BOLTON, ONTARIO (June 5, 9:50 a.m. EDT) — John Galt stepped into one of the toughest jobs in plastics machinery in September, when he became the top executive at Husky Injection Molding Systems Ltd. — replacing the legendary Robert Schad, who retired.
Schad had founded Husky in 1953 and built it into one of the world's largest plastics machinery manufacturers, employing more than 3,000 and generating 2005 sales of US$860 million from injection presses, robots, PET preform molds and hot runners.
While Galt, 46, may be a newcomer as president and chief executive officer, he is a Husky veteran of 20-plus years. He joined Husky in 1985, straight out of Ryerson Polytechnical University in Toronto.
Schad was known for being impulsive and tough, at times showing a volatile temper as he drove Husky forward.
Galt comes across as more low-key and soft-spoken. He paused to think before answering questions, patiently and precisely, during an interview in April with Plastics News' machinery-beat reporter, Bill Bregar, at Husky's headquarters in Bolton.
So John Galt is no Robert Schad when it comes to personality. But Galt, a mechanical engineer, shares Schad's love of machinery and technology. In recent years, Schad tapped Galt to oversee the company's transformation to a platform concept, a key part of moving Husky from its core strength in thin-wall packaging and PET preform machines to a broad-line supplier.
Galt has served as general manager of Husky's North American machinery business, vice president of engineering and, from 2002 to 2005, vice president of operations and chief operating officer.
He takes the reins at a pivotal time for Husky. Although sales showed a solid increase in 2005, the company managed just a $2.1 million profit, down from $18.7 million in 2004.
In an hour-long interview, Galt outlined challenges facing machinery manufacturers, including high resin prices squeezing customers and a global overcapacity of injection press production. The biggest pressure, he said, is coming from processing machines becoming commodities — a trend that forces machinery companies to move even faster to develop new technology.
Husky's new leader also threw out some tidbits about future North American assembly of large-tonnage presses, global sourcing and plans for India.
Through all the changes, Galt pledged that many key aspects of Husky will remain. That includes maintaining Husky's core values: make a contribution, proactive environmental responsibility, passion for excellence, uncompromising honesty and bold goals.
Q: I'm sure you've heard this question a lot: What's it like to replace Bob Schad? You're a different person, obviously.
A: Well, I think it's great. Husky's a great company. I've been here for 21 years because I love it; I tell everybody I meet, and that is absolutely the truth. It's founded on great values. They are my own personal values, so there was great alignment for me.
The company stretched me. It challenged me. It made me, I believe, more successful than I would've been in a lot of other places, just because of that culture. So it's been challenging at times, absolutely. But it's a great place to work. ...
This is a big challenge. Obviously, Robert has a heck of a history in the industry. Quite a legacy. He's one of our industry's pioneers.
So, I don't expect to walk in the first day and know what I'm doing, everywhere. But I guess I bring a slightly different perspective to the job of CEO. And I hope to keep things like innovation and the passion and the entrepreneurial spirit alive.
Q: I know Husky can be a pressure-filled environment. And I think the employees that stay here, and work well in this culture, carry these values and this passion with them. So obviously it's not just you running the entire show.
A: Absolutely not, no. It's a great team. I say that in all honesty. We've got a great group of people, surrounded by great talent. And fortunately, a lot of us complement one another; we're not all great at everything. So yes, there's a strong core group of people at Husky that enjoyed Robert's leadership style, enjoy the values and the culture that we have here today.
Q: How would you describe your management style?
A: I believe in the power of a strong team. I like what Jack Welch says there — surround yourself with people stronger than you are. I don't think there is a person who has all of the skill sets to take a billion-dollar company to a multibillion-dollar company. And so I think you have to complement yourself and surround yourself with great people, great leaders.
It's important that it be a passionate environment. That shouldn't be a yes-man environment — people should have opinions; they should know their subject matter better than anybody else around the table. We'll vet that, as I said, very passionately at times, but, ultimately, I think you've got to drive it from a team.
The culture we have is that we like to win. I love a competition. And I do like to win. So I think one of the things you can find around Husky, as a way to get everyone focused, is to get into a competition with somebody.
Q: Do you mean, trying to compete with another company for a customer?
A: On a job, in a market, in a technology. I think we flourish in that environment. It's fun. And work has to be fun. So, passionate … I know I have a lot to learn. I know very little of what I will ultimately have someday. And I take great pleasure out of that process.
Q: The impression — at least held by the outside world and the press — was that Schad kind-of ran everything. But as Husky went public in 1998, he started making comments about spreading out the decision-making process. Can you describe this evolution?
A: Well I think two things happened. One of them is that, as Robert's mentioned many times, he realized that while we were a technology leader and we were a very profitable private company, we had a fairly small base on which to grow. We served our markets and served them well, but we didn't have a competitive platform; we didn't have a competitive cost base; we weren't operationally where we needed to be. And we needed to change.
He assigned people within the company different tasks to go about and start to look at what it would take to develop the rest of the company.
Q: Companies founded by a strong individual often face the challenge that- one person can't run the entire thing.
A: There's the realization that you have to establish the next level of base foundation for the next level of growth. And Robert recognized that early. He made an investment in that. That's probably the biggest part of it is, just that investment in driving the development in areas of the company we were not focused on.
Q: Husky has undergone major changes in the past decade or so, kicking off its move into broader markets in 1997 and going public in 1998. The common-platform concept, based on the Hylectric press platform. The two-platen Quadloc. Magnesium molding machines. PET preform machines, the Index and HyPET. What role did you play?
A: Well, as you know, Husky's primarily been built on marketing and innovation. Robert Schad is a very dynamic individual. What we realized is that we had to focus on improving our operational performance, which really was, for most of our history, an afterthought. And so I was assigned the job of looking at our operations and understanding what it would take to bring them world-class. And part of that was the development of the concept of the platform, so we would have a world platform for our technologies — robust, reliable, energy efficient. Highly standardized. Reproducible around the globe, and a foundation for the market-specific technologies.
Before, without the foundation, it was difficult to coordinate those activities and also ensure an efficient supply chain. When I say efficient, I mean cost-effective, reliable, and fast and easy to produce.
Q: Your entire career has been with Husky. When did you join the company as a young engineer?
A: It was in that year after my graduation that I joined Husky.
Q: Forgive me for asking a personal question. You used to be married to Schad's daughter, Lili Schad. That marriage ended and you both are remarried. But for a time, you were Schad's son-in-law.
A: Well I don't want to talk about it too much. But we met while we were both here, and spent some time together, which was wonderful. And then decided to go our separate ways.
Q: I have asked Schad about the topic of family members in the business before, and he's not really into passing the company on to the family. A story in the Toronto Globe and Mail quotes both Lili and her father saying that, if you were Schad's son-in-law, you probably would not have gotten the CEO job — or even still be employed by the company.
So the point is, you didn't meet her and then learn about Husky. You met her after you got to Husky.
A: Absolutely. I came to Husky. I got a job. I started, and we bumped into each other.
Q: Now we'll move on to some financial questions. Husky made money last year, but just barely. And your sales have held up well, but profit has declined in 2004 and 2005. We know that machinery is a tough business. What is a respectable profit margin, in today's environment?
A: A respectable profit margin is, I guess, one that allows you to have a good return to your shareholders. Allows you to reward your people. And allows you to invest for the future.
Q: You're not going to give out any numbers, are you?
A: I think it's very difficult to say what the number should be. We've given some guidance in our quarterly calls about the number target-range that we'd like to look for. But I think in general, it's about building that lasting company. One of the reasons I'm attracted to this job is I know the industry's in a difficult time right now. There's a lot of volatility.
There's a lot of commoditization, and it isn't just within injection molding. It's within the world. I mean, the combination of the global competition, the emerging markets and the speed at which technology's been developing within our industry and within others. Mass marketers. All of that has combined for driving rapid commoditization.
Q: It's interesting that even a company like Husky that prides itself on very high-output technology faces this problem. Is that disturbing?
A: I think all industries will face, in these markets that we enjoy today worldwide, more rapid commoditization of technologies than we've seen historically. The ability to differentiate yourself through innovation, through technology, the time you get to reward yourself from that investment is going to be shorter.
Q: We know this from things like cell phones, for example.
A: Cell phones are a terrific example of an industry where the profits are made in a matter of weeks from the launch of a new product.
Q: But machinery is not on that same level of a cell phone, is it?
A: I think some of the same principles are at work. Because it's not difficult to copy the fundamental principle of an injection molding machine, robot or molds. The key is in constantly reinventing through innovation, through supply-chain development and the like, your ability to do it faster and better than the other guy.
There is always a better way. It's a matter of who finds it first, who gets it on the market, right, the first time. And that period of time in which you can capitalize on that differentiation until the idea, the value, is invariably lost to greater commoditization. So you have to constantly invent yourself. You have to be faster and more effective in doing it, I think will be the main message behind that.
If not, anybody who stands still today, will be commoditized tomorrow.
Q: One financial analyst says Husky, to restore a decent level of profitability, needs a more-dramatic outsourcing of production. You have said that Husky is cutting costs through global sourcing. That could be from China, where you're making small-tonnage machines and you've outsourced that work from Bolton. It could mean getting more components from China or India.
Here's the question: In today's machinery world, is outsourcing to low-cost countries inevitable?
A: I think what we believe is that, for critical components and for highly technical components, in-sourcing is actually the best solution.
Q: What do you mean by “critical components”?
A: The core technologies that are the basis — technologies for molds and the production of components around them, the core technologies behind our metal molding systems. Any fundamental core technologies behind any of the products that we produce, it makes more sense in our mind to produce those products in-house.
Whether those are in molds and hot runners, or whether those are in machinery, these are best kept in-house. Because you're going to be driving technology development on a rapid basis, you're going to have to have great control of technology.
Q: How about “noncritical” components?
A: Part of the development of the platform was saying, what you want to be able to do is, look throughout the globe. And right now Asia, China, represents one of those opportunities — but that will move. We look at the globe and say, how do we look for the best value globally.
Anything that is a fundamental component of the platform, what I would call the platform components, is worthwhile shopping the globe. Looking for the lowest cost — the total cost, I mean, logistics and everything else included.
Q: How about some specific examples?
A: It's obvious that, for a sheet metal component, it's very difficult to add value to a machine gate, a barrel cover, a purge guard, by producing them in one centralized location. The technology's widely available for the production of those parts. Logistics costs are high in moving them around the globe. It makes more sense to source those components as local to the customer's point of use as possible.
The second category of components are major castings, it makes sense to consolidate casting purchases, casting manufacturing processes around a supplier who offers you the global best value — that might be a platen or a casting.
Q: You also say Husky is pushing higher-margin products. Obviously this is everybody's goal. Can we get some specifics?
A: When we talk higher-margin products, we talk primarily about how can we come up with systems solutions, or technologies that allow us to produce the parts for our customers at a lower total cost, whether that's driving productivity, cycle. Whether that's driving uptime. Whether that's driving the development of new technologies, like our metal molding technologies, or long-glass fibers that allow traditional composite structures to be replaced with a new technology, sort of a disruptive technology. I think those are the types of developments that have the potential to add greater value and as such, bring the company a greater reward.
Q: As to “systems,” a lot of people feel that is Husky's biggest strength. You have the Factory Planning Group. You make your own robots, hot runners and preform molds. It's more than just a machine.
A: Absolutely. Our strength is focusing on the customer's application first, and then supplying them with the equipment around that application.
A general-purpose machine with a general-purpose robot running a general-purpose mold is unlikely to be able to compete effectively against a system-build process where the machinery has been adapted and refined specifically to the application of PET preform molding, to use as an example.
What we've learned, over time, is that having the perspective from the mold, the hot runner, the machine, the robots, that we can basically drive better productivity per invested dollar by focusing more on that purpose-built vision.
Q: Since NPE is coming up, let's turn to North America. It looks like the U.S. injection press market has stabilized at 3,500-4,000 units a year. Do you agree with that?
A: Yes. We've seen it decrease from the 6,500 units or so we had in 2000 to the 3,500-4,000 level. We're not seeing it move dramatically in any direction. But it will stay at about that level.
Q: Nobody thinks it will return to the 6,000 level.
A: I don't really believe that. I think, in general, as you drive greater globalization, as you create productivity per unit, you also need fewer [presses].
Q: All-electric injection presses now represent 40 percent of the market, measured by units. Yet Husky still does not have one. Schad has pooh-poohed the all-electric. What do you think?
A: Well, I think most of the inroads in all-electric machines have been the small-tonnage segment of the market, a market that isn't a big part of Husky today. I think if you look at the midsize and larger machinery, the hybrid solutions that we've developed, we believe are the best blending of those technologies. If you look at energy efficiency, performance and the like, we believe that's the best balance now of available technologies.
Q: I'm sure Husky is always looking at all technology options.
A: Yes. It really depends on, in the race between hydraulic and electric technologies, who can offer the best technology and the greatest reliability at a reasonable price.
Q: So will we see a Husky all-electric?
A: Development of a small all-electric machine isn't a focus today. No.
Q: Multicomponent is getting lots of attention. Last year, you held a news conference at your technical center in Novi, Mich., to showcase a press with 3,500 tons of clamping force, molding automotive instrument panels, with a soft TPE outer layer. Lear Corp. bought the QTI machine. Does Husky have more plans for revolving-mold systems?
A: Yes, we are focused on these. Again, the goal is output per invested dollar. If you look at the drive by most of our companies to become more lean, improve their own internal efficiencies, reduce their inventories, it makes more sense that to drive processes inside the envelope of the injection molding system — do more with the same floor space and with re-use of the same invested capital.
Q: Automotive suppliers seem to be under a lot of stress lately, with bankruptcies and consolidation. And yet, machines are still getting sold. What's the impact on Husky?
A: Automotive is an important market for Husky. Yes, there has been some turmoil in the industry. In the short term, there have been some deferred purchases. On the other hand, there are new cars, there are new products. Units are holding up OK. So we see it more as an issue of the investments being deferred rather than being eliminated.
We think it's inevitable that people will use technology to find a niche within the market space, so that's where we're really investing our money is in development of these new technologies. Examples include our Thixomolding presses for making lightweight magnesium parts, long-glass-fiber parts and QTI.
Q: High resin prices continue to be the big story for processors. Has this hurt press sales at Husky?
A: We haven't seen any significant impact to our orders based on the cost of resin. What we have seen is customers countering that by investing in more-productive systems and retooling to reduce the amount of resin that they use in their components. We're not aware of, today, any materials that look like they're going to replace plastics as the material of choice for many applications, so we don't see a disruptive technology coming in.
Q: In this environment, are machinery companies able to invest in the necessary research and development?
A: I don't think Husky would ever stop investing in R&D. If we stopped investing in innovation and in technology, we would be no more. That is core to what's made us a successful company, so we will not stop investing in any way in R&D. Matter of fact, I would say that we're investing more in the development of new technology right now than we have in many, many years.
Q: In financial documents, Husky talks about excess machinery capacity. Schad has long predicted a major consolidation, but that hasn't really happened. Is this a serious issue right now?
A: There is overcapacity. I think everybody accepts that's a reality. Given an emerging new competitive base coming from Asia and other parts of the world, there will continue to exist a general overcapacity on a global basis.
On the other hand, a lot of what's happening in these emerging markets is presenting us with new opportunities. There's a new economy; there's a middle class; there's a high level of consumption, whether that's in packaging goods, whether that's electronics or cars. So what we're starting to see is essentially in the mature markets, yes, it may be more difficult, and one would expect a difficult time. But we're also seeing the emergence of new markets, which are driving the demand.
Q: You've been very active in China. Do you plan to expand into India?
A: India is a rapidly developing market for electronics and other items. And yes, we would have some plans to enter India in the near term.
Q: Manufacturing in India?
A: I guess it's still to be defined at this point, but it's likely to include some form of sales and service and some manufacturing.
Q: Has Husky made a decision yet on resuming large-press assembly in North America? Schad talked about this at the K 2004 show. I see in your annual report you're making presses up to 1,000 tons in Bolton now. Do you think you'll go larger there?
A: As we focus on globalizing the supply chain of our machinery business, we have plans to more efficiently bring those products to North America, but they may be a little less traditional than others might do. It is a tremendous burden to bring a heavy machine from Luxembourg to North America. Whether we have to supply the entire machine here for North America, or we would bring in some level of pretested subassemblies, bring those together close to our customers for final assembly.
Q: Sounds like it could be interesting. The U.S. market for large-tonnage machines is pretty strong.
A: Again, the vision that we have is: How do we take the part from the point of manufacture, to the customer's point of use, in the most-direct, least-costly, fastest way? That's more the mantra that we're working towards.