Unforgivable actions

[Old Everything Tech]

During my years of experience, I worked for a large, I mean a large manufacturing company, very profitable.
This company did not lack for anything.
If they wanted it, they bought it.
They set up several machine shops.
One was 250 feet by 150 feet in size.
The biggest lathe was 20-30 feet long.
In the area that I oversaw, the machine shop was not as large, but it had most everything needed.
In the mid 90's the company decided to go with contract services to reduce overhead.
The upper echelons made the decision to junk all of the shop equipment.
After all they were in the ivory tower and could care less.
They set about to take out the equipment, load it onto tractor trailers and the equipment was sent it to a large metal scrap yard.
They sent an engineer with each load to assure that it was scrapped, and he stayed until the machines were ground to bits.
Everyone tried their best to buy the equipment, but it was not to be.
No amount of effort could overcome the stupid decision to junk that great equipment.
I can tell you that I wanted to cry.
After the equipment was trashed, they retired most of the shop personnel and transferred the rest of us to manufacturing facilities.
That was a time I can never forget.

 

[markba633csi]

A shame, they could have gotten more cash for that stuff, with practically no effort
Probably they were "advised" about liability- all it takes is one lawyer to scare everyone to death & ruin everything

 

[mmcmdl]

Large corporations do this all the time . The equipment to them is worth book value , not market value . It's been written off over the years . Beth Steel , General Motors , Unilever , Baltimore Sunpapers , Danaher and many more have shut the plants down recently and scrapped any and all contents in my area . It's a shame to the small mom and pop shops and hobbyists who could use the equipment . The gubmint place I was working for scrapped tools daily per the contract . We in the TS model shop were allowed to grab and use a lot of the stuff being kind of a skunk works shop .

 

[Nutfarmer]

When Ball Corporation bought and shut down the end plant where I worked, they took sealed bids on the shop equipment that they weren’t keeping. Still have the equipment I purchased. Nice to have an exception to the way many companies work.

 

[projectnut]

During my years of experience, I worked for a large, I mean a large manufacturing company, very profitable.
This company did not lack for anything.
If they wanted it, they bought it.
They set up several machine shops.
One was 250 feet by 150 feet in size.
The biggest lathe was 20-30 feet long.
In the area that I oversaw, the machine shop was not as large, but it had most everything needed.
In the mid 90's the company decided to go with contract services to reduce overhead.
The upper echelons made the decision to junk all of the shop equipment.
After all they were in the ivory tower and could care less.
They set about to take out the equipment, load it onto tractor trailers and the equipment was sent it to a large metal scrap yard.
They sent an engineer with each load to assure that it was scrapped, and he stayed until the machines were ground to bits.
Everyone tried their best to buy the equipment, but it was not to be.
No amount of effort could overcome the stupid decision to junk that great equipment.
I can tell you that I wanted to cry.
After the equipment was trashed, they retired most of the shop personnel and transferred the rest of us to manufacturing facilities.
That was a time I can never forget.

It isn't quite as simple as you make it sound. All of those machines carry a book value and have to be depreciated over time. If they're not in production, they can't be depreciated. They remain at the whatever the book value was when they were removed from service. They can sit in a warehouse for 20 years and still hold the same value as far as the government is concerned.

The downside is the machines are considered assets and are taxed according to their book value. Every year the company pays taxes on the book value of the machines. As an example, if a machine is taken out of service while holding a $100,00.00 book value the company pays taxes at that value until the machine is either returned to service or disposed of. Companies can't afford to pay millions of dollars in taxes on machines setting in warehouses.

At some point the cost of taxes exceeds the value of the machine. However, the taxes continue at the book value of the machine until it's either junked or sold. If it's sold for less than book value, the company eats the difference between the sale price and the book value. If it's junked it can be written off the books as a tax loss.

The company I worked for went through the same scenario with machine tools and production machines. We had warehouses full of machines that would have normally been recycled back into production as product demand increased. That all changed when the tax laws changed. We could no longer keep the machines on long term standby due to cost. We had to pay to have them removed from service, pay for storage, and pay taxes on idle machinery. There was a time when we were paying over $5,000,000.00 a year for equipment sitting idle in warehouses.

As painful as it was the decision was made to scrap anything that wasn't projected to go back into service within 3 years.

To further complicate things it's difficult if not nearly impossible to sell machinery that doesn't meet the current OSHA standards. In most cases a 20- or 30-year-old machine would need expensive updates to be brought up to today's standards. Even worse is that each OSHA inspector can more or less set their own standards. Updates that might be approved by one inspector, wouldn't necessarily be approved by another. In almost every case the cost to update, and potential liability far outweigh any profit that may be generated by selling the machinery.

 

[strantor]

I used to work maintenance in a factory that makes large cables for the oil field. One of the largest companies in oil & gas. We had a very impressive "store" of spare parts. Pallet racks all the way to the ceiling in rows, many more rows of Vidmar cabinets, the spare parts area was about 40k square feet. Over the years people before me had been diligent about ordering two or more of everything that ever broke or was likely to break, and meticulously documenting their location, use, cost, vendor, etc. in a computer database. Everything was labeled with our internal part number and stock location where it goes. We had a guy whose sole job was to maintain the spares and the database. He was on a never-ending audit cycle, making sure everything was where it was supposed to be, that we maintained the minimum specified stock of everything, that we knew what everything was and what it was used for (no mystery parts) and that everything was kept well organized and presentable. It was all very sleek and efficient. Our downtime metrics for every machine and production line were impressive. It was very rare that something broke and we didn't have what we needed to fix it.

Enter new plant manager, overwhelming genius with a 5 page resume listing nothing but academic achievements, swinging hammers of "Lean Manufacturing," "Six Sigma," and "5S." He made us to get rid of everything that hadn't moved in the past year. Unfortunately we had the exact data needed to make this happen. Our database listed when/where used of each part, linked to work orders going back 15 years or more. It only took a few seconds to generate a report showing that over 80% of our spares "needed" to go away. So they went away. We turned our Walmart full of parts into a 7 Eleven full of parts. Threw them all in the scrap bin over a number of weeks. Scrap bin was getting replaced almost daily. We threw out brand new electronics, mechanical parts, everything. Some of the stuff was really expensive, like more than a year of my pay. Some of it was invaluable obsolete unobtainium, new in the box, that other companies would have given their left nut for. We had it because someone years ago had the foresight to stock up before it was discontinued. One of the things that stands out was a gearbox the size of a sedan, we had built to order 20 years prior when its predecessor had failed and bought two just in case. The gearbox was the heart and soul of the line, one of our biggest moneymakers, and it takes many months and $380k to get another one. Hauled off for scrap.

All of it had to go, so that the plant could be completely rearranged, machines moved farther apart and highway stripes painted on the floor. No humans in the forklift lane, no pallets in the people lane, no forklifts parked anywhere but designated forklift parking areas, etc. I'm sure all this must have improved our efficiency in some way that I just wasn't smart enough to recognize. I was just too focused on the quantifiable downtime metric which was given a thorough kick in the nuts when we had to wait on vendors thereafter, each time a line went down.

That fundamentally rubbed me the wrong way. I'm sure these Lean Manufacturing concepts are fine for companies starting out, not having already implemented something better, but forcing it on a company that has? It's like forcing communism on a capitalist society. Many people quit, including me. Especially since they still held maintenance responsible for downtime even after hamstringing us to have the needed spares. What foolishness! It still pisses me off think of it.

 

[Weldingrod1]

I hate that 5S stupidity too! Evil.

Sent from my SM-S911U using Tapatalk

 

[mmcmdl]

I hate that 5S stupidity too! Evil.

Having had to do all this for 15 years at work I don't practice it at home . And it shows !

 

[projectnut]

I used to work maintenance in a factory that makes large cables for the oil field. One of the largest companies in oil & gas. We had a very impressive "store" of spare parts. Pallet racks all the way to the ceiling in rows, many more rows of Vidmar cabinets, the spare parts area was about 40k square feet. Over the years people before me had been diligent about ordering two or more of everything that ever broke or was likely to break, and meticulously documenting their location, use, cost, vendor, etc. in a computer database. Everything was labeled with our internal part number and stock location where it goes. We had a guy whose sole job was to maintain the spares and the database. He was on a never-ending audit cycle, making sure everything was where it was supposed to be, that we maintained the minimum specified stock of everything, that we knew what everything was and what it was used for (no mystery parts) and that everything was kept well organized and presentable. It was all very sleek and efficient. Our downtime metrics for every machine and production line were impressive. It was very rare that something broke and we didn't have what we needed to fix it.

Enter new plant manager, overwhelming genius with a 5 page resume listing nothing but academic achievements, swinging hammers of "Lean Manufacturing," "Six Sigma," and "5S." He made us to get rid of everything that hadn't moved in the past year. Unfortunately we had the exact data needed to make this happen. Our database listed when/where used of each part, linked to work orders going back 15 years or more. It only took a few seconds to generate a report showing that over 80% of our spares "needed" to go away. So they went away. We turned our Walmart full of parts into a 7 Eleven full of parts. Threw them all in the scrap bin over a number of weeks. Scrap bin was getting replaced almost daily. We threw out brand new electronics, mechanical parts, everything. Some of the stuff was really expensive, like more than a year of my pay. Some of it was invaluable obsolete unobtainium, new in the box, that other companies would have given their left nut for. We had it because someone years ago had the foresight to stock up before it was discontinued. One of the things that stands out was a gearbox the size of a sedan, we had built to order 20 years prior when its predecessor had failed and bought two just in case. The gearbox was the heart and soul of the line, one of our biggest moneymakers, and it takes many months and $380k to get another one. Hauled off for scrap.

All of it had to go, so that the plant could be completely rearranged, machines moved farther apart and highway stripes painted on the floor. No humans in the forklift lane, no pallets in the people lane, no forklifts parked anywhere but designated forklift parking areas, etc. I'm sure all this must have improved our efficiency in some way that I just wasn't smart enough to recognize. I was just too focused on the quantifiable downtime metric which was given a thorough kick in the nuts when we had to wait on vendors thereafter, each time a line went down.

That fundamentally rubbed me the wrong way. I'm sure these Lean Manufacturing concepts are fine for companies starting out, not having already implemented something better, but forcing it on a company that has? It's like forcing communism on a capitalist society. Many people quit, including me. Especially since they still held maintenance responsible for downtime even after hamstringing us to have the needed spares. What foolishness! It still pisses me off think of it.

Your inventory system sounds similar to the one we had. In addition to when and where a part was used we also tracked the number of cycles the parts would last and the time it took to replenish stock when a long lead item was used.

We had order points and order quantities that assured the proper parts were available when needed. Inventory dollars were easily in the millions, but it was constantly turning over. There were no dead or obsolete parts hiding in the shadows.

Fortunately the management was onboard with keeping the proper inventory

 

[strantor]

The downside is the machines are considered assets and are taxed according to their book value. Every year the company pays taxes on the book value of the machines. As an example, if a machine is taken out of service while holding a $100,00.00 book value the company pays taxes at that value until the machine is either returned to service or disposed of. Companies can't afford to pay millions of dollars in taxes on machines setting in warehouses.

At some point the cost of taxes exceeds the value of the machine. However, the taxes continue at the book value of the machine until it's either junked or sold. If it's sold for less than book value, the company eats the difference between the sale price and the book value. If it's junked it can be written off the books as a tax loss.

The company I worked for went through the same scenario with machine tools and production machines. We had warehouses full of machines that would have normally been recycled back into production as product demand increased. That all changed when the tax laws changed. We could no longer keep the machines on long term standby due to cost. We had to pay to have them removed from service, pay for storage, and pay taxes on idle machinery. There was a time when we were paying over $5,000,000.00 a year for equipment sitting idle in warehouses.

As painful as it was the decision was made to scrap anything that wasn't projected to go back into service within 3 years.

Thanks for the explanation, it makes some of the corporate nonsense a little bit less nonsensical. Or at least it shifts some of the blame for the nonsense to the government, where it typically belongs.

I wonder if there is any workaround/loophole for this.... What if the brass were to start a second company, some kind of company which exists to buy/sell/refurbish equipment. I imagine the tax implications for the second company are different, since they are buying equipment not for the purpose of production, but for the purpose of retrofit/resell. Do vendors pay the same kind non-performing asset tax for products which sit on the shelves? I doubt it, it seems like it would push both retail and wholesale totally out of existence. The original company could sell equipment to the new company either at book value or scrap value (not sure if it would matter), then the new company can sit on it indefinitely. The new company can, while in possession of it, do safety upgrades (or not), overhaul (or not), sell to outside buyers (or not), and when the equipment is needed again, sell it back to the original company.