Monthly Archives: June 2019

Ep. 45 – Patrice Zamor on Manufacturing in Israel

By Lloyd and Noah Graff

For most people manufacturing and Israel are two topics that are not normally spoken about together. Patrice Zamor, the guest on today’s podcast, lives in both of these worlds.

Scroll down to listen to the podcast.

Patrice emigrated to Israel from France in the 1970s and has spent much of his career working for Ditron Precision, a multi-national automotive component supplier headquartered there.

Takeaways from the interview:

  • Patrice discussed Israel’s strength in high-tech fields as well as its significance in producing machined components for international markets.
  • He gave his outlook on the current world automotive industry.
  • He talked about Israeli culture and what inspired him to emigrate from France.

Question: Is Israel a place you want to visit? Why?

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Single Source Gamble

By Lloyd Graff

This is just a guess, but I’m betting the following conversation took place recently between Warren Buffett, who owns $50 billion of Apple shares, and Tim Cook, CEO of Apple Corporation.

“Hi, Tim, it’s Warren.  I’ve been thinking about Apple’s China exposure, Tim.”

“Yeah, me too, Warren.”

“Tim, what if this Huawei stuff really gets out of hand, or Trump and Xi start to snarl at each other in Japan, or Hong Kong really blows up, do you think China might retaliate against Apple?”

“Yeah, Warren, that’s our biggest nightmare.  We have no backup plan in place, honestly.”

“Well, Tim, I think you better start putting one together, fast.  I don’t think you or I are Donald Trump’s favorite.”

I think all over corporate America some flavor of this discussion is taking place.  Dependency on China, and even NAFTA darling Mexico, is a troubling fact of life for companies dependent on a world supply network.  That reliability on China and Mexico that seemed so comfortable just a few years ago is now suspect.

People often ask me if the tariffs have had much effect on the people we do business with. The easy answer is “No” because China has absorbed most of the steel price increases or the market has just accepted them because of their ubiquity, but the nuanced answer is a big “Yes” because they have lifted the long-term competition with China from the theoretical to reality. Reliability of supply is even more important than price.  When the bedrock of reliability is eroded by political uncertainty and a doubtful “rule of law,” pricing attractiveness becomes secondary.

This is what we are seeing today with a clarity that was clouded by the rose-colored glasses business people wore from the Clinton through Obama presidencies.

Theft of intellectual property was the price companies like Apple figured into the profit margins that fueled the stock and provided vast reserves for research for new products.  It could be tolerated by Cook and Buffett.  But disruption of the supply chain, even just a whiff of a scare – that was a curse.

For Silicon Valley, China is key to supply, but for the machining world Mexico is our China.  In the automotive industry Mexico is the liver and kidneys of the supply organism.  GM, Ford, Daimler, Toyota, etc., cannot survive anymore without the plants in Querétaro and Metamoros.  In Mexico, like in China, price is important, but reliability is number one.  NAFTA has brought good prices, stable labor relationships, and proximity to American factories, but the new regime in Mexico City, a more aggressive worker attitude, and the recognition in Mexico that the United States and U.S. companies are terribly dependent on the Mexico supply chain have radically changed the dynamic.  Add in the Central American immigration pickle and Trump’s quixotic tariff gambit and suddenly companies have another supply chain nightmare.

In recent weeks labor disruptions at automotive suppliers, with big ransoms demanded and exacted to go back to work, have sent chills through the automotive world from Detroit to Stuttgart.  The realization that companies can be held hostage and that the rule of law is a hollow theory in Mexico City have challenged auto companies and Tier One suppliers to wake up to the need for dual suppliers with at least one in the U.S.  This cannot happen overnight with bidding and PPAPs, but the will is there, finally, to bring work back to America. The abject fear at a Ford truck plant or a Camry assembly facility that for want of an $8 part the whole joint can be stopped in place is moving the needle at last.

The trap of “just in time” is also becoming apparent.  It just does not work if Mexican workers are blocking the suppliers’ doors.

We are in the early stages of redundant sourcing.  It will change the outsourcing world that has been flowering almost unimpeded for 25 years in China and Mexico.

The countries are very different, but the supply issue they share affects our machining world in a profound way.  The “game” has finally changed.

Question: Has the move to dual sourcing affected your company yet?






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Ep. 44 – Bruno Schmitter on Hydromat vs. Swiss Machining

By Lloyd and Noah Graff

Today’s podcast is part two of an interview we did with Bruno Schmitter, CEO and COO of Hydromat USA.

When Bruno came to America in 1979, his competition was National Acme and New Britain Multi-Spindles. Today he says his competition is mainly CNC Swiss and 5-axis Turning Centers. Bruno argues that having one machine that can do many operations at a time is a better option than having multiple machines which require more space, more people and more tooling.

Scroll Down to Listen To The Podcast.

In the interview we also discussed Hydromat’s diversification into selling bar loaders and the company’s newest offering, the Eclipse 12-100, which offers machining up to 100mm.

Question: Would you rather have a Hydromat or six CNC Swiss machines?

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The Purchasing Bottleneck

What else doesn’t count anymore?  PURCHASING DEPARTMENTS.  The bottleneck of “purchasing” in big companies has become laughable to me as an outsider and to shop folks who make the money in manufacturing.  The big gripe used to be “management,” but I don’t hear that as much now.

Today, the outcry is with purchasing departments in larger companies that slow everything down with paperwork and “justifications.”  When you need 1,000 pounds of 12L15 round tomorrow, and Central Steel is happy to get it to you at a fair price so the company can make five grand on a hot job, and purchasing just can’t quite make it happen for a week, that is dumb, antiquated management.  We see it all the time.  It’s why small companies survive and often prosper, while bigger firms trip all over themselves.

It is also why private equity firms are eyeing even small shops with 20 or 30 employees if they have a “secret sauce,” few destructive fiefdoms, and a culture of cooperation.  Unions have failed in America today because they rely on a culture of conflict.  Enlightened management has reduced conflict in many cases, thus reducing the desire for institutionalizing conflict in a union setup.

American stock markets edged close to all-time highs yesterday.  The mavens of the market, who I think really know less than nothing, think it is the prospect of the Fed lowering interest rates today.  I doubt it.  The Fed is generally rather irrelevant during these days of low inflation and tiny unemployment.  The Fed is almost as irrelevant as the United Auto Workers who after 25 years still have not managed to unionize one auto plant in the South.  They lost last week at the Volkswagen plant in Chattanooga again.  This is at VW which has a Board thick with Union folks in Germany.  The UAW now has 30% of the workers it used to have.


We are celebrating 10 years of growth in the economy according to the numbers.  I am a bit skeptical of that personally.  I have seen plenty of ups and downs in my work over the last 10 years, but the broad sweep has been upwards — unless you build single-family homes in places like Chicago.

The national press and Democrats running for President are up in arms about the “lack of affordable housing.”  If you live in Seattle, Portland, or Manhattan, yes, you cannot find a cheap place to live except for an alley, but to generalize it for the rest of the country is absurd.

You want affordable, move to Bismarck or Oklahoma City or my neighborhood of beautiful homes on big lots, 35 minutes from downtown Chicago.  You may have a neighbor with darker skin than you, but this is America, folks.  Or you might prefer 900 square feet of quite-functional, newer space in Chicago and forgo a car.  Affordable housing is in the eye of the beholder.  I just heard of a couple from Seattle who made a study of the entire country as they prepared to move.  They were both in jobs which required them to have access to a major airport.  They were hoping to have kids.  They wanted an area that was not homogeneous.  They bought a home under $200,000 near me where they can live on one earner’s pay.  Affordable housing is plentiful if you have flexibility and don’t accept the conventional wisdom of scarcity.

Where is the “economy” heading?  It depends on what economy you identify with.  My economy of people making stuff out of metal using creativity and grit looks quite promising, even as automotive companies deal with a young population increasingly bored with cars and trucks.  There are plenty of more promising areas to gravitate into than pickups and SUVs.

Interest rates, inflation, the Fed, tariffs, the deficit, barely move the needle except to stock market junkies.  U.S.-China competition will continue whether Donald Trump wins or loses in 2020.

Enjoy the opportunities. Ignore the noise.

Question: Does “Purchasing” get in your way?


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Ep. 43 – Bruno Schmitter on Bringing Hydromat to America

By Lloyd and Noah Graff

Today’s podcast is part one of a two part interview we did with Bruno Schmitter, CEO and COO of Hydromat USA.

In 1979 at the age of 25, Bruno came to St. Louis to sell and popularize the previously unknown transfer machine in North America. Bruno told us that at a young age growing up in Switzerland his father began encouraging him to go into the machine tool business. He also discussed his first years in the United States when he traveled the country convincing multi-spindle screw machine shops to use Hydromats.

Scroll down to listen to the podcast below.

Question: Did your father encourage you to go into the machining business?

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Trying To Be The Hero

We’ve all done it.  We’ve all done it and gotten away with it.  We’ve all done it and suffered the consequences.

Tuesday night in the potentially climactic game of the NBA Finals Kevin Durant, the seven-foot shooting star of the Golden State Warriors, played ball after sitting out 32 days with a calf injury.  After 10 minutes of playing beautiful and surprisingly fluid basketball his leg buckled on a seemingly inconsequential move, and Durant crashed, all 84”, to the floor in Toronto.

Some ignorant Raptors fans started cheering, but to their credit, Toronto players immediately shushed them to silence.  They knew what likely happened to Durant, and they took no joy from it.  Durant had done what they had probably all done at one time or another.  He wanted to show his greatness.  He desperately wanted to show the world his toughness.  He wanted to be a hero to the world, to his own teammates, and perhaps most of all to himself.  And he paid the price.

In a fascinating coincidence that sports is so great at highlighting, he was opposing the magnificent Kawhi Leonard who was playing the most incredible basketball of his very nice, but not LeBron James- or Michael Jordan-like, career.  Leonard had become a superstar in the playoffs, yet last year he languished at San Antonio, sitting out the season for physical and personal reasons.  He would be a free agent after the 2018-19 season, and he did not want to spend it with the Spurs.

Kevin Durant After Being Injured

Kevin Durant After Being Injured

Kevin Durant was also in his prelude to free-agency season at 30 years old.  He was on a five-time NBA championship team in the GoldenState Warriors.  Playing with Steph Curry, Klay Thompson, and Drayman Green, Durant made Golden State seemingly unbeatable.  For his choosing to sign there in 2016 Durant was criticized for taking the pebble-free path to titles.

But in sports, like real life, stuff happens.  Earlier in the playoffs DeMarcus Cousins, a former All Star, had hurt his quad.  This had put him out of the playoffs until the middle of the Finals, and he was a poor imitation of the outstanding player he had once been.

Klay Thompson hurt his hamstring and sat out Game Three.  With Golden State down 3-1 in a seven-game series going into Game 5 in Toronto, Durant was under huge social pressure to play and seemingly faced a moment of personal self-examination leading up to game time.  The doctors had cleared him to play.  His teammates certainly let him know that they needed him.  But only Kevin Durant really knew how his leg felt.  Money was also an issue for him.  He would be a free agent after the season.  He was already rich, but soon he could be mega-rich.

He was a defending NBA champion, but the team would always be seen as Steph Curry and Klay Thompson’s Golden State Warriors.  Unless – somehow – Kevin Durant keyed the team to three straight wins to steal back the NBA Championship for the Bay Area.  Then Kevin Durant, incredible all-around, 7-foot player that he was, would finally also be heroic.

Durant played.  And he played really well for 10 minutes.  Then his personal disaster struck.  His Achilles apparently popped—and he seemed to know it.  A ruptured Achilles tendon injury doesn’t hurt as bad as it sounds.  (I’ve done it twice.)  But it messes up your walking, much less your jumping, immediately.  It wrecks your athletic career for 10 months and, at almost 32-years-old before Durant can fully compete, it will dramatically affect his athletic future.  The career of a basketball prodigy, #2 draft pick in 2007, phenomenal scorer, great teammate, could be all but over.  Poof.

By all accounts Durant was emotionally crushed.  The Warriors’ General Manager was literally in tears when he tried to conduct a press conference after the game that the Warriors won by one point.

Steve Kerr, Golden State’s coach, chose not to talk about it.

Before writing this piece I thought about Kerr’s life.  He knows heroism and its price.

Steve Kerr spent a lot of his formative years in Beirut, Lebanon, where his father, Malcom Kerr, was teaching at the American University of Beirut.  Americans were always endangered there.  Two hundred and eighty-two American soldiers had died in one attack in Beirut.  Steve left as a teenager, went home to comfortable Los Angeles, and played guard at the University of Arizona, going to the NCAA Final Four in 1988.  His father went back to Beirut to become University President in 1982.  He was trying to bridge the gap between Christians and Muslims — to be a hero in his own way.  But 18 months after arriving, at the age of 52, he was gunned down by terrorists in the hall of the University.

Question: Have you ever gone out there when you knew you shouldn’t have?  What happened?

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Ep. 42 – John Habe IV on Valuing a Machining Business

By Lloyd and Noah Graff

Today’s podcast is part 2 of an interview we did with John Habe IV, President of Metal Seal Precision, a machining company based in Mentor, Ohio.

Listen to the podcast on the player below.

Over the last several years John has grown Metal Seal Precision both organically and through major acquisitions. According to John, growing through acquisitions can be financially rewarding but does not come easily. John discussed the difficulty in buying companies, which often have emotionally attached owners. He also talked about how he calculates the buy price of a company. He looks at cashflow, often called EBITDA in the acquisitions business, as well as criteria such as product sector, customer diversity, and management style of the current ownership.

Question: Is this a good time to go into the machining business? If so, what sector?

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Quandry, Gold or Dross?

The scary, little, chubby chess piece sat in the old Scottish antiques dealer’s desk for 50 years.  He bought it for a few pounds and stuck it in a drawer.  After his death his heirs were checking out his belongings and discovered the elaborate carving made from a walrus tusk.  One of them thought it might have some value.  They guessed correctly.

On July 2, it will be auctioned off by Sotheby’s. Its anticipated sale price is around $1 million.

It is a piece from the collection of Lewis Chessmen, carved in the 12th century in the form of Norse warriors.  In 1831, 93 pieces of the group were found on Scotland’s Isle of Lewis.  They now are on display in museums in London and Edinburgh, Scotland.

I read about the 3-1/2” high Lewis Chessman yesterday morning in The Wall Street Journal at my factory office.  Later that morning we had an inquiry from South America on a used threading attachment for a 2-5/8”-6 spindle Wickman screw machine.  I immediately started wondering if the attachment was a potential Lewis chess piece.  I haven’t sold a big Wickman machine for years.  I have stripped several of them for key parts, but we don’t sell much big Wickman stuff anymore.

Then came the pricing quandary.  What do you ask for a 50-year-old attachment for a machine few folks in the world use anymore?  I am blessed to have a complete one in stock and the components to almost complete another one.

I pulled a price out of my behind, $7,500.  Another member of the team objected.  He suggested that another party who was apt to also have a complete attachment available might be asking more money for theirs.  He argued that we probe the other dealer’s price before quoting our prospect in South America.  I pushed back.  To me $7,500 was a nice price for a probably useless antique that would very likely outlast me.  To me it was iron.  To him it was gold.  It’s what makes a market and attracts all those cars to estate sales.

I am fascinated by how things are valued by people.  It is also the apple pie of my business, guessing the value of stuff, believing in my judgment, but having a willingness to throw in the towel when the market proves me wrong.

If I had bought that Lewis Chessman and I didn’t know the ugly carving was 900 years old, I probably would have dished it off, made a few hundred quid, and celebrated with chocolate ice cream.  If you have a business with expensive employees, rent to pay, taxes, and health insurance bills you need a semblance of steady cash flow.  It is hard to wait for the market to discover your hidden brilliance.

I knew that the potential buyer for the seldom-coveted threading attachment might decide to run his other big Wickman longer hours, rather than schlep a heavy piece of metal 5000 miles, pay 40% duty, then find a technician to put it on his machine correctly.  Or maybe he could find a soon-to-be-scrapped machine in Sao Paolo for $1,000.  A collector can afford to wait, but a business person has tuition to pay.

I may have a few ugly ivories on my shelves – dusty, grimy die heads or screw machine manuals that Mr. Davenport may have signed.  I don’t know, and I don’t really care.  Very often less is more in business, and a visually impaired old dude like me is quite likely to trip over a vagrant ivory that falls on the shop floor.

Question:  Do you collect or throw out?  Why?

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