Why should distributing GNU grep necessitate releasing the source of other things that you distribute? It only seems obvious to me that they would then have to distribute the source of GNU grep. Are they linking to grep but grep doesn't have the linking exception?
If the hardware system he's selling has some kind of crypto (like login passwords that you don't know!) that disallows modifications to the base system, GPLv3 can require you to give up enough control to let the user install their modified grep too. (That's still not giving away your source code, but it is more than just giving out the source code to grep.)