European Leaders Take a Look at the Economy & Suggest Lessons for Future

February 01

00:00 2010

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FEATURE

Editor’s Note: UK-based Fastener + Fixing magazine invited European leaders to reflect on 2009 and look ahead to 2010. Following are excerpts:

Anders Karlsson, president, European Industrial Fastener Institute:
2009 was the year that never started – after 2008 suddenly died in November. The challenge for all was to manage an industry when business levels crashed to a quarter of normal volume without warning. You look in your box of management tools and there are none such available. All actions to reduce capacity – like closing factories, reducing staff – take much too long time, cost a great deal and drain the small cash flow that you have.

The main objective rapidly became to preserve cash flow in a period when no bank would willingly lend you any money.

Orders from the manufacturing industry dried up completely in the first few months, affecting both traders and manufactures in the fastener industry immediately.

A big help was the various scrappage schemes that got the automotive industry back working quickly.

Andy Harland, managing director, Caparo Atlas Fastenings Ltd, United Kingdom:

Although December 2008 was dying, the order book for January and February was in line with budget and we were actively manufacturing to our customers demands. Then in an instant the order book was halved. We took immediate action to close the manufacturing side and three weeks of shutdown followed.

So would 2009 bring a change towards optimism? No. It was even worse, with some customers locking their gates so one could not deliver!

• Communication is key: with customers, suppliers and, last but not least, employees.

• Market diversification. Reliance predominantly on one industry is extremely dangerous.

• Margin. When you were just looking for an order anywhere, it was very easy to lose sight of the saying ‘sales is vanity, profit is sanity’.

• The fastener industry should now understand its vulnerability to the global OEMs. They can be expected to match vehicle production more closely to customer demand.

Dr. Florian Seidl, president, Fachverband des Schrauben-Großhandels e.V., Germany:

Looking back, 2009 was the worst year for the German Fastener distributors since the end of the war. Turnover shrank between 40% and 20%. The MRO business was at the upper level: the automotive, especially truck, business on the lower end. Due to this decrease and because stocks were packed full at the beginning of the year, as a consequence of anti dumping, nobody placed big orders.

In any case the growth will be only modest for the next years.

It is still an open question which countries and which manufacturers will be the main suppliers after the closure of China. The European suppliers will not be able to fulfil a growing demand at reasonable prices.

For distributors, on one hand is the risk that some companies try to get a greater share of a smaller market at lower prices. The tendency of the industry to reduce suppliers will help our trade on the other side. Strong relations with customers, optimized lean processes and added value for the customers will be more important than ever.

Wilhelm Böllhoff, Böllhoff Group, Germany:

Yes, 2009 wasn’t a pleasure. But if we look back into generations (my brother Michael and I are the fourth generation) it was anyway better than a lot of terrible ‘events’ that happened in earlier generations.

” … the whole automotive and other industry lost between 20% and 40% volumes. Of course all of us were affected and had to react fast.

Firstly, you can never have enough cash and equity in the “pocket” or in the balance sheet to be on the safe side.

Secondly, for the future our cost structure must be more variable to react to this kind of crisis – something I am convinced can occur again and not so far away.

The relation between supplier and customer will become even closer – not only products but also service will be required. The expectations of our customers will always grow from a technical and logistical point of view.

The technologies of fasteners will change, but not in a revolutionary way. Cars, machines and everything have to become more ecological, lighter with new materials and so fasteners have to react and offer new technology applications.

• The priority on which fastener businesses need to focus is technical and logistical support. The main topic will be to support the total value chain of the customers to reduce total cost. The material cost of fasteners (often called as “C-parts”) is small. So we have to focus on the total cost chain.

Geoff Hopwood, president, European Fastener Distributors Association:

Some events, like the global economic downturn, have been outside the control of our industry. Others, including the antidumping duties and new standards, have been of our own making, largely driven by some EU producers for their own commercial interests.

Whilst such self-interest is understandable, it can create problems for distributors and customers alike.

There has been and will continue to be widespread damage and disruption for the partial benefit of a handful of EU producers.

Fatih Uysal, Norm Fasteners Co., Turkey:

Looking back over 2009 it was dominated by the global crisis, and the loss of production for all product types destined for the automotive sector. The antidumping against Chinese fasteners was very important for the European producers especially in a year of production crisis.

The industry learnt that companies must not be bound to a single sector like automotive, especially since fasteners and fixings are used in so many different sectors. We also learnt it is critical to save some of the company assets for the crisis days; global sales can go down in a very short period and companies must be prepared for hard days.

Companies with their own assets will grow and invest more in new cost-effective products.

All companies must be more customer-oriented and will need to achieve production flexibility according to customer demands.

Fastener technologies will develop to provide new products that are lighter and stronger, more cost effective and easy to assemble. Zero PPM rules will be more important for cost saving assembly. Environment friendly coatings with greater corrosion resistance will be more important.

The dangers for which fastener businesses need to be alert include: high strength adhesives and plastic products; productivity price reductions enforced on producers by the automotive sector; complex fixings that offer solutions but are not cost effective.

Ramon Ceravalis, general manager, Groupo Celo, Spain:

Orders decreased 30% to 40% depending on the customer segment.

The recession, together with effects of antidumping, made us expect a restructuring of the competitive situation that has not happened – we expected more mergers, acquisitions or closures.

The fastener industry has to learn that big is not better. From my perspective smaller companies have been adapting better to the crisis situation. Financial muscle is what matters now.

The priorities should be to look for added value. Just do what one is good at. Get close to the customer. The biggest danger is concentration of customer power.

Konstantin Anatolyevich Fedoro, vice principal for marketing, BelZAN, Russia:

The implementation of EU protective measures against fastener imports from China, resulted in a concentration of stock volumes at the warehouses of the big European traders.

The fastener industry should learn the necessity to work in several market segments and to organize direct supplies to final consumers, avoiding traders.

If in the longer term producers make little or no profit, it will cause problems for the further development of production, technologies, modernization of equipment.

Probably some small producers will liquidate. In order to survive, companies have to diversify their products, look for new sales markets, and find possibilities for capturing new technologies and materials, which will allow them to cut the prime cost of their products.

Yair Wiesenfeld, Videx Machine Engineering, Israel:

It was 1992 when Videx faced the first serious crisis. We exported over 50% to a Japanese market that collapsed overnight and left us without work. As a consequence, we decided to expand our markets and never again rely on one single market.

Most of the projects that we have been working on are quite strategic for the customers and involve new concepts and innovative technologies rather then expansion of production capacity.

The European market has been searching for new technologies and innovative products and production methods while keeping labour to minimum. We believe that companies will have to invest in new technology to stay competitive and this will lead to sales of machinery necessary to achieve this goal.

We have been using this hard time to design quick-change machinery for short production batches and for development of some new ideas that we had no time to work on during the last years.

Reyher Nchfg. GmbH & Co. KG., Germany:

Looking back over 2009 the important events were the decision of the EU to apply anti dumping duties on fastener imports from China combined with the economic downturn.
Unusual high stock levels that required corresponding financial resources from all players in the fastener industry had a very negative impact on the cash flow situation due to the significant decrease in the overall demand. Consequently, competition became fiercer, hence prices dropped and the overall profitability decreased drastically.

What should be learnt is that it is important to have a balanced market approach and a diversified customer base. Companies need to take risk management on the procurement side more seriously and focus on extending their supplier base in number and region.

Procurement activities should be spread worldwide and should not focus only on one special region.

The fastener industry will face more complex requirements, for example batch tracing, dual use, inspection certificates, first sample reports.

We see a development from ‘normal’ trader to first tier supplier with process requirements, as it is already common in the automotive industry.

The industry will be more heavily regulated in the future. Compliance issues will require additional competence and favour larger importers in the long run.

The number of fastener businesses that import from the Far East (not just China) will decrease. For that reason major European wholesalers expect increasing business for the first quarter in 2010.

In order to return to the profitability levels of the past, fastener businesses need to ensure high service levels. In addition, the acquisition of new customers in diverse market segments will be a major priority.

Mustafa Necati Tecdelioglu, chairman, Cetin Civata, Turkey:

The rise in raw material prices in 2008 turned into a dramatic fall in 2009, creating huge shortages in demand. The application of anti-dumping taxes on Chinese products forced traders to over purchase.

We have learned that instead of making new investments and growing, increasing our efficiency is more important.

We believe that after the second quarter of 2010 things will start getting better but it will take until 2011 to reach the desired level.

Overall the Turkish Fastener Industry had fallen 25% in 2009 and expects maximum 10% growth in 2010.

Marco Manassero, managing director, Manassero & C, S.r.l., Italy:

Our view is that the fastener production continues to decrease in Europe and is therefore strengthening in China, Taiwan, India, Brasil, Turkey, etc.

The problems companies will have to face for 2010 will be to find themselves a reasonable quantity of work to grant them survival and possibly growth. But mostly they will have to pay particular attention to customers unable to fulfil their commitments, turning in the end their difficulties on other companies as well. Lack of cash will indeed be a major issue to keep into consideration.

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