Total overhaul and movement to China

Total overhaul and movement to China

By Virginia F. Bodmer-Altura

Oerlikon Textiles announces major reorganization steps and a move of its headquarters to China but increasing R&D investment in Germany and China

Only a short while ago a Swiss financial paper titled Oerlikon means located in China and underlined the importance of the Chinese market also for Oerlikon Textile but also as a basis for Asian business. Rumours were expecting some dramatic changes in order to make the textile machinery business more rewarding.

Now the steps are made public: The up to now five textile machinery and components divisions will be merged into three business units. This means no longer the brands and company name (Neumag, Barmag, Schlafhorst, Saurer, Textile Components) will guide the different business units but the newly created business units will be managed as of January 1, 2012 according to their business activities, meaning Manmade Fibers consisting of Oerlkon Neumag and Oerlikon Barmag. Natural Fibers entail Schlafhorst and Saurer and the third unit will be Oerlikon Textile Components. The company communicates those changes as a simplified organisational move and assure that the branding will be unaffected and a strong order stock into 2014 is another convincing argument used.

That’s not all, the headquarters of Oerlikon Textile will move to Shanghai and this will be the place for the new Oerlikon Textile CEO and the CFO and by the end of 2012 more than 40% of all senior textile management positions (today 10%) will be based at Oerlikon’s new office site in Chinese Shanghai. The position of COO (Chief Operating Officer) will be eliminated. Already now nearly 45% of Oerlikon Textile empolyees are based in Asia and their share will increase to 50% by the end of 2014.

Also the CEO of Oerlikon Textile Thomas Babacan is leaving and will be replaced by Clement Woon (52, Singaporean) according to in-house information “an internationally experienced executive”. He held management positions with Thomson Consumer Electronics, Leica Group (President of Geosystems Division) where he expanded business activities to Asia-Pacific, Europe, the Americas and Middle East regions. He served from 2008 until now as President and CEO of SATS Ltd.(airline caterer/ground handling, turnover around CHF 1.2 billion) in Singapore. He holds A Bachelor of Electrical & Electronics Engineering and a Master of Science degree in Industrial Engineering from the National University Singapore as well as a Master of Business Administration from Nanyang Technological University in Singapore.

There was made an indication that 2011 around 70% of Oerlikon Textile sales derived from Asia and thus rectifying a translocation to China.

Oerlikon Textile will increase its 2012 R&D investment to around CHF 60 million (worldwide CHF 80 million) in Germany and is reinforcing and expanding such activities in China with a focus on innovations such as the recently at ITMA launched Autocoro 8 from Oerlikon Schlafhorst, so it will be mainly regional adaptation where as it seems that the core R&D activities remain in Germany.

What will be the consequences of the relocations announced? Certainly the actual life of the companies and their management and employees in Germany and Switzerland will be affected because not all of those earmarked for Asia will be ready to dislocate. There remains also the question how the R&D departments and their heads and employees will react when they are deprived of a direct local contact with management and sales people so far in-house. This exchange seems to be vital to be continuously aware of customer demand and to be aware and form part of the necessary guide lines.

I believe that this is a dramatic development in the textile machinery industry in Germany and Switzerland. It will probably result in further consequences for Germany’s textile machinery industry and its sub-suppliers.

The decision is certainly controversial because Oerlikon Group CEO Dr. Michael Buscher states on one hand that the actual Oerlikon Textile business is on a good track with record margins in the ongoing year and beyond. On the other hand he continues with the announcement today we are positioning Oerlikon Textile closer to our largest customers and consistent with our strategy to further increase efficiency and profitability.

This means that the phenomena continues that there are record margins and earnings and still the segment is practically moving to Asia apart from R&D activities and remaining manufacturing. Fine, the profitable business seems to be based on the thriving business in Asia. But it remains to be seen how the world wide customer will react to the message published by Oerlikon, because this is not yet the end of relocation within the groups other segments. Up to now always quality from Germany and Switzerland were the distinct sales arguments but I wonder if global customers will appreciate the headquarters to be in China instead of Europe and what this fact will be triggering in the minds of textile investors and also to be probably confronted with totally new faces on part of Oerlikon Textile for new business negociations and also the CEO is not familiar with textile customers and textile machinery?

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