4/1/2004
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When Old Dogs Learn New Tricks
Taylor Engine: 2003 Machine Shop of the Year
When Jay Steel was introduced to the assembled throng at last spring's AERA International Expo 2003 as the winner of Engine Builder's 2003 "Machine Shop of the Year" award, he was intimately involved with the down and dirty business of rebuilding and restoring all manner of antique engines.
His shop's lineage descends directly from the great Southern California hot rod builders of the 1950s. His expertise is in Ford Flatheads. His writings on the subject have been published nationally in magazines and books.
So how surprising is it that a majority of Taylor Engine's work is currently in preparation of brand spankin' new Saturn racing motors designed to compete directly against Hondas, Toyotas and Mitsubishis on the Sport Compact Performance drag racing circuit?
Well, if you're familiar with Jay Steel, you know that he's not the kind of businessman to say no to an opportunity just because it's different. Even though nostalgia and restoration engine builds are very profitable, he believes only a fool fails to answer the door when opportunity knocks. And for this old dog, the tricks of the sport compact market are a pretty big bone to be chewed.
"Custom engine rebuilding is our specialty," explains Steel. "My motto is 'Antiques to Hardcore Racers.' We do about 60 Ford Model A/B four-cylinder engines a year, along with other exotic or unknown engines. But we also do block preparation for race engine builders along with lots of engine balancing."
Despite its reputation as one of the leaders in antique and restoration work, it has always been Taylor Engine's practice to keep up with the changing times, says Steel. This includes adapting to new technologies and markets as well as constantly updating machine tools and equipment. Taylor Engine has a wide variety of machine tools that help to achieve a more precise job, but Steel stresses one of the key's to his shop's success has been - since its founding - the dedication of its employees.
Taylor Engine was originally formed in 1947 as Southern California dry lake bed racing was helping to push the limits of automotive technology. Racer Nellie (Nelson) Taylor experimented with different engine combinations in his '32 roadster to reach a maximum speed of 127.11 mph. Fellow Gophers Car Club member John Ryan was topping out at 124.13 mph in the 268 Mercury motor in his '32 roadster. Both of them used Earl Evans' speed equipment (also a member of the Gophers) so when Taylor and Ryan decided to go into business together, it was in Evans' shop that they started building motors for other racers.
In addition to many others, Taylor and Ryan built motors for racing legends Ak Miller and Mickey Thompson, as well as Calvin Rice, who won the first-ever NHRA Nationals in 1955. Rice's dragster was powered by a 324 Ford Flathead V-8 running on 60 percent nitro, and was just one of several record-setters built by Taylor and Ryan.
As the oldest operating automotive machine shop in Southern California - and one of the oldest continuously operating members of the Engine Rebuilders Association (AERA) - Taylor Engine today serves a wide variety of customers. Jay Steel says he still loves the business but acknowledges that the industry has changed since he bought the shop 31 years ago.
"It appears to me that the future is bright for the custom engine shop, but you must find a profitable niche such as the antique or high-performance market. The Chevy 350 market is dead, unless you want to work for free!" he says.
"The bottom line is, because of the evolution of the 'throw-away' engines, mail order and mass-merchandisers, the industry's traditional marketplace is changing," Steel says. "You must adjust your shop policy, advertising and marketing posture and invest in new machinery. Above all, don't be afraid to try something new. Remember, we are all supposed to be entrepreneurs."
It is his flexibility and willingness to "try something new" that brought one of Steel's newest business opportunities into his shop. "We're doing block preparation of brand new GM 2.2L Ecotech engines for a Saturn racing program funded by Jim Eppler Motorsports in Indianapolis. The alcohol-powered engines will be running about 50 psi of turbo boost, so we're doing things to make sure they're durable."
Steel says his shop is currently filled with 13 of the Saturn engines and each of his employees has a part in meeting the quota. "The blocks come from GM with a list of things we're supposed to do: bore and hone this to size, align bore to this size, drill and tap that…it's a list of about 40 operations. My particular job is to custom fabricate some hubs for the magnetic pickup for the MSD ignition. No other manufacturer wanted to make the parts unless they got an order for several hundred of them…no one wanted to make just a few of them."
Steel says that although this project was not without some initial costs, it has been a boost to his business. "We needed to buy some specialized torque plates and counterbores, but when it's all over, we should have a great amount of labor involved, so the profit will be good."
Semi-facetiously, Steel says he's not used to working on engines like this: "They're all brand new - no dirt at all!"
Quite a contrast to the "old bangers" he has worked on for years. "In addition to the Fords, we do Buchetts, Duesenbergs, Blacks, Lycomings, Buggatis and Crane-Simplexes, among others," Steel explains. And yet, because of the wealth of experience within his shop and the extensive array of equipment Taylor Engine can easily handle any type of custom engine rebuilding project it may face.
"Whether we're doing needle bearing cam bushings and lifter bores for late model racing engines, boring out cylinder heads being developed for engines still in development or balancing antique engines, we're very precise with our work," Steel says. "We have three Tobin Arp align boring machines - we can align bore holes as small as .550? to 5.600? - even blind holes.
"Because of our vast array of machine tools, six mills, four lathes, three boring bar machines along with numerous hones, grinders, etc., we can complete jobs that other shops are afraid to even attempt," Steel continues. "By doing 90 percent of our work in-house, we can more closely control quality and turn-around time."
Control over his build-quality is something Steel takes very seriously, because there are so many aspects of his business that he can't control - such as parts.
"A few weeks ago, I had four jobs come in one day," Steel recalls. "Every one of the customers brought their own parts. These were parts that I could typically make a profit by selling: rod bolts, gaskets and the like. It's illegal in California to charge more if they bring their own parts so there's really nothing I can do about it."
Mail order parts, according to Steel, may be the biggest threat small engine rebuilders face. "I gave one customer a price on a complete engine rebuild after he melted his pistons with too much nitrous. He gave me a deposit and said 'do the work but don't order the forged pistons' that I specified. He said he had found them cheaper somewhere else. They were drop-shipped from one of the big mail-order retailers directly to me and, thanks to his credit card receipt included in the box, I found out he got them for $37 less than I could have bought them!"
Steel says his sales figures over the past few years tell the story. "In the 1970s and '80s we made good money on parts sales. In 1990, our shop sales were split exactly 50/50 between parts and labor. Today, the split is 78 percent labor and 22 percent parts. The only thing we can make a profit on is something that our customers can't go buy from someone else."
Steel shrugs as he recalls the time a potential customer called asking if Taylor Engine had a certain coated cam bearing. "I did, and I told him they were $38. When he came to the shop, he asked again what the price was. When I told him they were still $38, he named a local parts store and said they were only $32. I agreed, and said that's where I buy them. 'But they're out of stock,' he whined. 'Frankly', I said, 'if I didn't have them in stock I could sell them for $10 - but I did have them in stock and they were $38.' He didn't see my logic, so he turned and walked away from the project - over a lousy $6!"
Shrinking parts sales only serve to reinforce Steel's commitment to versatility. Whether it's antique restoration, brand new race motor machining or stock passenger car engine rebuilds (although he admits that the closest thing to a stock engine rebuild he has done recently is a 1956 Ford 292) having the people, equipment and expertise necessary to do the job right is one of his business philosophies.
"When I bought this shop in 1971 from its founder John Ryan, there were seven automotive machine shops in a five-mile radius. They're all gone now. That we're the only ones left, I think, means something," he says.
"When I bought this place, John Ryan gave me some sage advice in three simple rules," Steel says:
- "Never do work for friends."
- "Never give anyone credit and always get a deposit."
- "You can't make everyone happy. They recently made a movie about a man 2,000 years ago who tried to do that - look what they did to him."
Though he's reluctant to do work for friends in the neighborhood, Steel says he's more than happy to help friends in the industry. "My mentor in this industry has been Gene Ohly, from Evans Speed Equipment in South El Monte, CA. I'm not embarrassed to say that at least half of what I know I've learned from him. He's close to 70 now, and he has given me so many little tricks that have saved me a ton of money that I can never thank him enough."
As an interesting point of reference, Ohly now owns the same Evans Speed Equipment that gave young Ryan and Taylor their start back in 1947!
One of Steel's own tricks helps him to "find" literally hundreds of dollars of profits per week. "We're all wearing too many hats and we never seem to keep track of things exactly the way we should. I keep a little pad of red 'sticky tabs' in my pocket. As one of my employees tells me about some extra work that he's had to do to an engine or something that needs to be changed, I write it on one of those tabs. I keep them in my pocket and then, at the end of the day, I just pull them out and add them to the job ticket. Sure, the right way would be to add the additional work to the ticket as it is done, but I'll admit that we don't always do it the right way," he says.
"However you do it," Steel continues, "it's important that you write down those 'lost dollars.' I guarantee you won't remember to add them all otherwise." Each of Steel's estimates include a 10 percent "miscellaneous/unknown" charge to cover such findings - and no one complains about or questions it, he says.
Steel hopes that he is somehow able to repay his debt to Ohly by helping others in the industry today - a feat made easier by being named Machine Shop of the Year. Since winning the award, he says he has had a lot of calls from other engine builders on a variety of business topics. He says he's happy to share his expertise though magazine articles, books and personal conversations with people because a lot of people have helped him over the years.
"One of the most important things I remind other shop owners is that regardless of the type of engine, you need to be willing to do the work and have the ability to use the equipment in your shop," Steel says. "As a small machine shop operator, you can't be afraid to try something new. Look at your competitors and suppliers for tips and techniques that you can copy.
"Being willing to take on a new project has bailed our shop out in many cases," Steel concludes. "Successful businesses don't walk around with blinders on."