The Wizard of HAAS

Gene, how did you get into this business?
When I was in high school I worked in a machine shop. I started out sweeping fl oors. This is before child labor laws I guess; I was only 13 or 14 years old.

Did you take engineering in college?
I went into engineering when I first got to California State University of Northridge. I was in engineering for two years until 1972, around the time Lockheed almost went bankrupt. It seemed like maybe engineering wasn’t the degree to be in, so I switched over to business.

Where did you go from there?
They did placement at college, and after I got my degree they found me a job. It was going to pay something like $720 a month. I was making $300 or $400 a week as a machinist, so I just went back to working at a machine shop.

I actually had a job for six months as a programmer at Seaton Wilson, and I was programming the old fashion way – this is even before computer systems came along. It was at one of those fundamental turning points in the whole industry. When I started learning how to make parts in the machine shop, I ran a Hardinge Chucker and a Logan lathe, which were manual machines, and I was making parts one at a time. You put stock in the collet, and you feed the thing; you turn that diameter and then go to another dimension and put a groove in – that’s how parts were made. I was probably in my 20s doing all this and going to college and found it wasn’t easy to get a job. Around 1976, I decided to get a job using numerical controls.

That was the tipping point?
Right, I went to Seaton & Wilson as a programmer, and they had a TBI, Tomlinson Brother’s chucker with 5T controls and an LED display. I had two or three years making things manually on a Hardinge chucker, and I started working on this TBI chucker, which was an NC, and pretty primitive by today’s standards, but I caught on real quick. “Let’s see, if I put these parts in a collet and do it one at a time, I can sit there at $6.50 an hour, which was the shop rate at that time, and make $20 an hour.” I started working on the NC and thought, “Shit, parts that would take me maybe 20 minutes to make, I could make in a minute.” It didn’t take very long to do the math there. I sold my Porsche and bought a TBI chucker in 1978 for around $50,000. I started making parts and was competing against all these manual-type machines. The shop rate at that time was probably $20 an hour. I got a TBI chucker, and suddenly that $20 an hour shop rate turned into $60, $70 an hour.

So all of sudden you were coining money.
It was very lucrative. I will be honest with you; in 1980 or so I was probably lucky if my whole business, Pro Turn, did $100,000 a year, which doesn’t sound like a lot to run a whole business on, but for a kid who probably would have been making $20,000 a year at a regular job, making $50,000 a year at a machine shop was pretty good.

And then?
Well, I was making parts, and this whole new wave of NC machines was coming along. One of the things that I needed was an indexer to index some parts on a mill I had bought. I was using the old Erickson pneumatic indexers, and they were a disaster. I wanted to make something that was a little smaller, a better one, and that’s what I made. We went to Westec around 1983 and got a pretty good response. People liked the way it looked. It was small. It was programmable. It was different. We just started making them, and I never looked back. We had a lot of competition. The Japanese copied us, and you know how the Japanese are; they’re always trying to undermine you.

So around that time did you meet your neighbors, the guys from Fadal?
They were in North Hollywood, and I was in the Sun Valley area, so we were probably about 20 miles apart. Yes, I did meet them when they wanted to buy a rotary table from us. They used it and didn’t like it too much. It wasn’t a really good design, and it didn’t work too well for them. But I was making rotary tables, and they were making their mills. I actually ended up buying one of their mills, and it was okay. Then a couple years later we decided – Oh what the heck, let’s just try making a mill, something to put the rotary tables on, because it was so hard to interface the rotary to other people’s mills.

You had to be aware that Fadal was selling quite a few too.
I knew they were selling a little bit. But thinking back on it, I really didn’t look at Fadal that much. I was looking more at what I wanted to build. I was always building stuff like rotary tables.

The folklore is that you saw what Fadal was doing and felt that you could do it better. Is that not true?
That is not true. I never really looked at Fadal stuff that much.

So by ’88 did you have the core of your organization together?
We did. It was actually a pretty tight group of people. When we first started out, we were in a small building with just 10 or 15 people. By 1988, there were about 100 of us, and some of those people are still here.

As you look back, where was the real tipping point, the real accelerating moment that developed the vertical machining center and your business?
Well, I don’t think there was ever a tipping point. It seemed like we were always behind the eight ball as far as competition. Everybody was always coming up with better designs and better pricing, and it meant constantly trying to keep up with everybody else.

Weren’t you setting the pace on pricing?
We might have had a couple years lead there. But, as soon as the people started seeing us sell our little VF1 for $49,000, things heated up. I would say by 1992 there were ten competitors doing that.

I heard VF1 stands for Very First One.
That’s exactly what it stands for, the Very First One. It was very fast paced. We were always growing, moving forward, really didn’t pay a lot of attention to the details. The advantage for us was if we had an order, we had to be able to ship something in 30 days.

Gene, what is a Haas machine in your mind? How would you define the kind of machine that you make?
It is a rugged, simple, easy to repair machine.

I think that says a lot.
Yes. Every nation or machine tool building country has its own parameters. The Germans always pride themselves on building machines of super accuracy, hand scraping every single part. They build it like a Swiss watch. Then you have the Japanese, who basically copy everything. I think they are really great at execution but lack vision. They don’t seem to know what the heck to build. The Taiwanese just copy what the Japanese do, and the Chinese just do it as cheap as they can. Then you have the Koreans, who want to be as good as the Japanese for a little less money. And then you have the Americans, who really know how to build machine tools, but always have had problems with labor.

So when did you feel that you had outgrown the Chatsworth Plant?
Back around 1992, the first Flexible Machining Systems really started coming out. There were FMS’s before that with the pallet changers. But they were really expensive ones, and around that time the FMS’s started to become very popular.

Explain FMS.
Flexible Machining Centers for systems. Instead of just having a horizontal or vertical with a pallet changer, you suddenly had an AGB, or Automatic Guided Vehicle, that would go and get the pallets and put them in the machine for unattended machining. Those machines were just coming into focus in the early ‘90s. Bob Murray and I went to a show and saw one of those and thought, “Shit, that is what we want. That works.” So we bought one of the first ones. We bought it from Hitachi and installed it, and that really upped our production.

So you took a machine that was built for automotive’s heavy volumes and saw the application in a machine tool?
Yes, while most of our competitors were still building things by hand, we would get a customer’s machine out in under a month.

Did you take a big gulp after the bubble burst in 2001?
When our business dropped from selling 300 machines a month down to like 200, we cut prices. We realized that the prices we were getting weren’t realistic to what people wanted.

I read that the overseas markets are really accelerating for you now.
They are getting bigger. I don’t think they are accelerating, but that’s where most of the manufacturing is going. Less than 15% of our stock goes overseas. It takes time to establish distribution, name brand identity. I think we are finally being recognized in the United States as a serious player. I think it has only been in the last five years. People don’t take machine tool builders seriously unless you’ve been around for 20 years; that’s just the way it is.

Do you look at China as a big market?
It’s a complex market that I don’t think Americans really understand. I think the Chinese will understand the American markets long before we will understand their markets. But at the same time we are using them to produce a lot of the products we want. The really ingenious manufacturers realize that China is more of a help than a threat, because they have tremendous amounts of labor and are willing to work inexpensively. I think if a manufacturer doesn’t utilize that, he is foolish.

Tell me the concept behind the Haas Factory Outlet.
You can walk into one dealer who has a very nice showroom and another where the guy is working out of the back of a warehouse. I think basic Business 101 tells you that that is just not the way to sell stuff. If McDonalds’ were filthy dirty nobody would buy a hamburger there. We made dealers have service technicians. That was a big thing too; most sales organizations only focused on sales.

I think it is absolutely brilliant. Your technicians become your sales people.
Right.

And your sales people become your technicians.
I think one of the secrets to machine tools is servicing the stuff. I think a lot of our competitors have just missed that whole service attitude. The machines are so complex today you can’t fix them yourself. You need someone to come out and fix them for you. If you can fix a washing machine, you can fix a machine tool.

It seems like the whole thing is modeled after the Maytag repairman.
Yes, pretty much. Like I said, it’s a pretty simple business model. It has been around in other consumer products for years. We just applied it.

And interchangeability too, which you have built into your machines.
You’re making this part here; if you can apply that part to another machine, why redesign a whole new part?

So much has been said about the “demise” of American manufacturing. Everything that you have done over the last 20 years debunks that myth.
Oh I don’t think so. Back in the 1970s, there was something like 25% of the population involved in manufacturing. Today you will find it is less than 15%. You can’t go to a high school today and say, “How many people want to work in a machine shop?” I don’t think you would have anybody put his hand in the air. Nobody wants to work in the old machine shops of the ‘60s where you have Acme-Gridleys that just deafen your ears. They don’t want to do ho-hum work; they want to do something interesting.

Is your interest in NASCAR an economic decision, a fun decision or a combination of the two?
Surprisingly, it helps us sell machine tools, because people look up to companies involved in sports. Machine parts are pretty dry. You’re just selling nuts and bolts. NASCAR is a venture into the entertainment world.

Do you put a lot of thought into the design of your machines?
Absolutely. A machine tool has to look right, feel right to be right. People don’t buy machine tools that don’t look like machine tools.

How do you determine what people are going to buy?
I build what I would want to buy. I really do spend like 20 hours a day thinking about the next thing to build. I spend most of my time thinking about it, and then a very small amount of time actually telling people what to do.

How about asking your clients?
I have a little different philosophy on that. We’ve built machines that people said they wanted, and they are always dismal. The worst one to build is what a salesman wants. Oh, my God. A salesman will always want you to basically build the machine just like the last one he sold because that is what he sold, but that doesn’t necessarily mean it is going to be a successful machine. A customer has his point of view of, “Well, I want something that anybody can run. I want something simple, or I want something cheap.” Honestly, a lot of our products, our models that we come up with are dogs. It is not uncommon for us to build a whole model and say, “Well, that thing turned out to be a dog. Get rid of it.” And we do.

I’m curious, have you looked at going into a sliding head stock machine?
I honestly believe that the future of manufacturing is the less expensive machines. We see it in Mexico and India. Our guys just came back from India, and those are huge markets. Those kinds of machines are probably necessary for a lot of stuff like bone screw manufacturing. We actually have a couple Swiss
machines here making our draw bars. But we really see the future in stuff that we can build and sell for under $50,000. That’s where we put our focus. We build about 1,000 machines a month with about 1,200 employees.

Let’s say it is October 21, 2008, and you are looking back over the past three years. What would have to happen for you personally and professionally for you to be happy about your progress?
Nothing, actually. I’m happy now. I think the machining business is doing well. When you look back at things like Sony; remember the Walkman 10 or 15 years ago? Everybody had to have a Sony Walkman to put your little cassette in. Well, that is gone. Remember TVs with tubes? Five years from now, nobody will buy a TV with a tube. But you want to know something? I guarantee you five years from now, people will still be putting a hard tool against a soft material and ripping it apart, and that is what machines tools are; you just rip the stuff off. For 150 years that is what we’ve been doing in the machine tool business. I don’t think it is going to change too much in the next five years.

What car do you drive?
I have three of them; a little Chrysler Crossfire, which is an absolute blast to drive. It is a six-speed convertible. It’s like an old speedster. I have a Toyota truck for hauling crap around, and then I have a Hummer H2. I also have a Ferrari. The car I’m trying to get is one of the Ford GTs.

If you could be any machine what would you be?
I’d be a beer dispenser.

Why?
Sitting around having a beer with your friends is about the best you can get.