For today’s podcast, I decided it was a good time for us to reflect on our used machinery business so far in 2021. It’s been an interesting and profitable nine months for Graff-Pinkert, so we had plenty to talk about—enough to stretch it into a double episode. Also, I was having trouble finding a new guest I wanted to interview.
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Main Points
Lloyd says the word “rebound” is the first thing that comes to his mind when he thinks about Graff-Pinkert’s business in 2021. In 2020, the pandemic threw a wrench into the used machine tool business, putting Graff-Pinkert in survival mode. The only constant work machining companies seemed to be doing was supplying parts for guns and ventilators. However, by September of 2020, most shops were off and running again. Yet still, they were often too indecisive to purchase many machine tools. The 2020 contested election, which concluded with an incoming Democratic president and congress, caused machining companies to remain uncertain about the future.
Lloyd says Graff-Pinkert’s first quarter of 2021 started relatively slow, but the momentum of the business accelerated in February and March. In the second quarter, business was excellent, while in the third quarter it has softened a bit. Perhaps there is some new indecisiveness in the market due to the resurgence of Covid-19.
Noah questions Lloyd’s theory that Graff-Pinkert’s business success is directly connected to various market factors. He makes the case that a string of a few great machinery deals can make a fantastic month. He suggests that success is not reliant on all customers doing well, just the right ones doing well. However, Lloyd contends that confidence in the economy can tip indecisive customers one way or the other—if they will buy a machine or stand pat. Both agree they are often baffled when customers don’t purchase equipment that seems like a small investment with a huge upside.
Lloyd says that Graff-Pinkert’s Wickman spare parts business has been weak in 2021 in comparison to its relative success in 2020. He theorizes that lately shops are replacing their multi-spindles with CNC Swiss machines because they don’t have the people to run the old equipment.
Noah points out that Graff-Pinkert has done well in 2021 selling older cam multi-spindles. However, the majority of those machines were sold to plants in Mexico that have the personnel to run them. Graff-Pinkert has also done well selling cam multi-spindles because most used machinery dealers are afraid to spec on them. Lloyd says he is willing to take a chance on old cam multi-spindles that he knows he might end up scrapping because he can purchase them with a modest investment.
Lloyd and Noah have observed that more customers lately are choosing to buy new machines rather than used ones. They hypothesize this trend is due to the technical service and warrantees new machine tool builders provide.
Noah asks Lloyd what excites him most about the used machinery business. Lloyd says that the challenge of making deals is the reason he went into the business and the reason he has stayed in the business a half century. He says he loves the way it is fueled by serendipity and connecting the dots to create deals. He also admits to enjoying the gambling aspects of the business, particularly placing contrarian bets on equipment others overlook. Both he and Noah say that one of their favorite parts of the business is getting to work alongside each other.