The skills of deal making resemble those of writing a journalistic piece. Both require research—acquiring the facts from disparate sources. On the machinery side I am constantly looking for sources to provide me with solid comparisons of values. Is a four-year-old Mazak 30” x 16” vertical machining center worth $25,000 or $45,000? The difference in value may hinge on a change of controls, a choice of options or the hours on the spindle. Another variable affecting the price is the quality of Mazak service, availability of spares or whether the dealers are discounting at the moment.

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Albert Thuro of Thuro Metal Products instructed Noah Graff that he needs to find a wife soon or he’ll be relegated to “leftovers.” Romas Juodvalkis of Allways Precision talked about being electrocuted and surviving as a 20-year-old repairman at R.J. Frisby in Chicago. Dan Hankla of Alger Manufacturing, Ontario, California, has an ongoing tug of war with the state’s OSHA equivalent over degreasing processes. Dave Knuepfer of Dupage Machine Parts, who never seems to gain any weight, is finding success hiring local high school kids as interns to get new blood in the shop. Brian Adams of R.F. Mau Co. dropped 35 pounds and showed off his waist looking “maaaavelous.” Jack Steuby of John J. Steuby Co. Screw Machine Products looked himself, and is still trying to make up his mind about making can openers. Say it ain’t so, Jack.

Ron Bracalente of Bracalente Manufacturing Group in Trumbauersville, Penn., is exporting product to China which then goes to Poland. Mark Fordyce of Component Bar Products, O’Fallon, Missouri, talked of competing with Hydromat on spares while being a local supplier. Jeff Ohlemacher of EMC Precision in Elyria, Ohio, told members about having to exert social pressure on Barack Obama to wear safety glasses when the president visited his shop several months ago. Aaron Bagshaw of 140-year-old W.H. Bagshaw Company of Nashua, New Hampshire, was enjoying Phoenix with his wife and two kids. He and his wife are pleased lately about picking up five Nomura Swisses for 23 grand.

Lots of metal guys came but the only machine tool reps were Jim Trunk of Schutte, Jeff Reinert of INDEX, Olaf Tessarzyk of ZPS, and Luca Lanzetta of Pietro Cucchi America.

It was a better turnout than last year in Tampa with 98 companies represented to last year’s 92. It was a serious group. The U.S. vs. Canada gold medal hockey game drained only a few from the presentation of sales guru Jack Daly on Sunday.

by: Lloyd Graff

“Where have all the bearings gone?” This is the sad refrain of anybody looking to rebuild a machine whose mechanical joints depend on Timken tapered roller bearings. As far as Timken and most of its resellers are concerned the new chorus is “so long, it’s been good to know you…”

At our Graff-Pinkert screw machine business we were recently confronted with this serious issue when we sold a National Acme 1-5/8” 8-spindle screw machine with new spindle bearings. This is still a very popular piece of machinery in the fittings world, and ironically, still a staple of some bearing manufacturers. Rex Magagnotti our sales guy, searched the usual suspects to buy the cups and cones in the well-branded orange boxes wrapped in oily paper, only to hear the words every buyer fears: “Out of stock, 18-week delivery.” To an Acme guy, this is like hearing that McDonald’s is out of french fries, or Wal-Mart is sold out of D-batteries.

This video further explains the spindle bearing issue

I have always regarded Timken as a basic utility of the industrialized universe. I never thought they would ever fail to keep all of those zillions of balls – excuse me – tapered cylinders in the air. But the Timken scions in North Canton, Ohio, have pulled the plug on their lifelong customers in their homage to the lean gospel and the bottom line.So now it’s 18 weeks, if you are lucky, to secure spindle bearings for that growling Acme or centerless grinder that may be the core of your machining operation.

I talked to people at Timken, and the customer relations lady was frank. She told me that Timken has limited capacity so the part numbers that do not sell in significant quantities get pushed out until the run justifies a new setup.

They are rationing bearings in the marketplace, challenging their resellers to expand orders and daring them to stock the increasingly pricey cups and cones. The big resellers of bearings, also worshipping at the temple of lean, are reluctant to stock the expensive orange boxes that may sell in double digits each quarter.

If the real demand is out there, the market will eventually correct itself. I would not be surprised to see prices double for scarce spindle bearings like those for the workhorse 1-5/8” RBN-8 Acme Gridley as users decide to hoard them and specialty sellers see an opportunity for profit. We will see orange boxes of Timken mysteriously emerge from dusty Vidmar cabinets around the world as industrious prospectors search for gold in the orange flotsam of defunct automotive plants.

Spindle bearings are high precision bearings in matched groupings. A company in Lexington, Kentucky, Taper Roller Bearings, has developed a thriving business by purchasing standard grade Timkens and, by using sophisticated measuring techniques, matching them up to get the equivalent of Class 3 precision bearings. They are now suffering in this market because they cannot obtain enough standard or commercial grade bearings to meet the demand.

After years of shrinkage and neglect, the old screw machine world has reached a period of equilibrium, according to Andy McCarty of Taper Roller Bearings. Almost all of the workhorse machines are producing product, which means they are wearing themselves out. It also means more cash flow available for replacement bearings.

Meanwhile Timken, which makes its own steel in its own mills, is short of raw material for its bearing plants. They blame overwhelming global demand, especially China, which puts more pressure on the bosses to ration bearings to the statistically insignificant buyers of high precision spindle bearings, slighting National Acmes that aren’t even being made new anymore. Hard to blame them for concentrating on sexier, higher volume product streams.

It is hard for me not to lose my bearings when I’m struggling to fill an order from a vital customer. From experience, I know that if you search hard enough and are willing to part with serious money, commodities will suddenly materialize, but this is a hard way to run a business. I could also journey to Timken in North Canton and beg. Meanwhile, can anybody spare a set of bearings? I’ll replace them with interest in five months – I hope.

Software Malfunction. This photo has nothing to do with the story.

By Noah Graff

My boss, one of my favorite free thinkers in the world, asked me the other day whether Toyota is today’s Microsoft of the car industry.

It felt like a ludicrous question. I hate Microsoft products (I’m a Mac guy all the way), and I’ve always enjoyed driving Toyotas. Well, at least my parents’ Avalons and my 1997 Lexus ES 300, which has 175,000 miles on it.

So what was the thinking behind this analogy? Toyota like Microsoft has become the largest seller of products in its sector in the U.S. market. It appears as though Toyotas have gained such a reputation as the benchmark for quality and reliability that the company has grown complacent in keeping up its highly touted standards. As the world has seen in the last week, the cars have their share of bugs, which has always been a trademark of the Windows operating system. Because Windows’ has minimal competition in software it has been able to get away with mediocrity year after year.

But is comparing cars to computers really “Apples to Apples”?

When I googled “Toyota and Microsoft” I found a brilliant blog written back in 2006, called none other than “Toyota Vs. Microsoft.” The following is an excerpt:

“At a recent computer expo (COMDEX), Bill Gates reportedly compared the computer industry with the auto industry and stated, “If Toyota had kept up with technology like the computer industry has, we would all be driving $25 cars that go 100 miles to the gallon.”

In response to Bill’s comments, TOYOTA issued a press release (perhaps fictional) stating:

If Toyota had developed technology like Microsoft, we would all be driving cars with the following characteristics:

There are several more on the blog but you get the picture.

It was a brilliant comeback for Toyota back in 2006. But these days Toyota isn’t doing much snickering.

Question: Is Toyota the Microsoft of cars, and are Ford and GM now Apples?

Toyota Adds Prius to Recall

By Lloyd Graff

Food selling businesses can tell us a lot about best and worst practices in the unending search for elusive success as an entrepreneur.

I spent the holidays in the Bay Area (new granddaughter) and indulged my happy obsession of searching markets for the best and freshest produce, breads and cheeses. Farmers’ Markets are reduced in midwinter, but I indulged my passion at a semi-outdoor market open seven days a week called Milk Pail Market, in Mountain View, Cal., home of Google.

The store was started 36 years ago by Steve Rasmussen and his father when they bought a bankrupt drive-through dairy store and took over the lease. The business started out as an independent dairy. Steve bought tanks, contracted with local milk producers, homogenized and pasteurized raw milk and then sold it to the Silicon Valley locals looking for a better, fresher, cheaper product.

The milk business connected him to dairy farmers and he started buying big rounds of good quality local cheese which he then cut up to sell to his milk clientele. He built up a network of suppliers of superb cheese makers and then started to add fruits and vegetables of impeccable freshness and flavor. The dairy store became more like a cross between a Farmers’ Market and supermarket produce department—and he kept his prices ridiculously low.

Rasmussen competes with a Safeway across the street and a Whole Foods a half mile away. His prices are 25 percent lower than Safeway and around half of Whole Foods, and I consider his quality and service far superior.

The whole store is maybe 4,000 square-feet including an area under an awning and an entrance that spills into a parking lot. The aisles are narrow (he uses small carts), lighting is uneven, cheeses are available for sampling with toothpicks in a tiny nook next to the Acme bread (the best sourdough in the country) delivered twice daily. There are no checkout lanes. People just line up at the counter where cashiers also pack their groceries. AND it all works. Magnificently.

I look at Milk Pail Market and wonder why people make business so hard and complicated. Rasmussen runs one 4,000 square-foot store, buys the best stuff, sells it way cheaper than the competition and prospers. He does not plan to franchise—I hope.

Question: What is your favorite Cheese? Do you enjoy stinky cheese?

In Front of Milk Pail Market

This is the story of a cold saw that tells us how the used machinery business sometimes works and sometimes doesn’t.

Two partners bought a deal with a small assortment of machine tools in Arizona. They chose to auction the equipment off in the worst possible market, the spring of 2009.

The most valuable piece in the sale was a Kaltenbach KMR100AP cold saw, new in 2004. The partners in the auction had figured the circular cold saw would bring $30,000 at sale, but for an assortment of reasons including ineffective advertising, an out-of-the-way location and abysmal market conditions, the machine could only get a $5,000 bid at the sale. The sellers felt that price was ridiculously low in light of its superb condition and $125,000 replacement cost.

The owning partners squabbled after the disappointing auction. One partner, a California machine tool dealer, wanted to put the saw into his working inventory, but the auctioneer wanted to get rid of it as soon as possible. Graff-Pinkert had a customer who was interested in the saw, but his business was horrible because of the automotive downturn. He was too fearful to pull the trigger, even at a low cost.

Then the owners of the saw put it up for sale on eBay. The dealer planned to buy the saw himself if it sold for less than $20,000, but another dealer who specializes in saws won it for $25,000 and shipped it to his Midwest location.

He put a price of $69,500 on the piece and began waiting for the right user to come along and buy it.

Meanwhile, the automotive supplier who had coveted the saw for $20,000 back in April but had had no money for it, has called back all of his layoffs and has renewed interest in it. He also is considering buying a new Japanese saw with a year’s guarantee for $110,000, though his shop lieutenants still prefer the used German one for half the price of the new one.

The Midwestern dealer has told us he would take $50,000 for the KMR100AP cold saw, to which Graff-Pinkert added a 10 percent markup to our client.

Question: What would you do if you were the potential buyer of this machine? What would you do if you were the selling dealer?

Bob,
I love you and I love your product. My father made a lot of money running Davenports in World War II with the assistance of your father, Earl.
But sadly, today, the world of machining tends to look at your and my beloved Davenport automatic as a noisy representative of a bygone era. Right or wrong, the market for used Davenports, the world I live in, is in shambles. My brother Jim, my partner in our used machinery firm, Graff-Pinkert, attended an auction last week in Rhode Island and saw nice, operable, used Davenports with attachments sell for $250 each—and he passed on them. We recently traded our stock of 21 used Davenports for Maglites because we could not find a cash buyer. I know that your machines are still wonderfully productive pieces of equipment, but the market today is telling us bluntly that they are no longer valued by many buyers.

As always, I wish you all the best.

Lloyd

Letter from Bob Brinkman

August 11, 2009

Dear Lloyd,

To quote President Ronald Reagan, “There you go again.”

In your article on the demise of Automatic Machining you imply that Davenport is going the way of Automatic Machining.  “A cam operated magazine (machine) in a CNC world.  The comparison could not be farther from the truth.

In spite of my repeated advice, Wayne Wood could not quite understand that he had to get engaged in the business, develop new perspectives and improve his product.

In comparison, we at Davenport have constantly improved the machine, the parts and our customer service to the point that we are now considered the only alternative for spare parts.  Lower prices, highest quality, and extensive inventory continue to provide our customers with a superior customer experience.  Not only that, our machines continue to produce millions of parts a day because the Davenport is the most economical, efficient and cost effective way to produce these parts.

Sure, CNC has its place and is very effective for many applications.  But the thousands of Davenports running out there prove that the machine is still viable and will continue to be.  Our HP servo driven machines can do many of the things a CNC machine can do at a fraction of the cost.

We intend to continue to support our customers with the best in parts, service, and support.  When I took over in 2003 our motto became, “Davenport, Another 100 Years”.  As the only remaining American made screw machine builder we would appreciate your support instead of your repeated derision.

R. J. Brinkman

Chairman

Davenport Machine

They need a design engineer, a draftsman and an electrical control integrator.
I also heard through the grapevine that Bruno Schmitter, the head of the company, would like to buy a couple of CNC lathes to make more components in-house.
There is a strong rumor that Pfiffner in Switzerland has a severe cash flow problem and that company founder, Mr. Pfiffner, has infused the firm with a sizable sum of personal cash.

**************

Tad Yamamoto has been named CEO of Okuma America. He spent 1994 to 2002 in the U.S., then went back to Japan for six years and then spent a year getting reacclimated to the American company. This is not an unusual career path for a top executive of a Japanese multinational company.
By moving back and forth between Japan and the U.S. a Japanese executive keeps his ties and credibility strong in both places. The home Japanese execs keep their confidence that the man still shares the parent company values and the Americans believe that he knows the territory. Larry Schwartz continues as President and COO of Okuma America.

**************

The glutted screw machine market is going to get even more saturated in September. Niagara Machine Products in St. Catherine’s, Ontario, is being auctioned off by Glenn Gray’s Premier Asset Recovery Group September 16th and 17th. There are 50 multi-spindles including an MS32-C Index and (2) 8 spindle Euroturns to go with 40 Acmes and 60 centerless grinders.
This sale will be followed a week later by a DoveBid sale in Athens, Alabama, with 25 more 8 spindle Acmes and Conomatics.

**************

Chad Arthur, whose Arthur Machinery was the most dynamic dealer in machine tools in Illinois until his company spiraled into bankruptcy, has resurfaced as exclusive distributor for DMG in Illinois. Chad’s company, CDA Machinery, is based in Elk Grove Village Ill., as was Arthur Machinery. I think this is a good move for DMG because they needed a surge of energy, and few people in the business have more energy than ex-hockey player Chad Arthur when he is truly engaged.

Question:

Which machine tool builder from your experience has the best service?

And, which is more important for customer service, the builder or the distributor? (You can also comment at www.shopdoc.com)

Tad Yamamoto

Link to full article: New York Times

Question: Do you think it’s advisable to treat employees as if they were voters?