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March 19, 2009

Milacron/Chen Hsong - A Match Made in.......?

Ok, so I've been away a while, but what's a bit of time among friends, right? Speaking of friends, and the title of this piece, I'm betting that Chen Hsong Group is not feeling really friendly with Dave Lawrence and Milacron these days, what with Milacron going into Chap 11 with an outstanding bill of $489,000.00 owed to Chen Hsong. Proves two theories I've had a long time, now, first that forming an alliance with an Asian press house to keep your domestic business going is unlikely to work out for you, and second that Milacron management over the last few years (like the last 20) has not been doing the kind of long term thinking that should be required when you are running a company that has a history reaching back into the 1880's. Having been involved with injection molding for an EXTREMELY long time, seeing Milacron going under just seems a crying shame. Kinda wish they'd taken the time to observe and learn from the mistakes of all the other American injection machine builders who were years ahead of them on the path to oblivion, and used the observation to work out some way to not do exactly the same things that put all those builders on the scrap heap. I'm thinking about a couple used-to-be famous names, like Reed-Prentice/Package Machinery, Farrel, Stokes/Pennwalt, Van Dorn, Trueblood, HPM, Battenfeld, and a few dozen smaller companies that all managed to lose their once tight grip on the US market.

I blame it on accountants, and corporate lawyers, and investment advisers, all of whom have managed to bring most everything down to the bottom line, even when the bottom line was one that did not matter, in the overall picture. Bottom line mind sets in this business will get you a whole spectrum of bad decisions. Like the in-house bookkeepers at lots of major USA molding operations who were mistakenly allowed to look over the bids on capital equipment purchases twenty years ago, perhaps, and just HAD TO make the point that the latest then-Japanese machines would cost the Company 20% less than staying with Reed, or HPM, or Van Dorn. Forget that the US machines had about 25 years of service life capability compared to 8 or 10 for the imports, so the 20% extra cost was probably going to become a 200% SAVINGS over the import machines in the long run, that bean counter was going to get a BONUS for cutting costs that year. Anybody seen any of those guys lately? Still have one working for you, still pushing for the bottom line on everything? Ever catch yourself thinking he'd probably fit in the big Nelmor?

 Hate to say it again for the millionth time, but we in this business have a real propensity to shoot ourselves in one foot after another. An older fellow I used to work for, (imagine that!) always used to exercise what he called the "Presidential Prerogative" in major equipment buying decisions. That was to have some  hotshot engineering types (That would have been me and the rest of the engineers) survey the available equipment, price at least 4 choices, and then war-game amongst themselves, each guy presenting one of the products as his own and letting each of them try to prove theirs the best and show the shortcomings of all the rest.  After all that, the "P-P" decision was always his, and always surprising, in that the lowest priced solution was almost never the one chosen.

We ran REED machines the first 10 years or so, then moved on to Stokes Pennwalt when the Reeds lost out in performance testing for some thinwall closures, and ultimately had a few dozen of those and an equal number of Van Dorns in place when the Big Guy retired and the Company fell into the hands of a crowd of "Venture Capitalists" in the late 1980's. Those guys brought in their accountants to oversee "all capital purchase decisions" which meant all new machines were the smallest and cheapest that could hope to run each job. Capper to that was that the accountants decided our veteran commissioned sales reps were making way too much money with 5% of the gross, so they implemented a "sliding scale" rate that halved the salesmen's take above a randomly selected sales volume number. Kind of like the current geniuses capping executive pay at $500K, because it's a number they like. Of course the sales died off, the "capped" reps went to work for the competition, and the Company died within 18 months after the "smartest guys in the room" implemented their new regime.

Nobody to this day seems to "Get it" that our kind of businesses have to be run by people with vision that reaches above the bottom line. One worthwhile quote from my mentor in this business: " You can't build a Company up if you are always counting your change and worrying that you don't have enough. To do any good you have to make the competition count their change. Makes them lose focus." 

The plastics industry in the United States was invented and run by people with a real competitive spirit, a willingness to take risks, and an ability to choose correctly between acceptable risks and ones that were not. Milacron is a great example of risk-averse management making each and every one of the same bad decisions made by all the other defunct USA press builders. The real threat to the plastics industry as a whole, is that we will lose our focus, being too concerned about making safe moves to ever again break out and do the kinds of creative things that formed the basis of our past successes. 

Lately, too many of us are running scared, and doing just what everybody else is doing, to avoid standing out too much, risking being noticed and perhaps getting eliminated, once noticed. If you look at the success stories in plastics over the whole long time the industry has existed, none of them involve being more careful than everybody else, more reserved, more focused on the counting of pennies where there were dollars to be gathered up and run with.

Here's a thought, lets all take a few minutes to contemplate the moves we'd have made a few years back, when the economy was still OK, there was at least one USA press builder left, and we just thought of a great way to boost the profits on that one long running job out there on the press floor......you know, the press floor, where all the money actually gets made, or lost?

BTW, DO NOT let the Company accountant know what you're up to, just go do it and reap the rewards when it succeeds.


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