On the Road Again?

By Lloyd Graff

I had a very informative talk yesterday with a member of the machine tool brotherhood who is diversifying his portfolio into real estate, specifically Airbnb rentals in the Charlotte, North Carolina, area.

I thought Airbnb was in trouble because nobody was traveling out of fear of the pandemic, but he had a different view. He moved to Charlotte two and a half years ago from Chicago, where he had grown up and worked for two decades. His plan was to buy units he and his wife could manage themselves, saving any management fees. He wanted spots that would demand a premium during racing season and NFL season but would be close enough to the financial and restaurant meccas to appeal to men and women. Families could be accommodated but not emphasized.

This strategy has worked shockingly well. He claims to be making 30% to 40% yearly on his properties without the constant headaches of being a traditional landlord. Airbnb books the visitors according to its rules and the stipulations of the owner.

He told me travel has picked up significantly after falling off during the spring. Everybody is driving. Nobody wants to be at a property with elevators because of fear the virus will be left behind on surfaces by other guests.

Needless to say, he and his wife are searching for more potential acquisitions in the thriving Charlotte area.

****

Travel is rebounding. Southwest Airlines reported today that they are burning less money each week. The S&P 500 hit a new high yesterday, up 55% from the March lows. Gold is over $2,000 an ounce, Bitcoin is past $11,000, Amazon and Tesla stocks are going through the roof, and unemployment is still over 10%. Home Depot and Tractor Supply are going nuts with skyrocketing sales as plumbers, carpenters, and home improvers are in their heyday.

The odds are we will have a Biden presidency, pledged to higher taxes and monstrous spending on green schemes. The dollar is at a two-year low versus the euro, and Hong Kong is crushing free speech.

I don’t know about your business, but our machinery business is running uphill, and it is not easy. If you are not in the right part of the medical or weapons and ammo world, you are probably struggling. Covid-19 is going to be a major problem for at least six more months, even if we get a bunch of effective vaccines and useful therapies. Restaurants are buying scads of heat lamps, but unless you are in Miami or Los Angeles, the winter will be hell to serve outside. In late June Yelp stated that 53% of the restaurants that had closed during the pandemic indicated they would stay closed permanently.

It is quite a confusing picture in mid-August, trying to run a business and not die of coronavirus, especially if you are 75 years old. But I think we are healing if I look at the world from 30,000 feet without getting on a Southwest flight. I am incredibly grateful as I roll around to the 12th anniversary of my almost fatal heart attack in 2008.

My Cubs are in first place with 15 wins in 22 games, but don’t tell anybody that many of them were racked up against Pittsburgh and Detroit, which should only count as half wins. The NFL starts in a month, and Tom Brady is still slinging it at 64. The NBA and NHL are in playoff tournaments.

It is a time to cherish family and friends and every single day you are not sick. I’m trying. Be well, y’all.

Question: Would you stay in a hotel or Airbnb right now?

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Ep. 93 – Tricky Business of Running an Automotive Supplier in Brazil, with CEO Ali Jamil Jomaa

By Noah Graff

On today’s show we are heading back to Brazil as we continue our season exploring the machining industry around the world.

Our guest is Ali Jamil Jomaa, executive director at Samot, one of the most significant automotive parts suppliers in Brazil. Jamil has been at Samot for 32 years and is an authority on the tricky business of running a large machining company in Brazil.

Scroll down to listen to the podcast. Or listen on your phone on your favorite app or Apple Podcasts and Google Podcasts.

Main Points

Jamil gives his background. He says he has been working at Samot for 32 years, since he was 18 years old and loves what he does. He started at the company on the shop floor doing maintenance on CNC lathes.

Though he already had some training working on CNC machines, as a teenager Jamil worked for his father, who owned a Lebanese restaurant. He also happened to be dating the daughter of the owner of Samot, Tomislav Jancar. One day he was delivering food from the restaurant to her father (his future father in law), and they spoke about Jamil’s knowledge of CNC machines. This led Tomislav to ask Jamil if he wanted to work at the company. Over time he worked his way up to Executive Director. (3:00 – 6:30)

Jamil tells the story of Samot’s owner, Tomislav, immigrating with his family to Brazil from Austria when he was 13 years old as a refugee of World War II. In Brazil, Tomislav studied mechanics and then went to work at Mercedes Benz and Volkswagen. Then he started his own machining company in 1960. (6:30 – 8:15)

Jamil says that Tomislav’s business philosophy was to always reinvest in the company, keeping up with the latest technology. This legacy is clear today with the company’s many INDEX CNC multi-spindles and other late model turning equipment. (8:15 – 10:00)

Jamil says that the majority of Samot’s customers are Tier 2 automotive (87-88% of sales). He says the remainder of the parts the company produces are for the defense industry. (10:00 – 10:45)

Jamil talks about how Brazil’s low valued currency (currently approximately 5 Brazil real to one US dollar) effects his company’s exporting strategies. Jamil says that while other companies try alter their business models with fluctuating currencies, he prefers to continue to export regardless whether real’s value falls or rises. He believes if Samot can make parts efficiently it can remain competitive all the time. He says he has put three sales representatives in the United States to bolster the company’s exports. (11:00 – 12:45)

Jamil talks about why Brazil is a tricky place to do business. He says companies have to pay considerable taxes and provide lots of benefits for employees. He says the median salary for an employee at Samot is the equivalent of $10,000 US per year. He says the lowest paid person makes $5,000 and the highest paid makes $80,000. Jamil says that Samot has to pay 80% on top of an employee’s salary. This means if an employee makes $10,000 it costs Samot $18,000. The company has to pay several types of taxes and benefits such social security, private health care, and food (he says the company has a great restaurant). Employees also receive a 13th month of salary for vacation that is also increased by 30%. He says employees have to work 150 days per year to pay their taxes. (12:45 – 19:20)

Jamil talks about the disparity of income across Brazil’s population. He says Brazil has 210 million people. He says 47% Brazilians are “economically active people,” but among those people, 25 million are unemployed (searching for work). He says 40% of those economically active people are doing work off the grid. He says that 75% of Brazilians are medium to lower class and 19% of Brazilians are at the bottom “miserable class.” Jamil says that every month he and some friends distribute food to 250 poor people in the street. (19:20 – 24:00)

Jamil says he sees a bright future for Brazil, but he doesn’t know how long it will take. He says the government has been making a lot of promises about privatization and taking away extra benefits given to government workers. He says if the tax laws are changed, the country can thrive because it has so many diverse resources. (24:00)

Jamil says he knows a lot of Brazilians who want to move to other countries. However, he says that most of them don’t want to move because of economic conditions. Instead, they want to get away from the corrupt government and crime. (26:20)

Jamil says in recent times he has realized a great spirit of the employees at Samot, seeing how well they have come together to deal with the obstacles presented by COVID-19. (27:00)

Question: Where are you vacationing during the COVID-19 summer?

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Does Anybody Care?

By Lloyd Graff

Chicago is appalled by the disgusting and brazen looting of stores like Gucci and Nordstrom’s on its Magnificent Mile. Our Mayor, Lori Lightfoot, is furious and humiliated that her city’s elite shopping area has now been ransacked several times by bands of young thugs that communicate by cell phone, coordinating when to strike and who to hit first. They come by car and train and overwhelm the police so they can grab clothes, electronics, and booze.

There is good camera surveillance, so the authorities can pick up many of the looters later if they are inclined, but the State’s Attorney, Kim Foxx, seems disinclined to prosecute them and put them in jail. She is a political foe of Lightfoot, allied with Toni Preckwinkle, the Mayor’s archenemy who was trounced by the newcomer in the last election.

Chicago is broke, the state of Illinois is broken with its longtime Svengali, Mike Madigan, possibly on the verge of being prosecuted in a utility bribery scheme, for which Commonwealth Edison was fined $200 million dollars. People are fleeing the state for Indiana and Florida and Idaho, while I see my state and local taxes balloon.

It all stinks and everybody knows it.

While the city is being looted by politicians and thugs in different ways, I find it very ugly to follow the unfolding saga of the once-great Eastman Kodak, king of film that nobody uses anymore. Kodak was recently awarded a $765 million dollar federal government loan to start making the drug components that are no longer made in this country but are vital in the manufacturing of antibiotics and many key pharmaceutical products.

Target that was looted near Noah Graff’s condo in Chicago

When the loan was announced a couple of weeks ago, the $2 stock, still listed on the New York Stock Exchange, went nuts. It rose to $60 a share in a couple of days. This was when a member of its board of directors, George Karfunkel, gifted 3 million of his 6.3 million shares to a small religious institution that he happened to be the president of, enabling him to book a $116 million dollar donation. The charity received its charitable designation a year ago.

The whole deal may well be found legal if the loan to Kodak is not tainted by illegal bribery but rather a shrewd political contribution. Karfunkel was on the Kodak board for several years while the company was limping along, looking for a new blockbuster product in Rochester, New York.

The profit was neatly packaged as a contribution to a Jewish Orthodox synagogue in Brooklyn. The donation will hopefully do good in the world, but for Karfunkel and his wife, Renee, the write off will be worth at least $40 million dollars, usable for several more years. The suckers who made it possible were naive stock market gamblers whose shares are now worth a fraction of what they threw into the pot to buy them.

Can you draw a straight line from the brazen thugs who came from Chicago’s West and Southside slums to smash the windows at Gucci for the third time, to the sophisticated financial gamer, who sold his Kodak shares and gifted them to his favorite personal charity? I am curious what you think.

Question: Who is more disgusting, looters in Chicago, or Wall Street thieves?

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Ep. 92 – Machining Brass Fittings in India with Mayank Patel

By Noah Graff

On Season 4 of Swarfcast, we’re talking to people involved in the machining industry around the globe. On this week’s show, we visit India.

Today’s guest is Mayank Patel, director of Mayank BrassFit in Jamnagar, India. In the interview Mayank tells Noah his company produces Brass fittings primarily for Tribal Manufacturing and Parker Hannifin, both located in the United States. Mayank produces the majority of his parts on an expensive Buffoli Transfer machine. This is in stark contrast to his competitors who use cheap but slow single-spindle CNC lathes that require considerable manpower.

Scroll down to listen to the podcast. Or listen on your phone on Apple Podcasts and Google Podcasts.

Main Points

Noah introduces Mayank Patel, talking about the used Buffoli Transfer Machine Graff-Pinkert sold him a few years ago. (2:30) 

Mayank says he has  two Buffoli Transfer machines, one he bought new and other he bought used from Graff-Pinkert. He says that the new one cost 800,000 Euros. (3:20) 

Mayank gives his background. He lives in city called Jamnagar, which is the hub in India for manufacturing brass parts. He went to boarding school from ages 6-15, which he says is standard for a certain class of people in India. He spent two years in Bombay to complete is undergraduate degree. Then he went to London for four years and got a Masters Degree in international business. He says he later learned machining on the job, as opposed to having formal training. (4:30) 

Mayank talks about his family’s business. His family has been in business for a long time in the brass machining sector, and he wanted to join the company when he came back from studying in London. He wanted to run the international business operations of the company, but unfortunately he was 8th in line for this position. Mayank says the company did not want to expand into international markets like he did, but just keep the status quo, focusing on India’s domestic market. Ironically, Mayank says his father had explored opportunities to bring high production machines back to India and to export parts to the American market, but the family had never bought in. So, Mayank went on his own to start his own shop. (6:00) 

Mayank talks about exporting brass parts to US customers, Tribal Manufacturing and Parker Hannifin. He says it took him two and half years to get his first PO cut for those accounts. In 2018, when he came to the United States to dismantle the Buffoli he had bought from Graff-Pinkert he visited Parker Hannifin. He says before he started selling parts to Tribal and Parker Hannifin he was shipping parts to second tier distributors in Kansas City and Michigan.

Mayank says the main reason he bought his first Buffoli was to machine lead-free parts, which had not yet been done before in India. Mayank had to import lead-free brass rod samples from Italy to prove he could machine the material. At that time mills were not producing led-free brass in India because plumbing in India is entirely made up of iron pipes. Mayank says that before he proved he could run lead-free brass his own workers doubted him, saying it was impossible to run the material and he was wasting time and money attempting to. Mayank believed that if other countries required parts made from lead-free brass it had to be possible for him to machine it. He also knew that if he didn’t start machining it, a competitor would be the first to do it. (9:20) 

Mayank shows some parts he makes on the Buffoli for plumbing applications such as compression elbows machined from profiled bar. (See video). The parts are lead-free and he can machine them in 3.5 to 4 seconds. He also shows another part he makes from ECO BRASS with a volume of 1-2 million pieces. He says the tolerances are pretty wide open for brass plumbing parts (see video above). (14:00) 

Mayank says his competitors are now making parts with lead-less brass. He is using high quality ECO BRASS because he is sourcing OEMs in the United States, while his competitors are machining lower quality alloys for India’s domestic brass market. (17:00)

Mayank says that his competitors machine with inexpensive single-spindle CNC lathes. He says for each part it requires requires two machines. One lathe machines a blank, and then a second machine completes the part. Usually one person has to operate each machine. He says with this two machine process parts often have a 2 minute cycle time (one minute for each machine). Mayank runs the same parts on his Buffoli in 3.5 to 4 seconds.

Mayank says the machine shops running the single-spindle CNC lathes have to run lights-out to be profitable. He says he runs his Buffoli 20 hours a day. He also has 10 of the cheap single-spindle lathes in his shop for lower volume runs. (19:00)

Mayank says he personally works for 10-15 hours per day running the Buffolis and employs one other person to run them. He says he likes to be on the shop floor, solving problems and adjusting setups on the complex and powerful machines. (23:00) 

Mayank says that engineering is a very popular field for young people to study in India and that many companies send employees to their own engineering schools to groom their own workforce. (24:00) 

Mayank says a huge problem with running the slow single-spindle machines is that the large number of operators required creates tons of variables. He says the human factor decides the efficiency of a shop and the quality of the parts. If there are 50 machines, there are 50 different operators, 50 difference cycle times, and 50 different tolerances. (25:20) 

Mayank says when he was in Italy to get a demonstration of his Buffoli he observed a more efficient and focused work ethic than he generally sees in India. (26:50) 

Mayank says a typical machine operator in India makes less than the equivalent of $200 per month but this amount of money can go much further in India than many other countries. He says in India the cost of living is cheaper and often extended families live together sharing a house and car, which cuts expenses. (28:30) 

Mayank says a skilled machine setup person in India might make $600-$700 a month. He says that operators have the opportunity to climb the professional ladder and make more money as they acquire skills. He says his company also trains its own employees. (30:00) 

Mayank says nobody India wants to spend much money on technology. He says his peers tell him he is crazy to buy a million dollar machine when he could buy 50 single-spindle CNC lathes for the same money. Mayank says the stereotype that Indians like to negotiate is valid. He says there are negotiations on everything in India, from buying a carton of eggs, to buying materials, to buying machines. (33:00) 

Mayank says he sees India’s economy modernizing but says “change is always slow when you’re talking about a nation of 1.3 billion people.” He says the current Prime Minister is trying to change the country from what it was during the last 40-50 years, and obviously India is a huge market. He says there is a lot of high quality machining there but not for brass. He does not sell his parts domestically because Indians mainly want cheap brass products rather expensive high quality parts. (36:00)

Question: Do you expect products from India to be good quality?

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Juicing the Pickup Truck Market

By Lloyd Graff

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?

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Ep. 91 – Producing Automotive Parts in Brazil with Rogerio Salvatico

By Noah Graff

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.

Scroll down to listen to the podcast. Or listen on your phone on Apple Podcasts and Google Podcasts.

Main Points

(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?

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Best of Swarfblog: Making the Nut

By Lloyd Graff

Lloyd is deflected by a few big machinery deals this week so we thought it was appropriate to run this piece from the archives. Making the Nut was originally published January 10, 2018.

We all absorb things from our childhood that literally wire our cerebral cortex and remain with us as we mature. There are images, sayings, emblems of fear and instigators of smiles. We soak up stories and develop a narrative that frames our lives.

As I thought about writing this piece the line I remembered most vividly from my father while growing up, of a thousand things I heard from him, was, “You’ve always got to make the nut.” To him that meant you had to cover your costs every month. Losing money in business was FAILURE. It was just about the worst thing you could endure short of death.

I was reminded of this after hearing a captivating interview with Sara Blakely, inventor and owner of Spanx, a fabulously successful young company that germinated when Sara cut off the feet of a pair of pantyhose and envisioned a new undergarment that nobody else had imagined. She was interviewed by James Altucher whose podcast I highly recommend.

One of the first things she talked about was her nightly dinner table conversations with her dad. He used to ask her, “How did you fail today?” This was not to tear her down, but to get her comfortable with the idea of failure. She got comfortable with failure when most kids were trying to ace every test or hit a home run every time up at bat.

She also became comfortable with embarrassing herself. Later, she even tried to be a stand up comedian, even though she wasn’t great at it.

Her father was trying to help her understand that failure wasn’t like death. It was a setback, something to learn from. Something even to laugh about – not the end of the world.

This was very different from the narrative I grew up with. I felt like I was the “designated winner,” and I was always expected to be the best. Failure was for other people.

Not that I was always successful, but success was always expected. Just like my father always had to “make the nut,” I felt like I always had to be successful to be valued, though that may not have really been the case.

Sara Blakely’s experience of having a parent normalize failure, though not extol it, was much healthier. Being able to experience disappointment without withering or blowing up seems like an ideal way to grow up healthy and be comfortable taking risks.

Through the years, I’ve had plenty of failure. I’ve lived through excruciating periods when I didn’t “make the nut,” and my life did not end in disaster.

In retrospect, I wish I had not gone through childhood and high school always being “successful” even when I knew in my heart of hearts that I failed often, like almost everybody else.

I also feel sad for my father who was so terrified of losing money in business, of not “making the nut” even for one month. He was always desperate about economic security, though by most standards, he had nothing to worry about financially.

“Failure” is such a subjective word. Sara Blakely’s father attempted to frame it for her in a positive way. If he truly succeeded at it, I think he was one of the very few.

Question: What was one failure that you learned from this week?

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Ep. 90 – Running a CNC Swiss Shop in the UK with Tom Pearce of CIRC Manufacturing

By Noah Graff

Today’s podcast is the second episode of a season in which we’re talking to folks in the machining world outside of the United States.

We’re making a second stop in the UK to talk to Tom Pearce, founder of CIRC Manufacturing in Westbury, England, a small CNC shop specializing in producing flow control products using a Citizen Swiss lathe and Hitachi 4-axis mills. Tom talked about entrepreneurship in the UK and his company’s first consumer product, a luxury pen machined from exotic super alloys.

Scroll down to listen to the podcast. Or listen on your phone on Apple Podcasts and Google Podcasts.

Main Points

(2:10) Tom gives his background. He says he started as an apprentice electrician working with his father. Later he did maintenance engineering and installations in a big rubber factory that made strips and slabs of custom rubber compounds. Then he decided to start his own company. 

(7:10) Tom talks about starting CIRC Manufacturing. He says that while working at the rubber factory he taught himself to TIG weld on the weekends and started a welding side business. In 2014 one of his welding customers in the oil refining industry told Tom he had a job that was going to go big time and said this could give him enough work to start his own business. Tom says his dream was to start his own business so this opportunity gave him the impetus to quit his job and do it. Unfortunately, the big job he was promised never came. Tom had just signed a five month lease on shop space, so he took some small welding jobs. Then he got a lot of work welding cabinets for electronics, which enabled him to grow a business.  

(10:30) Tom says he thinks British people have an entrepreneurial spirit because he sees more and more people wanting to be self-employed.

CIRC Manufacturing’s New Luxury Pen Made of Exotic Super Alloys on a Citizen

(11:30) Tom talks about a luxury pen (see photo) he designed made from exotic super alloys such as Inconel and Nitronic 16. CIRC Manufacturing is now producing the pens on a 1993 Citizen L320. Tom says he thought it was a good product to sell because it is a product that people already want. He says the pen is important for showcasing his company’s capabilities as well has creating a new revenue stream. It is priced at 200 GBP. Tom says he spent months resurrecting the Citizen, but it now is a very reliable machine. He jokes that the tooling on the machine likely costs more than the machine itself.

(17:50) Noah asks if most English people are happy living in England. Tom says he thinks they are, but he admits he is speaking as someone who lives in the country side, so he can’t speak for everyone around the country.

(19:00) Tom says that his biggest challenge is to find the right people to work in his shop. He says the challenge is not necessarily because of a lack of talent available. He says he is most concerned with finding people he can work well with. Currently Tom has one full time employee, one independent contractor, and his mother does the office work.

(21:00) Noah asks Tom how he thinks British people view machining. Tom says living in the country he sees enthusiasm for machining, but he says that people in bigger cities may be less interested. But, he says he thinks that recently machining seems to be being portrayed as a little more hip on the Internet and on social media.

(23:25) Tom says that 2020 would be a good year if his company could finish as well it started. He says it started off well but when COVID-19 hit, he couldn’t get material he needed from Germany for several weeks. He says business fell off for a short time but has picked up.

(24:00) Tom says that CIRC Manufacturing’s specialty is flow control products—parts for metering, instrumentation, shafts, pins, and bushes. He says on the Citizen he makes pins and shafts, and for parts 20mm and larger he uses two Hitachi Seiki 4-axis mill turn machines. 

(25:00) Noah asks Tom to tell him something interesting he has learned in the last week. Tom says he learned how much work two men and a couple of old CNC machines can put out in a week. 

(26:30) Tom says that people can find out more about his company, CIRC Manufacturing, by going to his website, www.circmfg.co.uk. 

Question: What was the first machine tool you ran?

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Staying Too Long

By Lloyd Graff

Maria Konnikova, doctor of psychology, journalist and professional poker player, said that the hardest but probably most rewarding lesson she has learned is that to win consistently you have to fold when you see you are likely to lose, even after making a sizable bet on your hand.

This is a life lesson I see playing out vividly in the days of COVID-19 for people in business. In the machining industry, smart leaders shut down plants early in April, cut people or furloughed them, even if some were great workers they would have recruited with bonuses in 2019. Many also saw it as an opportunity to trim the marginal troublesome people who they will figure out how to do without even when business is strong again.

We also see the wrestling match between staying the course and cutting your losses in pro sports. 

The Chicago Bears drafted Mitch Trubisky, a quarterback who played only 13 games in college but was considered by some to be the next coming of Tom Brady out of high school in Mentor, Ohio. Ryan Pace, the Bears general manager, traded up one spot with the San Francisco 49ers to draft Mitch #2 in 2017, ahead of Patrick Mahomes II and Deshaun Watson. In his three pro seasons, Trubisky has been mediocre at best, ranking last among starting quarterbacks in the NFL last season. 

Yet Pace is bringing him back this year, though he signed journeyman QB Nick Foles to compete with him. Pace has refused to cut his losses. He has apparently not been willing to fold his losing hand after making a high stakes bet.

In baseball, the Cubs threw in their cards in 2011, hired new management, and cleaned house on the field. After three miserable seasons but several great draft picks and trades, the Cubs made the playoffs in 2015 and won the World Series in 2016. GM Theo Epstein is at the crossroads again this year with a fading team. He still has young players like former MVP Kris Bryant, who appears already to be in decline, and he has a pitching staff with no young stars. The question Cubs fans are asking is whether Epstein is waiting a year or two too long to throw in his cards for another tough rebuild.

Personally, I have found that changing course in business is the single hardest thing for me to do. Admitting an investment is a mistake, firing a nice person who is a mediocre employee, or worse, changing a direction that proved successful for many years but seems like it has lost momentum now, is extremely difficult for me.

I have also seen bad marriages linger for decades in some cases because of the sunken costs of children, familiarity, and financial security, which hold people together when the love is long gone.

Maria Konnikova said that she gave up more than one long-term relationship after internalizing the lesson of walking away from a losing hand in poker. Teaching this kind of resiliency and flexibility to children, and hopefully making it a part of your own DNA is much harder than tossing in a pair of aces. 

Question: When have you stayed too long?

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Ep. 89 – Machining in the United Kingdom with Joe Reynolds of MTD

By Noah Graff

Today’s podcast is the first episode in a multi-part series in which we’re interviewing people in the machining world outside the United States. Our first stop was England, where we interviewed Joe Reynolds.

Joe is Director of MTD, a company with several popular websites based in the UK that market prominent machine tool builders and inform people in the machining business on the latest news and technology. He also refers to himself as a “Swarf Guru,” so of course we had to interview him!

Scroll down to listen to the podcast. Or listen on your phone on Apple Podcasts and Google Podcasts.

Main Points

(3:20) Joe shares his background. Originally, he was an engineer and did a 6-year apprenticeship. He worked in sales with a few American companies before starting his own tooling company. Then at the EMO trade show 10 years ago he met Paul Jones, founder of Machine Tool Direct (MTD), which would be later known as MTD. Together they have grown the business to a staff of around 25 people. 

(4:35) Joe explains that MTD is a marketing company for machine tool companies as well as other industrial products firms. Joe says they work with Europe’s largest and most familiar CNC machine tool companies. 

(5:05) Joe describes how MTD works. Its websites focus on talking to people about CNC machines and other machine shop products. The sites feature tons of videos showing the products in action. MTDCNC.com is the most popular.

(7:40) Joe talks about the MTD Podcast. He says that anything that happens in the four walls of a machine shop is a good topic for discussion on the show, from the technology and tooling, to the people behind the scenes. 

(9:20) Joe debunks Noah’s preconceived notions about the UK machining industry. Noah says he has heard that the UK is no longer a major manufacturing center these days. Joe says that UK mainstream media would agree with Noah’s assessment. However, he says a deeper knowledge of the business reveals that manufacturing is massive in the UK. He says it represents 20% of the country’s GDP and nearly 80% of its total exports. He says the average annual salary in the machining field is about 32,000 Sterling, which is above the national average across all industries. He says the country has fewer factories, but they are more efficient. He says the UK is still lagging behind some other countries in Europe as far as adopting automation. 

(12:00) Joe claims that “approximately 80,000 businesses are doing something with a piece of metal in the UK.” He also mentions that the UK is working at improving certain disparities in the industry, including the fact that just 1 in 8 women are employed in manufacturing. He says the country is also struggling with an aging workforce. He says before the COVID-19 pandemic, the nation was 20,000 people short of the skilled labor needed to support the industry.

(14:00) Noah talks about his preconception that there is an occupational “caste” system in the UK. Joe says that this may have been true in the past, but things are changing for the better in England. Joe says that 20 years ago his peers questioned him going into engineering. He also reports that the perception of machinists is improving in the UK. He says there are more apprenticeships and more people are realizing that factories are cleaner and the money is good. 

(18:15) Joe talks about how the country is coping with COVID-19 and how that has impacted the machining industry. He says the government intervened with what it calls a furlough scheme. He says things aren’t as bad as you read in the papers, and that much like in the US, machining companies in the UK range from really hurting to doing well. 

(19:30) Joe describes the Ventilator Challenge, implemented by the UK government in response to the shortage of ventilators. He says the country’s manufacturing sector quickly produced 14,000 ventilators. The initiative helped some companies through a difficult time.

(20:20) Noah and Joe discuss Brexit. Joe claims 50% of people think it’s a good thing while 50% do not. He says the consensus is that it would be best if the country leaves with a deal. He says a good outcome would be the loosening of restrictions on relationships with countries outside of the EU and on exporting to those countries. He says some people believe that the UK doesn’t get enough out of the EU to justify the money it contributes to it. He says fewer companies are leaving then expected because of Brexit. 

(23:30) Joe talks about major companies with factories in UK, including: Boeing, Nissan, Ford, Toyota, Lotus, Jaguar, and Rover. He also lists aerospace companies such as Boeing, Airbus, and Spirit Airways. He says that Boeing chose to build a factory there, even when it knew that Brexit was coming.

(25:20) Joe says the UK is a good place to start a business. (see video) He compares machining company startups in the US to those in the UK. He says he sees a lot of US machining companies starting out in home garages, which is very rare in the UK. He says in England around 60% of machine shops are SME (small to medium enterprises) and have less than 10 people on staff. He says there has never been a better time to start a machining company in the UK, even with the COVID-19 pandemic. He says it is easy to borrow money and find grants, and machine tool dealers will sell machines with deferred payments and zero deposit up front. Joe asks Noah if the American Dream is real. Noah says that many Swarfcast listeners would say that it is. Noah says Americans have a tendency to lump all foreign countries together, which doesn’t provide an accurate picture of businesses overseas.

(30:00) Joe says that a lot of reshoring of manufacturing is occurring in the UK. He says it was already happening due to automation and robotics, as well as rising labor costs in China, and COVID-19 has accelerated the trend. 

(31:00) Joe says that revenues at his company are up and his websites are doing well despite COVID-19. 

(32:00) To view Joe’s various websites, visit MTDCNC.com (machine tools), MTDMFG.com, swarfandchips.com, and MTD.network (supply network). The MTD podcast is available on all the podcast platforms.

Question: Is America still a good place to start a business?

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