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2001 Machine Shop of the Year: Hendrick’s Diesel Exchange Inc., Springfield, MO

By Doug Kaufman

Traditionally, Missourians are thought of as skeptical, not prepared to embrace a new concept until it is a proven success. The motto "Show-Me" is imprinted on their license plates and in our national culture.

Luckily for his customers, Steve Hendrick isn’t content to be shown an adequate way of doing things; he wants to discover the best way himself. It is this desire to take chances, be a little bit different and make the necessary changes to improve his business that has made Hendrick’s Diesel Exchange Inc., Springfield, MO, the 2001 Engine Builder magazine "Machine Shop of the Year."

"We’ve taken a long-term view of this business," explains Hendrick. "To us, it’s not just a get rich quick scheme. We tend to do things for the future and try to get better each day."

Getting better is what Diesel Exchange has been committed to since Hendrick and his wife Lisa opened the shop nine years ago. And, coincidentally, for the past nine years, Engine Builder magazine, in conjunction with the Engine Rebuilder’s Association (AERA), has recognized such commitment by soliciting entries for the "Machine Shop of the Year" competition. Based on the quality of each shop’s entry packet, the staff of Engine Builder and a representative of AERA then select "the best of the best." This year, we received entries from as far away as the Canary Islands and Dar Es Salaam, Tanzania. But Diesel Exchange was truly the impressive choice.

As winner of the award, presented at June’s AERA Expo in Orlando, FL, Diesel Exchange received a check for $500, a plaque of recognition and free airfare and hotel accommodations at the show from Engine Builder magazine. In addition, AERA also provided a year of free updates to Diesel Exchange’s current PROSIS software package. PROSIS gives comprehensive information on AERA’s engine spec sheets, tech bulletins and component casting information.

Diesel Exchange, Inc. grew out of a Hendrick family business – Hendrick Diesel, a Detroit Diesel dealership – that was started in California in 1952. Steve’s father, Robert, retired in 1978 and moved to Missouri, where, just a few years later, he got bored and reopened Hendrick Diesel in Springfield.

Son, Steve, attended Southwestern Missouri State University and graduated in 1983 with a bachelor’s degree in business. After graduating, Steve became a loan officer with a local bank and later took a management position with a local real estate developer. But the diesel fuel in his blood called him back when his father reopened Hendrick Diesel in 1985.

Between 1986 and 1990, Steve worked in every area of the business from engine rebuilding to sales and accounting. His father passed away in 1990, however, and the family chose to close the business in early 1992.

"In May of that year, my wife and I decided to incorporate Diesel Exchange as an engine rebuilding facility," explains Hendrick. "As we remanufactured more and more engines, we had a greater need to reduce inventory and improve delivery time. So we gradually added the machine shop."

Due to a 15 percent average annual growth rate, Diesel Exchange has expanded out of two locations and last year moved into a new, state-of-the-art 63,000 sq.ft. facility. More than 60 people are involved in the daily operation of remanufacturing diesel engines for the bus, marine, heavy truck, energy services and industrial equipment markets.

The success of the machine shop, says Hendrick, can be tied to the quality of his team of employees – many of whom arrived with or because of shop manager Tony Mitchell. "When Tony came to work for us, we had a big improvement in the machine shop, because he had the knowledge to bring all of the operation in house," Hendrick says.

Mitchell is a career engine expert, beginning in a large production automotive shop ("Well, it was a big shop 25 years ago," he concedes) with his father. Following nine years with cars, he moved to another large Springfield diesel facility working on larger engines for 10 years.

Today, Mitchell holds ASE Master Certifications in both gas and diesel engine specializations.

"Then I had my own garage for a couple of years, because I thought that might be what I wanted to do. It wasn’t, so luckily, I met Steve," Mitchell says.

This meeting was actually ar-ranged through a mutual acquaintance; John Lee, a sales representative for Rottler Manufacturing, explains Hendrick. "He kept trying to sell me an F-88 boring, surfacing and line boring machine. I told him if he found me somebody who could run it, I’d buy it. He brought me Tony and the machine – the combination has worked out well."

Diesel Exchange grew by servicing the bus industry niche. The company’s main customer base was tour bus operators and city bus utilities. Now, the company serves many other heavy duty and industrial markets and actively markets its expertise to these groups with inside and outside sales representatives who continually visit existing customers and prospects in a six-state area in and around Missouri.

Popular for its nightlife, Branson, MO, is just 40 miles south of Springfield. Known as the "live music capital of the world," Branson has some 60 theaters featuring well known entertainers. Because of the severe travel these entertainer motor coaches endure, they are frequent visitors to Diesel Exchange for service and repair. Mitchell says his shop experts have ensured that Willie Nelson, Kenny Rogers and Lee Ann Rimes, among many others, were able to continue to perform for fans in distant cities.

Diesel Ex-change’s new facility is equipped with eight drive-in bays for service on buses, trucks and industrial equipment. The machine shop section of the business includes a complete assortment of late model remanufacturing equipment that allows DEI to keep nearly all of its machine work in-house. "This system of machines and processes is one key to quality products and workmanship from individual component to completed, electronically dynamometer-tested engines," explains Hendrick.

The machine shop work and engine production is scheduled through a central person, Hendrick says. "We evaluated several software applications to streamline our scheduling of various activities. In June of last year, we hired a full-time systems analyst responsible for putting into use our ideas and requirements by enhancing our existing customized computer software applications."

In addition to the latest in machining equipment, Diesel Exchange has taken advantage of the power of the Internet to become more productive. In addition to an active Web site (www.dieselexchange.com) which has spurred inquiries and sales, every workstation on the Diesel Exchange PC network can access the E-mail system.

"That’s been a big help," explains Mitchell, "Some of our customers don’t really know the details of their engines — whether they’re intercooled or aftercooled or many other things. They can just e-mail us a picture and we’ll know what they have."

The value of this electronic aid is immeasurable, Hendrick and Mitchell say, because of the vast expanse of their customer base. "We don’t have a big engine population near us, so we do business all over the country. Generally, we have to send the replacement engine out first. About 90 percent of the time, the core is returned only after the remanufactured engine is installed," says Hendrick.

"We have to make sure ours is as complete as possible," says Mitchell, "so that the customer doesn’t have to change a lot of components. It’s not like the automotive business where they just send out a bare engine and the old components are reinstalled. When our engines are shipped, they’re ready to go. We don’t want our customers to have to change the piping on the turbocharger, for example, and put the old dirty piping back in."

Hendrick and Mitchell can be certain their engines are ready for duty thanks to the well-balanced and time-tested combination of elements in the remanufacturing process leading to the dyno sheet that accompanies each completed engine.

All parts are put through a stringent cleaning and inspection phase to be sure the particular item is acceptable for remanufacturing. Blocks, crankshafts, heads and other items are carefully inspected using a wet magnetic particle inspection. Minor imperfections such as bolt and pipe thread damage are carefully repaired to ensure full functional performance of the parts. Major components are then remachined to stringent OEM-recommended specifications.

"Our technical staff has an average of 17 years experience in the engine remanufacturing or related business," explains Mitchell. "This is an extremely dedicated group of people that take a great amount of pride in producing quality products. This allows us to empower anyone who works at Diesel Exchange to stop production if a quality problem is suspected. Only after thorough investigation and, if needed, correction, is production able to continue."

All complete engines are thoroughly tested on DEI’s computerized engine dynamometer. Only engines that pass pre-determined guidelines for horsepower, torque, oil pressure, oil temperature, turbo boost, air box pressure, water temperature and water pressure get released for service.

The machine shop staff includes five ASE-certified Master Mechanics and eight other machinists certified in specific ASE vocations including heads, engine assembly and blocks.

Keeping that experience current is an important part of a DEI employee’s career, and a process that can be structured in many ways.

"We believe there is no single ideal training situation or environment that completes all of the technical, theoretical and hands-on experiences needed for the various positions within our organization," explains Mitchell. "Understanding this, we work hard to implement new in-house classes, outside training opportunities and inside apprentice-type hands-on training with senior technicians. We also have a tuition reimbursement program that helps both the individual and the company by improving our staff’s skills, experience and knowledge."

Hendrick explains that during the 2000 calendar year, DEI took a bold approach to its continuing education program. "We created a training proposal for the State of Missouri, which was sent to two different state agencies responsible for funding grants," he explains. "We were approved for almost $35,000 in training grants. We used the money to fund training projects that include engine diagnostics, precision measurement classes, training in business practices, basic and advanced salvage techniques, and engine and transmission technical review classes."

Obviously, DEI’s customers benefit greatly from such efforts. "We try to put ourselves in our customer’s place," explains Hendrick. "If we took something in somewhere, how would we want to be treated?"

This "Golden Rule" attitude carries over to Diesel Exchange’s warranty work, taking "satisfaction guaranteed" to a new level. "We’ve taken the outlook that, unless we can positively prove the customer did something wrong, we stand behind our engines," explains Hendrick. "If there is any problem with the work produced, we will pay to have the item returned to us, corrected and shipped back to the customer."

"It’s a different approach from what a lot of people do," acknowledges Mitchell, "but it’s brought a lot of repeat business in. In the long run, it’s worth it to us."

All of Diesel Exchange Inc.’s remanufactured engines are backed by a one-year warranty. Highway use engines are warranted for one year or 100,000 miles. Off-road use engines are guaranteed for one year or 3,600 hours. Extended warranties are available.

"Some of the engines we deal with are in the $30,000-$40,000 range," says Hendrick. "It doesn’t matter if it’s the customer’s fault or not – usually, no one is very happy if the engine fails."

The warranty situation is one area of this industry that Hendrick feels should be addressed soon. "We need to develop a national warranty network between the independent rebuilding companies," he explains. "Most smaller shops like us compete with the OEMs for business, but they have the captive warranty network in place – we don’t have that. It would be tough to put it all together, but such a network would help all machine shops.

"It’s not always about whose product is higher quality," Hendrick continues, "it’s who has the better support after the sale. That’s where the OEM can beat a lot of the independents."

Hendrick admits, though, that his shop doesn’t have the same restrictions that many smaller rebuilders face. "We’re dealing on a national level that many other shops can’t compete at. We deal in as many as 42 states and 15 foreign countries over a year’s time," he says.

"Being named Engine Builder’s Machine Shop of the Year is a tremendous honor," Hendrick says. "It should help us improve our professional image both domestically and internationally, as well as externally and internally, which may be the most important. After all, we’re here every day and probably don’t take the time to look at what we’ve accomplished. It’s been good for all of us – our crew is pleased and proud."

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