February 1926 – Large Price for Insurance

Recently a contractor was in the market for a locomotive. A new machine of the proper type and size was listed at $18,000 and could be delivered in about 30 days. A dealer in rebuilt equipment offered the contractor the same type and size of locomotive for $12,000. The dealer’s locomotive had been in service for only 60 days. It was in perfect mechanical condition and the dealer was willing to let it go at a price which would have amounted to a saving of $6,000.

The offer was rejected.

Upon inquiry it was found that the contractor had had an unfortunate experience with used equipment and as the result of a purchase had suffered considerably. He refused to inspect the locomotive.

The new locomotive was purchased and his explanation of the deal was to the effect that he was willing to pay $6,000 for what he called “insurance.” Insurance against failure in operation.

Contrast this somewhat overly cautious attitude with that of a large industrial corporation which will not consider new equipment unless it is impossible to obtain surplus machinery of the proper size and make. The latter concern is experienced in the matter of inspection and buying. It has reaped the rewards of such ability in reduced expenditures for production equipment. Six thousand dollars would cover the expenses of a first class inspector for an entire year. During this time he could, no doubt, save many times this amount in advantageous purchases.

Six thousand dollars is a large premium to pay for the working performance insurance on a locomotive.

Another Estimate of Machine Life is Made

Recent regional meetings of the National Machine Tool Builders’ Association disclosed many interesting facts about the machine tool industry and particularly the life and utility of machinery. According to the Association report, “our industry has about as much business as we can reasonably expect at this time. We seem to be witnessing the first stages of a boom condition with delayed deliveries. The labor factor is today limiting the production of machine tools. Some rising tendency in wages is also manifest, due to this condition. There is an increased cost due to breaking in new men, but until now there is no evidence of a material let-down in efficiency in the men employed.”

The above indicates the thriving condition of the machine tool industry. It appears as though the only difficulty to be anticipated is in the matter of labor and production. However, from the machine tool manufacturer’s viewpoint the situation deserves careful watching so that policies may be registered in case orders should show a slackening.

With these sound and basic principles of the industry reflected by speakers and reports comes an interesting sidelight of the machine tool industry, namely, that dealing with the life and utility of machinery.