Author Archives: Noah Graff

Daimler-Chrysler Wants a Divorce. Shocking.

We now have the news that Daimler-Chrysler wants a divorce. Shocking.

One more stupid merger falls apart because the people couldn’t get along. The Germans thought Detroit built crappy cars, and the Chrysler folk thought the Mercedes men dissed them. The hapless Dr. Z commercials were so discordant with American sensibilities even Beyoncé hood ornaments could not have saved the lines.

About the only way GM could buy Chrysler would be to trade its interest in Delphi for it. Marrying Ford and Chrysler would be a match between Alzheimer patients. Toyota needs Chrysler like it needs a UAW contract, and Carlos Ghosn now has a toothache at Renault.

Chrysler is as sick as a metropolitan newspaper, which means that there are buyers on Wall Street who smell blood and money, but not in Autoland. Kirk Kerkorian might resurface for a Chrysler redux, but at 90-years-old with his slots at MGM just spewing money, what does he need Chrysler’s misery for?

If Dieter Zietsche and his comrades are willing to take the hit, Chrysler will be sold to a hedge fund willing to stare down the UAW in the upcoming contract negotiations. This could mean a long strike like Goodyear recently weathered. I think Daimler has no stomach for this kind of war, so they will probably bail out quickly.

Some shrewd and gutsy people will step up for the minivan, Jeep and Dodge truck franchises. Chrysler is not a basket case yet, but the sooner the Daimler Dandies head back to Stuttgart the better.

Share this post

Lovie and Tony's Coaching Styles

Tony Dungy, the coach of the Indianapolis Colts, and Lovie Smith, coach of the Chicago Bears, are close personal friends who talk to each other at 5:00 a.m. every Monday morning during the NFL regular season. They are also the this year’s two Super Bowl Coaches.

The parallels between the management styles of the first two black coaches to run teams in the BIG GAME are suggestive of important shifts in business management at this point in American history.

Dungy and Smith are both soft spoken, religious, Christian men. They deflect personal notoriety and celebrity and both continually praise their players in public. They both stress defense and defer to their coordinators and in Dungy’s case the star quarterback Peyton Manning. They play the Cover Two defense, which is a complicated hybrid of the Man to Man and Zone approach in the secondary to defend the pass.

These men have risen to the peak of their profession while the egotistical coaches of the Bill Parcells, Tom Coughlin, Dennis Green model have been unable to mold cohesive, confident, winning teams in recent years. In a league where 70 percent of the players are young and black with a lot of spending money and huge visibility, these strong fatherly quiet men have built accountability into their systems.

The NFL has a rigid salary cap and a sacrosanct draft which builds parity of personnel. This makes coaching and talent evaluation the great unleveler. The New England Patriots have defied the equalizing momentum each year because Bill Belichick, another self effacing coach, remolds a great team year after year. The coach is the great variable in pro football and deserves to be paid as much of more than the star players.

Games are won consistently in the NFL because one team buckles at a critical moment. The quarterback is the most important player, but many teams win with a mediocre quarterback, the Bears being a prominent example.

The Smith and Dungy coaching model; emphasizing defense, speed and accountability while reducing the visibility of the “Star Coach” can teach us a lot about successful leadership today.

Share this post

Commodity Prices Unraveling

Copper prices are down almost 30 percent from the speculative hedge fund bubble. Brass rod is just beginning to follow with scrap prices down about 10 percent from the peak.

We are in the midst of the unraveling of the commodity price squeeze which was more about avarice than scarcity. Oil is hovering around $52 a barrel for crude, which is attributed to a mild winter in the United States, but really, how many people are still burning heating oil. The reality is that the speculators who went long on petrol are on the run. If we don’t get a Shia A-bomb soon, the oil bulls will be deader than the A-Team.

For Ben Bernanke, the commodity route gives him time to plan his next move. Gasoline at $1.75 a gallon is like a tax cut or a half point rate cut for the economy. It may be enough to stabilize the housing market which is already showing a heartbeat. The stock market analysts say they look forward, but they usually are obsessed with the current quarter’s comparisons with last year. They will probably miss the likely bounce in construction. Global warming also allows builders to work virtually year-round now, all the way to Manitoba, which skews old comps.

Weak steel prices are likely to give the auto companies and their traumatized suppliers a little boost. When the metal supply gets sloshy, the dynamic shifts power to the buyers even with the reduction in primary producers.

The acceleration of stock prices in recent weeks despite the Democrats grabbing Congress, Iraq dragging on, and a lousy Wal-mart Christmas indicates that the financial mavens believe the U.S. will get the prayed-for soft landing.

Amen.

Share this post

Don't Want to Get Passed Up

What do you do if your core business is imploding not because you are bad at what you do, but because the world has suddenly changed. Ask the Tribune Company, parent of the Chicago Tribune newspaper, the Los Angeles Times, the Chicago Cubs, and part owner of WGN television network and the Food Network cable channel.

Tribune Company’s newspapers are losing circulation and advertising weekly to Craigslist, ESPN and themselves on the web. America’s newspapers have a mass case of Parkinson’s for which there is no current cure. Younger people want their news on the Internet. It’s that simple. The big city newspaper as we know it is dying.

Big city papers like the Trib still make a lot of money, but the future is shrinkage. The stock market hates for that. It worships growth and despises shrinkage. The Tribune Board is now almost forced to sell the papers to a private equity firm, which will milk them to pay debt and fees. The tough decision is whether to keep the other media aspects together as a package or sell off everything and count the money.

The Tribune Company is in a fix like a lot of guys in the screw machine business today. The multi spindle business, high volume, medium accuracy is being dismembered by movement of work to China and India. The trend ebbs and flows, but the long term shift of high volume commercial manufacturing is clearly toward low cost labor markets. As these low cost suppliers hone their skills they will take low volume, high value added work too.

Using the Tribune Company logic, this is the time to sell out of the screw machine business to a smaller private equity investor who will do the eminently logical thing – squeeze it and pay down debt, then flip it to somebody else.

I think that the big city newspaper and the big manufacturing company analogy holds up fairly well. The niche publication, which is not time sensitive, can succeed in the marketplace. And the niche machining company with great expertise and swift response capability will be able to prosper in the American market. Medical, aerospace, military, specialty auto and hundreds of other specialty machining markets hold great promise for well positioned firms. The web will foster numerous export opportunities.

The Tribune is doing the right thing to dish off the papers. They are too big to fix quickly. Huge manufacturing concerns are also correct to shut down fat old factories, but little niche players should have an open field in both publishing and manufacturing in the next several years.

Share this post

November

As I am writing, the Congressional elections are an unknown. The conventional wisdom is that the Democrats will win the House and possibly the Senate. Is this a big deal if it happens?

From a legislative standpoint it is a nonevent.

But from a political point of view it is significant. The Republicans have held the House for 12 years. Six years of Bill Clinton and six years of Bush, the political climate in Washington continues to sour. The animosity between the parties is stronger than I can ever remember. This is good and bad.

Legislatively we will have gridlock. This is a wonderful thing for business because usually the best outcome we can hope for in Washington is stalemate. The mantra of doctors and Congress people should always be “do no harm.” If the government can’t get anything done, we are normally sheltered from gross stupidity.

So the Congress will probably become a vitriolic star chamber of investigations of the Bush administration with the Dems attempting to brand George the 43rd as Charles Manson’s twin brother.

But no matter what happens in the 2006 election, 2007 will be an important year for debate about the Iraq war and containment of North Korea and Iran.

The possible presidential candidates will be formulating their war messages next year. Al Gore, Hillary and various unknown governors will be testing their rhetoric on the left wing power brokers in the Democratic party. They will have to appease the La Monsters to get the nomination, but if they go too lefty, they will alienate middle America, which also dislikes an endless war of refereeing between Muslim gangstas in Iraq, but realizes that the U.S. needs a military presence in the Oil loaded desert.

It will be a signal event if the euphemism “War on Terror” finally is renamed by the candidates as the ”War against nihilist Muslim Jihadists.” It will be a long fight, like the Cold War was.

On the Republican side, the 2006 election will also shape the message of the presidential contenders. Senator John McCain appears to really want it. If the Bushies get whomped in the Congressional elections, he will be a logical alternative for the party, but the unalterable fact remains – senators usually lose Presidential elections. You have to go back to 1960 and John Kennedy to a senator who moved directly to the presidency. For this reason I think Rudy Giuliani has a good shot at the nomination despite a lot of health and personal issues which will disappoint the party’s Social conservatives. Whoever gets the GOP nod will position himself or (herself) as the counter-Bush candidate. History may vindicate Bush-Cheney-Rumsfeld’s foreign policy, but 2008 will be too close for happy reminiscences.

If the Democrats take the Senate with 51 seats, it will be extremely difficult for Bush to name a Supreme Court Justice if a vacancy occurs. About the only sure bet to pass a Democrat Senate would be Bill Clinton. Now that would be one way to get him off the campaign circuit in 2008.

Share this post

Ex One Revolution

For me, the highlight of IMTS was the Ex One exhibit. This company, led by former head of Extreme Hone, Lawrence Rhoades, and former CEO of Gleason Works Theaters John Burns, is revolutionizing the world of machining. Perhaps not revolutionizing, but replacing much of machining as we know it, using a three dimensional process, which incorporates a layering of metal powder by a version of inkjet printing.

Ex One is already using this process to make sand models for casting. It is also beta testing a similar mode of making dental crowns using gold powder added layer by layer to make a perfect crown in a fraction of the time as in the conventional process.

Rhoades envisions this approach replacing many of the dental laboratories making gold crowns. Dentists are already bringing the technology into their offices making the turnaround time a fraction of that with conventional methods.

Ex One’s vision of the world diminishes the role of Fed Ex and UPS because production would be on the site with virtually no waste.

Watch this video excerpt from interview I did with Mr. Rhoades. It will later appear in the print addition of Today’s Machining World.

Share this post

Today's IMTS Reflections

Mazak looks like a big winner. Their exhibit is almost always swarming, and they have focused on big machines well suited for the boom in energy production and distribution.

Haas seems crowded. They have a million machines and hordes of salesmen and technicians. I have done a sampling of attitudes of show attendees regarding the company and its products in light of Gene Haas’s indictment. I have found a general awareness of the tax problems, but the people I have talked to feel positively about the products and service. This seems to trump anger or dismay about the court case. Several people were sympathetic towards him, having fought with the IRS themselves. The exception was people in the machine tool field who seem to be delighting in Gene Haas’s problems.

I find it difficult to assess the attendance of this show. Aisles are not crowed. It often seems like more people are working the show than attending, but I know this is symptomatic of the dramatic decentralization of manufacturing in recent years. The GM and Fords are not sending big teams of people. Lean companies send key people because production must go on. IMTS 2006 may be a successful event despite comparatively low numbers. The people I have talked to, both buyers and sellers, are feeling successful and optimistic; it’s a buying climate. Midway through, it looks like this will go down as an excellent show for most exhibitors.

One of the weakest exhibits was by the organizing body of IMTS. Their IMTS TV on big beautiful plasma screens strategically placed was watched by nobody because it was a series of canned advertorial interviews, which reeked of inept PR. When will people ever learn that nobody has time for unauthentic fluff, whether written or on video?

AMT had booths at the front of the North hall. Great location near the hot dog seller, but I couldn’t figure out what their message was. There was a list of senators and a printed message about the R & D tax credit, but the call to action was unclear. AMT probably does good work, but nobody but the members of the club would know it from the display.

IMTS generates a lot of energy from the exhibitors and attendees. From my observation, AMT does a weak job of galvanizing the buzz of IMTS into anything that propels manufacturing in America forward politically and intellectually.

Share this post

New Life at Tornos

Welcome to the 21st century Tornos. At the Tornos press conference, I was impressed with Scott Kowalski, who has taken the reins at Tornos in America. Tom Dierks, who led Tornos for many years, was a fine person, but the business in America deteriorated under his watch. Market share slipped to also-ran status, despite having a superior piece of hardware to sell.

Tornos appears to realize the problem. They have improved the software by partnering with PartMaker and developing a Windows-based product.

They are building a “Center for Excellence” in Naperville, IL, outside of Chicago, which sounds like it will eventually be a home for the brand. They are taking a cue from Index, which moved from a cozy building in a small Connecticut town, to a state of the art plant near Indianapolis. Tornos has also granted a multi-spindle representation to Hydromat, which has a chance to really make something out of it.
Kowalski impressed me as a high energy mover and shaker. He has a clear idea of what he has to do – build the brand with service and support. Convince the best dealers that Tornos is on the rise again. Show passion and commitment to the customers.

I think this guy is really going to stir things up for the better.

Share this post

Three days and counting…….

Eight days of IMTS. Are you kidding? This is an idea from yesteryear. If you compressed IMTS to three days, everybody would come for those three days. Comdex, the National Hardware Show, big medical conferences – nobody does more than three or four days anymore.

The programming doesn’t even fill three days now. The weekend is slow, especially Sunday. Perhaps the downtown restaurants and hotels like the added traffic, but IMTS should be for the participants, not the city it is located in. And for the participants, eight days or six days is a big inconvenience and physically bone crushing.

We are in a period when manufacturing lives under constant pressure to reduce costs – go lean.

IMTS continues to be the show of excess – too big, too long, too expensive. This may temporarily serve the interests of the organizers, but ultimately the exhibitors will expect the same lean performance from IMTS as their customers demand from them.

Share this post

“Show Daily”: IMTS Dumbs Itself Down

Upon entering the main Hall at IMTS you are immediately invited to take the “Show Daily” pamphlet by an attractive young woman in a tight blouse and spiked heels.

For as long as I’ve been coming to IMTS, there’s always been Gardener’s “Show Daily”, a cheerleading shopper, which parodies journalism. It’s a compilation of advertorials barely masquerading as editorial copy. IMTS degrades itself by allowing the handout to be called “The Official Show Daily of IMTS 2006.” Perhaps people are dumbed down by years of pedestrian tripe, but for some reason some companies continue to spend lots of money to advertise in a rag that few but the totally bored out of their minds could read for more than ten minutes.

The IMTS Directory of Exhibits is another misfit. IMTS is doing a nice job with it’s web map and directory, but the book is a complicated jigsaw puzzle, full of fold out ads, which disrupt the flow of the listings. I find it a convoluted mishmash that is cumbersome to use at the show or after the show.

If you are looking for an exhibition, you cannot find it by going to the alphabetical listings near the back of the book. You will find a folded ad under the tab for Lyndex Nikken, which doesn’t seem to mesh with anything in that section. You will find folded maps requiring magnifying lenses to decipher the names.

Share this post