Pneumat Systems

Mankato service and manufacturing company that cleans out clogged grain and coal bins capitalizes on unique events

Photo by Jeff Silker

Gene Nelson is a Ripley’s Believe-It-Or-Not kind of guy.

The recipe for his success has been, uh, unbelievable. He includes his dad’s failed business venture, his own deteriorating health, two terrible grain bin fires, a flippant Canadian, a $40 purchase order, and a competitor’s ugly actions as defining moments in his career.

The events surrounding this man’s pinball life have helped transform Mankato-based Pneumat Systems Inc. into a niche manufacturing and service company now red-hot in 50 states and ten countries.

His quirky story begins in Thief River Falls, Minn., where his inventive father farmed, and for a short while owned auto repair and blacksmith shops. “My dad was one of the reasons you see what we have here,” said Nelson, 65, motioning toward his brand-spanking new manufacturing and service facility off Third Avenue. “Growing up I was immersed in all my father’s ideas. Being the oldest son, I also had a hands-on education as an auto mechanic and blacksmith.”

About 1948, Dad invented a pin-tooth harrow cleaner. “In our part of the world then,” Nelson said, “you didn’t have all these weed killers. Quack grass would get up and plug everything. Dad invented and marketed a piece of equipment to take care of it. About three years after he got things going well, a new invention came out and put his out of business.”

So Dad’s invention tanked, and son Gene learned.

He also earned his high school diploma studying mechanics at the local vocational school in Thief River Falls. From early on he’d loved mechanics, thinking the best jobs were the “greasy and dirty” ones. So for him the transition from vocational school student to carburetion tune-up and electrical mechanic at a Minneapolis Chrysler shop was a great career move.

He said, “When I had to get out of that shop, though, I began looking around for something to do. I started selling automotive test equipment for a Minneapolis company. Brad Reeves, who owns what is now All-American Towing, was a customer of mine, and he invited me to come down to run his new Mankato shop in 1970.”

It was a great job, yet he itched for being his own boss. In 1972, he bought Bernie’s Alignment in Mankato and renamed it Autotronics. He managed the business through 1979 when poor health forced a career decision. He could no longer handle breathing noxious exhaust fumes, and had to sell his business. The buyer was present-day owner Terry Tacheny.

“Having bad health from exhaust fumes was the best break I could have had,” Nelson said. Before selling Autotronics, in 1978, he and a partner had purchased Northside Towing. That business owned a grain vacuum machine that Nelson used to clean spills after grain truck wrecks. On request, he also cleaned grain bins for farmers. In 1980, out of the blue one Saturday night at 10:30, he received a call from a General Mills executive asking Nelson to clean up a Minneapolis grain bin fire.

It was the break of a lifetime.

“There was no one in Minneapolis to do what we could do,” he said. “That opened my eyes. When I got there, they had been working two weeks putting out the fire. To fight it, we had to have oxygen down in the bin, so I designed and built equipment to put men with oxygen packs in there. We were lowered into the bin with safety harnesses, and could work about 20 minutes with pick axes before becoming too hot. I was going at it with whatever it took to get the grain loose and out from the bottom. It took forever, and it was hot and dirty and unsafe.”

Soon, he sold his ownership in Northside Towing, and began a new grain bin cleaning business in a 1,000 sq. ft. facility on Victory Drive in Mankato, near Victory Bowl. He now realized a healthy demand existed for his unique services.

During the fire a General Mills executive told Nelson about a Canadian company that manufactured a grain bin cleaning product. Nelson visited, and a year later purchased the company’s Gyro Whip. From the get-go, however, this product didn’t work well, and Nelson did his best prodding these Canadian engineers to make product improvements.

“They wouldn’t change the design,” said Nelson, “and I was becoming more and more frustrated. I couldn’t in good conscience charge customers for work not done in a timely fashion. Really upset, I called the company one last time. I said, ‘This is enough. Where do I send this thing? I want my money back.’”

An engineer snapped, “If you’re so smart, why don’t you build your own?”

So he did. He invented the Bin Whip.

Envision a weed eater on steroids. Today, the Bin Whip has a hydraulically driven motor that spins a flail made of cotton/dacryon rope dipped in UHMW, a tough, plastic material. (The flail is similar to a weed eater’s rotating string.) The cotton/dacryon rope was especially designed not to ignite and cause grain explosions—a necessary property for working in that highly volatile and dangerous environment. To root out really clogged bins, Nelson uses a special flail on which he has globbed extra UHMW, with the globs acting on grain clogs the way brass knuckles add power to a punch.

Grain bins get plugged for three reasons: heavy bug infestations, when bugs eat the grain in bins and defecate; the grain was put in too wet or hot and and solidifies; or humid weather conditions.

“To use it, the Bin Whip is mounted on top of a bin,” Nelson said. “No one goes inside the bin. We then stick a post with an articulating arm down inside the bin. We raise and lower the arm with a hydraulic cylinder. We also are able to move the arm around with a crane. The whip will take up an area of about 40 inches, and the operator moves it around the bin with hydraulics. They have three controls: they control the depth of the machine with the hose reel, and they maneuver it around inside the bin with the worm gear and the arm.”

The Bin Whip can move 11 yards in any direction. Larger bins usually have more than one access hole, and the Bin Whip needs only an area one-foot square on top of the bin to operate properly. The equipment is made of lightweight aluminum, and can be broken down into pieces and easily moved with a boom from access hole to access hole or bin to bin. The heaviest piece of equipment is a 300-foot hose reel of half-inch hydraulic hose that weighs 256 pounds when filled with oil.

Nelson said, “As for safety, that hose reel is put on top by a facilities elevator or by a boom or crane. You don’t need your people climbing stairways with heavy equipment.”

About 80 percent of Pneumat Systems Bin Whip business today is with customers buying and operating purchased product. The company includes a training package of between one and three days onsite with the purchase price of about $40,000.

In 1980, Nelson began with a 1,500 sq. ft. building on Victory Drive. To make his invention, he farmed out manufacturing the first unit to various area machine shops and assembled the parts. He wasn’t manufacturing to sell; he was making it for his own use as a contract grain bin cleaning specialist to elevators in the Upper Midwest. The first year he grossed $50,000 and was thrilled. “Every job was a new adventure, a new engineering setup,” he said. From there, his contract service business took off and he was too busy to manufacture anything.

Then 1990 brought a $40 purchase order, and another fire.

Nelson recalled his big break. “We attended trade shows throughout the ‘80s. At one of them I met Jimmy Hearne. How’s this for irony: Jimmy owned one of the machines out of Canada that didn’t work very well. The product’s whips couldn’t withstand the heat generated by a grain bin fire—they would work an hour and fail.”

One day, Hearne called Nelson. He’d just sold his plant in Chattanooga, Tenn., he said, and one condition of the sale was that he first had to put out all his grain bin fires. These weren’t just any ordinary fires: they’d been smoldering for years. Laborers at Hearne’s plant had been on strike three years and the company had locked them out another two. Sometime in that span, insect infestation had caused grain in bins to self-ignite, and the company was spending big money trying to contain the fire.

Hearne asked if Nelson could adapt a Bin Whip part to fix the faulty Canadian machine. “That $40 sale turned into a million dollars,” Nelson said, because Hearne would hire Pneumat Systems to put out the fire. It took the company 30 months to empty nine massive grain bins, with the largest at one time having contained 70,000 bushels of $12 soybeans.

While fighting the fire, Nelson learned of British equipment that could speed up the process: Cardox, which enabled operators to shoot short carbon dioxide bursts into bins to break caked grain free. So he bought one for the job. To quell the Chattanooga fires, Pneumat Systems ended up using more than 3,000 “shots” of Cardox.

“That job put us on the map,” Nelson said. “We had money to do what I really wanted: to have my own machine shop so I could put together equipment to get the quality and changes I wanted without going through any hassles. Until then I was buying product from others and adapting it. I’m not a machinist, but I knew enough.”

In 1991, flush with Chattanooga cash, Pneumat Systems moved into a 4,000 sq. ft. building west of Mankato near Minneopa Park, and a year later that doubled to 8,000 sq. ft. Their contract service was booming. They were sending crews all over. They still weren’t manufacturing any product on site; just assembling product made for them by others, except now they were selling a bit.

In 1997, Nelson purchased Kentucky-based Long Airdox, a company that made a product called “Air Cannons.” This product was an air tank mounted on a grain bin that shot compressed air into the bin to help product flow. This company was the U.S. distributor for Air Cannons and Cardox. The same year, 1997, Nelson purchased the British company importing Cardox into the U.S., and he also purchased 40 percent of Cardox manufacturing and office facilities in England.

“The world then had only two manufacturers of Cardox,” Nelson said. “In 1995, I bought one of them. The product had been put together 50 years ago for use in methane gas and coal mines.”

Nelson’s tone turned serious. “With that purchase I wound up with a Turkish partner whose father owned a coal mine in Turkey,” he said. “They were using Cardox heavily and wanted to insure supply. His son and mine were the same age. He had 40 percent ownership, I had 40, and we gave the employees 20 percent. I sold my share to the employees in 1999.”

Nelson then took money from the sale of Cardox to make a better product than Cardox. He could do that because its patent had expired. Pneumat Systems tweaked and tested its own version for three years before getting it right. Today, in the U.S., Canada, and Mexico at least, Pneumat Systems markets this new and improved product under the “Cardox” name because the British firm Nelson used to own doesn’t have North American naming rights. Pneumat Systems currently competes against its former sister company, which continues to market a product in the U.S. also called Cardox.

“I’ve taken what they made and made it better,” Nelson said. “It is much safer and easier to use.”

In late 2003, Pneumat Systems settled into new headquarters off Third Avenue in Mankato. Company sales are “more than $2 million,” said Nelson, “with 14 employees,” and the company is on the verge of “explosive” growth. Primarily through its Bin Whip product, now almost fully manufactured and assembled in Mankato, the company does business in Europe, Iceland, Turkey, South Africa, and Colombia. Most overseas business comes through contacts with U.S. multinational corporations, such as Cargill and ADM. A sizeable portion involves coal and cement customers.

As for Bin Whip: “All our competitors have copied it,” said Nelson. “The Chinese aren’t in the market because it’s too small. One Ohio company bought a piece of my equipment in 1989 and copied it. They still sell theirs today, and haven’t made any changes since 1989. Their copying us was one of the best things to happen to this company.”

Nelson’s eyes narrowed. “Whenever I think of this company, and the man that has done this to me, I get angry,” he said. “I’ve lost very few sales to this man. He keeps me motivated. I don’t want him out of business; I just want to kick his butt. And we do. And that’s great.”

He said his newer hydraulic Bin Whip developed in 1997 cleans a bin one-third faster than the one sold by the Ohio company, which uses compressed air in theirs, an outdated technology.

The new building on Third Avenue boasts two $250,000 computer-operated vertical mills and a $130,000 computer-operated turning center. Total shop investment in Mankato, excluding building, is about $2 million. Besides Mankato, the company has sales representatives based in Dallas and Great Bend, Ind.

As for unbelievable events alone shaping Pneumat Systems? Don’t believe that for a minute. Nelson couldn’t have made it without excellent employees. “We probably have one of the better paying facilities in this town for machinists,” he said. “We pay over market wages for labor because we want the best. These guys turn out top-notch, top-quality product. I haven’t had a warranty claim for more than two years. When our products go out, they stay out.”

Deadly Gas Chamber

Exhaust gases from an internal combustion engine are very toxic. I dearly loved the business, but over time my body built up a sensitivity. It got to the point where if I was in a shop area with an engine running, I’d be sick three days. It would take that long to purge it from my system. Once my body reached that point, I knew it was time to get out. —Gene Nelson

Why Do Grain Bins Catch Fire?

Bins sometimes spontaneously catch on fire when grain naturally heats up after being brought in too wet. They also catch when there is bug infestation, especially when the infestation is deep in the bin and not caught quickly enough to fumigate. It can self-ignite. What most people don’t understand about cement grain bins is that they breathe air. Bins fires act just like peat fires in northern Minnesota. It’s virtually impossible to put a grain fire out in the bin. You have to get it loose, out of there, and smother it. —Gene Nelson

England (Business) Swings Like A Pendulum Do

After selling the Cardox facilities in England, I opened a contract cleaning business there with a former Cardox employee, Joe Hilton. He wanted to do service contract-only work cleaning grain, coal or cement bins. So Pneumat Systems put up money for equipment to help him start. In this new business we weren’t competing with the plant we’d just sold because we were doing service contract work only. No manufacturing.

Joe was having problems getting appointments with ADM and Cargill plants there in England. So my son Greg went there to call on the ADM plant. When he called for an appointment, lo and behold, the plant manager was a young man who used to work at ADM’s Mankato plant.

Things were running well, Joe had paid us back and then he discovered he had lung cancer at 47. He had that under control when doctors discovered brain cancer too. Without Joe’s leadership the company hasn’t done as well. So we are in the process of selling our share to an employee, and continuing to furnish him with supplies. Joe’s widow still owns 25 percent. —Gene Nelson

You’ve Got Mail

I am grooming my son Greg, 41, and Jim Blomquist, 45, to take over. Jim used to be my banker and he quit that to work here in 1997. I plan to exit in five years. But right now I have the best of both worlds. My wife and I travel a lot in our motor home, about 20,000 miles a year. When I’m in my coach, I keep in touch: I get emails from the company off a dish from the Internet. —Gene Nelson

© 2004 Connect Business Magazine. All Rights Reserved.