Swarf: The Business Warrior

By Lloyd Graff

Today’s Machining World Archives August 2010 Volume 06 Issue 06

Tony Maglica, the owner, founder and embodiment of Maglite®, burns with the same intensity at 80 as he did when I met him at 40.I saw the flashlight king recently at his million square foot plant in Ontario, Cal. I could tell from the moment he greeted me at the reception center and we walked up the 20 stairs to his large but surprisingly austere office, that the factory was Toni’s home.

He immediately showed me a slide show on his Samsung 42” computer screen of his other home—the one he doesn’t live in… yet—his villa on his home island of Zlarin in the Adriatic off Croatia. He grew up poor as dirt there, endured the Nazi occupation and the life altering experience of staring at a German machine gun in the town square as the officer in charge threatened to kill everybody in sight in retaliation for the ambush of a Third Reich soldier.

Tony Maglica, a fabulously successful American entrepreneur, dreams of going back to Zlarin as the patron of the island, developing his property, and bringing back his extended family for visits. He wants to plant olive trees and shake the fruit off them with the most modern Italian harvesting machines. He considered buying 75 cement mixers in Florida recently, but decided it was more practical to make a deal with a cement form in Split, Croatia. He’s sunk $5 million into his land and buildings so far, freed his European architects, and hired an American one, but just can’t find the time to get to the island this summer. He’s too involved with a new flashlight rollout and the recent purchase of the German Eubama company out of bankruptcy.

I think the island villa is Toni’s dream of going home triumphant, but his real enduring and consuming passion is still building his business in America. Tony Maglica at 80 is totally committed to making a brilliant and beautifully designed flashlight out of the best materials in America, the country that afforded him the opportunity to shine. He comes to the Mag plant at 6:00 a.m. every morning, stays ‘til 7:00 p.m., and never lets his business fame flicker. The Eubama purchase intrigues him because he gets the chance to refine a machine tool he respects by making the components in the U.S. He’ll make them more efficiently and better by applying his intellect and zeal to the process. Tony says he’ll be making money with Eubama by the end of the year. He’s shopping for a big gantry mill to machine the castings he’s having made here. Eubama is real and practical, and a potential moneymaker. Tony is into it.

Toni’s obsession is making things at his California plant more efficiently and less expensively than in China. He says he’s “a bad businessman” because he doesn’t take the easy way out and buy product from Asia. That would just not be him. His life’s work and daily passion is to continually improve his processes and products so he can successfully make them in California. Mag has a sophisticated new flashlight aimed at the camping and boating market. It is powered by three Triple a batteries housed in an elegantly designed plastic receptacle. Tony says he has a ridiculously inexpensive proposal to make the housing in China, but he won’t do it. He’ll invest heavily in injection molding and assembly equipment, and clean rooms. He’ll do almost anything to make it here.

Tony Maglica is a business warrior and truly loves his America. He hates a government that he believes stupidly makes doing business much harder than it should be. He’s politically incorrect, but doesn’t care because he’s absolutely sure he’s right. Tony is a business anachronism and delights in it. He wants to run his business forever, the way he wants to run it, but his practical side tells him he needs a successor. He asked me if I knew of a manager who he could train to succeed him. I told him I would think about it, but where do you find another brilliant, America-centric, machining entrepreneur like Tony, who would have a small enough ego to learn the job and a big enough ego to stand up to the magnificent Mr. Maglica?

I received an email announcement entitled “AMT and NAM Announce Historic Partnership.” I didn’t know whether to laugh or yawn because of my gut cynicism about Washington based organizations. But then I thought about the financial regulation bill—the current obsession of D.C. politicians. Apparently the massive compromise bill’s regulations are being written by a collaboration of Washington lobbyists and staffers.

Most of the lobbyists are former staffers, and many of the staffers are former lobbyists, so you need a scorecard to know the players.

American manufacturing certainly needs an all-star team to advocate and trade for the interests of metal cutters and benders around the country.

The disconnect between the alphabet lobbying groups on K Street in D.C. and the contract shops of Dayton and Duluth has become a gulf. But behind my cynicism I’m hoping that our Washington advocates actually know the difference between carbide and high-speed steel, and can cut through the red tape and blather in the Capitol. That would be historic.

The post 4th of July period is a good time to celebrate the value of passionate and precise political advocacy. The Declaration of Independence was written by Thomas Jefferson, but his pure prose was edited and rewritten before it made the final scroll.

The reporters and public relations flacks will Red Bull it through windy John Engler’s National Association of Manufacturers (NAM) speech at the International Manufacturing Technology Show (IMTS), but Bonnie Gurney of the Association for Manufacturing Technology (AMT) says they will stream IMTS interviews on the Web with real constituents to members of Congress, which may actually penetrate the Capitol Hill haze.

Tesla Motors went public at the end of June. The company’s all electric roadster has not been a resounding success financially or mechanically, but has been a publicity magnet. Elon Musk, one of the company’s founders, has an amazing track record as an entrepreneur. He has Toyota money behind him now and the modern Nummi factory in the Bay Area to make the new versions of Tesla cars. Tesla chose not to participate in the X-Prize competition to produce a production-capable 100-mile-per-gallon car, but the company could still be a big big winner over the next 10 years.

Prices for nice CNC machinery at auction show some firmness in the market. On June 29, James Murphy Auctioneers sold a Mori Seiki 2007 NV5000/A1B40, 20” x 40” table for $135,000. The machine had a Lyndex Nikken 5th axis trunnion. A 2005 NV5000/A1A40 Mori 23” x 30” table brought $102,000. The sale at New Concepts in Redmond, Washington, also had a 2005 Mori DuraCenter, which sold for $67,000 and a 2006 Doosan 3016, which fetched $25,000. A 2006 Zeiss CMM Contoura G2 fetched $61,000.

On the same day, Thompson Auction Co. sold Sherman Tool near Dayton. Two Hurco VMX 30 machines, new in 2004, sold for $40,000 each, while a little Okuma ES-6 new in 2007 brought $35,000, and a 1998 Okuma Cadet with a 16” chuck brought $45,000.

In late June at a Winternitz sale near Duluth, Minnesota, a 2008 240-C Doosan 3-axis lathe sold for $49,000.

I would describe these prices as reasonably strong, particularly for the Hurcos. On the other hand, a couple sales in Michigan, MetaVision in Traverse City and a Hilco/Maynards auction in Detroit, were softer for machines that ran mostly automotive related stuff. Dealers bought the bulk of the equipment, and at Metavision a lot of older cam equipment went straight to the scrap yards.

Statistics from the Precision Machined Products Association (PMPA) indicate that business among its member companies has made a full V–shaped recovery over the last 18 months. After business dropped by a third during the worst of the recession in the spring of 2009, it regained the base level of sales in May of 2010. The ascent of automotive business to the still not so lofty level of 11.5 million units and the rebuilding of paltry inventories everywhere have fueled the resurgence. Weak home sales, tepid employment growth and an undulating stock market have eroded confidence, but as the BP mess slips from the news and the stats show the world isn’t coming to an end confidence will come back.

It’s August, the corn is high, and everybody in Machine-toolville is getting stressed out because IMTS is getting close.

If you are showing in Chicago the tension is building. Are you spending too much? Will enough people show to justify the Benjamins?

On the fop side, IMTS holds the promise of giving business a big bump for the end of 2010 going into 2011. It will connect you with the foot soldiers that can make a difference for your product. It can give you leads to drink from for a long winter. It will provide precious emails and cell phone numbers to bang away at.

IMTS is still important for showing off new machines and strutting your stuff. It establishes a pecking order in the key areas of metalworking. It’s part of playing in the Big Leagues, but still, I always agonize about whether IMTS is worth the sacrifice of tripping through the maze of McCormick Place. I have lived with this schizoid view of America’s machining festival for many years. When the holiday lasted 10 days it was an excruciating, foot killing, back cracking opportunity to press the flesh of the oil stained cognoscenti of Machinedom.

When there used to be tigers, contortionists and sexy German and Japanese models in the exhibits, IMTS was live theater. In 2010, the froth will be gone. It will be all “bidness” compressed into six days of hard selling.

God willing, I’ll be there, peddling and schmoozing and wearing a tie. Oh, what fun—I hope.

On June 8, Meg Whitman, former eBay CEO, won the Republican primary for governor in resounding fashion. The same day Rod Blagojevich, former governor of Illinois, watched while his lawyers grilled potential jurors for his corruption trial.

Blago’s father ran a numbers game in Chicago. Young Rod grew up in a world of payoffs and married the daughter of a rough local Democratic politician on his way up the political ladder.

Whitman used $71 million of her own dot-com fortune to pave her primary campaign, while Rod Blagojevich shook down the paving contractors to get his political seed money.

Is Whitman more pure than the driven snow because she was recruited by venture capitalists to run the fledgling eBay after the company’s founder realized he didn’t want to run the business?

Do we prefer the Rockefellers, Heinzes and Whitmans, or maybe celebrities like Arnold and Ronald Reagan to run our country because the earthy Rod Blagojeviches are too untrustworthy? Do we want only the elite who go to Harvard and Yale Law on the Supreme Court, which we now will have when Elena Kagan is confirmed?

Maybe we want a House of Lords because the raunchy Rods and the slick Willies get too dirtied up climbing to the top.

When I wrote the blog about Meg Whitman using her eBay wealth to win the Governorship of California while Rod Blagojevich defended his mastery of payoff culture in a Chicago courtroom, I was unconsciously touching a bigger theme—the rise of women in American life.

Hanna Rosin’s cover story in the July/August Atlantic—“The End of Men: How American Women are Taking Control of Everything”—tells the story of the decline of men in 2010. Economically, this trend is related to the decline of manufacturing and construction. Current unemployment is heavily weighted toward males but the long range trends are even stronger than recession related layoffs.

Testosterone, physical strength and a gambling spirit, the traits that tamed the Old West, are not as highly valued in today’s world. Women are earning 60 percent of the college degrees now. Statistically men struggle more in school, and school is the gateway to advancement.

I think that the shift towards female dominance is less apparent in the machining world we inhabit, but I find women taking more of the purchasing agent roles. Men may still be making most of the stuff, but women are often signing the checks.

When Pierre Omidyar, founder of eBay, realized his business was getting too complicated for him to manage, his venture capital investors found Meg Whitman in Boston biding time as a consultant and brought her to San Jose to grow the business by harnessing the entrepreneurial fervor of mom and pop companies everywhere.

Meanwhile, Rod Blagojevich, who still can’t use a computer, was wheeling and dealing in the backrooms of Chicago politics. His first big move was marrying a powerbroker’s daughter. He then joined the law form of Eddie Vrdolyak, a famous fixer and Chicago dealmaker. He used his smile and big hair to charm the voters all the way to the top of the State. Very competitive, very male, very Chicago, very corrupt, our Rod.

Meg goes to Sacramento if she beats the old liberal poll Jerry Brown, former governor of California from 1975-1983. Rod goes to prison if the wiretaps stick.

It’s getting tough to be a good ole boy.

I love the “Second Act” column which appears on Tuesdays in the Wall Street Journal. It recounts the stories of people who forsake their original career for one that promises more excitement, opportunity, fun or satisfaction than the career path they originally pursued.

On June 8, Journal writer Dennis Nishi told John Putnam’s story. Putnam was a successful bankruptcy lawyer in Boston with a form representing failed airlines and steel mills. While taking a deposition he had an epiphany. “Everyone there was very senior and making serious bucks. That’s when I looked around and [realized] I didn’t want to spend the best part of my life getting to where they are,” the Journal quoted him.

The rest of the story is about Putnam buying a farm in Vermont, taking a job with a Vermont law firm while developing the farm, and then chucking the law to make specialty cheese for a living.

He studied cheese making for four years and bought a custom made copper cheese vat to give his Alpine cheeses a unique favor. A French college student taught him some tricks of the trade in a work-study exchange while he wrote his graduate thesis.

Putnam started making cheese in 2002 and his business was profitable in 2003. Today his Thistle Hill Farm sells eight tons of cheese a year and is making decent if not great money. Doing Today’s Machining World is the second act for this used screw machine dealer.

I would like to hear from you about second acts you are now involved in, would like to be involved in, or have tried and given up

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