Injection press supplier Demag Plastics Group, newly cut loose from its sister firms in Mannesmann Plastics Machinery GmbH, is in the midst of a major restructuring.
The changes are designed to revitalize the machinery builder, sharpen its focus and make it more competitive. They include shifting more manufacturing to Asia and a revamped, simplified product range, according to President and Chief Executive Officer Klaus Erkes.
In a critical review of the company's state two years ago, Erkes pointed to what was a globally fragmented, unfocused organization trying to be a full-line press supplier of every machine size to all markets around the world. There was resource duplication in manufacturing plants and a decentralized international structure.
Outlining Demag's new strategy, Erkes said: ``We want to be the global leading toggle injection machine expert. We want to deliver small to midsized [up to 2,000 metric-ton] hydraulic and electric toggle injection machines of [the] highest quality, efficiency and reliability for a fair market price in every region of the world.''
Amid all the changes, one question went unanswered. Asked about the future ownership of Demag, which is held by Chicago-based private equity group Madison Capital Partners, Erkes remained enigmatic.
``No engagement of a private equity firm is forever, so you can interpret that for yourselves,'' he told journalists at a July 4-5 open house in Schwaig.
The event came less than a week after Demag's bombshell announcement that it will stop making presses at its Strongsville, Ohio, plant by Aug. 28. The firm blamed a sharp downturn in the U.S. market - which has fallen from 7,500 presses annually to 3,200 over five years - and the plant's over-reliance on production of hydraulic presses, where electric machines now account for about half the market.
Erkes confirmed Demag plans to shift production of the U.S. plant's large-tonnage, two-platen Titan injection machines to Asia. However, he repeatedly stressed Demag is not ready to reveal exactly where they will be built: at Demag's plant in Ningbo, China, or at its joint venture unit in Chennai, India.
Measures already taken to improve Demag's global operations include its expansion in June into a bigger, 119,000-square-foot plant at Ningbo, and the February sale of its noncore Ergocast GmbH foundry in Junkerath, Germany.
Smaller product line
On the product front, the company already has reduced its offerings from more than 20 machines lines to 12. It plans to cut that number to just three core lines by 2009.
Those main lines will be the Systec hydraulic range, the all-electric IntElect line and the hybrid El-Exis machines. All the lines will feature modular designs, allowing for particular market variations, Demag said.
The existing Extra, Concept and System series will be replaced by the Systec hydraulic line, first launched in 2005, with larger clamping-force models gradually being added to the current range of 50-210 metric tons. By the end of next year, the Systec range will cover presses of 50-2,000 metric tons.
The all-electric IntElect range is the second core line. Equipped with the NC5 control, and initially built in the smaller sizes of 50-210 metric tons, the line will feature bigger models up to 420 metric tons next year.
Demag's fast-cycling hybrid line - the El-Exis S series, being built in Germany - is produced in the range of 100-200 metric tons. That line also will be expanded by the end of 2008 to include presses up to 1,000 metric tons, all with NC5 control.
Within the core press lines, Demag will offer the rapidly growing Chinese market locally built Dragon hydraulic presses, and soon will build the Chinese version of IntElect (CN) electric machines, each up to 200 metric tons, to meet local design and price demands.
Erkes emphasized that, although assembly of the IntElect in China with Chinese parts will lower costs, Demag will not ``jeopardize the quality.''
A changing focus
Erkes said changes were required to focus Demag on the right markets. A fundamental change in attitude also was necessary.
``We had a European-centric Asian strategy - that is, we looked at Asia from the point of view of Europe,'' Erkes said.
Demag intends to focus on end markets including packaging, electrical equipment, medical devices and consumer goods. Automotive will remain important, including vehicle lighting.
Reviewing the world injection machine markets, Erkes said Demag is dedicating resources to the largest and fastest-growing - the 3 billion-euro ($4 billion) Asian region. Representing 57 percent of the global pie, the Asian market is in transition, gradually demanding larger and more sophisticated injection machines.
Demag is within the top 10 suppliers in Asia, and will raise its current press-tonnage range of 150-200 metric tons there to 200-400 metric tons in 2008, Erkes said.
In Europe - the world's second-biggest market, with a 23 percent share and worth 1.2 billion euros ($1.6 billion) - Demag ranks third. The third-largest global market is North America, with a 12 percent share and a value of 654 million euros ($893 million). In a follow-up online press conference on July 11, Erkes said Demag probably ranks as fourth or fifth among the press suppliers in North America.
The company will adapt, with a ``tailored approach,'' to meet demand at both ends of the technology sophistication spectrum, with high-end machines from Germany and electric presses from China, Erkes said in Germany.
Referring to Demag's decision to stop press production in the United States, Erkes said the company's machines ``have a good name,'' in North America, but the market had evolved away from just hydraulic presses. The Strongsville plant, where the HT line and IntElect press production were phased out in October, was ``underutilized and outdated,'' he said.
Erkes stressed the North American market remains very important to Demag and ``we want to be there.'' The firm, which has more than 8,000 presses in that continent, will maintain sales and service for all machines delivered locally or from Germany.
The machine supplier plans to offer the full range of Titan presses (900-4,000 metric tons) it will manufacture in Asia for sale in the region and beyond, and has some presses on order already. The main demand is likely to come from the automotive sector in Asia.
Erkes did not rule out the possibility of reducing Demag's presence in countries where it has sales or service subsidiaries, such as in Italy, where it recently cut back and now handles service from Germany.