Interview 100 % Lightweight Automobile Design = 100 % Cast Aluminum
The concept paper "Aluminum casting: Success story part 2" created by Johannes Messer Consulting describes the past, comments on the present and motivates for the future of the aluminum casting industry. We spoke to business owner Johannes Messer about the contents, findings and recommendations of the paper.
The concept paper implies that the foundry industry, more than other automotive suppliers, has been affected by the transformation in the automotive industry and the effects of the current pandemic. What is your opinion about this?
Most of the foundries in Germany already had a "previous illness". Despite know-how and productivity advantages in international comparison, they have not been able to keep up economically in the international benchmark for several years. The foundries, with their high personnel and energy requirements, are not able to compensate for the disadvantages of the location (taxes, energy, and wage costs) here in Germany, despite their technological lead and highest productivity. Transformation and the COVID-19 pandemic have made the overall situation even worse.
Compared to other automotive suppliers, foundries are currently particularly affected by insolvencies. Doesn't it make sense then that a "market shakeout" is taking place now?
The foundry industry has been fighting for years against unequal conditions of competition because of the aforementioned locational disadvantages. The conditions of competition are not the only reason for the financial imbalances, but they are the most important.
However, the possibilities of companies to compensate for these disadvantages are limited. Many foundries have therefore moved parts of their production to neighbouring European countries in recent years. The main motivation was and is to participate from the low-cost advantages. Proximity to customer markets, which is often used as an argument in such relocations, is often of minor importance.
What other reasons for the current problems do you see besides the location disadvantages?
Answering this question in detail at this point would certainly lead too far. You will find detailed answers in the concept paper. In principle, however, it can be stated that foundries in Germany have developed more slowly in recent years than in the past, both technologically and economically. I currently see the main need for action in the following areas:
- Alignment of the product portfolio
- Economically focused technology orientation
- Managing investments
- Merging the value chain
- "Preserving and shaping" liquidity
- Find partners
- Understand CIP as a lever for success
- Accept and implement the new normality
- Changes in line with the key success criterias
- Look beyond the box
To be successful again in the short term and to remain successful in the long term, these issues must be dealt with now at the latest. The complexity of the topics and their importance for the company's success require individual a detailed revision of the corporate strategy.
Basically, you assume that the German foundries are competitive. Will the necessary market still exist in a few years? In the long term, the transformation will make today's powertrain “superfluous”.
Foundries will inevitably lose volume with today's bread and butter parts. The foundries will lose cash flow due to the volume losses from the powertrain. These losses can only be compensated for with new parts after a time delay due to corresponding start-up costs. The resulting risk is to be assessed as particularly high in view of the current liquidity situation and the upcoming investments in connection with the transformation.
The transformation will also open opportunities for foundries. The trend towards lightweight design, as one of the essential levers for increasing the range of the BEV, will continue to increase. Casting as a process and aluminum as a material are the guarantees of success at this point. There are opportunities for new cast parts in the field of electromobility, autonomous driving and chassis and structural parts.
You consider the foundries competitive and see the necessary market in the long term. These are the essential requirements for all companies to operate successfully. In your opinion, what needs to be done to take advantage of the opportunities available and to make the foundries more successful again?
Yes, I think that foundries in Germany are largely competitive. However, I also say that the foundries must work harder on the success levers of technology and productivity in order to at least partially compensate for location disadvantages and to secure their competitive in the long term. Politicians, trade unions and foundry associations must also contribute their part and bringing taxes, energy and labour costs close to the international level of competition, so that the foundries can return to the economic track of success.
As far as the market volume is concerned, there are opportunities to generate further growth. The extraordinary foundry network (metal suppliers, tool makers, foundries, machine manufacturers, research workers) in Germany/Europe can exploit these opportunities. Together we can and will succeed in making lightweight design technologically and economically possible “everywhere” in the automobile through aluminum casting.
In my opinion, success depends on the foundries doing their homework successfully on an individual basis and all those involved working together on the following topics:
- Reduction of the location disadvantages (taxes, energy and wage costs)
- 100 % lightweight automobile design = 100 % cast aluminum
If we all want success together, the extraordinary foundry network in Germany/Europe is able to make part 2 of the success story at least as successful as part 1.
Thank you for the interview, Mr. Messer!