Sector sets another record for production output in 2015
For 2016, the German machine tool industry is cautiously optimistic. “We’re expecting moderate growth of 1 per cent in 2016,” says Dr. Heinz-Jürgen Prokop, Chairman of the VDW (German Machine Tool Builders’ Association), speaking at the organisation’s annual press conference in Frankfurt am Main.
This prognosis is based on capital investment from the major customer sectors, global figures for machine tool consumption, and finally the order bookings at Germany’s machine tool manufacturers.
For the investments, Oxford Economics, the VDW’s forecasting partner, was in the autumn of last year expecting a global increase of 4 per cent. The principal drivers are traditionally the automotive industry, followed by the electrical engineering and electronics industries, metal product manufacturers, and the mechanical engineering sector. Machine tool consumption is predicted to rise by 4.2 per cent. Europe tops the rankings here (plus 4.6 per cent), closely followed by Asia (plus 4.5 per cent) and America (plus 2.5 per cent).
Order bookings at German machine tool manufacturers, an indicator for medium-term business activity, showed a moderate rise of 1 per cent in 2015, to reach 14.9 billion euros. Production output and order bookings are thus settling at approximately the same level.
During the first three quarters of 2015 Asia and Europe ordered 4 and 3 per cent more German machine tools respectively than in the previous year. Orders from China, which account for around a quarter of the total, were down again, this time by 8 per cent. This shows that the restructuring process in the Middle Kingdom will remain an issue for quite a long time to come. Nonetheless China remains important due to the sheer size of its market alone – the country is responsible for one-third of international machine tool consumption.
In 2015, the sector produced machines worth 15.1 billion euros
The VDW’S prognosis is based on the record year of 2015. Last year, the German machine tool industry produced machines worth 15.1 billion euros, corresponding to an increase of 4 per cent. “That’s once again a record figure, following the last high in 2013,” explains Dr. Prokop.
With an export ratio of around 70 per cent, and exports up by 4 per cent to around 9.4 billion euros, markets abroad made a somewhat greater contribution to the overall result than domestic consumption. Contrary to all expectations, Europe did particularly well, with a plus of 8 per cent.
Asia, by contrast, a few years ago on almost level pegging with Europe, disappointed with a fall in exports of 5 per cent. China, the largest market with a share of still over one-fifth, has been severely affected.
In 2015, the sector’s workforce increased by an annual average of 1.5 per cent to around 68,500 employees. Capacity utilisation was running at an annual average of just over 88 per cent, which was about 2 per cent down on the preceding year’s level. The current figure in January, however, shows a renewed uptrend. The order backlog, at 6.8 months, was averaging half a month below the preceding year’s figure.
“Overall, these figures show the sector has once again performed very well. Some of our member companies have reported the best year in the firm’s history,” is Dr. Prokop’s comment on the figures for 2015.
Global business is getting progressively harder
“Nonetheless, the business environment for our operations has become more difficult, and our options for exerting a direct influence are limited,” says Prokop. The newly industrialising countries, in particular, are under pressure, due to the low prices for raw materials, Russia is suffering from the weak rouble and the low oil price, Brazil is mired in a serious recession, while China, with its faltering growth is weakening the most important trading partners. Then there are the numerous geopolitical uncertainties. “So it’s all the more important for our companies, in time of transformative global change, to be on the lookout for new long-term market potentials,” says Dr. Prokop. This applies both to new sales markets, and to new products and services from the manufacturers.
Market potentials for German machine tool manufacturers
Iran, currently on everyone’s lips, offers potentials for German manufactures as well. In the boom times of the early 1990s, they exported machines worth almost 190 million euros. The figure for last year, by contrast, was a mere 20 million euros. The country’s machine tool consumption is expected to increase rapidly from its most recent 82 million. In particular, German vendors are anticipating good sales opportunities thanks to a very substantial demand for modernization among equipment suppliers for the oil and gas industries, and in the automaking segment. In order to reconnect with the traditionally good relationships with Iranian customers, VDW is joining forces with Messe Stuttgart to host the AMB Iran, a trade fair with an accompanying symposium, in Teheran from 30 May to 1 June 2016.
Mexico is also regarded as an exciting high-growth market, driven predominantly by the automotive and aviation industries Mexico’s machine tool consumption rose by an impressive 85 per cent between 2010 and 2014. With 1.5 billion euros, the country nowadays ranks among the world’s biggest markets for machine tools. Germany is the third-biggest supplier, with a share of 14 per cent. German exports have since 2011 climbed by more than 250 per cent. In mid-April 2016, on the initiative of the VDW and with political support, there will be a German exhibition called “German High-Tech in Metal Working” under the aegis of the Expomaq trade fair in León.
Another promising region is the ASEAN bloc, whose countries represent a market volume of 3.9 billion euros. The Japanese have so far been dominating the market, not least because the Japanese automotive industry has a strong local presence. Japan supplies around half of the machine tools imported, Germany a mere 4 per cent. Nonetheless, German exports to the region have risen substantially in the past few years, and most recently totalled more than 150 million euros. “So greater involvement will be well worth while,” opines VDW Chairman Dr. Prokop.
Upgrading competitive advantage with new technologies
“If you want to continue prospering in the face of international competition, it’s increasingly imperative to offer solutions that others cannot emulate,” adds Heinz-Jürgen Prokop. Keyword Industry 4.0: it’s becoming progressively more difficult to attain major competitive advantages in terms of machine technology. For this reason, machine tool manufacturers are well advised to broaden their viewpoints and to think in terms of holistic production solutions. If these are to be consistently adopted throughout a system, this demands profound knowledge of the process concerned in the context of what are sometimes highly disparate customer’s requirements. “No one knows these worlds better than we do, and this is our great opportunity,” is Dr. Prokop’s firm conviction.
Another issue with a definite future is additive manufacturing. It enriches the range of existing conventional metalworking processes by enabling customised or complex components to be produced, for example. More and more manufacturers are accordingly examining the idea of hybrid machines, which combine conventional machining processes with additive manufacturing. Nonetheless, their use is viable only if it creates an additional benefit for the customers that justifies the higher production costs involved. “In the case of customised or complex components or in small series, this is easy to implement; in medium or large series and mass production, there’s still quite a lot left to do in order to achieve competitive unit costs,” admits the VDW’s Chairman.
125 years of success for the German machine tool industry – 125 years of the VDW
All in all, the German machine tool industry is in excellent shape. It is doing intensive work in the fields that it can influence itself, so as to successfully compete with its international counterparts. The majority of companies are taking globalisation on board and are operating all over the world. They are training young people, researching and developing new products, integrating new technologies, and expanding their spectrum of service capabilities. “If they succeed, they will maintain their international competitive lead,” is Dr. Prokop’s firm conviction.
The machine tool industry has since way over 100 years been demonstrating that it can repeatedly re-invent itself, has met and mastered numerous challenges, and never failed to upgrade its leading position in the world. This is equally true for the VDW, which in 2016 is celebrating its 125th anniversary. Over all these years, the association has provided backing and proactive support for the sector.
“Against this background, it’s all the more important to be properly prepared to identify and maintain a shared course, and never lose sight of the shared goal. What we’re relying on here is tradition and experience. What’s also essential is flexibility and creativity if you want to continue being successful even under altered situational conditions,” to quote Dr. Prokop.
As of February 1, 2016, Dipl.-Ing. Martin Roschkowski (50) joins the Board of Management of Mesago Messe Frankfurt GmbH and its subsidiaries Mesago Messemanagement GmbH and Mesago PCIM GmbH. Continuing the proven success of dual leadership at the company, he will lead together with co-president Petra Haarburger. Martin Roschkowski takes over the reins from Johann Thoma, who will be taking up his new role at the Messe Frankfurt headquarters as of May 2016, after nine years at the head of Mesago.
In Martin Roschkowski, Mesago is gaining an experienced manager. For the last ten years, he has held the role of Managing Director at Xylem Water Solutions Deutschland GmbH. Before that, the qualified electrical engineer served as a head of department for a number of years at Weidmüller Interface, where he was responsible for strategic marketing worldwide. Given his technological background and many years of sales experience, he is the perfect choice for Mesago Messe Frankfurt GmbH, an active player in the area of technology events.
“I would like to start by thanking my predecessor, Johann Thoma. Together with Petra Haarburger, he has really made his mark on Mesago in recent years and has helped make the company what it is today. I consciously opted for Mesago for the same reason. I also wanted to contribute to shaping the company and continuing its success, in close collaboration with our customers, partners, and employees,” explains Martin Roschkowski.
Dr. Steffen Haack, member of the executive board responsible for the Industrial Applications business unit and coordinating the sales organization of Bosch Rexroth AG
Industry 4.0 will not only trigger innovations in production technologies – the automation industry itself will also undergo fundamental changes. But at the same time, it will be difficult for many players in the automation industry to part with approaches to which they have become accustomed. Again and again, I encounter the wishful thinking from those with whom I speak, proposing to “go it alone” in Industry 4.0, being the first, staying ahead. On the other hand, there are areas into which news about the exciting potential of Industry 4.0 has not yet reached.
Here, Bosch Rexroth has taken a decidedly different course. Together with partners from the world of IT, we are systematically sounding out the potential of Industry 4.0 and broadening our experience with a variety of small steps. This in turn influences new drive and control solutions, especially in the development of interfaces with the IT world.
From our perspective – and we hope, that of the broader automation industry, much of the path forward has already been successfully laid: For Industry 4.0, Bosch Rexroth offers a comprehensive portfolio of intelligent and open solutions, from intelligent drive technology and highly functional and high-performance control technology, all the way to a wide software portfolio for engineering.
But if many automation tasks have already been accomplished, why is Industry 4.0 implementation lagging so far behind in factories and production halls? The answer: The gap between the worlds of Industry and IT is not yet closed. In order to speed up implementation in this area, Bosch Rexroth is collaborating with numerous companies from the world of IT. In many cases, the aim is to link existing knowledge with available solutions based on open IT standards.
At the Bosch Rexroth trade fair booth, Dassault Systèmes, MathWorks, National Instruments, and Oracle IT companies, as well as the Eclipse Foundation, are presenting just such connections for PLC IPC drives. Thanks to Rexroth Open Core Engineering, they are connecting their solutions through various tools, languages, and platforms, using Bosch Rexroth’s automation portfolio to form a homogeneous, comprehensive solution. In the process, these partners are able to transfer their knowledge and expertise to the machine world in terms of simulation, process, and company software. It demonstrates how machine manufacturers enable this evolutionary bridge building between PLC automation and IT-based solutions as collaboration proceeds, leveraging the value of intelligent integration to make Industry 4.0 a working reality for the world of automation.
Citing its ability to develop innovative solutions and provide extensive support to commission new factory lines, Nestlé USA awarded Rockwell Automation its 2014 North America Procurement Supplier of the Year award for technical procurement – maintenance, repair and operations (MRO). Nestlé USA also commended Rockwell Automation for its superior ability to communicate its supplier relationship management scorecard throughout Rockwell Automation’s organization, using it to gauge its performance as a supplier to Nestlé.
“This award recognizes many years of innovative collaboration and partnership between Nestlé USA and Rockwell Automation,” said Andy Murray, head of technical procurement, Nestlé. “Rockwell Automation is one of our key strategic suppliers, and I’m proud of all our collaborative efforts. Rockwell Automation has innovative ideas, and we would like to see even more. It’s a great pleasure to present this award to Rockwell Automation.”
“We’re honored to receive this award,” said Keith Nosbusch, chairman and CEO, Rockwell Automation. “We pride ourselves on working with the best companies in the world, and Nestlé is certainly one. Nestlé was our first global account, and our relationship is the benchmark that we use to measure all others. Whether it’s sharing technology roadmaps or identifying mutual goals and objectives, our close relationship has driven this strategic alignment. Thank you to Nestlé for being a great customer and partner.”
The goal of the Nestlé Supplier Relationship Program is to strengthen and develop relationships between Nestlé USA and its key suppliers, creating more value for both organizations.
Orders received by the German machine tool industry in the second quarter of 2015 were 10 percent up on the previous year’s figure. Domestic orders were 3 per cent higher, foreign demand grew by 14 percent. There was 6 percent growth in orders from the euro zone, and a 16 percent increase from non-euro countries. Compared to the previous year, incoming orders stagnated in the first half of 2015. Domestic orders fell by 8 percent, whereas foreign demand rose by 6 per cent.
“After a decline in the first quarter of 2015, orders recovered again in the second quarter. This means that the German machine tool industry has presented a balanced half-year balance sheet,” said Dr. Wilfried Schäfer, Executive Director of the VDW (German Machine Tool Builders’ Association) in Frankfurt am Main, commenting on the result. This is mainly due to the significant increase in demand from abroad. Domestic business continues at a satisfactory level despite percentage cuts triggered mainly by the base effect of strong figures in the equivalent period last year.
The main driver of growth in the second quarter was the non-euro zone. Asia – where China posted a slight increase in business, strong orders were received from South Korea and the ASEAN region performed positively overall – was a major factor in maintaining order levels. The United States, however, has been disappointing so far.
Relative to the first half of 2015 the euro countries posted a double-digit growth in orders, providing a greater boost. This is largely due to the strong industrial demand from Spain and Italy which are returning to growth thanks to investment incentives. The development in France is striking. The politically motivated support for the modernization of production equipment is also likely to provide for buoyancy there.
Sales remained the same or were slightly up in the first half. “Achieving the 3 percent increase which was forecast for 2015 now appears somewhat ambitious,” said Wilfried Schäfer. This would be dependent upon an increase in demand in the second half of the year, particularly with regard to domestic orders. German industry should remain in good shape because large groups of customers are export-oriented and should benefit from increased price competitiveness thanks to the weak euro. Confounding analysts’ expectations, the IFO business climate index recovered in July following two falls. “The temporary relaxation in the Greece situation is boosting sentiment in the German economy,” explained Schäfer.
Employment remains high. This is an indication that the German machine tool builders are in good shape for the future despite the cyclical swings. “The industry is strong and is investing in qualified staff,” emphasised Schäfer. In May 2015 almost 72,800 people were employed in the machine tool industry – an increase of 2.3 per cent year-on-year.