BOLTON, ONTARIO (May 5, 10:45 a.m. EDT) — Robert Schad will turn 75 this fall when his company, Husky Injection Molding Systems Ltd., celebrates its 50th birthday.
Schad recalls he was “an impatient young man” back in 1951, when he emigrated from Germany to Canada. Two years later, he founded a company making the Huskymobile, a snowmobile. But it wasn't long before Husky began making molds and then injection molding machines.
Husky became known worldwide for its high-speed presses to make thin-wall packaging and later rode the PET boom with machines to mold preforms. Today, Husky employs 2,800 and generated 2002 sales of US$581 million.
A big series of changes hit in the late 1990s. First, Husky in 1997 launched a major move to transform itself from a packaging specialist into a broad-line press manufacturer with greatly expanded in-house component production. One early move was to roll out the Hylectric press, a hybrid that combines hydraulic and electric power.
Next, in 1998, Schad took the closely held company public. That opened up Schad to criticism from stock analysts who questioned his big-spending investments in a period when financial results declined.
Husky — along with every other machinery maker — has been hammered by the severe downturn in equipment spending, now approaching three years. But Schad thinks far beyond the current quarter. Right now, he's planning Husky's new $20 million Asian headquarters in China, where one day employees will build machines. A technical center in Moscow also is in the planning stage.
Schad still shows signs of his youthful impatience. He bounded up the stairs two at a time at Husky's Bolton headquarters to a second-floor conference room for a question-and-answer session, then offered his views on topics like the future of machinery manufacturing and how North American molders can survive as work moves overseas.
Q: Let's start with the serious issues facing domestic molders. China scares people. How can they survive?
A: When you look at U.S. molders, there have been a lot of general-purpose molders. The mode was: How can I buy the cheapest building? The cheapest machine? There was no shortage of hiring the cheapest people, and I'm in business! This will not work anymore. Molders now have to specialize and we have to automate.
For example, we're spending tens and tens of millions of dollars on automating our mold-making operations. And the automation helps you through difficult times. You can pick up market share in difficult times, if you are solid and well-automated. And we are now selling to some custom molders — very successfully — who understand this.
Q: Why did you change Husky so dramatically?
A: We spent about $500 million in the last five years to drastically change the company. In 1997 we were strictly PET and some packaging. Totally specialized. And we decided then, if we do this, in the long term we will not be cost-competitive because we don't have the infrastructure for low-cost manufacturing. [By broadening out products], we have a better cost base for our niche, like a PET niche, and other niches that we're planning to enter. So we had to totally redesign our machine line. So in five years, every product at Husky is practically obsoleted. Everything has been obsolete, and all new products have been developed.
Q: Are you planning to retire from Husky?
A: Not immediately. Eventually yes. But no, not in the very near future.”
Q: How much of Husky do you currently own?
A: I personally own 47 percent, and have controlling interest in another 5 percent, for a total of 52 percent.
Q: U.S. sales of plastics machinery are way down, about 40-50 percent the level of the late 1990s and 2000. How does this compare with past manufacturing recessions?
A: I don't think this is the worst crisis. I think the oil crisis was the worst [in 1973-74]. Husky was a Mickey Mouse company back then. We had a minus $2 million net worth. And we got out of it.
In 1991, we didn't feel it very much, a little bit. And now it's another serious crisis.
But the reason we have suffered now was not because of the crisis, but because we were in a transition period. We rolled a whole new product out. We had to get all these capital investments for the last five years, in a start-up mode. We had to digest all the mistakes we made in these startups. And we had to become more efficient. We have brought our prices down. And [the downturn] happens on top of it. But it didn't make that much difference. It would've happened to us anyway.
Q: In past speeches, you've predicted a consolidation among plastics machinery manufacturers. Do you still think there are too many?
A: I'm very convinced that in 10 years, we will have less than a handful of companies that have a major share of the market. There could be a number of smaller ones that will specialize in certain things. And this is why strong global coverage in distribution and in manufacturing is of utmost importance.
Q: Layoffs have hit nearly every machinery company. Husky has laid off about 400 employees from 2001 to today. Why did you cut those positions?
A: We had one [across-the-board] layoff. This layoff was more an efficiency move than a lack of business. This was a layoff to be more efficient. Our whole move in these five years was to become more efficient.
Q: You've used “meltdown” to describe the situation today. Do you think machinery makers have cut back on research and development for new technology?
A: They have, yes. There's a lot of engineers available. But we have increased our innovation in R&D. That's the last thing we cut. That's our lifeline, technology.
Q: What can we expect from Husky at NPE?
A: I'd rather not comment too much at this time. But one thing I can tell you is for the packaging market. We're readdressing the packaging market with the Hylectric line and phasing out the G machine. Also, we will show a 1,000-ton machine that dry-cycles at four seconds.
Q: Another quick technology question about all-electric injection presses, which you once dismissed as “mass hypnotism.” Many people think all-electrics will dominate, especially in small-tonnage presses. Will they?
A: What's 'small'? When I talk small, I'm looking at below 50 tons. Really small. There, the electric machine is perfect. But when you go bigger, let's say a 100-ton machine — we have production figures on 100-ton machines which are very difficult to obtain on an all-electric.
You see, the Hylectric has specific advantages over the electric. First of all, you don't have a toggle system. I personally believe that the toggle system has many disadvantages, such as die height adjust; we don't have to adjust the die height. No. 2, we have ideal low-pressure closing for mold protection. We have no clamp-pressure changes during the process. As the mold temperatures ramp up on a toggle machine, the mold platen pressure increases. We have perfect clamping pressure every shot.
But you know, when you walk into our lobby, the machine that stands there is an all-electric from the early 60s. We built an all-electric, and we have still a very good understanding what some of the limitations are. With the Hylectric, we can have similar energy consumption of electric machines, with higher output.
Q: Environmental responsibility is one of Husky's core values. You have helped set up a custom molding plant at an Indian reservation and you give out stock to employees to reward green activism. Why?
A: If we don't make a contribution, we should walk away from an account. So you want to buy a machine? If it's not the right thing, I won't want to sell it to you. We only want to make a contribution. It also applies to our own people, and to the communities where we do business. So 5 percent of pretax profit goes to charity.
Q: So you still do that, donate the 5 percent?
A: Oh yes. Clearly. And let the analysts scream. We will do this. This is very important for our people, and we do it all over the world to integrate into the society, to be seen as a company that has values. Because people want to deal with a company that has values. They don't want to deal with a company that uses every trick.
Proactive environmental responsibility is also important, because it puts us ahead when things happen. The buildings we've built now are the most advanced environmental buildings. Our products' energy efficiency is very important. It all goes together. Passion for excellence, and that means everybody here. That's why we don't build things cheaply.
Q: Where would you like to see Husky in five years?
A: We've built a base, long-term, where we can now build on to become the absolute leader in our industry, within five years.
Q: How do you define that, the absolute leader? By sales?
A: I would say, by sales. And we should also be very profitable.