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The Little Cow

By Lloyd Graff

I just read a provocative book called The Walk by Richard Paul Evans. It’s hokey and a bit contrived, but I still recommend it, if just for the epilogue, which I will now recount.

A master and his apprentice are traveling the countryside. The master sees a ramshackle hovel and commands his apprentice to knock on the door to ask for food, which he dutifully does. The poor peasant with five children answers the door and says, “I have meager food but I will spare what I can. Our little cow provides us with some milk. Here is some cheese and a crust of bread.”

The apprentice goes back to the master with the food and tells of the man’s poverty and his little cow. The master tells the apprentice to find the little cow and take it. The apprentice protests but does what the master commands. He brings the little cow to the master who then says, “lead the little cow to the cliff and push her off.” The confused apprentice reluctantly follows the order.

Years later they return to the area, and the master sends his apprentice to the peasant’s house to once again ask for food.

The apprentice goes to the site of the hovel and sees a beautiful villa surrounded by other substantial homes. He fears that the poor farmer has died or been foreclosed upon. He knocks on the door and a servant answers. The apprentice asks about the man who used to live on this land. The server then brings down a distinguished gentleman.

“What happened to the poor farmer?” The apprentice asked.

“I am that man,” he said. “A few years ago my little cow who used to provide us a bare living ran away. At first we were terrified, but our family realized we had to go out and work hard, and be resourceful and we prospered far beyond our greatest expectations. The best thing that could have happened to us was losing our little cow.”

Question: Do you have your own little cow story?

Little Cow

An Interview with DuPage Machine Products President, Dave Knuepfer

By Lloyd Graff

DuPage Machine Products President, Dave Knuepfer

Dave, do you consider DuPage Machine Products a job shop?
We’re still a traditional job shop. We run 5,000 and 500,000 pieces, but we’re not always profitable doing that. I have thought about changing the mix, and we’ve gotten more into dedicated and longer runs, but we’re still dealing with shorter runs, and I don’t think we make money on those jobs. I know you want to know about the economics of buying an Index. Why would somebody spend $1.4 million on an Index machine? The way I see it, at least for my survival, it is the only way we can survive as DuPage. We must get into a niche, and that is not doing commercial work.

How do you define commercial work?
I consider commercial work hardware-type parts, home appliance, plumbing; not the techy stuff that you’re grinding and lapping and honing. I think hardware will be gone from this country, certainly in our lifetime. We had several million dollars worth of commercial work in fire suppression systems for restaurants, which we ran for years. It was a couple of nuts with different types of washers on them – Screw Machine 101. The customer came to us 3 or 4 years ago and said, “We’re going to go to China with this thing.” At one time, we shipped 100,000 of these into one of their 15 warehouses throughout the country. We said, “Listen, we will add some value. Rather than ship 100,000 of these for you to assemble, we will assemble, package them in your bag and identify the part number, and when the Denver warehouse needs 15, we will send them 15.” Out of sight, out of mind. That bought us about 2 or 3 more years; it finished last year. $2 million worth of business they could buy delivered here for about $1 million. They would have been foolish not to shift. I don’t think there is any future for that type of work in this country unless you’re interested in just getting along and not making a reasonable rate of return on your investment.

You’ve chosen high-volume, high-precision.
It’s not all high volume to begin with. We hope it matures into that, but it is certainly high-precision. That’s how you afford an Index. We went with the Index for two reasons; one was to get that high-volume, high-precision dedicated part; and the other was to run a family of parts. We run a family of hydraulic cages, and these parts run anywhere from 500 pieces to maybe 7,000 to 10,000 pieces a week per part. Our biggest problem was the big run that ran 10,000 pieces a week. We were running 50,000 pieces and couldn’t get to the next job because we had all this production time, and everything was waiting in the queue before we ran the 50,000 pieces off. With the Index we can run 10,000 pieces or 2,500 pieces, switch over to a similar part where we run the same size stock, and it reduces our inventory. But more importantly, it reduces that queue time, where we couldn’t get to the next job because the machine was tied up with a job and we couldn’t ship for 4 or 6 weeks.

Read full article here

The Apple Reinvestment Plan

By Lloyd Graff

The Honey Crisp apple season will begin with the Labor Day weekend. Honey Crisp is the apple that has overwhelmed the Golden Delicious, Macintosh, Pippin and Gala varieties in the hearts and palate of the applistas who frequent farmers’ markets in search of the perfect pomme.

Count me as an apple knocker with credentials.

I have traveled to the orchards of Wenatchee, Washington; Logan, Utah; Laporte, Indiana; and Honeoye Falls, New York, searching for apple succulence, but in the mountains of North Carolina I found my best Apple anecdote if not the tastiest fruit.

I stopped at a roadside stand near Asheville where a young woman was selling Winesaps—not my favorite variety but a presentable late season species. I always like to talk to apple sellers for tidbits about their growing approaches. The Winesap lady told me her story gladly. She said her husband was a minister and they knew they never would make a lot of money. When their children were born they planted apple trees under their homestead. They tended to trees with great care, and after five years began to get apples.

Their plan was to let God’s bounty pay for their children’s college education. She said they took a portion of the proceeds of each year’s crop to buy more trees, and the Apple reinvestment plan was working just as she had hoped.

I hope they planted Honey Crisps before they caught fire in the market. If they did they probably could afford Harvard.

Question: What is your favorite variety of Apple?

Stayman Winesap Apple

One on One with John Raztenberger

Interview by: Noah Graff

John Ratzenberger

John Ratzenberger is best known for his role as Cliff the mailman on Cheers. Today he hosts Made in America, a documentary-style television show on the Travel Channel in which he travels around the United States visiting American manufacturing companies and meeting factory workers. He also recently started the Nuts, Bolts and Thingamajigs Foundation to encourage and help kids develop the manual skills required to work in the manufacturing industry.

NG: John, tell me about your family background. What did your parents do?
JR: I grew up in a factory town. My mother worked in a factory, my dad drove a truck. I was a carpenter before I became an actor.

NG: Like Harrison Ford?
JR:
No, No, everyone says that, but Harrison Ford was a different kind of carpenter. I was a house framer, he was a fine carpenter. I actually did it for a living. I traveled around the country and throughout Europe building houses before I became an actor.

NG: Why did you start the Nuts, Bolts and Thingamajigs Foundation?
JR:
Traveling with my show, Made in America, it occurred to me after about 50 factory visits that the biggest problem [our country] is facing is the fact that kids now come out of high school without any manual skills. The average age of a factory worker is 52-years-old. So in six to 10 years, that’s it. And without people who manufacture things, there is no civilization. It’s over.

Read full article here

Wrapping Up the X-prize: The Race to 100 MPG

By Paul Eisenstein


Race to 100 MPG

The disastrous blow-out of BP’s well in the Gulf of Mexico is expected to have a devastating, long-term impact on everything from marine life to the region’s tourist industry. If there’s an upside to the murk of spilled crude it’s the way the catastrophe is putting a renewed spotlight on the nation’s dependence on petroleum, whether imported or domestic.

“We are concentrated on a single source of energy,” says Eric Cahill, an energy researcher and now the senior director of the Auto X-Prize, but whether you believe in global warming, worry about the cost of importing crude or simply fear the potential for more disasters like the BP spill, there is increasing pressure to find alternatives to that primary energy source. Nowhere is that more visible than in the auto industry, where the strain on the global oil supply is already apparent.

In the U.S., the Corporate Average Fuel Economy, or CAFE, standard was recently raised 30 percent, and is set to reach 35.5 miles per gallon by 2016. Skeptics contend that increase could add significantly to the cost of the typical automobile, perhaps as much as $9,000, according to a new report by the National Research Council, the research arm of the National Academy of Science.

But not everyone buys that argument. And that includes the organizers of what is now known as the Progressive Auto X-Prize. Formally unveiled at the 2008 New York Auto Show, it’s a follow-up to the original Ansari X-Prize that helped spur the first private sub-orbital spaceflight in 2004. But its roots go even deeper, says Cahill, back to the early days of aviation, when the Orteig Prize helped spur Charles Lindbergh to make the first successful solo crossing of the Atlantic Ocean.

Read full article here

After Two Years, Every Day is Gravy

By Lloyd Graff

August 29, is the second anniversary of the day I almost died. I hesitate to revisit it in this blog because I’ve already written about it extensively in the magazine. But I am of the philosophy that you should never let a good crisis (or the memory of one) go to waste, so I’m going to bring it up once more.

IMTS 2008 was coming up, but I was feeling so crappy I didn’t care. I had spent two weeks pretending to vacation with my family in Michigan. I drove home with my daughter Sarah and remember feeling so depressed I barely spoke during the hour and a half drive. A week later, my wife Risa and I sullenly drove 55 miles to St. Francis Hospital in Evanston, Illinois. I walked to the doctors office of my friend, Dr. Chris Costas, and waited while he attended to a child with a cold. How stupidly polite I was. When Chris came out and saw me waiting, he put a stethoscope to my chest and immediately announced that I was in congestive heart failure. He then wheeled me to the emergency room himself. I remember very little except being super scared as they cut my clothes off. Risa told me that the doctors were pessimistic about my survival after looking at my arteries. A cardiologist from Pakistan named Mohammed Akbar was available in the hospital, and he volunteered to try to place a stent in my blocked LAD coronary artery. He succeeded, which bought time to do a quadruple bypass surgery after my body could strengthen for three days.

I remember virtually nothing from those three terrible days, but for Risa they were probably the most moving of her life, and I have relived them vicariously through her stories. My children dropped everything and rushed to her side. Friends and family flew and drove in from everywhere. Camp was set up in the waiting room with air mattresses. It was Friday night, so the Jewish Sabbath blessings were said in the Catholic hospital waiting room over candles and brought in pizza. Everybody held on to one another, praying for good news. Several doctor friends arrived to ask questions and translate medical language to the rest of the group. The ICU nurses at first regarded the amassing family members with reservation, but then embraced them. For three days, I had a breathing tube along with a million monitors and tethers, so I tried to sleep as I hoped for a successful surgery after the Labor Day holiday.

16 days later, I left the hospital with Risa and we drove home. Not a day has gone by when I didn’t think about those tumultuous days. After two years, for me every day is gravy.

Stocks on Steroids

By Lloyd Graff

The lead story in the Sunday New York Times discussed the “striking” drop in the investment in common stocks. The article went on to talk about the widespread disillusionment with equities since the dot-com crash and the subprime demolition. The Dow Jones average is actually down over 1000 points since 2001.

Personally, I think the widespread disgust with the stock market performance by individual investors derives from the “gaming” of the market by professional computer jockeys for whom long-term investing is holding a stock or an index for a week. The Quants, for whom the stock market is a video game, use huge leverage and a lightning fast computer thumb to play for pennies on a $50 stock.

I was thinking about this as I watched both the Little League World Series and Major League baseball games this past weekend. The kids are allowed to use metal and graphite bats but in Pro ball only wood bats are used, because it would be unsafe for the big boys to use metal sticks at the plate. Pitchers would literally get killed by batted balls.

We have speed limits on our highways and hold the maximum speed of showroom cars well below what is possible. But for trading stocks we have allowed the “gamers” to turn the markets for the most important business enterprises in the world into a casino block. This is nuts.

Major League baseball finally shut down the steroid tap, but stock trading is so out of control it is poisoning the public markets. Just because a Ford can theoretically go 200 mph on the interstate does not mean it should be legal.

Until the equities market or government regulators hold back the velocity of trading, long-term investors will take their marbles and go home.

Question: Should there be “speed limits” for professional traders?

Early Quant

Ethics Column: Divided Loyalties

By Russell Ethridge

My company submitted a proposal for rigging services as part of an engineering firm’s bid to layout and install machinery at a customer’s manufacturing plant. The job will be profitable, and we work frequently with this engineering firm. Since submitting our proposal, I received a call from the manufacturing customer wanting to know if we would work directly with them and split the savings they would realize by cutting out the engineering firm’s markup. If we say yes, we’ll do better on the deal, but at minimum, the engineering firm will lose their margin on our work and may be cut out of the deal entirely. If we say no, neither of us may get the work. No one’s signed anything yet.

You are justifiably concerned about violating the time honored loyalty rule that “you dance with the one that brung ya.” If you agree upfront not to bid directly or not to bid as part of some other engineering firm’s proposal, the ethical dilemma is answered by the agreement because your agreement identifies the scope of your loyalty and was made in the absence of any actual opportunity. Here, however, you must make the decision under the pressure of real temptation.

Read full article here

Three Amigos: Manufacturing, Murder, Mexico

By Lloyd Graff

The consulting firm AlixPartners makes a yearly assessment of competitive economies worldwide for manufacturing firms. The number one country for the last two years has been Mexico. Interestingly, China was sixth and the U.S. was eighth. I was particularly dubious of the survey after reading yesterday’s lead piece in the Wall Street Journal about the chaos in Mexico that has spread from the border drug wars to the capital of Mexican industry, Monterrey.

The last time I was in Monterrey I stayed at the Holiday Inn near the exhibition center. According to the Journal piece, that hotel was stormed by masked gunmen last April. “The security environment has changed from seeming benevolence to extreme violence,” said U.S. Ambassador to Mexico, Carlos Pascual, recently.

Monterrey is a city of 2 million people, a four hour drive from the Texas line. It is a wealthy town with Mexico’s top technical college, the Monterrey Institute of Technology. In March two students were killed in a shootout with soldiers. The mayor of the wealthy suburb of Santiago was just assassinated. Mexico may be competitive with skills, infrastructure and great access to the American market, but the carnage from the overflow of the Narco Wars, which has left 28,000 people dead in the last four years, would make me hesitate to make a major investment in the country.

The last time I visited Mexico was three years ago to see a client in Tijuana. I had a ride to and from the crossing point, but even with the escort I was relieved to return to San Diego.

Is Mexico the most “competitive” economy in the world? Not if you need a bodyguard when you check into the Holiday Inn in downtown Monterrey.

Question: Should the U.S. spend billions on a fence to secure its borders with Mexico?

Alternative question: Who is your favorite of the Three Amigos?

The Eclectic Style of Jeff Begg

By Lloyd Graff

Jeff Begg

When you enter a machining firm which cuts millions of pounds of brass bar each year, you expect to find a line of New Britain screw machines or Davenports – bunches of almost identical automatics methodically turning out fittings.
But at Marshall-Excelsior Corporation in Marshall, Michigan, the machinery assortment reflects the eclectic taste of its owner, Jeff Begg. A little bit of this, a little bit of that. Warner-Swaseys, New Britains, Davenports, Wickmans, National Acmes; 5-spindle; 6-spindle; 8-spindle; a menagerie of screw machines bite at the brass rod, turning out Jeff’s variegated mixture of niche market non-ferrous fittings.

Begg’s mixture of screw machines cannot be easily type-cast. If it’s a good buy and it cuts brass with efficiency, he’s usually interested. Jeff Begg has built a thriving independent fittings business in southern Michigan amidst the wreckage of automotive-land by following his instincts and his own intense personal scrutiny of the fittings marketplace. Marshall Excelsior reflects the particular style and taste of Jeff Begg, who says, “I guess people say I’m eccentric,” not just because of his collection of screw machines, but because he defies the notion of the blueprint-bound engineer, even though he is an engineer by training.

Read full article here

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