Global Fastener News

EU’s Hopwood Tells TFTA: Global Competition is a Challenge and Opportunity

John Wolz

Many businesses have outgrown national boundaries and controls, Geoff Hopwood, vice president of the European Fastener Distributors Association told the Taiwan Fastener Trading Association.

It is a challenge and an opportunity to “reposition our companies to suit the new conditions and to try to re-stabilize the market position,” Hopwood observed. It is also an opportunity for fastener associations around the world to provide a platform to exchange views and to draw inspiration from others which does not depend on size or importance but on cleverness and speed.”

In a report on the TFTA meeting with the U.S.-based National Fastener Distributors Association and EFDA, Taiwan-based Fastener World magazine noted Hopwood pointed out that the U.S. car industry is down, although Japanese car producers in the U.S. are less affected, and European car manufacturers sales are down 30%. “If no cars are produced, machinery investments suffer,” Hopwood noted. “Larger investments in construction are postponed.”

Many governments are starting infrastructure investments water supply systems, railroad tracks for bullet trains and highways to support the national economy. “In this environment only companies which are strong enough and add real value to the national economy by their products and performance will have the opportunity to use these difficult economic circumstances as chance to grow and finally produce better results,” Hopwood observed.

“There will be much unused capacity in specialist production units but it will be a struggle for European companies to expand and compete in global markets, without sponsorship from governments,” Hopwood observed. Previous government actions included import restrictions such as quotas for Japanese cars in France or quotes for steel production in the European Coal & Steel Community.

Those actions didn’t prevent structural changes in trade. “The European car industry only prospered when it started to build high quality and competitive cars. The lesson is not to fight the natural trend but to outperform your competitors,” Hopwood advised.

Hopwood termed the current European economy as “not a slow down” but a “collapse.” Orders are cancelled, scheduled deliveries are postponed by weeks or months and no new orders are coming in. Many debtors are unable to pay bills and some companies will stop production for several weeks to adjust to the lower demand.

Fastener World quoted Hopwood saying the biggest challenge for the fastener industry is the EU’s anti-dumping decision. “The bigger distribution companies with a purchasing mix of 30% import and 70% European source estimate an average price increase of 40% to customers. If we then take the guide, that about one third of price increases can only be applied with a time lag, and we also know, that price increases from suppliers need about 40% more net working capital for inventory and debtor investments it is easy to estimate the disastrous financial impact for distributors. ”

China’s fastener prices will drop because of raw material cost reduction. China’s economic board will support those industries and regions.

Distributors face “squeezed market, squeezed results! One solution is to sell new products to existing customers. But new activities require financing and it is a challenge for distributors is to finance the price increases, over- capacities and new market approach. “It is most likely, that many ‘middle of the road’ distributors will experience a real financial challenge,” Hopwood predicted.

Economic forecasts are difficult due to the global interlinked economy. “There are just too many global variables. It is likely that we will not have a speedy recovery in 2009. At least the car industry foresees that the actual slowdown will last until 2010.

All we can do is keep in close touch with suppliers and customers and prepare our companies as best we can to cope with the changes and opportunities.

“What Europe needs is not protection, but rather to respond to the challenge for innovation and new products,” Hopwood suggested. “The German solar cell industry is such a success story, already 20% of all exports are in the field of environmental protection techniques. Many states in Europe have invested in education and R&D to make their nation fit for the coming challenges. Especially in biomechanics, energy saving techniques and chemistry, new industries are growing and expanding as they make their products known to a broader public.” �2009 FastenerNews.com and Fastener World