Kurtz Ersa - Interview "We want to be an Industrial Corporation that Operates on Multiple Fronts"
Already in February, Kurtz GmbH, a division of Kurtz Holding GmbH & Co. Beteiligungs KG, announced the planning of a strategic reorientation. In an interview, CEO Rainer Kurtz explains the background of the decision and talks about the challenges during the Corona crisis.
With its focus on Moulding Machines, Kurtz GmbH is one of three business units of Kurtz Holding GmbH & Co. Beteiligungs KG. In this business segment with about 80 engineers and technicians, foam machines and foundry machines have been manufactured at the locations Wiebelbach and Wertheim, Germany, as well as in a plant in China for decades. Now the Kurtz GmbH has been reorganized. On this special occasion, we from the SPOTLIGHTMETAL editorial staff were on site at the company headquarters in Wiebelbach and asked Rainer Kurtz, CEO, Chairman of the Management Board about the current developments - also in relation to the corona crisis.
SPOTLIGHTMETAL: In mid February, i.e. shortly before the beginning of the corona crisis in Germany, Kurtz GmbH made public the plans for a strategic reorientation. The reason was "serious changes" in the areas of foam machines and foundry machines. What exactly does this mean?
Rainer Kurtz: The main reason for the strategic reorientation is that we have experienced massive sales declines in both business areas. Firstly, this is due to the fact that one of our largest buyers of machines in the plastics processing sector has been no longer with us due to its own planning difficulties and that we are unable to maintain the volume of the past despite the fact that the order situation is now improving again. Secondly, there is the major debate surrounding plastic packaging, which is unsettling our customers and is leading to overcapacity on their side. Consequently, no investments are being made at the moment. And thirdly, the automotive sector is also currently undergoing technological change. Despite very good business in the past with automotive suppliers and OEMs, there is currently also overcapacity here. We are experiencing a time when the focus is no longer only on combustion engines, but also on battery-powered and hybrid vehicles and even hydrogen. Where the journey will take us cannot be said with certainty at the moment, which is why investments are also being stopped here. Since we produce all Kurtz Ersa products at our local site here in Wiebelbach and in China, the other two divisions, Electronics Production Equipment and Kurtz Ersa Automation, can partially compensate for certain losses in the Moulding Machines field. But in the long term, production must be cut back by half, and at this point structural changes are absolutely necessary.
SPOTLIGHTMETAL: What concrete changes does Kurtz GmbH plan to make in the course of the reorientation?
Rainer Kurtz: As a first measure we had to cut 20 jobs. However, in the long term this step was not sufficient, so that we shifted another 40 employees to other growing areas of Kurtz Holding GmbH. Furthermore, we decided to sell the entire "Mechanical Processing" division. The corresponding organizational process has already been set in motion, so that the complete prefabrication is expected to start on August 01, 2020 under new ownership. A further component of the reorganization of Kurtz GmbH also provides for the launch of a new business segment, but I am not allowed to reveal anything about the direction at this time.
SPOTLIGHTMETAL: Then it will definitely remain exciting at Kurtz GmbH. Speaking of new developments - has the corona crisis had any influence on the planning and implementation of organizational processes in the meantime?
Rainer Kurtz: Since we presented the strategic realignment to the Advisory Board on January 24, 2020 and it was accepted, we have consistently implemented the plan. Although the coronavirus did not have a direct effect on the restructuring, the crisis has instead caused significant declines in business for our entire Group worldwide. In terms of order intake, the first quarter still went more or less as planned, as we had included the Chinese New Year Effect. In the second quarter, our expectations were already slightly disappointed, and now in the third quarter we expect the low point of incoming orders to be reached. We are currently at -25 % to -30 %, in some areas even at -40%, and the effects of this low order intake will also be felt in the fourth quarter in sales. We also believe that we will not yet be back in the first quarter of 2021 where we would have been without the corona crisis. We have even planned for a corona effect in the second quarter of 2021 and hope that the situation will return to normal in the second half of 2021t. In 2019, we were able to achieve sales of around 263 million euros and had even higher targets for this year, but due to the crisis we are now losing around 50 million euros in sales. This is very unpleasant news, but we have already learned a lot from past crises and are well prepared. For example, we have set up a contingency plan. For example, this plan provides for short-time working as a cost-cutting measure - we have deliberately refrained from further job cuts in order to maintain the current number of employees. In the two weeks while production was completely shut down in April, employees reduced accrued overtime and took holidays.
SPOTLIGHTMETAL: Apart from the short-time work and the reduction of working hours - which personnel measures did Kurtz GmbH still have to take due to corona?
Rainer Kurtz: We have taken the virus very seriously from the very beginning and made sure that we kept it out of the company. For this reason, we sent employees into quarantine for two weeks at the slightest suspicion and many of them worked from home. This was possible because we just built a new data center last year. So now we have two data centers - one in Wertheim and one in Wiebelbach - which are connected to each other. That's why it was possible for even design engineers to work from their home offices via virtual accesses with the performance they are used to. As a further protective precaution, we measured fever at the entrances and set up disinfectant dispensers. Of course, an open information policy was also part of the agenda. At the beginning of March, for example, we already introduced a daily telephone conference in which management, works council and even disaster control staff took part. During these meetings, we created clear rules for dealing with the coronavirus and brought our employees up to date on the current state of knowledge accordingly. We also encouraged everyone to use the corona warning app so that we could also take full advantage of the digital possibilities.
SPOTLIGHTMETAL: Regardless of the corona crisis, the Kurtz Ersa Group has already sold the iron foundry in Hasloch in 2018. Did the start of the reorientation in reality already take place at this point or did the decision have other reasons?
Rainer Kurtz: The iron foundry in question and also the contract work division was part of our former Metal Components business unit. Three foundries belonged to this division. These included a sheet metal processing plant in Wertheim and one in Baiersdorf near Nuremberg, which also included this small part of mechanical processing. And this business made up the largest field in the Kurtz Ersa Group in 2007. Now we will have completely eliminated this business sector as of August 01, 2020, but we have grown nevertheless. So we have already undergone a major transformation over the last 13 years, in that we have parted with foundries, sheet metal processing, mechanical processing and now also with prefabrication. This is part of our long-term strategy, because we realized back then that we were too complex and that we had to follow a clear line. We want to be an industrial group that operates on multiple fronts, and we have now succeeded in doing so: We still have three business units, namely Electronics Production Equipment, Moulding Machines - currently undergoing restructuring - and our newest unit, Automation, in which assembly lines are automated. So we are now a pure engineering group with a few standard products and the ability to integrate systems.
SPOTLIGHTMETAL: In the future, Kurtz GmbH will concentrate primarily on the business areas Automotive and Protective Solutions and offer comprehensive solution concepts to customers from the automotive and plastics industries. To what extent can this increased focus on the automotive industry be matched with the reduced demand for castings?
Rainer Kurtz: Our customers in the automotive industry are not only from the metal but also from the plastics sector. We have therefore restructured our activities and now offer expertise in the area of Protective Solutions. This means that we manufacture the machines that are used, for example, to produce bumpers, side impact protectors, dashboard padding and tool carriers from foam plastics. In addition, we are working on something new, for example, innovative applications for hard and foam plastics in the bodywork area are currently in the pre-development phase. There will be other new areas - also from the metal sector - but the time is not yet right to talk about them in detail.
SPOTLIGHTMETAL: The "Future Business" competence centre, in which new technologies are analysed and developed, will also be decisive for strategic future design. How does the "radiofrequency technology" developed there, which you describe as a world first, work, and which industries should benefit from it?
Rainer Kurtz: For the foaming process to work at all in the production of particle foams, it requires water vapor. So anyone who buys our machines to produce parts from particle foams also needs a steam generation system. But such a plant is not worthwhile for a single machine, as the purchase costs are between one and two million euros. A typical customer with a steam plant thus feeds 10 to 40 machines. This is the actual situation. However, many customers would like to produce individual applications themselves, but cannot afford to purchase a steam plant. That is why people have been looking for a way to get away from steam for decades. With radiofrequency technology, we have found a first functional and industrially suitable solution for foaming plastic particles. The process is very similar, except that electromagnetic waves are used instead of steam. The change in the electrical fields causes the plastic molecules to move rapidly, causing them to become hot and have the same effect as steam.The advantage, however, is that the energy is only absorbed by the foam, so that the machines and tools do not become hot, unlike when using steam. In this way, not only energy is saved, but also time. At the plastics trade fair in Düsseldorf this method was announced as a world first, which has given us a lot of encouragement. This worldwide know-how lead will strengthen us in the market. So this is our future business!
SPOTLIGHTMETAL: Thank you very much for the interview, Mr Kurtz.