Machine Tools Manufacturing could play a key role in European growth

Editor: Eric Culp

Martin Kapp, the president of Cecimo, Europe's association of machine tool producers, is calling on politicians to improve the region's manufacturing environment.

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Speaking to ETMM ahead of the AMB metal working show, Cecimo President Martin Kapp said government policies can spur growth in Europe's mechanical engineering sector.
Speaking to ETMM ahead of the AMB metal working show, Cecimo President Martin Kapp said government policies can spur growth in Europe's mechanical engineering sector.
(Source: Cecimo)

ETMM: You recently noted that the manufacturing sector could help bring Europe out of its growth slump. How?

Kapp: Despite the destructive impact of the economic crisis, mechanical engineering is one of the best-performing EU sectors, with a large trade surplus. It provides direct jobs for three million Europeans. Manufacturing can help to invent new industries, boost the innovation capacity of Europe and equip Europeans to become highly-skilled people. Currently, manufacturing companies are striving to find people with the right skills in Europe.
We are lucky to have maintained a strong research and manufacturing base, which has not been the case for the US, for instance. This is why the US economy lost a large share of its manufacturing due to intensive off-shoring in the past decade. By making the right investments in infrastructure, human resources, research and science, Europe can unleash the full potential of advanced manufacturing industries to contribute towards the knowledge-based low-carbon economy.

ETMM: What national and pan-European laws have been hurting manufacturers?

Kapp: There is no particular piece of legislation affecting European manufacturers. They have been suffering from the overall economic problems surrounding the Eurozone, which have caused investments in Europe to slump. Basel III rules, e.g. tightening up liquidity requirements for banks, are leading to the deterioration of lending conditions with negative consequences on manufacturing companies. Despite the existence of a real demand in the European market, lack of liquidity is delaying investments on the users’ side, which hampers demand for machine tools. Moreover, worsened access to finance prevents manufacturers from making new investments in innovation, thus impairing the competitiveness of European companies on the global stage.

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ETMM: Is there anything in the legislative pipeline that can help?

Kapp: The European Commission published a study in March this year on the competitiveness of the EU mechanical engineering industry, which includes a set of recommendations for policy-makers. The Commission is preparing to issue a Communication to determine priority policy actions for the implementation of the recommendations in this study. We expect the Commission to tackle problems such as access to finance for SMEs, weak domestic demand and investments, barriers to accessing high-growth markets outside Europe, and distortion of competition. As regards the last point, a Market Surveillance Package is in the legislative pipeline. The Commission’s proposal, which is due in the autumn 2012, aims at addressing the problem of ineffective market surveillance in the EU to prevent unfair competition caused by non-compliant products in the internal market.
The review of the Europe 2020 flagship initiative on industrial policy is also foreseen for autumn. We hope that the manufacturing industry and especially production technologies, which are crucial for the innovation capacity of Europe, will receive the attention they deserve. First and foremost, Europe has to develop a comprehensive long-term strategy for manufacturing to address the unfavourable economic climate in Europe which hurts manufacturers. The side-effects of this situation are getting increasingly costly for European manufacturers both in and outside Europe as it hampers their international competitiveness. Recently, Cecimo has repeatedly called on the EU to formulate a European vision on manufacturing. Political support and vision for manufacturing is important for engaging economic players and society as a whole to mobilize resources across Europe for developing advanced manufacturing industries.

ETMM: What are the most difficult problems facing manufacturers in Europe?

Kapp: The major market opportunities for European manufacturers are outside Europe, and mainly in emerging countries. Adapting to globalisation is a major challenge. European companies need to transform their organisational and business models so as to grasp the opportunities offered by high-growth regions. As the share of industrialising Asia in the consumption of machine tools increases at the expense of Europe, European machine tool companies need to adjust their organisation, products and manufacturing accordingly. This is a tough call, particularly for SMEs, which have traditionally been focused on the European market, and requires lots of effort and investment.
The distortion of the level playing field is another major problem. Whereas European manufacturers are struggling to get bank loans or to access export credits, competitors are receiving generous support from their governments. This makes the business proposals of some competitors more attractive to customers, as they benefit from better payment options. Moreover, it is a challenge for European companies to compete with large local companies owned or backed by their governments.

ETMM: There has been a hard push toward sustainability in Europe, which includes the Blue Competence initiative for machine tool builders. How far down into the production chain will demands for sustainability reach? Could tool and mould makers be forced to use cooling water from a sustainable source?

Kapp: I don’t think we should limit our vision of sustainability to a few technologies or product features. Sustainability should be seen as a general shift in both production and consumption patterns towards more efficient use of the world’s natural resources. The market is one factor to drive a change in habits of manufacturers, retailers, users and consumers. Another important thing is that sustainable production solutions should be ecological and at the same time economically beneficial to the industry, so that the impact on the economic growth and jobs is also positive. In this way sustainability could also be beneficial for tool and mould makers.

ETMM: Demand for machine tools is falling in many traditional European manufacturing countries. The Italian machine tool association UCIMU recently said domestic consumption for such equipment will decline 4.2 % this year, and Italian suppliers will ship a whopping 11.1 % less to their home market in 2012. What are your expectations for Europe this year and beyond?

Kapp: The European machine tool market underwent a dramatic slump in the aftermath of the economic crisis of 2009. At the end of that year we had a turnaround, and consumption in Europe has been gradually recovering ever since. Currently, we are witnessing some weakening of this trend, particularly in southern Europe. Provided that the current crisis is solved and confidence on the market restored, I am sure that the trend initiated in 2009 will be continued for some time to come. For 2012, Cecimo predicts the European market will grow marginally by 3% to €12.6 billion compared to 30% growth last year. This is still a far cry from the €17.8 billion in consumption in Europe in 2008.

ETMM: How much has the euro crisis affected European manufacturing?

Kapp: Until recently, the manufacturing industries in Europe had been immune to the debt crisis in the Eurozone. Very high order intakes in Cecimo countries were the best evidence that there was confidence in the markets. However, the uncertainty around the Eurozone and mounting problems are effectively preventing many customers from making any investment decisions. Recently, the International Monetary Fund lowered its forecast for the growth of the world’s economy, primarily because of the situation in Europe. Consequently, the European manufacturers, who are often the world’s leaders, are suffering on the export markets as well.

ETMM: Tool, die and mould making businesses are often very small and highly reliant on credit. Money has tightened up drastically despite the efforts of politicians and central bankers. Do you see any chances for better access to credit in the near future?

Kapp: The feared credit crunch has in Germany, at least, failed to materialise. However, conditions for loans have become tougher. I do not believe this is going to change in the foreseeable future, because the banks are likewise subject to more stringent rules under Basel III. Companies have to adjust to this, and improve their transparency and communication in their dealings with the banks so as to spotlight their opportunities.

ETMM: What kind of new technologies can help tool and mould makers and other companies use to ensure that machining metal becomes more competitive?

Kapp: Our task is to support the customers of the metalworking sector in achieving success in their chosen fields. Against this contextual background, I believe the machine tool industry is very competitive. Its products are innovative and technologically unrivalled the whole world over. Important issues at present include new materials and alternative production processes, like generative modes. There is a particular focus, too, on measures for saving energy and upgrading efficiency levels. Thrusts for higher productivity, complete machining capabilities and process integration also contribute towards more sustainability. With a view to growth and technological developments in the Far Eastern growth markets of China, Taiwan, plus India as well, it is becoming progressively more obvious that technological leadership is crucial to success on the global market. The relatively simple machines are meanwhile available locally. And because competitors in the growth markets are not asleep, we have to work on the next generation of machine tools.

ETMM: Many firms are complaining about a lack of qualified personnel. AMB is offering a range of programmes to attract young people to mechanical engineering trades. What can companies, and state governments, do to improve recruitment in this sector?

Kapp: This development is not new: For many years now, young people have been losing interest in technical careers. This problem can be solved only in the medium and long term. Companies have to continually advertise themselves and take every opportunity to showcase themselves as appealing employers with good prospects for the future. They have to cooperate with schools, technical colleges and universities, so as to attract the attention of potential recruits at an early stage and if possible secure their services. In Germany, they can work together with the VDW-Nachwuchsstiftung so as to stay in contact with vocational colleges, keep their own training operations up to date, and thus be an attractive proposition for young people. Finally, state governments and schools should give engineering and business studies a stronger presence in the curriculum, firstly to underline that our nation’s prosperity is based on these cornerstones, and secondly to demonstrate how exciting the subject matter in these two fields actually is.

ETMM: How would you rate the AMB exhibition? Do you have any suggestions about what visitors should be sure to see at this year's show?

Kapp: The AMB is an important trade fair for production technology. Many of our customers are located in the southwest part of Germany, and don’t have far to travel to Stuttgart. they can visit the fair in a single day. Thanks to the compact size of the exhibition grounds, they can be certain of seeing all the important aspects we’ve been discussing here. And they should definitely not miss out on visiting the VDW’s Blue Competence stand in Hall 7, D51, plus the special show for young people entitled “Mechanical Engineering – a Job with Power“ organised by the VDW-Nachwuchsstiftung in the atrium of the Stuttgart exhibition centre.

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