Friday, October 5, 2012

The Mazda Parts Story

                                               The Mazda Parts Story
                        A true story and psychological lesson in business for my son
                               Written 9/2012 and rewritten 03/31/2016 unedited
                                                      Howard Yasgar

      By the end of 1963, I had bought into an automotive parts rebuilding company located in East Hialeah Florida, and by 1968, we had to move the company to a larger building located on 36 Avenue in North West Miami.
      In 1970, the company’s original owner, Dave Chait, passed away, so his son Don and I purchased the company, and we started modernizing and changing the direction of what the company did.
      We felt that a change was needed because of our ideal location in Miami, and coupled with the fact that our company was bilingual, insured that we constantly had a flood of customers coming to buy from us from Central and South America. These customers were mostly automotive parts importers that were looking for American made replacement automotive parts, and they came to us steadily, with their attache cases filled with bundles of U.S. currency to spend.
     We soon learned that these importers were not only interested in purchasing all kinds of U.S. made automotive parts, but they would buy anything as long as the price was cheap. So when they came to see us, they would walk around all our warehouse and buy pretty much anything that they could make a profit on.
     At the time, back in 1970 our specialty had been automotive electrical parts, mostly for U.S. made automobiles and trucks. But during the late 1970’s the automotive market worldwide was changing, with more cars being imported from Japan. So to fill the needs of our clients we started selling lots of starters and alternators and other parts that we imported for use on all types of Japanese vehicles. Most all the parts we were importing were either coming to us imported from Japan or they were copies of Japanese parts that were being made in Taiwan.
     We couldn’t help but see how fast that the market for Japanese car parts was growing, and we were told by most of our customers, that although the Japanese cars were popular and were cheap to buy in their countries, when they broke down, it was very hard to find repair parts for them. They said that was the reason they were now always coming to Miami hunting Japanese parts, was because in their countries Japanese cars were just parked everywhere for months just waiting for parts.
      At just about the same time this was happening, we had started buying truckloads of  surplus automotive items, these were mostly items that were available to us as excess material, originally made by the large automotive parts suppliers and manufacturers  located in the Detroit area.
      So all during the 1970’s to 80’s we were buying lots of parts from several surplus parts dealers that we had developed good relationships with, most of them were located in the Chicago and Detroit area. We had found that both the cities of Chicago and Detroit had become sort of the hubs for surplus, and because of this it also became the hub for surplus dealers. They were people that specialized in buying and selling large wholesale lots of excess parts, and then reselling them to people like us.

     In Detroit, we had Barney Kaplan Surplus, and in Chicago there was George Lustig and Billy Keene of Fleet Supply, also in Chicago there was Abe Greenstein of Automotive Supply.
     Even though we had found these people to be relatively honest suppliers, we still we always had our nose to the ground looking for new sources of surplus parts. We knew that there were many other surplus dealers around the Chicago and Detroit area, but most of them had such bad reputations, we avoided them.
      All through the late 1970’s and early 1980’s the economies of the Central and South American countries was booming, and the importers were coming to us in droves, but now they were all asking that we find more Japanese automotive items for them to buy. All their countries were now being flooded with so many Japanese cars, that they desperately needed a Miami source for replacement parts.
     On many mornings, we would show up for work to find five or six importers all waiting in line for us at our front door. Most of them were now only looking for Japanese spare parts.
      In the cities of Chicago and Detroit, the surplus dealers that we did business with were all friends with each other, but while they were friends they also were  competitors with each other, so the  last thing any of them would do, is recommend to us another surplus dealer that we should do business with. However, as we were always coming to Chicago and Detroit it was really impossible for anyone to keep a secret from us for very long.
      We started to hear about somebody in Chicago named “Fizzy Nelson”. We heard the name over and over again, and one day one of my friends in Chicago told me that we were missing a big opportunity by not doing business with this guy named Fizzy, and he gave me Fizzy’s phone number.
     I called Fizzy, and made an appointment for us to visit his warehouse in Chicago. When we got there, we were surprised to find Fizzy Nelson, was a real character, and when we spoke with him, he didn’t have one good word to say about any of the other dealers we were presently doing business with. He said he was the only honest surplus dealer in Chicago.
      I must admit Fizzy did have a very big warehouse, and it was absolutely loaded with surplus parts, But what really caught our eye was row upon row of new Japanese Mazda Japanese car parts. It appeared that Fizzy, had tons of them, and I was excited as I had already heard from all our South American customers how popular Mazda automobiles were in their countries.
     Fizzy told us that when the Mazda USA company consolidated their parts distribution system, they moved everything to one big central warehouse, and when they did that they had a lot of excess inventory, and no room to store it, so they sold all the extra inventory to Fizzy. He said that was why his warehouse in Chicago was full of Mazda parts.
     We told Fizzy that we were interested in the Mazda parts as we sold to Central and South America. As a sales ploy, Fizzy said that he had already sold some of the Mazda parts and they were already on the way to South America. We learned later that it was all
a lie, and he only said it because he knew our market was to South American buyers.
     Fizzy said that if we bought the entire Mazda parts deal from him, he would sell it to us for sixteen cents a pound, FOB his warehouse in Chicago. It sure sounded like a good deal. So as we looked the Mazda parts over, I thought I recognized hundreds of electrical items that I recognized as our kind of electrical parts. All the boxes had Mazda part numbers on them but unfortunately all the other information on the boxes was printed in Japanese. To be sure we knew what we were doing, my partner Don and I spent several more hours looking over the Mazda parts, opening up boxes hoping to recognize the parts inside, but the more we looked, the more we saw items mixed in that we didn’t want, like Mazda body parts. There were lots of Mazda hoods and fenders, and these were items that were not in our line of business, and we didn’t want to buy them. We knew that those kinds of parts took up way too much room to ship and store. So we decided to talk to Fizzy about it. We told him that we didn’t want any of the Mazda sheet metal parts as it was not our business. Eventually, Fizzy relented and said he would remove all the sheet metal parts, and we agreed to buy two forty foot container loads of the new surplus Mazda parts for eighteen cents a pound. After that we shook hands on it, and the deal was closed, and my partner asked Fizzy if he could use his rest room. Fizzy said yes, it was located in the rear of the big warehouse. When my partner Don came back from the restroom he told me that Fizzy had a big cardboard sign in there, called “Fizzy Nelson’s Shit List” and on the list was all of our other suppliers names, as well as the names of other people we knew. It was apparent that this guy Fizzy had a lot of enemies that he didn’t like, and some were our friends, it was not a good omen.
     When the parts showed up in Miami, There was so much, that it was all we could do to unload them into one of our warehouses. We had agreed to pay a premium price to Fizzy because he would leave out the sheet metal parts that we didn’t want. Well, Fizzy never removed them and the sheet metal parts were still all mixed in. I received a bill from Fizzy for $18,000.00 and the freight was $3,200.00. It appeared we now had a sizeable financial investment, in a lot of parts we didn’t want. Our total cost so far was $21,000.00 and that was not counting all our other expenses.
      Yes, we complained to Fizzy, but it was to no avail, he said he had other South American customers that wanted the parts. We later determined that everything he said was just another lie.
      Since there was still a lot of Mazda electrical parts that we thought we recognized, we eventually stopped complaining. Then we spent over a month sorting out the parts. We found that the sheet metal pieces took up so much warehouse room we put them all up on the roof of our warehouse to get them out of the way.  Receiving those fenders and hoods, was a big disappointment, and after our complaining to Fizzy, I was sure we would probably end up on Fizzy’s “Shit List.”
      After we unloaded the two trailers of parts I spent most of the next month trying to organize them and doing an inventory, we needed some kind of inventory so we could start trying to sell the parts. But making an inventory was difficult as all the writing on the boxes were in Japanese. So we did a lot of calling Mazda agencies, and we estimated that at Mazda’s selling price on the items was a minimum of $250,000.00. Every item we inventoried had a Mazda part number on it, but when we called various Mazda agencies in Miami, they said they had prices but the parts were not for the U.S. or South American
Market. They were for the Mid- East and Europe. So Fizzy had lied to us, no South Americans would buy these Mazda parts.
      We eventually spent several two months doing the sorting, I estimated that we had over $26,000.00 invested in the Mazda deal. Finally, when the inventory was done, we started letting in all our friends and our export customers. Hoping they would look the Mazda parts over, and start buying it. Not one person, recognized even one part number, and having all the descriptions in Japanese didn’t help. I was getting depressed. We needed to somehow recover our $26,000.00 that we had invested. We had no customers from Mid-East or European countries. So now, my partner and I were getting concerned that possibly we had bought a bad deal, and we could lose all $26,000.00.  We realized that was the reason Fizzy sold us the parts so cheap. He knew that they were originally only for the Mid-East and European consumption. He had lied to us telling us that he already sold some of the Mazda parts to South America.
      After about two years out in the rain, the fenders that I had put on the roof started rusting, and we had them taken down and thrown into the trash.
      By 1985, I started noticing that our customers From Venezuela and Colombia were not coming in as frequently as before, and it became obvious to us that there were serious economic problems going on in those countries. We were also concerned that we were really going to lose our shirt on the Mazda parts deal. We had spent hundreds of hours trying to sell the stuff with little luck.
      Then one day, I received a call from my fiancée Katherine, she was managing a large British freight forwarding company in Miami called MSAS. Her company specialized in shipping merchandise to Europe and the Mid-East. Katherine said she had customer just in from Egypt that was looking for a deals on automotive parts, so I told her to send him right over to see us. The very next day a dignified Egyptian fellow came over, he said his name was “Mr. Solly.”
     As I talked to Mr. Solly, I could see he was not going to be what I considered to be a friendly type of customer like the South Americans that we usually dealt with, but I did recognize that he was a potential Mid-Eastern customer for our Mazda parts.
      My son Jack was working with me at the time, so I asked him, to take Mr. Solly over to look at all the Mazda parts. When they came back Mr. Solly said, “We have a lot of Mazda cars in Egypt, and he said he had looked over all our parts and he was interested in buying everything, how much did we want?”
      At first, I thought I could handle Mr. Solly easily, just like any other export customer. I felt that I could do business with him the same as I have done with hundreds of other business men in the past. I knew that I never had a problem in telling a customer how much an item had cost me, and how much profit I needed to make. Most sensible business people know that everyone needs to make a profit, but that was not to be with Mr. Solly.
      Now I had never dealt with a Middle East buyer before. So I told Mr. Solly, that I wanted $40,000.00 for all the Mazda parts.”  But Mr. Solly said, “No way”, and I could see from his attitude that the only way Mr. Solly would buy the Mazda parts was like it was on a fire sale, he wanted us to lose money. He wanted us to sell the Mazda parts to him for little or nothing.
      Mr. Solly, I concluded would only be happy if he made sure we were losing money.
So I now knew that selling to him wasn’t going to be easy.
      The next day Mr. Solly said that he wanted to check out some of the part numbers with his associates in Egypt, so he called them and they talked about part numbers for over an hour. That night I couldn’t sleep, I was troubled by the fact that Mr. Solly was the type of guy that wouldn’t be happy unless he was taking advantage of someone, and I didn’t like that, so I knew that I had to be much sharper than him, if I intended to sell him the Mazda deal.
     The next day, when Mr. Solly returned, I knew it was a good sign, his associates in Egypt obviously wanted the parts. Then Mr. Solly said he could pay us only $8,000.00 for all the Mazda parts.
      My son Jack was sitting in on the meeting and listening. I hoped that this was going to be a good learning experience for him, because I had an idea.
      I said, look Mr. Solly, you appear to be a trustworthy and honest fellow, so I think the best thing we can do is for us to be partners on the Mazda deal. My company has more than $26,000.00 invested in the Mazda parts, and I have the receipts that we can show you. We know that the parts are worth over $240,000.00 or more than that in Egypt. If you will pay us our cost of $26,000.00, we will load the containers and ship the parts to Egypt, freight collect. Then when you sell all the Mazda parts we will be 50/50 partners on all the profits. You can deduct the cost of the freight, and my son Jack will fly to Egypt to collect our share of the profits from you.
      I could see that Mr. Solly was scheming in his head. He couldn’t believe I was so stupid to trust him to be our partner. Mr. Solly knew he could sell the parts in Egypt for probably $300.000.00 dollars and he would never call to give me any of the profits, so he agreed immediately. We shook hands, as now we were partners.
     The next day, Mr. Solly paid us, and we loaded three 20 foot containers full of the Mazda parts. I was 100 percent sure we would never hear from him again, but I was wrong. About six months passed, and I received a call from Mr. Solly who was in Egypt. He regretted to inform me that the Mazda parts had arrived in bad condition, and his customer never paid him. Consequently he had lost his money and regrettably there was no profit for us.
     So, you see, after all the bad thoughts I had about Mr. Solly, the Egyptian who wanted to screw us, he was really such a nice guy by calling us to tell me he had no profit for us.
     I think for Mr. Solly it was important for him to call me, as it would show me that he was the shrewder business man than I was. I should have told Mr. Solly that I already knew there would be no profit for us, as I knew the very minute he bought the parts, he would cheat us, and that was my plan all the time, to let him cheat us.
      For me it was all an exercise in getting rid of the Mazda parts, and recovering most all of our money. I’m sure Mr. Solly made a handsome profit selling the Mazda parts in Egypt. But I hoped that by letting the Egyptian think he got the upper hand, it was perhaps a good business lesson for my son to see.
       I told my son Jack he was lucky, now he didn’t have to fly to Egypt to collect our profits. He smiled, and I hoped that he had understood, and benefitted from the business lesson that had happened.
       My partner and I had also learned a business lesson, we never went back to Fizzy Nelsons place, and I am sure you will find us on his shit list.


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