Category Archives: Economy

Obama’s Subsidies will Benefit Foreign Manufacturing more than Us

By Lloyd Graff

"Broc Obama" from greenupgrader.com

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?

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Feeling Groovy

Productivity in manufacturing rose an unprecedented 13. 5 percent in the third quarter. It means business is rising but the number of employees isn’t. The inflation vigilantes do not accept these numbers. But I’m feeling groovy about productivity gains which will give a big chill to the dollar killers and gold hoarders. Sell your bullion unless you’re going to make soup.

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After discussing murder in the workplace, Tuesday, how about some good news?
Chrysler is breaking even now despite its third grade styling. Costs have been pared to the femur. Fiat’sMarchionne is a serious guy and he has brought in a young, aggressive team to turn the joint upside down. With money in the bank (taxpayer’s) and minimal cash burn, Chrysler has a fighting chance to make it when its Chef Boyardee Italian-American line hits the market in two or three years.

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Ford made a billion dollars last quarter and gained market share. They have 23 billion in cash. GM gained market share in the quarter. Toyota made money in the quarter after predicting a loss. Automotiveland is producing at the rate of 10.5 million units per year and making some money. At 12 million they will feel good. The emasculated supply base will need to rebuild capacity.

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Ninety yen to the dollar, and a 1.45 Euro will make American suppliers tasty dollops for acquirers. The Canadian dollar has risen .80 to .93 to the U.S. dollar. We are seeing Canadians in Ontario stepping up for CNC lathes here because they look like bargains with the almost 20 percent swing in the relative value of the respective currencies and because of the upswing in automotive.

Question: Are you feeling happy today?

533-fiat

Jerry Seinfeld’s 1967 (Summer of Love) Fiat 500 that he crashed in 2008

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The Inflation is Coming! Really?

The Inflation is coming! The inflation is coming! The inflation is coming! It’s all over the news and the bond speculators are fanning the inflation hype like Billy Mays wannabees.

I have to ask the dumb question: What planet are they living on?

In my world, Wal-Mart and Amazon are in a price war on books with best sellers going for $10 per copy. Home prices continue to fall as properties fester on the market. U.S. unemployment figures stick around 10 percent, but smart guys like Dan DiMicco, head of Nucor, says if you include discouraged workers who don’t show up on the charts it is over 16 percent.

Commodities like oil have rebounded because Wall Streeters are playing games again, but the real demand for petroleum and natural gas is far weaker than supply. There is no more on-land capacity to store oil so 125 million barrels are now floating in slow moving tankers headed nowhere.

In the machine tool world, auction prices are still trending soft, supply is huge and distributors are discounting like crazy. I recently heard of a Nakamura CNC lathe listing at $360,000 being sold for $217,000. Prices are inconsistent but we hear that 20 percent discounts off quoted prices are common.

The classic definition of inflation is “too much money chasing too few goods or services.” Excuse me, but whether it’s golf clubs or Renoirs, prices continue to fall.

Ten year U.S. Treasuries are around 3.5 percent, which hardly portends inflation. I was astonished to see my real estate taxes on my home are going down and my dentist is dealing on cavities.

Inflation? Yes, if you are talking about balloon hoaxes in Colorado.

Question: Are you raising prices now when you bid for jobs?

walmart

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50 Jobs in 50 Weeks

By Noah Graff

For the upcoming issue, I interviewed Daniel Seddiqui, a 27-year-old native of Northern California who recently completed his quest to work 50 different jobs in 50 states in 50 weeks. Before he started his journey Seddiqui had been unsuccessful in 40 interviews for finance related jobs (his college degree was economics) and had several jobs in various states he hadn’t found fulfilling.
For his 50-50-50 quest he tried to work a stereotypical job for each state. In Maine he was lobster fisherman, Mississippi (the state with the highest obesity rate) he was a dietician. He was a surfing instructor in Hawaii, a bartender on Bourbon Street in New Orleans during Mardi Gras, a border patrolman in Arizona and worked in the machine shop of a medical device maker in Minnesota.
Seddiqui claims that in his job search he was rejected over 5,000 times, yet 95 percent of the time the people who did hire him wanted him to stay. He is now going on a lecture circuit, writing a book and producing a documentary film sharing what he learned on his quest—the power of thinking outside of the box and being willing to step out of your comfort zone, the opportunities which do exist in America.
He shared a story about when he was working in Kansas City as a boilermaker. A dentist who had been out of work for three years saw him on the news and said, “Wow, this guy is going around showing he can do anything, showing he’s an asset to these companies. I have welding skills, why don’t I go in and apply for a job there tomorrow?” The next day the dentist showed up at the company and got hired right on the spot.

Question: Do you feel a lot of unemployed Americans could find jobs if they were more open to different occupations?


50jobs

Seddiqui Working at Medical Device Plant in Minnesota

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Wall Street Lemon Pickers

By Lloyd Graff

Richard De Leon is looking for more than a few good men. He took an ad costing several hundred dollars under the “Careers” category in the Saturday Wall Street Journal, searching for lemon and orange pickers to work from September 17 to Jan. 31, 2010, near Yuma Arizona.

I called Mr. De Leon at his firm, Servicios Agricolas Mex Inc to see how many refugees from Wall Street had applied for the $7.95 per hour seasonal job. He was affable and informative.

I asked him why he advertised in the Journal and he said it has a big circulation and a long reach, so he figured something good would come from it. He needs 150 workers for the upcoming season. With the difficulty in getting traditional migrant workers across the border he is looking all over.

He admits that the work is tough. A worker must haul a 40 pound tree ladder from the site drop area. The picker carries a bag for the fruit and clippers. I asked him if he gets many college students to pick. He says he gets several every season but they rarely last more than a few days. The temperature in Yuma yesterday was 110 degrees.

I told Richard that my view of the job was colored by the movie Cider House Rules. He hadn’t heard of it. A few years ago I traveled to Wenatchee, Washington, during the apple harvest. I love apples and have picked apple sauce quantities from nearby Michigan orchards. I know it was “apple picking for sissies,” but I think there is real value for young people to leave the comfortable settings they know and go to Africa or Peru, or Yuma to feel what rigorous manual work is like, and sleep in barracks and carry a picking bag of lemons along with a 40 pound ladder.

Question: What tough, dirty, physical jobs have you had that taught you something important?

This video explains how to harvest citrus fruit. At one point the old farmer says, if you want to carry a 100 pound bag of fruit for a living, “God bless you.”

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Time to Leave Business Hibernation?

Mike Jackson, head of the publicly traded dealer group, AutoNation Inc., says the automotive economy has turned the corner. He sees a 13 million car year as early as 2011 or 2012. Ford is making money. GM may have an IPO as early as next year. Inventories of cars have been halved in the last few months. The green lights are illuminating the highways. Yet business in my world, the machining world, still stinks.

What do you do if you are making decisions now that could affect your business for the next three years?

From experience I know that the big money is made in the tiny window of a market turn. We have already seen that in the stock market’s 50 percent rebound since the March bottom. If we are at the pivot point in machining, particularly in automotive work, this may be the time to go into business if that’s what you’ve always wanted to do. If you are a business person still standing after 18 months of being pummeled, this is probably the time to gamble on the upside.

When a bear hibernates his bodily instincts tell him when to exit his cave. Rational humans tend to want to stay in the cave well after the thaw begins because a spring blizzard might hit and finish them off.

I must make the decision in the next few days about whether to increase the number of Today’s Machining World issues from the survival mode of every other month, to nine or even 12 issues for 2010. After I almost died a year ago I fear being reckless in case of an economic relapse. But because I survived near death in the hospital and on the economic playing field, I am much more inclined to say to myself and the world, “If not now, when?

Question: Are you ready to leave survival mode?

Leaving a Cave

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A Tale of a Woman Machinist

In yesterday’s Battle Creek Enquirer, Elizabeth Willis wrote an earthy portrait of Julie Eddy, a machinist for 24 years and now an adviser to local students. She says she first got hired because she was wearing a push-up bra when she knocked on the door of the machine shop. She’s had her share of shop injuries and talks about it with the sensibility of a professional wrestler–they come with the job. While the writer views Julie as a working anomaly, anybody who walks into a factory today is likely to see women working all over the shop floor.

Direct link to interview: www.battlecreekenquirer.com

Question: Do you find there is generally a “grease ceiling” which keeps women in a plant assembling parts or doing second op work instead of programming CNC equipment?

Julie Eddy (Battle Creek Enquirer)

Julie Eddy (Battle Creek Enquirer)

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Government aid allows work sharing

While job losses keep mounting in today’s brutal economy, a growing number of companies are avoiding layoffs using a program known as work sharing.

Instead of laying off employees, companies are keeping them while reducing workers’ pay, often by 20 or 40 percent. The employees generally get to hold on to benefits as well. Then, state governments step in and make up part of the lost wages, usually about half. Seventeen states have adopted the program, and economists and executives are hailing the program as a way to keep workers employed and retain skilled labor. A similar work sharing program has been credited with saving thousands of jobs in Germany.

With savings from reduced income taxes and from commuting fewer days, some workers nearly break even. Unfortunately, only a small portion of eligible businesses and workers are presently benefiting from the program because most companies still don’t know it exists.

A story in the June 15 New York Times covered a Connecticut metal working plant utilizing the program. At Tri-Star Industries, the 29 nonmanagerial employees now work three- or four- day weeks. “The alternative would have been to lay off three to seven workers,” Andrew Nowakowski, president of Tri-Star Industries said, “but that would mean that when things become busier, I’d run the risk of not having the trained people I need.” The company’s employees have bought in to the program as well, even if it means less pay. “Without this, it would have been four or five guys out the door and one of them could have been me,” said John Drzata, who runs a five-spindle precision lathe.

Right now, business is all about staying in game; fighting to see another day. A shrewd combination of sacrifice and creativity such as work sharing is the way to survive.

Source: New York Times

Question: Would you be willing to try a work sharing program in your business?

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On the Way Up

By Lloyd Graff

June 3rd, and the world looks a lot different than just 30 days ago.
    GM finally did the dirty deed and filed, and the stock market reacted with relief. It appears suppliers are going to get paid from the Feds lending as the reorganization goes forward. BorgWarner stock is up 80 percent from its low and Johnson Controls has also bumped.
    All of the commodities are zooming with copper near $2.30 and ArcelorMittal stock more than double from its yearly low.
    Obviously, the markets are signaling a bottoming of the economy.
    One of the most encouraging aspects of what’s going on is the strength of the California home market. Sales have been improving for existing homes and the unsold overhang is shrinking. Home prices have actually been rising recently. California led us into the housing chaos and it appears to be leading us out. New homebuyers are appearing in Phoenix, Florida and Vegas where syndicates are coming in with speculative bids for cash on multiple units.
    In the real machining world we live in, the signs of a rebound are beginning to show. Hoff-Hilk’s Bystrom sale last week was a winner with Swiss CNC machines, and Gerry Mannion told me that his recent Bosch sale surprised big on the upside. On the other hand, Robert Levy of Hilco says that he remains very conservative after seeing the market for used twin grip Cincy centerless grinders grind to a halt. Presses and multi-spindle screw machines have no pulse right now, and gear equipment is languishing.
    Intrest rates are rising on 10 year U.S. government bonds, the dollar is weak, the big banks have floated $70 billion in stock and are begging to pay back the TARP. Huge money is leaving the sidelines for investments that appear to have upside. Put it all together and it smells like a recovery in the womb, if we can hang in there while inventories gradually rebuild.

Question: Do you feel more upbeat about business now that GM has finally filed?

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There is Life After Automotive

By Lloyd Graff   

    Over a dozen years ago I developed a wonderful business relationship with Ed LeClair, who used to be operations manager at Curtis Screw Company LLC., of Buffalo N.Y., one of the largest precision machining companies in the U.S.
    Among Ed’s many responsibilities at Curtis was buying used machinery, which put us on the opposite sides of the table, but we developed a great rapport even while we were negotiating like pit bulls on the price of Schüttes and Acmes.
    It came as a shock when Ed told me he was leaving Curtis in 2007 to buy a printing shop franchise in Raleigh, North Carolina, which he planned to run with his wife Carol.
    I knew that Ed had long had the dream of going into business for himself because he had queried me periodically about what job shops were on the market. But Ed and Carol were entrenched in Buffalo, and I doubted he would put it all on the nose to buy a screw shop in Detroit or L.A. But one day he and his wife, a long time teacher, found themselves rattling around in their big house, their youngest child now off at college, looking for one more big challenge before retirement. It was the right moment; the print shop opportunity popped out of the weeds and they grabbed it. Mild Raleigh winters sounded good, and the thought of absorbing the pressure of running an automotive supplier had lost some of its appeal. Ed regretted leaving his good friend and colleague Paul Hojnacki, the general manager of Curtis Screw, and the tremendous team of professionals he and Paul had shepherded in Buffalo, but as it turned out his timing was impeccable.
   The auto market tanked and the stock market imploded, but Ed managed to escape from both calamities with his move to Raleigh, a place where he found relative stability in job shop printing and a community heavy in colleges and drug companies.
    He and Carol have now been working together for more than 500 days, definitely an experiment, but Ed says they still love each other.
    Ed is a thorough and charismatic operations guy and he brought the rigor of automotive land to the AlphaGraphics franchise he bought. Business is prospering. He called me to ask if I knew of a good sales person in North Carolina he could hire. He told me he stays in touch with Paul Hojnacki at Curtis, but he is happy to have fled the misery of the car industry.
    Ed LeClair is living proof that there is life after automotive. He says he’s just a lucky guy. He bought Ford stock in February and it has tripled. Lucky, maybe, but smart enough to live out his dream before life runs away.

Ed LeClair, former operations manager of Curtis Screw Company LLC., Buffalo N.Y.

Ed LeClair, former operations manager of Curtis Screw Company LLC., Buffalo N.Y.

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