Sumitomo Heavy Industries Ltd., which now owns Demag Plastics Group, promises to bring a Japanese style of long-term thinking to the German machinery builder - with a common Sumitomo/DPG platform about five years away.
Officials from both companies discussed this new type of ``global'' injection press company - with, yes, factories around the world, but also a global blending of top managers - at Chinaplas, one of the first trade shows since the deal closed March 3. Sumitomo and DPG exhibited in separate booths next door to each other in Shangai.
``Everybody among our competitors - and Demag was included in the concept - says that `we are global,' '' said Raik FlÃ¤mig, DPG's director of marketing. ``But we are really global, together with Sumitomo. We are present all over the world, for all cultures.''
FlÃ¤mig said employees of the German company are ``really happy'' to be owned by a fellow machinery maker, after six years under U.S. financial owners.
``They really like this situation right now, definitely. And we don't have any fears within us,'' FlÃ¤mig said.
In an April 18 Chinaplas interview, officials of Sumitomo and DPG outlined the future of a combined company with total sales of about 700 million euros ($800 million). The sales figure accounts for changes in the dollar/euro relationship.
``We look at the long-term future,'' said Tetsuya Okamura, a Sumitomo executive who has taken over as chief executive officer of Demag Plastics Group, after Klaus Erkes left the company shortly after the sale closed. Okamura, who is based at DPG headquarters in Schwaig, Germany, said he is not an interim CEO and expects to be its long-term top executive.
As the ink dries on the deal, many questions still are unanswered. Will both companies need their own separate China factories, both in the injection press center of Ningbo? Exactly how will Sumitomo and DPG integrate their respective technologies? Company engineers and executives are discussing these issues right now. They're sizing up each company's strengths and weaknesses.
But Okamura, FlÃ¤mig and Katsuhiko Taniguchi, executive vice president and general manager of Sumitomo's Plastics Machinery Division, did talk about the general direction, including details about all-electric machines.
The largest Japanese injection press manufacturer, Sumitomo does injection press assembly at its headquarters in Chiba City, Japan; Pendergrass, Ga.; and a machinery components plant in Ningbo, China.
DPG has assembly plants in Schwaig and Wiehe, Germany; Chennai, India; and Ningbo.
Sumitomo opened its U.S. factory in Georgia 10 years ago. Demag shut down assembly at its U.S. operation, in Strongsville, Ohio, last year. Okamura and FlÃ¤mig said DPG will retain the Strongsville facility for sales and service, with 70 employees there. Sumitomo will retain its factory in Georgia.
For North America, the companies will integrate the sales and service organizations to handle product lines from both companies, FlÃ¤mig said.
In China and Asia, the two companies will keep separate sales and service operations. Officials have not yet decided which strategy to take in Europe.
Sumitomo paid 77.6 million euros ($118 million) to buy DPG from Madison Capital Partners, a Chicago investment firm. Madison Capital had broken out the underperforming DPG from its plastics machinery group, which includes KraussMaffei and Netstal injection presses.
Madison bought the machinery group from Kohlberg Kravis Roberts & Co. two years ago. KKR had purchased it in 2002 from Siemens AG.
Under both Madison Capital and KKR, leaders of the machinery units assembled every three months, to give an update to the owners, including financial details. The idea of private equity ownership is to improve a business, then sell it for a profit.
Sumitomo is looking further out.
``They are every time asking us what we wanted to be within five years,'' FlÃ¤mig said. ``Our planning is for the future - we talk about five years - to have a common platform. Sumitomo every time says, `We want a good solution, not a quick one.' ''
Industry observers will be watching how the companies work together in all-electric injection technology, an area where Japanese press makers dominate.
Demag Plastics Group will continue to make its IntElect line of all-electrics in Germany, FlÃ¤mig said.
``We will continue with the IntElect machine because, mechanically, it's a very good machine for the European market, for the automation integration with complete solutions.''
DPG will use some Sumitomo components to improve the IntElect, he said. But FlÃ¤mig also said that DPG has abandoned its previously announced plans to build IntElects at its Ningbo plant in China. Sumitomo makes all-electrics at its Ningbo operation.
``We will definitely avoid any competition of electrical machines in the Asian market,'' FlÃ¤mig said.
Both firms also make similar types of direct-drive, all-electrics.
``We are now trying to integrate the products,'' Okamura said. ``Our technical people are in discussions about the integration now.''
DPG also will continue to make hybrid machines, which blend electric and hydraulic power, as well as the line of Systec small toggles, Okamura said. All-electric presses are not as popular in Europe as they are in Japan and United States, he noted.
According to FlÃ¤mig and Okamura, DPG will retain its Strongsville facility as a sales and service site, employing 70. In North America, he said, the companies will integrate the sales and service team to handle the product lines of both firms.
In China and Asia, sales and service teams will remain separate, working in parallel. Officials have not yet decided on the strategy for Europe.
Whatever the future brings, Sumitomo's purchase of Demag Plastics Group has made history. Japanese, European and U.S. injection press makers have done technology licensing deals in the past. In the most recent example, KraussMaffei AG and Toshiba Machine Co. Ltd. signed an agreement earlier this year, to develop machinery jointly.
But the Sumitomo-DPG deal marks the first time a Japanese injection press maker has purchased a German one, industry observers said.
After the transcontinental marriage, the combined companies will be stronger than their parts, the officials said at Chinaplas. European machinery makers have a hard time selling in Japan, and vice versa.
Taniguchi said that each company - and industrial culture - brings its own strong points: The Japanese are experts in all-electric technology, while the Germans are good at ``application engineering,'' or supplying a targeted system of injection press, automation and other downstream equipment targeted to each customer, he said.
DPG has good business in automotive and medical molding markets, while Sumitomo is strong in optical products, connectors and micromolding.
FlÃ¤mig said each company will continue to do what it does best.
``The message has to be that we will avoid any competition between our two companies,'' he said. ``As you know, we failed [in that] within the MPM group, with Netstal, KraussMaffei and Demag. We will definitely avoid the situation with Sumitomo.''