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Folks Of Interest The Truth About Speedway... Part 1

Discussion in 'The Hokey Ass Message Board' started by Ryan, Aug 27, 2014.

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  1. The real crime here is the f**cked up copyright/trademark laws in this country that favor the big guys, and the insane amount of hurdles one has to go through to start and maintain a business, and continue to innovate, etc. while fending off the competition.

    Knock offs steal bread off your table, no doubt about it. Our little corner of the hobby has EXPLODED over the last 10-15 years, so there's money in it right now. The tide will eventually roll back, and hopefully the cream will rise to the top.

    I don't want to make any remarks about Bill. Speedway to me is like McDonalds. Sometimes it's just there, and it's convenient, and sometimes it makes you feel like shit.
    jocktherock and ynottayblock like this.
  2. metalman
    Joined: Dec 30, 2006
    Posts: 3,276


    I think the issue Ryan is presenting really goes back to the beginning of business. That's why they started patents way back when, to keep one company from stealing another person's idea. Might not be moral but it's been a fact of life for a very long time. FWIW read history on any of the men that started all the giant corporations around the turn of the 20th century, I dought you will find a one of them that didn't possess some lack of morals! Cut throat is NOT a new term.
    The big issue now is a small company cannot usually afford to patent a small part with limited sales without raising the price (to cover the cost of patent) to the point know one would buy it. My wife works in the IP department at a large law firm that does patents, trust me, the cost is astronomical (it can run well into 6 figures!) these days. Not feasible if you think you can sell 1000 of a part for $100 for example, to cover a patent cost that same part would have to sell for $300. IMHO the issue lies with all the rules and red tape the government has put to the small businesses.
    Not that anyone is bigger (Summit maybe) but is there any reason someone bigger then Speedway couldn't do the same to them? It's a big dog eats the little dog world.
    I for one am getting really tired of hearing it's "corporate greed" to blame for what's wrong with America.
  3. Reading through all of this,,,,I couldn't help but think of Alan Jackson's " The Little Man"
  4. A Boner
    Joined: Dec 25, 2004
    Posts: 5,448

    A Boner

    Ryan, you might want to check into the disc brake hidden in the fake Buick drum story out of California. Not a Speedway story, but a big rip off story from one of their competitors.
  5. arkiehotrods
    Joined: Mar 9, 2006
    Posts: 5,767


    A long-time friend of mine invented a tool to remove nails from millwork without destroying the wood. He spent several years perfecting the tool. He had his lawyer brother go through the patent process, which took several years, before he sold tool number 1. He told me the patent process took longer than developing the tool, but it was worth it, so that his invention could not be easily copied (and/or patented) by someone else.
  6. All I want is the best part available, and good honest service. I use a small parts guy for the same parts the big guys carry. The difference is the small dealer knows my name and will tell me if the part is crap. Sometimes that is all that is made but at least I know going in. Also I get the best fast service I could ask for. I won't mention names because it has been beat to death in the past. Again don't overlook the small dealers.
  7. Don's Hot Rods
    Joined: Oct 7, 2005
    Posts: 8,319

    Don's Hot Rods
    from florida

    For those of you who think Speedway should come on and comment, that will never happen if they are smart. They have nothing to gain by it and it would only end up in a pissing contest. What they would more likely do is sue the HAMB for defamation. I took enough law courses to know that the absolute defense in a defamation case is that the statement is true, but a company the size of Speedway probably has lawyers just waiting to take on cases like this and it would cost the HAMB a lot of money even if they were to prevail.

    The owner (Jon, I think his name is) of another forum some years back started writing things about Coker Tire, Newstalgia Wheel, and Gas Monkey Garage over something. He would not let up, and they sued him. Last I saw, he was begging members of that forum for donations to defend that suit.

  8. arkiehotrods
    Joined: Mar 9, 2006
    Posts: 5,767

  9. hayu
    Joined: Feb 8, 2010
    Posts: 30


    This is another example of what i have said for several years. There is a big difference betwen what is legal andwhat is righ. Buddy.
    Jeem likes this.
  10. metlmunchr
    Joined: Jan 16, 2010
    Posts: 730


    All niche manufacturers have to be wary of getting involved with big retailers today because Speedway's actions in having good selling items copied offshore have become the norm for most of the big players across all industries.

    Its easy to get sucked in by the idea of getting hooked up with an outfit like Speedway and seeing your sales increase by 4 or 5 times or more, but that comes with a downside even if the retailer doesn't have your product copied. Retailers are going to demand 1/2 to 2/3 off the sticker price of your product, and the bigger they are the larger the discount they'll be looking for

    Hang with me for a bit while I show how this works out for the small manufacturer. Lets say I'm making an item that has good market appeal at a price of $100, and it costs me $20 all in to manufacture and package it. I'm currently selling my product on the web, and moving 40 units a week. Most sales are via Paypal or credit card, so the fees on that cost me 3 bucks on a $100 sale. It also costs me another $2 to have a clerk box and address each item for shipping. All in, I'm making $75 on each item sold. Since all sales are paid up front, I have the money available within 2-3 days.

    Big Speedshop Inc approaches me with an offer to put my product in their lineup. They say their projections show they can sell 6X as many items as I'm currently selling, and they're looking for a .4 price multiplier which means they'll pay me 40% of retail, or 40 bucks, each. I'll still have $1.25 or so per unit in packing, invoicing, etc, so I'll be clearing $18.75 per unit.

    Sure enough, Big's sales projections are spot on, and I'm moving 240 units/week. I was making 40x75=$3000/wk, and now I'm making 240x18.75=$4500/wk so it seems like this is a great thing being hooked up with Big.

    But, if I look at it another way, I'm now doing 6x as much work to make 50% more profit. Doesn't look quite so great in that light.

    I soon realize my paid for cnc lathe and mill won't keep up with the new demand. So, I've gotta have additional machining capability, and I've gotta have it immediately. Depending on the part configuration, I need either a live tooled subspindle lathe capable of milling and putting out a finished part, or I need another standard cnc lathe and cnc mill. Either way, I'm looking at spending at least $160,000 on new machinery. I've got to have reliability to meet the demand, so used equipment is too risky to consider.

    Now I've got the new machines in, and a $3000/mo payment for 5 years to go along with them. I was making an extra $6000/mo via selling thru Big, but now that's shrunk to $3000 extra in the bank account. I'm doing 6x the work I was doing previously, and only making 25% more profit.

    A year goes by and my costs have gone up 5%, or $1/unit. But in the standard manner of retailers to keep downward price pressure on their suppliers, Big wants a 2.5% price reduction for the coming year, which eats another dollar of my profit. So I'll just tell Big to stuff it and go back to selling direct. Oops. Forgot about that $3000/mo in machine payments for 4 more years. It'd take all the profit from my original 40 units/wk to cover that amount, so I've put myself in a position where I've gotta eat the increased costs and meet Big's price reduction demands to avoid putting myself in a real bind. So that's another $2000/mo of my profit gone.

    So where was I before, and where am I now? I was making $3000/wk, had no debt, and had time to give customers personalized service when they had questions or advice about my product. Life was pretty good. Now I'm making $3250/wk for 6X the work, have another $145,000 in debt to pay off, have no time to do anything other than make sure product gets shoved out the door on time, worry about when the next steel price or utility price increase is going to lower the profits again, and hope Big doesn't decide to have my product copied in China before I can get myself out of debt and out of this race to the bottom that I've gotten myself into. Life generally sucks now.

    Although its too late now, this is the time when I begin to think about how I could've spent $500/mo in advertising on some related internet forums, pushing the product on Ebay for exposure, etc. If I'd done that, and just increased my sales by 10 units per week, I'd be making $3600/wk, have no new machine debt, have my life back to the point where I could spend some time developing another new product. If demand exceeds my ability to produce, the product is profitable enough that I can sub work to other shops at a price where they can make a good profit, and I can still sell the subbed product at a decent profit while keeping the lead times reasonable.

    If you're a small manufacturer of specialty products with a good profit margin, the most important thing to remember is that volume gained via big retailers won't necessarily make you rich. The retailer doesn't want your product. What he wants is most of your profit out of your product. Talk to 10 people who have gotten into deals with big retailers like Hot Rod Works got into with Speedway, and I promise you 9 of them will tell you they wish they'd never done it.
  11. Truckedup
    Joined: Jul 25, 2006
    Posts: 3,863


    Interesting reading......Ya think Ford mastering cheap high volume production pissed off competitors and probably drove more than a few out of business?
    Anyone who runs a business competing against other doing the same work knows it often cut throat. And by being cut throat ,some will find better ways to do ..And that can lead to innovation and or better products.In a non competitive market manufacturers will get lazy and just build the same old shit...Think the poor build quality of 70's US cars...
  12. pasadenahotrod
    Joined: Feb 13, 2007
    Posts: 11,776

    from Texas

    Having spent 25 years in the old car parts business and been involved in development of new parts I find the complaints about the small shop versus the the larger wholesale/retailer the same since the Seventies.
    The main reason any large retailer would "knock off" a part from a small supplier is simply lack of constant supply to supply the market. Small shops are often unable to keep ahead of demand due to lack of money, time, space. It is not their fault in most cases, just circumstances like not wanting to give up their day job, becoming bored with repetitive manufacturing, not wanting to deal with packaging, advertising, etc. The market must be filled and if they cannot or will not fill it, the vacuum will be filled by someone else.
    Just a little secret too. This old car/hotrod market isn't that big and is easily and quickly affected by economic turndowns. Large inventories must be maintained and profits may not appear for years. Many innovations are really rehashes of older ideas "with a twist" and may only have a one-time market life. As one in the business once told me, "It takes a trainload of money up front and on hand to make and maintain those big profits you'll get in five years."
    This market is a guessing game when it comes to new product development, no amount of traditional market research is likely to be right. It is one of the last markets where "gut feelings" make a lot of the manufacturing decisions.
    Dan Hay and Ryan like this.
  13. VoodooTwin
    Joined: Jul 13, 2011
    Posts: 3,455

    from Noo Yawk

    If I was Ken Smith, I would have asked Speedy Bill why they started selling the Chinese-made part instead of buying his. I'm sure he did, no? What was Speedy's response? Did he ask them?
  14. Ryan
    Joined: Jan 2, 1995
    Posts: 18,928

    from Austin, TX
    Staff Member

    I asked Ken about this actually. Here's a quote from his answer:

    And again... I want to make this clear. The movement of manufacturing to China is unfortunate and not something that I at all support, but it's not really the point of this discussion from my side. The questions that I have are more about the reasoning for taking another design and running with it. And in defense of Speedway, there could be valid reasons for that.
  15. 270283
    Joined: Jun 11, 2006
    Posts: 402


    [QUOTE="...Think the poor build quality of 70's US cars...[/QUOTE]
    I bought a new Monte Carlo in 1970 and drove it for 16 years. I also bought a new Chevy Caprice in 1979 and we drove that for 15 years. Only problem between the two of them was I replaced the 200 Metric trans in the 79 with a Turbo 350. I think that shows solid build quality. But then again, I maintain my cars properly.
    Bubba1955 likes this.
  16. Bruce Lancaster
    Joined: Oct 9, 2001
    Posts: 21,682

    Bruce Lancaster
    Member Emeritus

    Also..."originality" and "knock off" need close looks.
    I think Speedway ripped off Tardel's little brake drum retainer clip for early Fords.
    Recently I found a nice picture of that clip in a 1950's Hot Rod magazine new product section...hmmm.
    Earlier, Speedway ripped off the stronger internal drum retainer design, I think an actual original design of the '50's, also...but in that case the original part was no longer available.
    Then they ripped off Hot Rod Work's open drive conversion...but...
    First, the EXACT product there was indeed new to the market, not because it was a breakthrough idea but because the Ford pickup truck pieces (slightly different, same results) were dirt cheap and readily available until pretty recently.
    But look closer. The Halibrand quick change rear, a fairly elderly design, was made for torque tube use both because it was Ford based and because it was used in circle trac cars and dragsters in which the tube solved several problems. Looong before HRW came along, people started running quickchanges in Nonfords. Halibrand responded with a simple new plate to hold the seal and a U-joint that fit their splines, something too readily obvious to patent probably. They did it because it was simpler than making a tapered quill to take '46 pickup parts, which were functionally the same thing otherwise. In more recent times, SEVERAL Hambers who considered the conversion parts prohibitively expensive ripped off the world by simply sawing off a torque tube, using bearing catalogs to locate a seal they could stuff in there, and located a commercial Ujoint that fit the splines. Done. Who the hell ripped off who, here, and is simply providing a seal in a flange and purchasing a Ujoint with the right number of splines something that you think you can patent? Or something 10,000 simple mechanics could not think of independently?
    gas pumper and 1946caddy like this.
  17. Having read through some of the recent, better written threads, I'm left musing on the idea that perhaps some businesses plan to poach a design/product all along. They might seek out products/manufacturers which are... vulnerable... , 'test market' the original, and if sales are strong then invest in their own copy. They may seek out 'legal' opportunities knowing all along what the end-result is going to be. Hmmm... Legal? Maybe. I'm not a lawyer. Ethical? I don't think so. I don't think it's news to anyone that there are people/companies practicing predatory business habits.

    Last edited: Aug 27, 2014
  18. chiro
    Joined: Jun 23, 2008
    Posts: 822


    Regarding the above. I am a chiropractor and developed a specific type of adjusting table used for a very limited type of spinal adjustment. It was generally regarded as the best one available. I hand built each table personally (other than the upholstery), made jigs for standardization of the parts and took great pride in the table. A few years back a colleague (I used to call him friend) remarked how much he liked the table and asked if I had patented or copyrighted it. I asked him, "no. who's going to steal it from me? You?", and then he did just that. I looked into having my design patented and found out the cost would have been somewhere in the neighborhood of $20,000.00. Certainly out of reach for any small mom and pop shop as well as out of reach for me as well. My table is better, built better, has a better reputation in the profession and EVERYBODY knows that the other guy stole my idea. I still build more and sell more than he does. He farms his manufacturing out. I build by hand, but it still hurts. The point is that patenting something is very hard to do and very expensive and time consuming as well as out of reach for most small operations. Just not cost-effective.

    lothiandon1940 likes this.
  19. So, about patents.....Martin Guitar Co has been building high end instruments since the 1800's. I'm sure they own a fair number of patents. Next time you see a good deal on a Martin on Craigslist, for example, be very very careful. The US is flooded with counterfeit Martins right down to the logo and label. I haven't heard of Martin putting a stop to it and I doubt they could. That's what your patent is worth when dealing with China and US importers.
  20. 3wLarry
    Joined: Mar 11, 2005
    Posts: 12,804

    Member Emeritus
    from Owasso, Ok

    so I'm guessing Speedway won't be asked to become an Alliance Vendor anytime soon?
    Last edited: Aug 27, 2014
  21. While many seem willing to cry about this, few seem willing to do what it takes to fix the problem. Which is to stop buying product from them....

    A typical capitalist story (not even American); come up with a good product, have some success in the marketplace, then imitators show up. This is basically an ethics issue, and never as clear-cut as you would hope. Sometimes an imitator sees a way to improve the original design, or it generates a different design that does the same thing. Sometimes it's an outright copy. As was pointed out, the patent process is a difficult one, not helped by the automotive industry's aversion to patents of any kind; look back at Ford's battle against the Selden patent. Very few (if any) of our 'hot rod parts' are patentable, and it's a good thing they're not; if they were, how many reproduction parts would disappear over night? This is not the same as licensing fees, which cover items that display brand names.

    And as more than few smaller businesses will attest, getting in bed with a volume retailer isn't always in their best interests (see post 71).

    Ultimately, it's up to the consumer; how badly do you want the product, and what are you willing to pay for it? If low price is your main driver, then go with the import stuff. Personally, if I have a problem with a business and it's ethics, it doesn't get my business if there's an alternative. I can proudly say I've never bought anything from WalMart, and try very hard to 'Buy American' for all my purchases. Is it sometimes impossible? Sure it is; but that doesn't stop me from trying....
    Last edited: Aug 27, 2014
    Bubba1955 likes this.
  22. metlmunchr
    Joined: Jan 16, 2010
    Posts: 730


    HRW's product isn't legitimately patentable, both for some of the reasons Bruce mentioned above, and for the fact that anything "obvious to those skilled in the art" is not patentable. Skilled in the art means someone familiar with the product and its use. IOW, an engineer or a machinist or mechanic or someone else familiar with driveline parts and the components used in them. That an accountant or a secretary would never have thought of the product is immaterial. Its as simple as this...... if a DIY mechanic can look at a 9" Ford rear end and say Wow, if an early Ford rear had a seal retainer and a compatible yoke, it could be used with an open driveline, then the invention is obvious and not patentable. Its just a different application of prior art.
    gas pumper likes this.
  23. ridenlow559
    Joined: Mar 6, 2011
    Posts: 37


    Honestly wish the USA could've at least stuck to there roots of being a producing country. And like every one says its money and greed of the government that we now rely on other countries for oil and consumer goods. I would have no problem paying for good products made in the states. I think that's part of the back bone to some of these traditional builds, good old American made parts. That's something to be proud of once we put all out time and money into out builds.

    Posted using the Full Custom H.A.M.B. App!
  24. This is a tough situation and thank Ryan for bringing it up. Metlmuncher gave a great story, but not sure if that was the exact situation or not. I believe Ryan's point is recognizing business actions can be in conflict with our moral compass.

    I know the Smiths and try to support them or plug their products when i can. They produce good parts that will work good for many years. A small business has to survive on customer service and innovation while operating on a tight budget. Large business survives on efficiency and having a large capital available.
  25. denis4x4
    Joined: Apr 23, 2005
    Posts: 3,424

    from Colorado

    My wife and I had a personal tour of the Museum with Speedy Bill two weeks before he passed away. We stood in front of a window looking out at eight CNC machines running full bore and his comment was, "here's where we make the Chinese products".

    When I first started in the speed equipment industry in the early sixties, the agency where I worked filed at least 30 copyright applications a month for packaging, ads, catalogs and instruction sheets. And on more than one occassion, our attorney would send out cease and decist letters to some of the more famous names in the industry. Too, we would get similar letters saying that we were guilty of plagerisim. We had one client that sent a brand new product to a competitor with a note saying that "if you're going to copy this, do it right".

    There is a book called the Speed Merchants (available from Amazon) that documents countless legal threats between speed equipment manufacturers going back to the late fifties. I'm trying to figure out why Ryan even bothered to post this.

    For the record, the museum is a 501(c) 3 non profit and there is an endowment to guarantee its future.
    Dan Hay likes this.
  26. Ulu
    Joined: Feb 26, 2014
    Posts: 1,748

    from CenCal

    Man, what a hot-button!

    I've been drawing for 40 years & I too have seen my work turn up under someone else's logo; and let me tell you I was HOT!

    But the issue of us versus the world in manufacturing is really about us teaching them to do what we need them to do better. People who think we can compete/rest on the basis of our laurels are dreaming. Isolationism is a bad policy for the non-omnipotent. Cooperation is the only sensible option, but we can't do it right if we have selfish motives.

    If America doesn't take the high road on this issue, if we don't lead instead of react, we're no better than any other self aggrandizing society.
    Jungle Jalopy likes this.
  27. Phil1934
    Joined: Jun 24, 2001
    Posts: 2,675


    My first thought was I wouldn't want Ryan to do my obituary. :) My second was I have used Speedway for axles, brakes, springs, mounts, switches, etc. and have always found the parts to be good. I don't agree with cutting out a supplier, but don't know details so NOMB.
  28. Ryan
    Joined: Jan 2, 1995
    Posts: 18,928

    from Austin, TX
    Staff Member

    I guess because I'm interested in the truth... there are so many rumors floating around out there about the subject and I thought it would an interesting exercise to hear from both sides of a case study. I'm really hoping to have a part 2 that shows the side of Speedway with a little more clarity.
  29. Truckedup
    Joined: Jul 25, 2006
    Posts: 3,863


    What about the hot rod builder lost art of making parts in his garage because you couldn't buy it.
    I never worked on early Fords...Needed an open drive conversion on the belly tank car as discussed on this site.300 buks for a open drive conversion was too much money for a limited use car.
    I machined the parts on a 70 year old lathe, I never used a lather before. Shortened a WW2 Jeep drive shaft,pressed Ford splines inside the Jeep yokes after machine them. Seal retainer made from an electrical box cover and the seals are Chevy and Jeep....It's not perfect but it works for my situation.
  30. Like you, I have had good experience with Speedway and I also have heard of the outsourcing of other people's innovations. I am troubled by some of the practices but torn as to whether or not to continue to support them.
    Things would be a lot simpler if Speedway would just stop the practice because its kind of a raw way to do business. But will I stop buying from them?.....I honestly don't know. Maybe, if it gets worse.
    No one will run a business like we would for ourselves. You have to take a measure to decide if the uneasiness in your gut is worth it to you.
    Jungle Jalopy likes this.
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