VIENNA, AUSTRIA (Aug.30, 9 a.m. EDT) — Wilhelm SchrÃ¶der, named the top executive of SMS Plastics Technology in January, has shed some light on why he left his former employer, Krauss-Maffei Kunststofftechnik GmbH.
The well-known German plastics machinery executive also talked about attempts by SMS to win retroactive rebates from its suppliers.
SchrÃ¶der made the comments to reporters after SMS Plastics Technology's pre-K news conference in Vienna. Soon after he arrived at SMS AG, the German maker of machinery for steel-making and plastics processing returned to full ownership by the Weiss family, which purchased the majority stake of SMS from the German conglomerate MAN AG.
SchrÃ¶der left Krauss-Maffei in September 2002, just as New York buyout firm Kohlberg Kravis Roberts & Co. was closing on its purchase of KM's parent, Mannesmann Plastics Machinery GmbH.
During the Vienna event, SchrÃ¶der stressed how SMS is now family owned. He said private ownership is preferable to a “financial investor,” especially during tough times now facing the plastics machinery sector.
After the news conference, a reporter asked if that was one reason he left Krauss-Maffei, after eight years leading the company. SchrÃ¶der said: “Of course. Krauss-Maffei at that time was a very successful operation for years, and we had so many things in front of us. But these people [KKR] weren't interested in what I was telling them. They were into free cash flow, money back, value of the company. I said, 'I'm talking about value of the company. I grew the value of the company over the last eight years by a factor of five or something. You do not have to tell me how to increase the value of the company.' But they are looking at the financial numbers only.”
SchrÃ¶der said he understands the by-the-numbers approach, but he thinks running a machinery company requires more.
“This is, with the Weiss family, a very, very good thing. Because these people come from the entrepreneurial side,” he said.
SchrÃ¶der addressed another hot topic: rebates. SMS last fall sent letters to its suppliers asking them to give back 7 percent retroactive rebates on goods that SMS purchased since mid-2002. SMS also said it wanted discounts for goods it planned to buy in 2004 and 2005.
SchrÃ¶der said the practice is widespread during slow periods in the machinery industry, but often does not get publicly reported. “Everybody did that … I mean, you can try it. If somebody gives you 5 percent, that's fine. If not, you're as good as before,” he said.
Retroactive rebates cause rancor among suppliers. SchrÃ¶der said the firm is no longer seeking the retroactive givebacks. “No. This was a one-time action. You cannot repeat that all the time.”
SchrÃ¶der said the move did have some success. “It brought some money. No doubt about that. Not everybody responded on that, and not everybody was willing to do that, but a good part of our suppliers understood what we were talking about.”
SchrÃ¶der pointed out that the rebate move happened before he arrived at SMS. He said: “I don't like it, but many companies do it.”