to watch. Family and friends want to see it, look under the hood, and drive it, and few people try to hide their skepticism about if this was a dumb purchase.

The price of a used Leaf sounds too good to be true. Our 2013 with 22,000 miles was priced online in the south suburbs of Chicago for $8900. After our initial offer of $7500 was rejected we agreed to pay $8000. These cars sold in 2013 for $30,000-$35,000 in three trim models, and look and feel like $30,000 cars inside. Most new Leaf buyers lease the cars, which has left the used Leaf market flooded and the used car price unnaturally low.

Steve’s 2013 all-electric Nissan Leaf

A 2013 Leaf when new reportedly had a range of about 100 miles per charge. Our used Leaf shows 91 miles of range after being fully charged, so we’re already seeing some signs of battery capacity loss, though it doesn’t seem too bad considering it’s a four-year-old battery. This is the scariest part about the Leaf, not knowing how much battery capacity it will lose each year. There is some worry that we may be left with an un-drivable car that needs a $4000-$5000 new battery sooner than we expected. After reading hours of blogs and articles on the subject it’s clear the battery wear issue isn’t simple. A lot depends on how the car is driven, the climate the car battery is subjected to, and how it’s charged.

Driving a Leaf does mean a bit of a lifestyle change. The automatic noting of gas prices I used to do while driving around has morphed into a feeling of smugness I try to resist while watching people burn dollars at the pump. You also see your neighborhood in a new way, because I wouldn’t feel comfortable traveling more than 35-miles from home without having a plan in place to charge the battery.

It’s surprising how many charging stations are around. Of course, there’s an app for that. BP is reportedly working on a network of quick charge ports at their gas stations, though there aren’t any in Chicagoland yet. We’ve already taken a trip to the Indiana Dunes National Lakeshore Park for a hike so we could try charging the Leaf at their free charging station while we walked the beach trails near Lake Michigan. And knowing there’s a charger next to our favorite farmer’s market in Chesterton, IN is exciting. Our local hospital and park have free chargers, and every Kohl’s store has a free charger too, info that has changed our opinion of the retailer notorious for its fake sales.

Charging the Leaf is a learning experience. The car comes with a Level One 3.3 kW, 120-volt charger that fully charges the battery in about 11 hours, which perfect for overnight when electricity is the cheapest. You can purchase an after-market Level Two 6.6 kW, 240-volt charger for about $500 that will do the job in 5 hours, but you’d need an electrician to install a dedicated line in your home. A public fast charge port can charge the battery to near capacity in 30 minutes, but these aren’t always free. It’s estimated that home charging a Leaf costs $2-$3 from zero to full, a quick-charge station can be up to $7.

Since we’ve only had the car two weeks the newness and excitement hasn’t worn off, we don’t yet have a feel for how well the car will work for us in the long run. The modest car payment is easily being covered by Steve’s previous monthly gas expenditure, so financially we should feel no worse off. And we still have my 2010 Subaru Forrester for Steve’s fishing trips and our vacations. But there is a small sense of loss of freedom, because the combustion engine lets you get up and go anywhere without much thought. Right now we feel it’s a positive move, but ask me again in a year and I’ll let you know if we’ve passed the real world test, and Steve has in fact sold the TrailBlazer.

Question 1: Would you ever consider buying an electric car?

Question 2: Tesla’s market value just surpassed Ford’s. Does this make sense to you?

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Shot at Stardom

By Lloyd Graff

Jon Samuelson has three daughters, Bonnie, Karlie and Katie Lou. Two were in the NCAA Basketball Final Four over the weekend. A third started for Stanford and graduated in 2015. How do you end up with your three kids all starting for big time college programs? Start by having them shoot 500 shots every day with Dad checking the numbers and the form.

Jon Samuelson is 52. He played college ball himself at Cal Fullerton and Chapman College. He took his love for the game to England to play European Pro ball and met his wife Karen who was a Netball player, a poor cousin of basketball. The three girls have the b-ball genes and being over 6’ tall doesn’t hurt. The youngest, Katie Lou, was the most sought after, considered the top high school recruit in the 2015 class. She picked UConn, which had won 111 games in a row before losing to Mississippi State in Saturday night’s semi-final.

When I researched the Samuelson family my a priori feeling was that Jon must have been a crazy, autocrat of a father, demanding his girls practice like fiends. This was the picture tennis great Andre Agassi painted of his father who he despised. I have this image of the Indian and Chinese parents who relentlessly drill their kids on spelling words day after day hoping they will win the National Spelling Bee.

Karlie, Jon, Katie Lou and Bonnie Samuelson. Courtesy of ESPN. 2014

But the Samuelson girls portray a tableau of a loving family of jocks who were in constant search of vacant gyms to practice in. Jon delighted in seeing them surpass his skills, though he still thinks he can beat them at HORSE because he is ambidextrous. They have trouble with their left hands.

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It’s baseball season again, and I’ve been bubbling with anticipation. My Cubs are stacked, but it is extremely hard to repeat even if you have a great team.

On paper, the Cubs are superior to last year’s team. They are better at catching, possess the best defense in the game, and sport a superior offense with Kyle Schwarber and Willson Contreras who will be playing most of the games in 2017.

But the team has something special that cannot be easily quantified – players with character and leadership. Start with Anthony Rizzo and Jon Lester, both cancer survivors. Rizzo spends at least one day a week at Lurie Children’s Hospital, really connecting with kids with cancer. Matt Scczur, an important substitute outfielder, is a bone marrow donor.

Jason Heyward, who signed a huge contract last season and had a disappointing year, held the crucial meeting during the rain delay of the seventh game of the World Series to rally the team to victory. He spent a grueling winter working with special instructors to remake his swing despite being guaranteed $25 million a year.

Heyward also paid out of his own pocket for an upgraded hotel suite for third string catcher, David Ross, last season that could hold his whole family during every road trip. This is something I have never heard of before.

Kris Bryant, last year’s National League MVP, beat out his closest friend, Rizzo, for the award. They are such close buddies they had jerseys made up with an amalgamation of their two names, Bryzzo, to wear.

Miguel Montero, the Cubs backup catcher, is tutoring his replacement, Contreras, a fellow Venezuelan. The Cubs also signed John Jay for $8 million to be a utility outfielder and coach his friend and protégé from Miami, Albert Almora, who will start in Center.

This collection of young men is very special. Theo Epstein, Cubs President, understands that you do not just put together an assortment of batting averages and 90-mile per hour sliders. Over a 6-month season, character and chemistry make a tremendous difference when things get tough. Same goes for a business or a Boy Scout troop.

I like the Cubs’ chances in 2017 to repeat.

Question: Did you push your kids too hard, not enough, or the right amount?

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