The First Fifty Years: A Personal History
By Robert Newman, Former President of Loeb
As published in The AMEA Appraiser, Spring 1992
The following is a personal history of the used machinery business by AMEA member Robert Newman of Loeb Equipment Supply Co. Mr. Newman has been involved in the used machinery business since 1949. His son Jim joined him at Loeb in 1970 and is the fourth generation of the Newman family to be active in the machinery and appraisal business.
Prior to the 40's my own experience was limited to running errands and part-time work in the machine shop after school. There were only two used machinery dealers in the Chicago area who specialized in food/chemical machinery. There were about seven or eight used machinery dealers in the country at that time. Most dealers were typical small family owned companies named for the proprietor whose word was bond. They provided a good middle class lifestyle. I can't recall any mention of appraisals.
After service in the Navy, I had heard stories of the public auction sales conducted during the war while under OPA ceiling price regulations. Since good used machinery was scarce the liquidator reached the ceiling price bid promptly from several buyers. Then a number was drawn to determine who the fortunate buyer would be.
Following World War II, veterans were returning and there was a feeling of national triumph. The war, however, had created a shortage of materials of all kinds. Everyone needed something: homes, furnishings, cars, clothes. Both the baby and a business boom was in hand. Factories were being built and machinery and equipment was in great demand. The wait for new deliveries was long and companies that never bought used machinery now found it a valuable option. Dealerships were becoming popular places, but it was harder to find and buy good used machinery than it was to sell it. The industry made money primarily supplying buyers (I don't recall too many liquidations), and few dealers bothered with appraisals, except as a favor to their banker or a good customer. During this growth period more dealers came into being, and in general the used machinery dealers became better educated and their operations became more sophisticated.
As supply caught up with demand in the mid-50's, many of the major consumer product manufacturers created their own "asset recovery" departments. While we still bought from them, they also sold to users in competition to us. Prior to this we received primarily surplus machinery from these large companies, rebuilt it and sold the machinery to small and mid-size companies. I recall surplus machinery be called "salvage". Occasionally we were able to buy at book value or even from a demolition job or as scrap, although it has always been competitive to buy good quality used equipment. Dealers also started rental/purchase option programs for their customers. The large appraisal companies and auctioneers did the appraisals and in general the banks didn't contact used machinery dealers.
In the 60's the metal working industry machinery dealers began to recognize that "machinery" also included construction, materials handling, food and chemical, plastics, etc., and that working together was beneficial for all concerned. Dealers in trades other than metal working were invited to join the MDNA. The asset based lending business was continuing to grow. It seemed that every bank was developing a division for asset based lending and to operate their newly developed divisions the banks induced key people away from finance houses. Being leverages was very fashionable and mergers and acquisition deals abounded. Dealers were now being asked to provide appraisals. Words like "what is it worth", "street value", "sound value" and "real value" were tossed about. "Fair Market Value" seemed to be interpreted many different ways depending on who you talked to and their intended purpose. To formalize it we called our lawyers for help in writing definitions, limiting conditions, and developing report formats.
With high interest rates available many dealers glanced at their inventory costs, which if invested in the market would yield more (without overhead or working) than they took home as salary. The machinery business was getting tougher. In the 70's some weaknesses were also indicated in certain lenders portfolios. This seemed to increase the call for dealers to make, or review, appraisals. We all had a firsthand working experience of the subject machinery, the used marketplace, good mailing lists, and liquidating experience. We worked well with the auctioneers. The lenders could feel more comfortable and in some cases it seemed like a good supplementary business for the machinery dealers.
Most of my contemporaries and I feel that the formation of AMEA in the 80's was a turning point. We needed an organization to standardize semantics, establish qualifications for membership, monitor methodology, establish test requirements, etc. We all wanted to be recognized for our attempt to provide the highest level of integrity and professionalism, but we had been unkindly known as used machinery dealers. We did enjoy reliability for years living up to our own "handshake" deals, but we were now dealing with a different group of people, all of whom did not know us well. We wanted credibility.
There is a general surplus of used machinery today, and there are more liquidations than new businesses being started. So today in the 90's (especially in our Western world) over the past five decades we have seen tremendously dramatic and dynamic changes. They are particularly interesting in what seems to me to be a relatively short term perspective. Perhaps it is beneficial to occasionally stop where we are and look backward to hopefully try to see where we are and look backward to hopefully try to see where we are going. As I play out the "back nine" of the machinery dealer/appraisal business, I sincerely wish that I could say that I feel that our planet's social/economic/political conditions have improved as well as our little industry.