Category Archives: Business

Gene Haas Trial Coming

The Gene Haas tax evasion trial is projected to begin in September. It has been stalled by continuances, but both sides evidently want it to happen now.

Denis Dupuis who was Gene’s top deputy was indicted with him. Dupuis has made a deal with the Feds to testify for the prosecution.

The Haas Automation company has attempted to distance itself from Gene’s travail and appears to be going strong. My dire predictions about the possible impact of the case on the Haas business have proved wrong to his point.

My understanding is that Gene Haas still owns the Haas Automation company. Today’s Machining World will be following the trial closely, because the outcome will affect the machining community. Haas, the man and the company have embodied the resourcefulness and resiliency of American manufacturing as much as any person or company over the past 25 years. The trial certainly demands our interest and scrutiny now.

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The Customer Isn’t Always Right

I hear that Sprint has notified 1,000 of its customers that they are being terminated by the cell phone service provider.

Sprint will get some momentary snickering PR, but frankly, I am sympathetic to the idea of dumping the nags. I believe that not all customers are worth the aggravation. A demanding but intrinsically fair client is a good thing because he or she forces you to raise your game, but some people just “drey your kop” (Yiddish for “play with your head”). Life is too short to diddle with such time wasters. The chronic malcontent customer is always worthy of being pruned. Sprint has the right idea to forgive their balance and direct them to AT&T or Verizon with a gracious kick in the butt.

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The Labor Shortage

The labor shortage of skilled machinists is not a singular phenomenon. Heavy equipment operators who maneuver excavators, dozers, and cranes are also scarce. Power Equipment of Chattanooga, Tennessee, is doing something about it in its area. The company contributed $600,000 worth of Kubota machinery to Chattanooga State University to equip operator courses, according to Larry Moon of the company. He says that the classes have been oversubscribed every time they have been offered. This is a smart move for Power Equipment, which has several branches in the state.

On the machine tool front, Haas Automation has been the most aggressive in donating equipment to colleges and universities. This has had the double barreled effect of developing brand awareness for machinists and engineers while enriching the pool of operators in the field.

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Can Old-school Steel create a New School dream?

Several issues ago in Today’s Machining World, Robert Strauss wrote an in-depth story about Conserve School and its unusual relationship with steel distributing agent, Central Steel and Wire, of Chicago.

James Lowenstine, son of the founder of the company, left this centi-million dollar estate to build an environmentalist’s dream of a prep school in rural Northern Wisconsin.

The Trust which funded the school was endowed with Lowenstine’s stock in Central Steel, a beautifully run company doing $750 million a year in sales. Several board members of Central Steel also sat on the Conserve School’s Trust board.

A clause in the Lowenstine will stated that if Conserve School failed to meet the educational goals Lowenstine had envisioned, the Trust should move the assets to Culver Military Academy, Mr. Lowenstine’s alma mater.

The possibility of attaching itself to a billion dollar corporation was overwhelming and Culver decided to sue Conserve School and its trusties late in 2005.

Both sides were well along in the pretrial discovery process this spring when Culver decided to drop its lawsuit. The judge dismissed the case on May 25th, 2007.

I found this case fascinating for many reasons. Central Steel is the epitome of an old school company in the best sense. The people wear white shirts and don suits and ties. Most of the salesmen come out of Chicago Catholic high schools.

Its reputation for excellent service is impeccable. Some might call the company dull and gray, but it’s brilliant at chopping up steel, delivering on time, and making money. We should all be so boring.

What James Lowenstine did so cleverly is try to preserve the company he loved and build a groundbreaking educational institution on the North Woods ground he adored.

The vast wealth of the trust was such a sweet carrot that it almost became the undoing of the will’s grand plan.

It will be awfully interesting to see how a bunch of steel guys out of Irish Catholic Chicago high schools can steward a tree hugger school in the boonies of Wisconsin with almost unlimited assets behind them. It is a strange brew.

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Rube Goldberg is Alive and Well

“Rube Goldberg” is alive and well in Harry Potter’s neighborhood. Three blokes in their mid-twenties, graduates of elite Cambridge University, have developed fantastic mechanical chains of devices, like sliding chess pieces, dropping hammers, and perfectly aimed darts that keep the crazy sequence going on video. They reckon four to five million people have watched their clever automation process on screen.

Their contraption videos are a brilliant effort to promote the young company of these clever mechanical engineers who specialize in manufacturing and design creativity. I urge every reader to go to their website, www.baynhamtyers.com to see their hard work.

I talked to Tom Baynham, one of the creative engineers, about the group’s business plan, and how the popular videos fit into it. He says they are in the manufacturing and design creativity business. They are currently working on a project for a firm providing portable machine tools for the oil industry. They have spent time at the Mazak plant in Japan and see a future for their innovative approaches to making things.

He says that their videos have brought them notoriety and networking opportunities in manufacturing circles, but my sense is that they have not grasped the potential of the films.

They have a superb opportunity to turn their site into a huge social networking venue for people interested in mechanical things. This could lead to opportunities in toys, construction, even apparel – judging by the young guys from Threadless. They also could try the citizen contest method, which could culminate in an interesting show approach.

What these fellows have done is discover the latent interest in intricate mechanical contraptions. This implies big opportunities for machining companies to popularize and humanize their websites with similar creative efforts.

If I was looking for a company to make something, and found a group with the creative acumen of a Rube Goldberg master, I would definitely give them a shot at my work.

It is not a big leap to connect the dots from wacky contraption to perfect machined parts.

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A Perfect Day

Sometimes I have a day when everything comes together and I have to say, “Thank you, God, for allowing me to experience it.”

I had one on May 7th. Noah and I had an interview scheduled with Eitan Wertheimer, Chairman of the Board of Iscar, the huge Israeli cutting tool firm that he and his father Stef built. They just sold 80 percent of the company to Warren Buffet’s Berkshire Hathaway for $4 billion.

We got to the Standard Club in Chicago a half hour early, stepped into the elevator and Eitan introduced himself to us. He was ready to start the interview at 9:00 instead of 9:30, and we immediately began talking about Iscar, the sale to Buffet, his business career, love of cars, interest in education, the ups and downs of family business and a satchel full of other subjects.

Great chemistry. He wanted my take on business in North America, particularly the car industry and the woes of GM, Ford and the Tier Ones. I wanted to get his view of Israeli politics. He said that in business you can develop good people and work with them for a long time, but in politics you have no choice but deal with a bunch of difficult personalities.

He had advice for Noah about family business. The two of them seemed to hit it off immediately. Eitan’s oldest son is Noah’s age and is trying his hand at being an internet entrepreneur.

The interview lasted 75 minutes, and I felt like we could have talked for hours, but I knew that other people were waiting for a piece of his day in Chicago.

So we left the elegant, old Standard Club to prepare for our later interviews that day. Noah was preparing to talk to the twenty-something owners of Threadless, a custom tee-shirt company that is rewriting the business script of retail, and I was going to see the young entrepreneurs at Microlution, a machine tool startup on the Northwest Side of Chicago.

Microlution is making a CNC milling machine, smaller than a desktop computer. The next version of the tool will be adding a tool changer with the same kind of tiny footprint or, to be more precise, handprint. These young engineers worked on this stuff when they were students at the University of Illinois and are now translating it into what they hope will be a viable business. They are working on a big development contract from the Navy, they hope to sell four machines by the end of 2007 and 20 next year.

I think that they are doing something very cool. The current machine is potentially a design engineer’s best friend because the engineer could make prototypes literally at his desk by himself, skipping layers of bureaucracy and enormous tooling expense in a traditional big company setting. The engineer could make ten iterations of a component in a fraction of the time it would take to job it out or send it to a big company’s toolroom for prototyping.

I was impressed with their product, and I liked the way they think. I had a 5:00 p.m. reception for the American Israeli Chamber of Commerce back downtown, and I needed a ride. In a moment of inspiration I asked Andy Phillip, one of the brains at Microlution, if he would like to meet Eitan Wertheimer of Iscar. After a long moment of pondering his schedule, he said yes.

We stopped by his apartment in the city (he lives two blocks from Noah), so he could change into a suit and tie for the old school meet-and-greet for big shots at the Conrad Hilton on Michigan Avenue.

We walked into the reception (for the American/Israeli Chamber of Commerce) and saw Eitan Wertheimer surrounded by a gaggle of people. He immediately greeted me buoyantly and asked me if Noah was coming. I told him no, but I had another young guy named Andy Phillip that he had to meet. I briefly described the Microlution product, and then the two men started to talk shop. After 10 minutes they exchanged cards and promised to email. Then Eitan introduced Andy to several men from Pratt and Whitney, with whom he has a big joint venture making jet engine blades in Israel. One of the aircraft engine guys we met has 450 design engineers working under him.

I got a huge kick out of it. Will anything great come of the interviews and the matchmaking? It already has for me.

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How little Spira Shoe Company stole the show from Nike

What do you do if you are an unknown pipsqueak company with a killer idea, going up against a giant with an almost unlimited marketing budget?

On April 16th at the biggest running event of the year, the Boston Marathon, tiny Spira Shoe Company of El Paso, Texas, stole the show from Nike.

For two thirds of the race, two unknown Kenyan runners led, wearing brilliant yellow Spira shoes. Spira shoes have a superior design to their competition aside from just their color. Tiny springs are put into the heel of the shoes. This idea is getting traction in the footwear community but has not been deemed kosher by the running mavens. The Spira guys did not expect to win the Marathon. They just wanted to be noticed. And for one hour 32 minutes of the two hour, 10 minute race, they were front and center.

Nike can buy every track star on the planet (the winner did wear the swoosh), but the talk of the race was these two wannabee Kenyans with the incredibly yellow shoes.

Spira had promised the Kenyan rabbits $150,000 if either won the race. If the runners had won the race they would have had to forfeit the marathon’s official prize because of the spring shoes, but Spira was pretty secure these unknown runners weren’t going to finish first.

Unknowns do not win the Boston Marathon, but this year one did – Spira

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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.

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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.

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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.

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