After a devastating year which saw sales drop 70 percent for major world machine tool builders, well capitalized firms like Mori Seiki and DMG are contemplating building machines in the United States. According to the Japanese press Mori and its partner in America, DMG, are expecting to start building machines in a jointly operated factory by 2011. Since both are headquartered in the Chicago suburbs, that appears to be the likely site, though Davis, California, near Sacramento is also in contention.
In other news, Industrias Romi S.A., the Brazilian machine tool builder, has made an unsolicited offer for Hardinge Corporation. The offer was $8 per share, a 46 percent premium over the price on February 3, when it was made. This offer is only $91 million for the company.
These two developments are logical efforts by aggressive international firms to get a better foothold in the U.S. It is indicative of long term confidence in American manufacturing. It is also a commentary on the strong yen and euro (despite its current fallback). Hardinge is resisting a Romi bid, but when relatively strong firms like Romi see a Hardinge stock price so depressed, it is an invitation to an attack.
According to Twenge, young people today have had it reinforced to them, that they’re “special” and they have higher expectations than previous generations. In the last 10 years, an average of 50 percent of high school students said they expect to get a graduate degree. That is twice the percentage of students with that expectation in the 70s. While in reality only around 10 percent actually achieve them.
Twenge recognizes that having high expectations can be good because it inspires ambition, but she says that having unrealistic goals can be detrimental to success, especially in today’s brutal economy, and research actually shows that confidence does not necessarily translate to success. One reason people associate success with confidence is that successful people often become confident because of their success.
She also says that young children today often get too much structure in their educational upbringing. She believes that unstructured activities like leaving kids alone in the kitchen to play with pots and pans are important to develop creativity. She says that by having to play without structure, kids learn to come up with ideas on their own.
Question: Do you believe that confidence is essential to achieve success? Do you think that there is a dearth of talented young people entering the workforce?
Hans Peters needs some help. He recently bought a machining business with several late model Citizen CNC Swiss-type lathes. He has business, but his key setup and programming guy was the previous owner who temporarily stayed on to ease his path into the operation. But now he’s moving on shortly to run another company he owns, which leaves Hans in big need of a sophisticated CNC person to join his firm, M&M Specialties, in the small town of Greeneville, Tennessee, located between Knoxville and Nashville.
It’s not an area like the Twin Cities, or even Memphis or Puerto Rico, where you have a well established medical manufacturing complex that supports CNC training. So Hans figures he needs to import somebody. He has contacted three recruiters, but so far no cigar.
Even with 10 percent unemployment and 16 percent shadow unemployment (part-time workers looking for full-time work), it is hard to hire the type of skilled people Peters needs who will relocate.
Peters understands the rigors of relocating. His wife and young children are at the family home in Delaware where previously he had been in business with his three siblings. At 44 years old he wanted to run his own shop and spent close to a year looking for the right situation. He went into the precision machining business because he saw opportunity in the depth of a recession.
It was a gutsy call, especially for somebody who lacked the technical sophistication.
Hans Peters is 600 miles away from his family, and his programming lifeline is moving on. Is there anybody out there who can help?
They say tough times are the best ones to start a business, and Zach Peterson hopes to build his new machining company, Sodak Machining Inc., near Rapid City, South Dakota, out of the ashes of the recession.
Zach is 28, with 13 years of being around machine shops. He grew up in Gillette, Wyoming, where his father mines coal. He took high school shop classes, did a two-year tech college stint, and has worked on lathes and mills all along the way.
He started up in a pole barn outside of Rapid City, about the same time his wife became pregnant. His first machine was a Hwacheon CNC lathe with a 12” chuck, manufactured in 1997. He then picked up a Mazak vertical machining center with the help of a Twin Pities dealer, new in 1998.
He had $20,000 in personal seed money to start and went to a local bank for instruction on how to acquire an SBA loan. He said the paper work was amazingly easy to navigate. The bank steered him to a consultant who helped him write a business plan with projections. In a short period of time he had $50,000 for capital investment and a $95,000 line of credit.
He has found clients by knocking on doors and using some of the contacts he had in the coal and oil industry in Wyoming. Business is growing. He hopes to acquire a larger vertical mill soon. His wife has helped in the office and the plant, but with the baby imminent, she’s about ready for some maternity leave.
Zach was proud to tell me that his first non-family employee was starting work on Presidents Day.
Question: What advice would you give to Zach Peterson?
Mount Rushmore is located 23 miles from from Rapid City, South Dakota
Sunday night, after the Super Bowl, I watched the premier of the new CBS reality show “Undercover Boss.” I have to say I was quite moved by the end of the episode. For those of you out there who haven’t seen it, it’s a reality show in which heads of large corporations go “undercover” with a film crew to work amongst the company’s average employees. In the first episode the COO of Waste Management, Larry O’Donnell, works as a litter collector, Porta Potty cleaner, garbage man, along with several other menial jobs.
The employees he works alongside are all depicted as sympathetic, down to earth folks, with personal stories that border on inspirational. O’Donnell is also depicted well as the sympathetic boss willing to take responsibility for the faults he sees in company policies and management.
I myself have made documentaries, and have my own reality dating show on YouTube called Jew Complete Me. So as someone who has produced and starred in a reality show I know a thing or two about the subjectivity and ethical questions involved when producing and editing “reality.”
It’s obviously risky to be on a reality show, especially when you don’t have editing control. I’m sure some of the PR people from Waste Management thought it was a joke when someone posed the idea of being featured on a national television program in which they in essence spy on themselves.
Although, I do have a feeling that prior to agreeing to be on the show, CBS gave Waste Management some assurance that they wouldn’t be crucified. I could tell that the producers of the show did a great job working with Waste Management’s Human Resources department to find great, likable people, whose endearing qualities would compensate for the company’s faults.
We knew that a few juicy problems in the company were going to be exposed—that’s why we were watching. But the PR team must have wagered that if the employees of the company were so compelling, as well as the big boss, Waste Management would look better than it did before the show. After all, no one is perfect, and no company is perfect, obviously. And heroes aren’t perfect, but they are genuine and honest. Wow, that just sounds so American. I like it!
Could reality TV be the new trend in advertising? I see some parallels in this presentation of Waste Management with that of the recent self-depreciating Domino’s Pizza commercials. They both try to relate to the consumer by admitting their imperfections and do it in an entertaining way. Has either company convinced me of its worth? I’m not sure, but at least I’m paying attention to what they have to say.
Question: Would you want your company to be featured on “Undercover Boss”?
The cross currents of job growth, environmental protection, energy and raw material security for the United States make for a public policy jumble.
The Obama administration is showering incentives to build alternative energy facilities using wind and solar under the “green jobs” theme and some Republicans have joined in the chorus. The sad fact is that the subsidies usually benefit foreign manufacturing more than domestic. Bloomberg recently ran an informative piece talking about a $2.1 million subsidy for Suntech Manufacturing to build a poly-silicon solar panel plant in Goodyear, Arizona. It will employ 70 workers to assemble 30 megawatts of power. In China, Suntech plans to boost production 40 percent to 1,400 megawatts.
In Wuxi, China, where the Suntech plant is located, minimum wage is $141 per month, about 15 percent of the U.S. minimum wage.
The stimulus package contained $2.3 billion in tax credits for renewable energy manufacturers. Obama wants to expand it to $5 billion next year.
The unfortunate fact is that the big solar producers are making their stuff in China and Malaysia. It will be installed here by “green workers,” but the incentives will benefit big multinationals more than American manufacturing companies.
Question: Do big subsidies for alternative energy make sense?
Saints coach Sean Payton gambled that his team could recover the ball and change the momentum of the game. It worked. The Saints then outscored Indianapolis 25 to 17 in the second half to upset the Colts.
I laud Payton for the gamble. Most pro coaches are extremely conservative in mapping a game, but Payton was willing to gamble, as he had done late in the first half by shunning a sure field goal to go for a touchdown from the one on fourth down. The Colts stopped the run, but New Orleans still made a field goal just before the first half ended.
According to the blog, NFL Advanced Scouts, the Payton gamble was not roulette. The blog reports that although the success rate of NFL onside kicks is 26 percent, the success rate of “surprise onside kicks” is actually around 60 percent. The reason they have a bad name is because they are usually attempted when the other team is expecting them, and plays a “hands team” of ends and backs who practice receiving onside kicks regularly.
I submit that teams should make the onside kick a common practice. If kickers became extremely proficient at kicking them like they are for field goals, they could completely upset the special teams’ return game. Large segments of the field would be vacant, and blocking schemes would be a mess if teams routinely used “surprise” onside kicks.
In business most people live in the world of routine. They play it safe, follow accepted practices and live in the world of the average—perhaps a little below or a little above. We all need more onside kicks. Actually, we need to get more kicks period.
Question: Do you think the onside kick should be used regularly?
New Orleans Saints recover onside kick in Superbowl XLIV
The bi-annual IMTS gripefest will be upon us in half a year. An article in the February 5th Chicago Tribune documents why people hate McCormick Place. Stupid work rules, $66 per hour laborers, and overpriced food—that’s my town. Today’s dramatic cuts in the number of Chicago Transit Authority routes will also make the city even more alluring.
The Trib. article compares Chicago, Las Vegas and Orlando—the three biggies for huge conventions.
Orlando maybe cheap, Vegas has craps tables, but there’s no place like Chi-town for pizza and hot dogs.
Is paying overtime rather than bringing in new employees lean manufacturing practice?
For adherents to lean concepts, the question of how to handle a “bullwhip” effect where companies need to rebuild inventories is a challenge for suppliers. (All this “bullwhip” talk is making me hum the theme song from “Rawhide.” See clip below.) People who were laid off may be unavailable for a call back or may be happily pruned. Overtime is expensive, and eventually core workers get burned out working six or seven days a week or 12 hour shifts.
Temps are often an imperfect answer because they require significant training and may be poorly integrated into a group of standoffish employees who are offended that old employees are not being rehired.
As contract shops reach the “bullwhip” phase of inventory rebuild, how do you think workforce additions should be handled?
Brad and Jeff Ohlemacher with President Obama at EMC Precision Machining
For EMC Precision Machining in Elyria, Ohio, it was just another day at the office last Friday—except for President Obama stopping by for a walkthrough and photo op. For Jeff and Brad Ohlemacher, the owners, it was a chance to show off the plant to, who knows, maybe a big new customer. The video on their Web site shows the Ohlemacher brothers introducing the President to family members including Jack, Brad’s young son and several engineers in the plant.
Obama came to Elyria and Lorain, Ohio, to connect with small business people who are the key to new hiring in this country. He gave a brief talk at Lorain Community College and chose to go to EMC Precision, which was on a short list of desirable sites to visit. The Ohlemachers had six days from the first call to prepare for the Big Boss.
While scrolling through Google, my brother Jim found a 644 Wickman 7-axis machine in use at a factory in Bournemouth, England. He visited the Web site and found a company called Hemp Technologies. Their product is “The Green Grinder” which according to the site is made of “high quality” HE30 aluminum and is then CNC turned and milled on a Wickman lathe. The site boasts, “The herb grinders are hand finished and feature our 31 spring steel pins.”
I wonder, is there enough demand in England for this product to justify buying a $250,000 CNC multi-spindle?
Question: If somebody contacted you to make a part used in cigarette manufacturing, would you take the contract?