Cuts at KraussMaffei to spare US, assembly jobs

Machinery maker KraussMaffei Technologies GmbH is in talks with workers' representatives in Europe over "several hundred" layoffs for the German company, although it says those job cuts will not impact its North American subsidiary.

The war in Ukraine, supply chain disruptions and transportation bottlenecks contributed to a loss of some $230 million last year at KraussMaffei, including a goodwill impairment of at least $108.6 million.

Planned projects — such as moving the company headquarters and manufacturing plant in Allach, Germany, to a new facility about 15 miles away in Parsdorf — also are taking a financial toll on the builder of machinery for injection molding, extrusion, reaction process and additive manufacturing.

Since 2018, KraussMaffei has invested more than $100 million in four new locations as part of a modernization strategy. The other three sites are Jiaxing, China, and Einbeck and Laatzen, Germany.

During the same period, the COVID-19 pandemic struck, cities locked down, the supply chain kinked, Russia invaded Ukraine, inflation hit globally and interest rates spiked.

Now company officials say tough steps need to be taken to shed expenses, including the layoffs of "several hundred" employees whose jobs are not related to manufacturing and assembly.

Details, including the number of job cuts and the affected sites, will be negotiated with the Works Council during the next few weeks, a company spokesman said in an email.

The layoffs won't extend to subsidiary Krauss-Maffei Corp. (KMC) in Florence, Ky., the spokesman also said. The North American group offers sales, service and a 30,000-square-foot innovation center that can handle short production runs to help customers in the medical, logistics and packaging markets on the injection molding side of the business and recycling and profile applications on the extrusion side.

The overall company goal is simply to make money again selling machines.

"In the light of internal and external challenges, taking actions to enable us to be more competitive is important to restore profitability at KraussMaffei," CEO Li Yong said in a Feb. 28 news release. "Therefore, various measures have been initiated to improve operational performance, to increase work efficiency and to reduce the cost base, including job reductions. We are confident that KraussMaffei will get back on the road to success."

A profit warning published Jan. 30 on the Shanghai Stock Exchange says KraussMaffei lost between $230 million (RMB 1.58 billion) and $275 million (RMB 1.89 billion), according to preliminary estimates for the audited 2022 annual report.

The figures include a goodwill impairment of at least $108.6 million.

While the parent company, state-owned China National Chemical Corp., saw sales increase overall, its "important subsidiary," KraussMaffei Group Ltd., experienced increased losses, the profit warning stated.

KraussMaffei also ended 2021, 2020 and 2019 in the red.

The profit warning lists a slew of factors, including Russian troops invading Ukraine on Feb. 24, 2022.

"The downward pressure on the economy continues to increase, and KM Group's business is concentrated in Germany and the entire European region," the profit warning says. "The problems of chain instability, significant increases in the prices of major raw materials and energy, and logistics and transportation bottlenecks have not been fundamentally improved. KM Group material purchases, order production, product deliveries and revenue recognition were significantly affected."

The job cuts will not be the only action taken by KraussMaffei to reduce spending.

"In a next step, we are now adjusting our cost base. We are convinced that the company has thus laid the foundations for the turnaround and the return to growth," said Zhang Chi, chairman of the supervisory board.

The combined impact of internal and external factors caused KM Group to lose money during the first half of 2022, according to the company's 2022 semiannual report.

A goodwill impairment test is being conducted to closely look at key parameters, such as growth rate, profit rate, discount rate and more, to estimate the present value of future cash flows and recognize any goodwill impairment loss.

An impairment charge is a process used to write off the worthless goodwill of assets that have dropped in value.

The company expects a provision for goodwill impairment to be in the range of $108.6 million (RMB 753 million) to $143.6 million (RMB 995 million), according to preliminary figures cited in the profit warning.

When ChemChina acquired KM Group for $1.01 billion in 2016, the new owner said the deal generated goodwill equivalent to $500 million (RMB 3.46 billion).

KraussMaffei became part of Beijing-based Sinochem in 2020 when the latter merged with ChemChina to create a company that holds positions in plastics and rubber materials and machinery, as well as real estate, finance and especially oil.

Part of the plan for KraussMaffei to grow again includes becoming climate neutral at all plants by 2030.

A big step will be taken when the move to Parsdorf is completed in mid-2023. One of Europe's largest photovoltaic solar systems then will go into operation with an output of 8.0 megawatt peak (MwP).

The modern building also has a combined heat and power plant, heating and cooling sails in the offices to regulate temperature, active hall ventilation, lights with motion sensors and 240 electric charging stations for electric vehicles.

The company says the Laatzen plant also will meet the highest environmental standards. Both sites will be certified to the DGNB system (German Association for Sustainable Building).

KraussMaffei's HQ relocation project is the largest one in the Munich area since 1992.

The new site will house three production halls, a main administration building, four office and social buildings, two multistory parking garages, a canteen, a cafeteria and a customer experience center.

Whether it's factories or machines, KraussMaffei officials describe their vision as "building better for a sustainable future."

KraussMaffei's construction took place on an ambitious schedule, with the company investing a "three-digit million euro sum" into the four sites in Germany and China from 2018-22.

Amid the brick-and-mortar projects, sources have told Plastics News that KraussMaffei officials flirted with a plan to sell Netstal Group in 2021.

Based in Näfels, Switzerland, since 1961, Netstal builds injection molding machines with clamping forces between 80 and 1,000 tons for the packaging, medical and beverage markets, including PET-Line-brand preform systems.

Netstal employs more than 500 people worldwide and has been part of KraussMaffei since 1992. It was renamed KraussMaffei High Performance AG several years ago.

Then, in mid-August 2021, KraussMaffei announced it would turn the business into an independent unit with its name reverting back to Netstal, effective Oct. 1, 2021.

At the time, KraussMaffei CEO Michael Ruf said the change took into account "the wishes" of customers wanting the Netstal brand and Netstal organization under a common name.

A few weeks later, in an online meeting held Sept. 10, 2021, an official with Cham, Switzerland-based Benpac Holding AG told employees of Vaughan, Ontario-based Niigon Machines Ltd. that Benpac had acquired the Netstal business and that Niigon would be next.

However, neither deal materialized. On Sept. 24, 2021, Niigon filed for bankruptcy and all employees were immediately terminated.

KraussMaffei officials have denied that there was ever a plan to sell Netstal. Asked if a failure to sell the unit was a contributing factor to KraussMaffei's current financial problem, the company spokesman responded: "KraussMaffei and Netstal are a good match. We confirmed that many times during the last years, also during K2022 last October."

KraussMaffei has encountered some turnover in its executive ranks in recent years.

Karlheinz Bourdon, a senior vice president of integration for KraussMaffei Group and a Plastics Hall of Fame inductee, left in 2017. The engineer developed injection molding machinery and computerized processes, including robotics and computer integrated manufacturing.

In 2019, KMC President Paul Caprio left after 10 years to pursue other endeavors. He was followed by Matthias Sieverding, president of extrusion technology, and Bengt Schmidt, vice president of extrusion sales, in 2021.

Most of the openings were filled by new hires from outside the plastics industry.