Q: How is morale at Milacron right now?
Bourdon: You feel the situation is behind us, certainly everybody enjoys this. And shortly after that, we did the name change for the products. Also we had the 120-year anniversary of the company. So everything came together. We partied a little bit.
Q: Good timing! When was the anniversary?
Bourdon: March 18, a couple of days after the refinancing was done.
Q: Did you lose some sales as a result of uncertainty surrounding the refinancing? In your first-quarter conference call, Robert Lienesch, vice president of finance and chief financial officer, said uncertainty did cause some impact on your North American business for the quarter.
Bourdon: I don't know if we have lost some sales, but I'm sure that we did not get all the sales we could have, on time. Some of the sales got delayed, and I'm hopeful that it will materialize now, after the thing is done. It looks like that will happen. But I don't know that we really lost a lot of sales against the competition. I don't think so.
Q: That brings up your outlook on the U.S. market. Is it still the same situation of strung-out delays, customers holding off?
Bourdon: No. I mean what we see is the project activity is improving. That's without any doubt. And I also see actual sales and new business are improving. But it's not a steep increase. It's not a strong comeback. But it's relatively improving, yes.
Basically what has happened is, after the year 2000, the U.S. machinery business got reduced by 50 percent. And we are more or less still on that level. If you look into the [Society of the Plastics Industry Inc. Machinery Division sales] numbers, it confirms that we are still on that level. But relatively, it's improving now, step by step. But, if you ask me, do I expect the business in two years from now back to the 2000 level? No.
Q: Trade magazines are full of stories detailing the challenges facing U.S. molders, like automation, a higher level of value-added ... What are some of the issues?
Bourdon: I see the opportunity for the U.S. molder, in what I would call higher-level applications. And that does not necessarily mean very complicated parts. It also sometimes means it's a thin-wall part. It could be a simple part but with a thin wall, so it's not simple to mold. So you need a special technology. That is, I think, the opportunity for the U.S. molders. They cannot compete on jobs that easily can be done in other parts of the world where the labor costs are much cheaper. There's a big movement with simple molding jobs going offshore. But there will be a part for the U.S. molding industry that will stay here, and our task as a machinery supplier is to support this industry with some product, with the right technology, to enable them to make money on those parts, and to stay competitive. That is our job.
Sometimes it's multicomponent. Sometimes it might be all-electric technology. ... Sometimes it's: OK, I need a complete system for this application.
Q: What about challenges facing machinery companies? I do hear a lot of talk that manufacturers are looking to supply more customized equipment.
Bourdon: It is a kind of customization. Now the trick is that you have a machine design where it doesn't require a lot of engineering to customize a machine to the needs of the customer. The real thing is on the mechanical and hydraulic side, that you have a machine design that allows you, with less engineering effort, to design what I would call a special machine.
Q: All this talk about complete manufacturing systems leads to robots. Is Milacron at a disadvantage because you don't make your own robots?
Bourdon: No. I wouldn't consider a robot a core business for a machinery supplier. It has to be available, and what we do is, we work together with a number of robot suppliers, and with good success. So there's no need, as far as I can see it, to do it ourselves. And even the robot manufacturers, they have their specialties as well. So you need to select the right robot supplier for the downstream automation, which is the expert for that specific application. You can't have the guy who is perfect at everything.
Q: Earlier this year, you created an Applied Processing Business, with Jim Abbiati as the president. What is that?
Bourdon: It consists of the machinery business for blow molding and extrusion. And the reason why we put this a little apart from injection is very simple: The number of machines in blow molding and extrusion is less compared to injection. So every single machine is very dedicated, and driven, by its specific application. That's why we call it the Applied Processing Business.
On the other side, we have put into that business the complete after-sales business, including the U.S. injection molding machines. We have spare parts. We have services. We have a business which we call the contract business, where we do refurbishing of machines. That is all part of that business.
[We need to generate earnings over the lifetime of our machines, rather than just when we sell the machine itself.] So we have to approach this business opportunity in a different way.
Q: Given the U.S. slowdown in new machinery sales, how important is your ServTek parts and service business?
Bourdon: It is important because, if I describe the market generally in the U.S. in a simple way, I would say it's a 25 percent machinery market and a 75 percent after-sales market.
Woerner: The U.S. market maturity is greater, so what they're doing is, they're maintaining their equipment, but there isn't much expansion or growth.
Bourdon: When you have this situation here in the U.S., and the aftermarket portion of the business becomes more important than in other parts of the world, it is very important that you are close with the customer - geographically, businesswise.
And I see a big advantage for Milacron in the fact that we are located here in the U.S. So we have a competitive advantage because we are here.
Also, we look at the aftermarket a little different. The traditional way of looking at it is, yes, we are a machinery company, and we also have after-sales service, like spare parts and service people. When you look in another way it is a core business. And that means that, mentally, you have to change your approach. You have to apply good talent to the after-sales market, and not only to the new-machinery part of it.
Q: OK, let's look internationally. Your future injection press plant in China, which you announced in April, is the big news. But Milacron already has a lot of experience building machines in India. How is Milacron doing in India?
Woerner: [Milacron] has done very well in that marketplace. They're 40 percent of the market [in India]. It's a much smaller market than China, but it's growing with high rates. And the Ferromatik product, which has been upgraded to the latest technology for hydraulic and electric.
Also, the initial blow molding technology transfer is beginning to go in there from the U.S. and Europe. And the point I would make is that operation in India, which is nearly wholly owned now by us, serves not only the Indian market, but about a third of the product they produce goes out to Africa and the Middle East. So it serves those surrounding continents and regions as well.
Q: Mr. Bourdon, with your background at Ferromatik in Malterdingen, here are some questions about what the company is doing in Eastern Europe. Specifically, the Milacron Uniloy plant in Polícka, Czech Republic. Several years ago, Uniloy moved the assembly of blow molding machines from a plant in Berlin to Polícka.
Bourdon: First of all, here is some background: Before we acquired Uniloy [the blow molding machinery business] in 1998, the so-called B&W company that produces shuttle machines in Germany had made the decision to move partially the manufacturing into the Czech Republic, in Polícka, about 50 miles north of Brno. So when we acquired the business, Polícka was already there.
Q: B&W assembly had been based in Berlin. What do they manufacture in the Czech Republic?
Bourdon: As part of B&W, they had started with electrical cabinets for the blow molding business, and then they extended it to some subassemblies. And in 2000, we made the decision to put all manufacturing, the complete assembly and runoff into that operation.
While in Berlin, only sales and service, and some engineering, was left.
Q: I know Milacron Uniloy also consolidated several plants into a single new one in Italy. Was Berlin the only German Uniloy plant?
Q: The point is, Polícka was already part of Uniloy when you bought it.
Bourdon: It was already existing and we developed it further. And then we added some work for Ferromatik for the injection molding business in Europe, to it.
Q: What kind of stuff?
Bourdon: We started again with electrical cabinets. And that's what we are doing today there.
Q: Are they doing any machining in the Czech Republic?
Q: This brings up another question. Our European sources say that Milacron used the possibility of moving work to the Czech Republic plant to gain concessions from workers in Malterdingen. During Milacron's first-quarter 2004 conference call, the company credited cost-cutting measures in Malterdingen and at Uniloy for the improved financial results at the European segment. Currency translation also helped. But did Milacron use the threat of outsourcing to get concessions from Ferromatik?
Bourdon: Where did you get that?
Q: From machinery sources in Germany.
Bourdon: That is not accurate. But certainly the Malterdingen people understand that we as a company are obliged to look for opportunities to reduce our cost. That's quite clear. But at the same time, we want to keep our quality standards. And we are not up to change our business concept for Malterdingen, which would include machining and assembly, and engineering and sales and service.
Q: So we're really only talking about these electrical cabinets in the Czech Republic?
Bourdon: Yes. That is a make-or-buy decision. We have a number of things that we produce ourselves, and we have a number of things that we just buy.
Q: It does sound like you got concessions from the Malterdingen union. In the United States, this has become fairly common. But winning concessions from a union in Germany, that's still pretty unusual, right?
Bourdon: When you deal with German unions, the rules in Germany get applied. And, you know, you would negotiate under these rules, certainly. We have some [flexibility] in working hours per week. We have some [flexibility] in the wages and salaries that we pay. That was negotiated. But this, I would say, was independent from the thing in Polícka. I wouldn't say there is any relationship between the two of them.
Q: How many people work in Malterdingen?
Bourdon: At this point in time we employ 470 people in Malterdingen. Outside of the Malterdingen plant, we have another 90 sales people working worldwide.