From a business standpoint these last 16 months have been one of the most fascinating and turbulent periods I have ever observed and dealt with.
Last March we were entering the COVID-19 pandemic. It was a period of fear, doubt, and paralysis. Selling used machinery was almost impossible because the industrial economy was a mess. Business virtually shut down in April, employees were laid off or furloughed, and everybody wore a mask and watched TV. Making ventilators and gun parts was about all that was cooking, except cooking, which was hot because almost all restaurants were closed.
I asked myself, Risa, and Noah how we would cope.
My answer was to quickly let go of two employees who were obviously not needed. Neither were really bad employees, but one guy was unreliable as far as attendance was concerned, and the other was a perfectionist, which made him too slow when speed was needed. Letting them go would save over $100,000 a year, so it was not a hard decision when business was so awful.
A harder call was deciding whether I wanted to stay in business when I was losing money. I was 75 years old, my wife was recovering from heart surgery, and I had money in retirement savings to draw upon. Yet, I decided to stay in business because I liked the people I work with, I enjoyed the trading part of the business, and I could work from home quite effectively. I thought the pandemic would run its course and the Pfizer and Moderna vaccines would be successful.
The COVID cases kept rising, deaths were becoming scary, but at least in the machining world people were working in factories, and our primary customers were staying alive. It appeared highly likely the Pfizer and Moderna vaccines would be successful and approved by the end of 2020.
Business woke up after the election. I closed the deal I had been working on for three years in the last week of 2020, which made an awful year look tolerable in the light of a miserable 10 months.
But for the first time in my business career, Graff Pinkert had no end of the year cash for employees. I regarded the 2020 losses as a personal and team defeat, despite people hanging together and working hard.
The stock market’s stunning gains in 2020 were a bright signal that the absurdly low interest rates and the huge amount of money being pumped into the economy were indications of an impending turnaround if COVID-19 would cooperate.
I scrapped several machines in January that looked like they would never sell. My bank lending line was trimmed, but I still had money to buy inventory. Machinery looked cheap. Competitors appeared afraid or unable to buy.
In early 2021, despite the January 6th Washington debacle and Trump’s recalcitrance to vacate the presidency, business was budding. The vaccines were released remarkably quickly and the machining economy began to accelerate like a sprinter at the Olympics.
I expected business to improve, but I was shocked by the first quarter and amazed by the second quarter. Even old cam multi-spindle screw machines were selling. Dinosaurs were awakening from the dead.
I added overtime, hired one new full-time person, a summer employee, and two gig workers to provide extremely valuable skills. One of the gig workers was an electrician I had let go in April of 2020. As a full-time employee he wasn’t always fully engaged, but as a part-timer he was a star.
Gig work, unemployment checks, and wiring refurbished homes suited him more than a full-time factory job. I also traded him a 2002 Toyota Avalon for hours worked, which enabled him to get to Graff-Pinkert without Uber.
I also decided to raise the hourly workers by $4 per hour. This was partially to offset a dismal 2020, but also to reward them for a resounding 2021. It was also partly the Amazon effect. If Amazon, which is building several enormous distribution facilities within a few miles of Graff-Pinkert, could start at $15 per hour plus health care and other benefits, I figured I had to pay more. I hired two beginning laborers for $18.50 per hour to outbid Amazon.
Labor is really a small part of our expenses, but it is crucial. I paid significantly more in bonuses to Rex and Noah, who were assuming an ever greater role in Graff-Pinkert. I paid off all of the company’s bank loans for the first time in decades.
I expect the rest of 2021 will be very strong economically. More workers will start to enter the precision machining world if wages look attractive compared to restaurants, hotels, and low paying service work.
Next year is cloudy. The pace of growth cannot continue at 8%. The recouping for 2020 will run its course. Inflation will come down. But I see the machining world improving for several years after very choppy growth for the past 20 years.
The future of the automotive industry is quite fuzzy to me at this moment. The enormous announced investment for non-gasoline cars is a huge bet on the public actually buying electric, which I see as quite iffy. If the stupid leaders of Volkswagen in Germany really plan to throw $35 billion Euros at electric, it stands a strong chance of failing.
In my business, I have placed my bet on good people and aggressive buying of what we call “sexy ugly” machines. Time will tell if they remain sexy to customers.
Question: What is the one thing you won’t forget from the last 16 months?