On today’s episode we are discussing the machining industry in Spain.
Our guest is Patrick Bosch, Managing Director of Nagamohr, a 150 employee Tier 2 automotive company headquartered in Madrid, Spain. According to Patrick, despite Spain’s reputation as having a relaxed culture, its people are quite serious about manufacturing.
Patrick talks about his family’s German origin and about a subsidiary his company started recently, Nagamex, in Mexico. (2:55)
Patrick talks about Nagamohr’s business, producing turned parts for Tier 2 automotive. The company has over 80 machines in its shop in Spain, including a large number of Hydromats, as well as CNC multi-spindles and other CNC machines. It has a turnover of around 15,000,000 euros per year. (4:05)
Patrick says Nagamohr was originally a joint venture between a Spanish firm and a German firm, Nagares and Mohr, but the two could not get along, even while the company just existed on paper. Nagares, the Spanish division, wanted out of the partnership, so Patrick’s family took its place. Only a few years after the company was founded, the Bosch family assumed full ownership of Nagamohr. (5:25)
Patrick talks about his background. He studied business administration and engineering at university. For a few years he worked in the finance field, but when the opportunity arose he decided to join his family’s company in 2011. He assumed a leadership role in 2013. (6:40)
Patrick’s talks about why his family moved to Spain. He is the first generation of his family born in the country. In 1962 Patrick’s father originally visited Spain to study Spanish, but decided he preferred to stay in Spain than return to Germany. Patrick’s mother is also German. (8:00)
Patrick says that the automotive industry represents over 10% of Spain’s GDP. He says Spain’s manufacturing is most significant in the country’s Basque region (in the north) as well as Catalonia, while his location in Madrid ranks third.
Patrick discusses the division between the regions of the Spain. He says half of the people in country identify themselves as Spanish, while the other half of people identify themselves by their region. (11:45)
Patrick talks about the skills gap in Spain. He says it’s hard to find skilled workers in the machining field, so usually its necessary to train employees in house. (13:10)
Patrick talks about the industries commonly found in Spain besides automotive, including the energy industry and engineering. (14:40)
Patrick says unemployment in Spain fluctuates quickly and can be very high because of the country’s reliance on the seasonal tourism industry. He says before the COVID-19 crisis the country’s unemployment rate was around 11%, but right now it is around 18%. (15:22)
Patrick dispels the myth that Spanish people are lazy workers. He says the Spanish work day is similar to that of other countries but the custom of the Spain is to operate one hour later than the rest of the world, as though it were in another time zone. For instance, someone working in a shop in Spain might start at 7:00AM rather than 6:00AM, but then work an hour later in the day. Rather than eating lunch at noon, Spanish people often eat lunch around 2:00PM. Then they typically start eating dinner around 8:30PM and as late as 10:00PM. (17:10)
Patrick discusses salaries in Spain and Spain’s government-run programs such as health care. He says salaries range widely, with entry level in a shop around 20,000 euros a year, with an additional 33% going to the government for social security and health care. He says that Spain’s public health care is very good. He says inexpensive private insurance is also available but generally everyone uses the public health care providers for serious medical concerns even if they have the private insurance. He jokes that he always asks himself why he pays for private insurance. (18:50).
Patrick says people in Spain work much harder than other nations realize. (21:20)
Patrick explains the origins of Nagamex, Nagamohr’s Mexican subsidiary, which was originally conceived in 2015 (See video below). Two major customers suggested the company should build an additional facility to be a local supplier to North America. It started the company there two years ago. Patrick says the biggest challenge of working in Mexico is the paperwork. He says there is significant employee turnover there but also many good workers. He also says he hasn’t encountered any corruption there so far. He says the Spanish language and Western culture was one of the driving factors behind building a plant in Mexico rather than in Asia. (21:55)
Patrick says that 99% Nagamohr’s work is automotive. The company was hit hard by COVID-19, with a reduction of more than 70% for two months. Business has picked up somewhat in the last few month. (27:00)
Patrick talks about something new he learned recently. He says two weeks ago at the beach he saw someone riding a special bicycle on water. (27:45)
Question: Do you prefer to work early or to work late?
I talk to a lot of folks in the machining trade every day, and the clear sense I am getting is that business is improving. The automotive segment is definitely firming. Auto related work has bounced back from the April, May, June, July doldrums. Demand has picked up, and car showrooms are extremely short of hot inventory.
European and Japanese companies were also shut down, and the supply chains are strained. Guns and the medical sector are strengthening.
We are seeing an uptick in the used machinery business. The auctioneers are surprised at how strong their sale prices are holding up. Inventory of late model Swiss-type and multi-axis CNC machines appears to be light.
On the macroeconomic front, the recent perverse behavior of stocks is being attributed by pundits to the surprising decrease in unemployment after PPP money ran out and extra layoff checks ended. Evidently some people did choose to return to work.
Small businesses, especially those travel-related and restaurants, have been severely hurt, but the wounded giant called the American Economy appears to be healing. The prospect of multiple viable vaccines being approved soon, while good for most people in business, is viewed by some speculators as negative for tech stocks like Apple and Amazon, which have continued to thrive despite the swooning economy. It appears that improving conditions are sell signs for the option trader gamblers.
From my observation, the impending election does not seem like it will be a significant issue for the stock market, but it could be an issue small business people.
They should ask LeBron for advice. He seems to know all.
Do politics and NBA basketball mix well?
Maybe the better question is does China own the NBA? Or perhaps the real question is does LeBron James play for the Los Angeles Lakers or Nike?
The three questions are tied together. LeBron signed a contract in 2019 easily worth a billion dollars with Nike, becoming its most valued endorser, though Michael Jordan trails him very closely.
The NBA also signed a $1.5 billion dollar contract last year with Tencent, the Chinese mega company, granting it the exclusive rights to broadcast all of the NBA games it chooses to air in China. The games are mainly watched by young people on their cell phones as they ride public transportation to work in the morning.
The NBA has built academies in China to teach and promote the basketball. When Daryl Morey, the general manager of the Houston Rockets, had the audacity to tweet critically about communist China crushing the human rights demonstrations in Hong Kong, the Beijing Party leaders bristled. Then the NBA bosses cowered and tried to make nice.
LeBron, who probably sees himself as a potential president of the United States, and heir to Oprah and Martin Luther King Jr. in America, had a real dilemma. It was magnified when COVID-19 hit midway through the 2020 NBA season. The players were undecided about continuing to play, but LeBron had the NBA, Nike, China, and Black Lives Matter all looking at him to thread the needle. It was a time to prove himself to be politically skillful before he even stepped on the court again with Anthony Davis and the rest of the Lakers.
I watched LeBron play brilliantly Monday in the playoff series, ironically against Daryl Morey’s Houston Rockets. Black Lives Matter signage was everywhere in the Orlando bubble, where all of the games are being played and broadcast on TNT and Disney’s ESPN. Player uniforms displayed social and political messages, and a huge VOTE sign was prominently displayed during all broadcasts.
It is a fascinating mishmash of sports, business, politics, and LeBron, who is proving himself to be the Confucius of America in 2020.
Question: Is your business rebounding?
The automotive world is churning these days. New cars are creeping out of the showrooms, but used cars are going bananas. CarMax stock has doubled since April.
Yesterday’s announcement by Ford that CEO Jim Hackett is stepping down should come as little surprise after his 3-year tenure saw Ford’s stock plummet 39%. His predecessor, Mark Fields, lasted only 2 years. Ford’s big plus has always been its F-150 pickup, and it is reintroducing the Bronco, with 150,000 pre-sales to position itself against the Jeep Wrangler. Hackett was an outsider who was recruited from furniture maker Steelcase. His successor, Jim Farley, is a Ford veteran like Mark Fields.
The pickup truck melee is getting more competitive with Elon Musk’s Cybertruck with its radical styling, now gearing up in Austin, Texas, which is also where Tesla’s new battery plant is being built. Musk has reported well over 500,000 pre-sales for the electric truck, priced at $39,000. As usual, he has taken an unorthodox approach to build the vehicle with stainless steel sheets, cut and laser welded, avoiding the cost of stamping out the body and doors with enormous expensive presses. Using lithium batteries is expensive, but making them in Austin in huge quantities will lower costs. The F-150 is cheaper in its base cost, but if we compare apples to apples for a bigger bed and 6-passenger capacity, the price edge goes to Tesla.
An interesting new entry into the electric pickup game is Lordstown Motors in Lordstown, Ohio. This is a start-up being funded by a money group from Wall Street. Who is really putting up the money is vague, but GM just tossed in $75 million and the company will be on the NASDAQ shortly. GM is also building a battery plant near the Lordstown, Ohio, plant, which it built in the 1960s to build the Chevy Caprice. Lordstown is famous for a strike in 1972, in which the UAW infamously turned out cars with torn upholstery in its guerrilla retaliation against the company. To me, Lordstown has always symbolized the downfall of American automotive companies and the stupidity of the UAW.
Will Lordstown Motors, which plans to build a plain vanilla electric pickup with a GM battery using a stealth group of investors, be able to compete with the sexy Cybertruck? It’s not a hand I would bet on.
Another player may be Rivian, which Ford invested in through its Lincoln division but has now walked away from. It is another stealth company, which supposedly got $700 million in backing from Amazon. If they ever really build a competitive electric pickup, they will be as far behind as a Volkswagen diesel.
Not to be forgotten is Nikola, which is planning to build a hydrogen powered pickup truck called “The Badger,” in a non-existent plant in Coolidge, Arizona. They claim to have 20,000 pre-sales, but everything about this company seems weird.
To me, the big question under the surface is do the real people who drive F-150s, Ram trucks, and Silverados really want an electric pickup truck? I know the US government is forcing electric vehicles on us because the sky is falling if we only get 30 miles per gallon from gasoline, but the market is telling us that electric cars, even Tesla’s, are not that useful in places like Chicago or Nashville or Frankfort, Kentucky.
A hybrid makes more sense to me. The technology has been tested for decades and does not require a gazillion dollar charging station infrastructure. Did we all forget that the power plants to fuel the recharging stations run almost totally on fossil fuels in America? Same in China and Europe, and in those places they are still primarily coal-fueled.
I love Elon Musk for his entrepreneurial brilliance, but I still wonder if we have simply bought into the enchanting myth of electric vehicles.
Question: Do you think those who drive pickup trucks really want an electric pickup?
On this week’s episode we’re continuing our tour of the machining world outside the United States.
Today’s stop is Brazil, where I’m speaking with Rogerio Salvatico, Industrial Manager at Engemet, a major precision parts supplier for Tier 1 and Tier 2 Automotive in Sao Paolo, Brazil.
(3:00) Rogerio gives his background. He grew up in São Paulo, Brazil. During high school he attended a specialized school with technical classes in the afternoon. When he was 17 he started an apprenticeship at Mecano Fabril, a machining company producing automotive components. The first machine he learned on was a Haas SL10, which he says he immediately fell in love with. He says for him the idea of CNC machining parts for cars was fantastic. Mecano Fabril had 60 Wickman cam multi-spindle screw machines.
(4:20) Rogerio says that after high school he went to university to study engineering. Later he went to work for Engemet, a large automotive parts supplier, where after eight years he became engineering manager.
(5:30) Rogerio says São Paulo has a lot of industry and technical schools. He says the city has a lot of opportunities for people to work in the machining industry because lot of automotive suppliers are located nearby.
(6:30) Rogerio says Engemet is primarily an automotive supplier. It supplies parts for Tier 1 and Tier 2, both cars and trucks.
(6:50) Rogerio states that most of the parts Engemet makes are for domestic use, though the company has supplied some firms in Germany. He says Brazil has factories of most of the major car companies from around the world. He says most of the cars manufactured in Brazil are sold in Brazil.
(8:20) Rogerio talks about Embraer Brazil, a Brazilian owned company that is the third largest aircraft manufacturer in the world, behind only Boeing and Airbus. He says many regional jets in the United States are produced by Embraer, usually models with 100 seats or less. He says Boeing recently tried to merge with Embraer, but the merger was stalled by the COVID-19 pandemic.
(10:20) Rogerio says that the salary of a machine operator in Brazil starts at around $500 a month, however this number is misleading because the current economic crisis has made the Brazilian reais plummet. He says when the currency is stable it is around 3 or 4 reais to the dollar. Recently the currency fell to 5 reais to the dollar and at one point it was around 6 to one dollar.
(12:20) Rogerio says that because of the falling Brazilian currency a lot of customers are asking domestic vendors to make parts that they were buying overseas in the past. He says this is a big opportunity for Brazilian manufacturing companies. However, current automotive parts volumes are at 40% of their average because of lower demand for cars during the pandemic.
(15:00) Rogerio says there are a lot of machining companies in Brazil doing medical and dental implant components. He says there are also many companies machining components for the oil and mining sectors.
(17:00) Rogerio shares that he hopes the Brazilian economy is going to improve before the end of the year. He says the country was optimistic the economy was going to have a good year at the beginning of 2020.
(18:00) Rogerio says that it is pretty difficult to borrow money in Brazil. He says the country’s interest rates are very high, and it’s hard to buy capital equipment from abroad because used machine tool imports are taxed at 30 percent.
(20:20) Rogerio explains that it’s hard to start an automotive or aerospace parts supplier in Brazil because it takes so much capital, but he sees a lot of startups in the Dental and Medical sectors.
(21:45) Rogerio says that Brazil’s president Balsonaro has been called the country’s version of Trump because he is pro free markets and often makes impulsive remarks. (Watch the clip below).
(23:15) Rogerio says that people in Brazil’s favelas (ghettos) sometimes work in machining shops, but it isn’t easy for them to get those jobs.
(25:15) Rogerio likes that people in Brazil are social and enjoy life. He says that families there spend a lot time together and he loves the country’s food and music. He says when the economy is good Brazilians are content, but when the economy has problems a lot of people want to leave. He says he would like to move to a smaller city in the country because it’s peaceful and without much crime, while still having a lot of industry.
(27:00) Rogerio says that Brazil is the seventh largest economy in the world. He says the country has a lot of opportunities to prosper in the future because of its manufacturing, oil, mining, and finance industries. However it’s still developing, so life there isn’t always easy.
Question: Is Brazil a place you would like to visit?
Is it a lot to ask of a car to be able to have a conversation or listen to music while driving on the expressway? Maybe so, because I can’t seem to find a car that can enable me to do so.
My wife’s lease is up on her 4-door Camry, and we are searching for a vehicle to replace it that does not require a scream to answer a question.
The problem of cabin sound appears to be multifaceted. One issue is that I wear hearing aids which amplify background sound which can drown out human conversation. There are adjustments to modify this issue in the control module in my phone, but that is impractical, particularly while I am driving.
Another complication appears to be the 4-cyclinder engine in the Camry which is noisy and seems to have to huff and puff to push a 4-door, full-sized sedan from place to place.
Tire noise on fast highways is another noisemaker. It grinds through the floor relentlessly. Add in meager sound insulation in the doors and you have the almost debilitating drone of a Camry and evidently most of the cars being sold today.
Going electric is an option, but that does not address most of the sound generation that drives me into silence.
Does anybody know of a viable option for people with a noise aversion?
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Major League Baseball’s spring training begins again this week in Arizona and Florida. This is a blessed event for me. It is a sign of hope that another brutal winter in Chicago is finite. Hallelujah.
It also means hope is alive for another successful season for my beloved Chicago Cubs who have a new manager, David Ross, who was a second-string catcher during the Cubs recent golden period of 2015-2017. I loved the former manager, Joe Madden, but the team seemed to need a change and a $5-million-dollar-a-year boss whose contract had expired was an easy target. Madden quickly caught on with the Los Angeles Angels.
Another hopeful sign for 2020 is the hated Houston Astros have been found out as cheaters who used high tech to steal catchers’ signs and then used crude banging of a garbage can lid to alert their hitters to a fastball or off-speed pitch. In the 2017 World Series they devastated Yu Darvish, then a top pitcher with the Dodgers, by informing hitters of what kind of pitch was coming. People thought Darvish was “tipping” his pitches, but really it was the devious Astros who stole his catchers’ signs. The incredible improvement in batting contact made by Houston hitters should have alerted Major League Baseball to the chicanery of the Astros, but the baseball honchos did not act until former Astros players spilled the information.
It is possible the Boston Red Sox may have done similar dirty tricks in their World Series season in 2018, but the verdict has not come down. Their manager, Alex Cora, did get fired, however.
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The battle for the Democratic Presidential nomination is fascinating and scary. It appears Bernie Sanders will face off against Donald Trump, with Michael Bloomberg possibly running as a third option.
Many people think this match-up is a sure win for Trump. I’m not so sure. More later.
Question: What car would you buy to get a quiet interior?
Tesla stock sold for $169 per share in June of 2019. People were wondering if Tesla was today’s DeLorean. Its 2025 bonds were paying 7%.
Today, Tesla stock roared past $900 per share. What happened in seven months, and what does it mean for the machining world?
Obviously, the short sellers got killed. The stock has a rather thin float for a significantly traded company, which makes it volatile. But even the doubters, and there are loads of them, must admit now that Elon Musk has done an amazing job in building a car company from scratch.
There were hot moments when cash was short, and he pushed everybody to work overtime to hit the production goals for the Fremont, California, plant on the mid-priced Model 3. Then he surprised most people by surpassing sales targets. He did the impossible again by building the enormous battery plant in Nevada and somehow putting up a huge plant near Shanghai and rolling the first cars out before the end of 2019.
Meanwhile, GM and Ford are lumbering along with their electric car plants in the Midwest, while Tesla is starting its European plant in Berlin.
I have always been a Tesla skeptic and never bought the stock, but now I must admit that Musk has an astounding track record on cars and somehow finds time to build his SpaceX dream into a viable entity, too.
The aspect of Tesla which I think most people have missed is the amassing of data for producing a viable autonomous car. Tesla has had a few fatal accidents with its self-driving cars, but Musk, the supreme risk taker, evidently has made the calculation that getting to the end line first in both electric and self-driving is worth the damages incurred when screwballs push the envelope or fall asleep. Google’s Waymo has been much more conservative, avoided tragic accidents, but is a distant second to Tesla in data derived.
The Europeans like BMW and Audi, the cautious American car companies, and the ultra-conservative Japanese are way behind and stumbling. The $900 stock value of Tesla is the world waking up to the farfetched idea that Tesla may have a tremendous first mover advantage in both electric and self-driving vehicles that few people thought possible even a year ago.
It is possible that neither category becomes enormous, but it seems likely to me that at least one of them is the jackpot.
On the other side, Exxon stock is down 12% so far in 2020, and oil prices are sputtering. Electric vehicles gaining traction and, to a lesser degree, the rise of self-driving taxis, mean fewer machined parts. In our machine tool business we see people hedging their bets on automotive work. It isn’t going away, but it certainly does not look like a growth business unless you are in the Tesla orbit.
Our customers who are heavy in auto and small truck are looking for diversification, which has pushed them into Swiss-type machining and away from multi-spindle screw machine work. The brutal competition for high-volume auto work has also forced our clients to take automotive expertise to other more appetizing areas.
Yet the conventional wisdom that automotive work is an idiot’s game may turn out to be wrong, too. The automotive supply chain’s reliance on China is showing itself to be vulnerable. The Trump tariffs, Chinese theft of intellectual property, the threat of the Hong Kong demonstrations spreading, and now the Corona Virus epidemic are exposing the danger of becoming too dependent on China outsourcing.
Despite Tesla stock hitting $900 on Tuesday, it would be a mistake to give up on old school gasoline vehicles driven by human beings, at least for the next 10 years.
Question: Is automotive work too risky to be in?
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?
In today’s podcast we interviewed Jeff Reinke, Editorial Director of Industrial Equipment News (IEN). He gave his take on several of the fastest emerging trends in the machining business, including electric cars and 3-D printing.
Reinke said that right now Elon Musk is suffering the consequences of overpromising and underdelivering on his products. He said that Musk is a unique car company CEO because when certain projects suffer setbacks he stubbornly charges forward instead of shelving them as other car companies would.
This boldness enables Tesla to develop innovative technology that sets the company apart from the established but conservative automotive makers.
Reinke said that when the big car companies start producing all-electric vehicles on a large scale Tesla will have to develop a niche to survive the market. Not having a niche could lead to being acquired by an established car company seeking to obtain Tesla’s technology.
The big question is whether the majority of consumers will follow the electric technology or if they will stubbornly hold onto their current gas vehicles.
Reinke also said the advancement in 3-D printing is one of the current trends in machining he is most excited about. He said it is fueling the demand for customization and he is impressed by the cost-effective materials available for the process such as carbon fiber and metal. However, Reinke believes that for the near future large volumes will still be made with conventional metal cutting equipment rather than using additive manufacturing.
Question: Does producing guns with 3-D printers scare you?