Discussion

By Dr Joe Webb on Jun 22, 2009

Any company that gets bailout money may have an advantage in a financial sense, but the companies that don't get it have a longer-term marketing advantage. They should keep pounding away on their own financial management that they did not need to be bailed out, and that their strategies for coping with the downturn were more forward looking, and that very proactive management style permeates their company and their product design and service.

 

By Pat Berger on Jun 22, 2009

When I see a bailout it raises many questions. Why do they need a bailout? What is their competition doing right that they don't need a bailout? How viable is a company that needs a bailout? Is it more cost effective for government to provide aid than pay extended unemployment and retirement and health care cost for a company that could go belly up? What are the long term consequences of buying equipment from a company that could go belly up? Who will take care of parts and warranty issues? Would I be better off buying from a company that doesn't need government bail out? The companies that do not get bail out money do they have better technology?

 

By Peter on Jun 22, 2009

What, if any, is the difference here from a 'Phoenix' Print Company? To my mind there is an obvious imbalance against the likes of KBA and the rest just as the 'Phoenix' or Print Co (2009) Limited is able to run an operation with a significantly reduced overhead compared to those that did manage to live within their means.

 

By Adoniram on Jun 22, 2009

"Bailout" is an emotionally charged word and while Pat raises many good questions, I have to wonder how different the language surrounding some of these loans would be if they were described as "low-interest, government subsidized lines of credit." Obviously with the public state of Heidelberg, the language wouldn't make a huge difference, but for many other companies considering "bailouts" it might very well be a deal-breaker. If Heidelberg's competitors are complaining about unfair competitive advantages, then something seems out of place. Either, a) Heidelberg isn't as in dire need of capital as it might seem (unlikely) or b) competitors are under equal fiscal pressure and are not yet willing to look into the "bailout" option. There are probably other concerns as well, but it strikes me odd that a financially sound corporation would complain about an unsound one trying to shore up losses. It would be like having two competing hardware stores in a town and one of them complaining about firefighters' use of water when their competitor's building started burning down.

 

By Michael J on Jun 22, 2009

Adoniram,

You make a very important point about the word used. Bailout is usually used by the mass media because everyone seems to know what that means.

But, if you look at it as a low interest loan, with sometimes onerous to management conditions, it's just another business deal.

It's instructive to watching the bankers in the States fighting to return their "bailout" money once they realized it means that they are subject to debt holders demands for good managment management.

In the case of GM, it's sometimes overlooked that half the board of directors and the CEO got summarily fired. If the debt holders and share holders had been paying attention in the first place, they would have been replaced long ago.

What is new in the States, is that the money comes with lots of strings that they are not afraid to enforce.

 

By Lithoman on Jun 22, 2009

Heidelberg has become the GM of printing presses. Both were the biggest in their industries. Both were deemed to big to fail. Both have extensive product lines. Neither one has a strategy ten years down the road.

Heidelberg’s competitors have cut back reduced costs and pretty much have gone into hibernation until this economic downturn blows over. Unfortunately the German manufactures really don’t have a strategy other then to sit tight. When the economy turns around, being the largest manufacturer of newspaper presses (manroland) won’t help the company grow. Heidelberg’s large format program is sucking hundreds of millions of Euros from the company. If it survives they still will have to slug it out with manroland and KBA for ever tiny piece of market share. When could this division ever become profitable?

The market for printing presses is changing. The question is how will the manufacturers respond? So far their strategy is to sit tight and they hope when the world economy turns around they will go back doing what they have been doing for the last ten years.

 

By Beckett on Jun 22, 2009

This isn't a Heidelberg problem. This is a structural problem. "Too big to fail." and "Bailout." are both completely loaded statements. Big business and industry are expecting hyper-laissez-faire-capitalism to keep going and government is expected to provide the crutch. Over use of debt (provided by fiat currencies), and over use international equity (a side effect of globalization) has allowed unsustainable over production and over consumption. Market forces forced this leveraging upon them. When it hit the fan Heidelberg (like many other industries) couldn't stop the production lines fast enough and had planned on the production to pay the off the debt further perpetuating the problem. If companies of this size default (and had to the follow the same laws of small business) it would cause massive social upheaval through unemployment which is without surprise politically unpopular. These companies that are "Too big to fail." are eating at small and medium business stifling competition shifting tax burden. We praise the market when it accelerates our living status but we shun and attempt to subvert it when smacks us and tells us no. The more political capital you have to play with the more subversive you can be.

 

By George Alexander on Jun 22, 2009

I imagine the recession hit Heidelberg worse than its competitors because Heidelberg is so deeply into small-format sheetfed presses. The relatively small companies that buy those presses are probably more likely to postpone investments in tough times and are more likely to get turned down by banks when credit is tight than the bigger companies that buy web presses from KBA and Manroland. If that analysis is correct, it could be a major reason that Heidelberg needs loans while the others don’t. In other words, Heidelberg isn’t necessarily doing a worse job of handling the current crisis than its competitors; it just made a wrong long-term bet on small-format sheetfed, and that strategy is devastating the company now.

Re: Lithoman’s comment that the press manufacturers “will go back doing what they have been doing for the last ten years,” I think they know better than that. For example, at the recent KBA annual meeting, President and CEO Helge Hansen told shareholders, “… like many other industry insiders, once this crisis has passed the KBA management board does not see the global market volume for press technology returning to the high levels of 2005 or 2006 for the foreseeable future.” KBA plans to move more into packaging and “green energy technology” (does that mean equipment for printing solar panels?) in the future.

 

By Michael J on Jun 22, 2009

Just curious, does Heidelberg have any program to go into printed electronics? From what little I've read I would think that could be a quickly growing market after this all settles down.

 

By Ed D. on Jun 22, 2009

I been in ups and downs for 30 years in this business. But this time is like none we have seen.
My bet is at the end it will take out 50% . Business will never be the same in Print. Every one is looking to save cash

 

By George Alexander on Jun 22, 2009

@Michael J, about printed electronics:
I have not heard anything from Heidelberg about printed electronics, but my guess is they won't be active. Most R&D in the field is focused on flexo, gravure, screen printing, and inkjet--next to none on offset. And it's all roll-to-roll. I don't think there's a sheetfed opportunity here.

 

By Adam Dewitz on Jun 22, 2009

A company called Quantum Paper had retrofitted offset printing presses to print electronics in the past. More info here from May 8, 2006 http://members.whattheythink.com/home/060508.cfm

It appears the company is now called NthDegree Technologies (http://www.nthdegreetech.com)

The samples I saw at a TAGA conference a few years ago were pretty cool.

 

By Erik Nikkanen on Jun 22, 2009

Of course if a company is suffering more than their competitors today it is because they did not make the right moves years ago. They were either foolish with their money, such as when Heidelberg bought back it shares at a high price or made wrong technical decisions such as giving up web presses in order to concentrate on sheetfed. One could see them painting themselves into a corner that now they are having some problems.

When an industry is shrinking, it is even more critical to innovate to gain a sustainable competitive advantage. Wasting money developing dead end technologies such as the Anicolor does not help. Nice concept but not a breakthrough technology.

Increasing market share will only be obtained when the market can clearly see that you have a better technology that performs better at a lower cost.

The engineers at Heidelberg are not stupid but they do not take steps to innovate enough. I don't think one will find Lockheed styled "skunk works" at Heidelberg where new scientific ideas are pushed to the limits at relatively low cost. The fastest plane in the world was designed in about 1958 at the Lockheed skunk works.

Over three years ago, I did get a response from some high level Heidelberg engineers regarding my Ink Transfer Blade (ITB) technology.

They said,"We see a certain potential in this ITB technology. The major opportunity of the ITB is that the state of the ink in the ink train less effects the ink feed rate into the inker (feedback-free inker). We expect a greater independence of the ink-water balance and the temperature conditions in the inker, perhaps also different press speeds might less influence the metered ink amount."

They kind of got the idea but could not make the move to test. Testing for them requires a highly structured approach and not one that breeds innovation of new ideas. So over three years later, they are in a mess with no indication of any special technology coming. Nothing shows up in their recent patents to suggest anything special.

Smart people who make dumb decisions. Deciding to not go down the ITB route, which would have helped explain a lot of things in the press that could have further been developed into other effective tecnologies. Not investigating the ITB, opens the possibility for other press manufacturers to take advantage.

The problem is that the other press manufacturers also have the same kind of smart engineers who make dumb decisions or just no decisions at all. That is why the industry still has 150 year old technological concepts to feed ink inconsistently into their state of the art presses.

If you want to kill off the competition, you have got to think differently and do different things. Things that you may not believe in but need to find out for sure if it is a true possibility. Complaining about subsidies is not the way to do it. Testing theory takes very little money. Just do it!

 

By Neil Stratton on Jun 23, 2009

Before everyone gets carried away with the terminal decline of Heidelberg; what Heidelberg is receiving is access to funds under a German government programme that is not specific to either Heidelberg or the printing industry or companies deemed 'too big to fail'.
It's a German government programme designed to support its industry (all industry not just print suppliers) and all sizes of company, not just big ones. It's a programme that is being made available because of the difficult conditions being faced by much of German industry, not just Heidelberg.
It provides access to a mix of loans and guarantees on which interest is charged at rates described as being based on capital market rates.
To receive funds under this programme companies/projects must be deemed to be viable were it not for the rather unusual crisis that has affected the world economy over the last year or two -- something that has affected not just Heidelberg or German press manufacturers or Germany.
The programme that Heidelberg has decided to take advantage of is one that its German rivals could avail themselves of if they deemed it sensible given their commercial situation and the terms of the programme. If they choose not to that's a matter for their commercial judgement; if Heidelberg chooses to do so that's a matter for its -- we'll only know who was right a year or two down the line.
However, a loan based on commercial rates that is also available to its rivals strikes me as neither a bail out nor a distortion of competition.
In any case, as some of those crying 'foul' are well aware, Heidelberg is far from alone in reporting losses, falling order books and cutting jobs -- remind me which major press manufacturer recently parted company with its CEO.

 

By Mark Haworth on Jun 23, 2009

revelations regarding Heidelberg's financial health have been the topic of discussion for some time. It is just now that the pressures of a slowing economy have "caught up" with the demands of borrowing money and having trouble paying it back. The Press builing business demands cool thinking and long range planning to be successful since lead times from development to production are quite long and the investment is huge. Heidelberg has long suffered denial in that what they take on and pursue should be considered industry leading and financially justified, because we make it, it must be good. Take for example the digital offering, DI etc which grew into the mid sized offset presses. This bombed and few if any of those presses which were new just 8-10 years ago exist today and are gone or have been converted to conventional printing. They sold the nextpress so bottom line, hundreds of millions spent and lost. Take for example the web direction for them. Buying Harris web was a huge expenditure with limited success. In the end too expensive to maintain and inovate against competitors. Result, sell the operation, more losses in the tens or hundreds of millions. Take the status of large format. It wasn't enough to just tip toe into the market and build a press, they had to build a gigantic factory before selling their first ten presses. Mayby someone didn't notice back in Wiessloch that others like KBA, Roland, Mitsubishi have been in that market and entrenched for years, were they just going to settle for second or third place? not likely. Result another arrogant adventure likely bitting the dust with a suspect product, introduced at the wrong time with losses on into the foreseeable future. The real loosers are their current customers who now fret over their investment and have to pay for this mis management with every transaction. Contrast this with others perhaps like Komori who at this very moment is expanding it's two year old Tskuba plant to soon be the largest press plant in the world at nearly 550,000 sq ft. With little debt, a history of inovation, lean manufacturing and distribution Komori is introducing new models as we speak. No bail out required if you are "minding the store".

 

By Erik Nikkanen on Jun 23, 2009

Mark, thanks for the added history of Heidelberg's activities that have increased their present problems. I was not aware of some of those details.

It is understandable that you are proud of Komori's measured approach to innovative development but I have to say that even Komori has failed to take innovation in the right direction. A lost opportunity.

Many of the Komori innovations related to colour control are aimed at getting around the legacy press design thinking of the past. Komori is just as vulnerable as the other press manufacturers to some press manufacturer that breaks away from the existing faulty press design concepts and innovates higher performance that is obtainable at a lower capital cost.

You may think that your concepts in the Komori presses now are very clever but what will you do if some other supplier makes them all obsolete. Makes those concepts look foolish in retrospect. This is the danger all press manufacturers face. At this time, press manufacturers do not fear this because they do not know what can be done. They can not image what can be done. For them ignorance is bliss.

The arrogance that all press manufacturers have is believing that no new knowledge will turn up to hurt them, therefore they don't have to think about it. Komori shares this same type of arrogance with all the other press manufacturers. I wish it wasn't true but it is and eventually will be seen.

 

By Jose Botas on Jun 24, 2009

I have read all the above comments on the financial crisis that Heidelberg finds itself in, I am intrigued by the suggestion that some people have, when the bubble has burst all the wonderful suggestion come out, I wished all these wonderful ideas could have been put in place prior to the crises.
Crises like these are not new and if you go back in history you will see that there have been many like these, maybe not so severe, however this will happen again and then it will even be more severe because we will have a bigger population to deal with.
Heidelberg did not become the biggest by just sitting around, Heidelberg provided solutions that made money for their customers and they will keep doing so.
One must remember that money makes this world go round no money no go round.
Now let’s go back a year and ask ourselves what caused all this, America the world leader ( please note that I have full respect for America and its people)it’s financing institutes failed them, this had a ripple effect throughout the world. We can say this has been caused by greed….the fact is, public companies grow with the money that the shareholders put in and if they put money into a company they want a return, how much the return, this is debatable.
It is also logic that the bigger you are the harder one falls, what you have to ask yourself is how quick can you pick yourself up.
I also agree with comments that the world will not be the same, for one banks the money providers are cautious as to what they loan, try and get a loan and see how long you have to wait these days.
I am for new technologies and print is going through some major changes, in 10-15 years time you can look back and say Wow….., not long ago Heidelberg had Nextpress but when the product did not make money it’s shareholders then tell you what to do, remember the money and the go round . I have no doubt that technology will grow it’s has been like this since the world started. Provided that new technologies can make money they will keep flourishing. Petrol is much talked about subject why are we not riding cars that do not use petrol, why has an invention such as the wheel not been replaced by something else,… economics dictates .Take the inventor of the IPod no money to forward his cause. New technologies get off the ground because they are subsidized from profits of other products or by the state.
You can have the best technology, the best R&D and the best sales force if customers do not have money or they cannot borrow, then everything slows down.
The “”SO BAILOUT” for Heidelberg is also available to KBA and ManRoland, the people that are providing the bailout must have some assurances and comfort that this will work.
Let’s look at the future and see what Heidelberg does in the next 3-4 years, encourage the development of new technologies from all facets of life, I have no doubt that we have learnt a lesson not only Heidelberg but also the other suppliers, as for the other suppliers they must focus on what is best for them.What must be remembered about Heidelberg presses talks for itself. Find any press in the world with same format and same age and look at the empression counter and then compare this to a similar Heidelberg machine and you will find that the Heidelberg has a bigger empression count, this only means one thing,more money in the pocket of the user and as long as this is the case then Heidelberg will always sell presses the day this stops then the alternative solution has been found to economical printing.

 

By Ralf Schlozer on Jun 24, 2009

Neill,
you are correct, there are several conditions under which a Company can apply government credits but essentially all can apply. The ownership situation of KBA or manroland might make it more difficult for them though.
It is not a massive market distortion, but it will be felt when KBA and manroland have to refinance long term credits and probably will not get great conditions from banks when the market leader got government cover.

All-in-all it is still more the effect of financial institutions still seeking for double digital risk free (?) returns on investments instead of lending money to manufacturing/service companies with lower returns and some risk attached. Until this is realised state support can be a wise thing but can also distort markets.

btw. Heidelberg has several activities in printed electronics and even in ink-jet.

 

By Michael J on Jun 24, 2009

Ralf,
Is there anything you can share about Heidelberg and printed electronics? I know that it's mostly done with ink jet, but I think litho has been used for printed circuits for many years..

 

By Neil Stratton on Jun 24, 2009

Ralf
Exactly -- it's not that I'm trying to be a one man Heidelberg fan club it's just that in the UK and US a lot of the comment / commentators seem to be under the impression that this is some sort of special Heidelberg rescue mission for a set of problems that are unique to Heidelberg and this is not the case.
Since they -- seemingly -- misunderstand the nature of the fund/funding much of the comment seems to me to be beside the point.

Michael
There is a printed electronics congress taking place in Frankfurt, Germany which closes tomorrow -- so perhaps a bit late for you to attend but there is a web site, www.lope-c.com, which might give you a flavour of it.

 

By Michael Mittelhaus on Jun 24, 2009

KBA shouldn´t complain, as they´ve asked for a government bail as well, which they hope to get in April 2010.

 

By Neil Stratton on Jun 24, 2009

tut, tut Michael, haven't you read the press release? That guarantee is only needed because the nasty banks are sitting on their piles of money and won't lend.

 

By Mark Haworth on Jun 24, 2009

To all,
I appreciate that little interest in the ITB you speak of perhaps has calloused you to all press manufacturers. I have attended 9 Drupas and 38 Graph Expos and visited thousands of print plants in the USA to date this is the first I have learned of this design, would love to know more. Have you presented this to other manufacturers like Komori? As I see it the press field is very competitive anyone who has or can gain an advantage would certainly gain to pursue that advantage. I would just guess that between the five top manufacturers that there are possibly 1000 engineers or more who's full time job is to innovate and design. I would suggest they should get some credit for making todays' modern press nearly 800% more productive over the last 25 years and at just about 200% more cost all this with a fraction of the waste and man hours. for any press manufacturer to invest the hundreds of millions needed to expand and retool and NOT have a good plan is just plane ignorant. New technologies are always on the table and can be brought to market at any time. This is the battle fought in all industries. Clearly AB Dick learned that and so has HP. The looser and the winner if you will. Many press designs will fail as others will not, only the market decides this, not engineers. Right now and for the near future the press field will likely continue to be evolution rather than revolution.

 

By Erik Nikkanen on Jun 24, 2009

Mark, I am as you say calloused and also disappointed, angry, resentful and on and on, but I will be happy to let history judge whether I had a right to be. At this point, it is too soon for that.

I don't know why people in the printing industry, when they hear about something new, they tend to say, "I've never heard of that before" as if everything possible should have been already known. Just a human reaction I guess but it always surprises me when I hear that.

Yes, you are right, that all those engineers should be interested in innovation to keep their companies ahead but for some reason they don't seem to seek out the critical information.

The problem, I think is very clearly stated in your belief, which I think those engineers also have, that the press field is going to continue to be evolutionary rather than revolutionary. If one believes that it is evolutionary then one has no interest in revolutionary ideas because one just thinks they must not be true or possible. That is why all the press manufacturers don't take any action.

I have never said that the engineers in the industry have done a bad job of refining the process, which is evolutionary but they have not done a good job at being revolutionary. And it seems that the management of press manufacturers don't expect or demand revolutionary thinking of them.

My main interest is in revolutionary change. The ITB is revolutionary by definition. It fundamentally changes the process and will force a change in how people think about the process. It is the critical start of new possibilities which can not be obtained until the critical problem in the press is corrected. It has the potential of changing the competitive profile of a press manufacturer at low investment cost.

I am glad you are interested in the ITB or at least curious. I live in Toronto. Komori has representatives here and certainly customers. If Komori is really interested, I would be happy to build an ITB for one print unit on one of your smaller presses. Komori or one of your customers can test it and make the results public. Obtain a license if you want.

I already have a standing offer (on printplanet) to any small printer in the Toronto area, that if they are interested in testing the ITB and make the results public, I will work with them to have their press fully fitted with the ITB concept at cost.

It is important to make the results public by a third party, because that is the only way to break the strong belief that is wrong.

Maybe Komori customers would be interested and maybe worried that if the ITB story is true, they may prefer to have Komori know about it. Send Mark a note.

As always, it is up to the press manufacturers to take some action. Mark, this might be a great opportunity. You can contact me offline at [email protected] and I will be glad to explain the ITB in more detail and provide the patent #s and answer your questions. Please think revolutionary and not evolutionary. It will put things into better perspective.

 

By Patrick Berger on Jun 25, 2009

There is revolutionary technology in the chemistry, ink and consumables that is out there now. Presses, web and sheetfed running coated, uncoated without the use of IR or UV or gas ovens. The energy savings are tremendous.
Ability to control density plus or minus .01 density across the substrate.
You can take a 20 year old press (that is in good mechanical condition) with this type of technology and print just as good as the new presses. You will not be as productive because of press speed. With the press properly pinned for plates you will be able to make ready in minutes.
If you are not a 24 / 7 operation a new press is probably not needed.
A used press will get the job done.

Now through in the Chinese and India press manufacturers who are selling 20 x 28 and 14 x 20 presses for up to 1/3rd the cost of the European machines you can see what is happening. It is now a world market. Price wise you get what you pay for. There is always the case at what point does the price verses quality of machine become a factor.

 

By Heiner Mueller on Jun 25, 2009

Reading all the comments, I am utterly astonished that no one has commented on a fundamental change that is currently taking place in our industry, and which is likely to gain momentum in next years.

The overall amount of commercial printing, direct mail and magazines in particular, is taking a bit hit and is not likely to ever recover, on the contrary. Nowadays, printing is just one aspect of a marketing campaign, and with response rates of less than one percent, one starts to look where else to spend the money.

If you trust the relevant prognoses for the 2009, revenues from sheet-fed printing will decrease in Europe by almost 11 %, web offset by nearly 10 %. In such a scenario it is no wonder that only digital printing will increase by 7.7 %. If you look at the overall volume, it might still be minute compared to traditional printing, but folks, the news is digital printing has finally arrived in the market for good. The people at Heidelberg, however, arrogantly see 'no thread from digital printing'. It looks to me that all three major German press manufacturers completely missed the digital boat. We all remember the half-baked attempts they made in that market, and how they actually failed for various reasons. Mainly, they did not believe in the success of digital printing, and today they don not have the money anymore to finance such a huge R & D effort. In hte years to come, the major players will be the likes of Xerox, HP-Indigo and Océ. I am not sure how long this is going to take, but remember when offset came to market back in the sixties and how long letterpress survived?

Someone was talking about Heidelberg's strategic management errors, and I can only second that. In case one has forgotten,on the occasion of Drupa 2000, Mr. Schreier said something like: 'Digital printing is vital for Heidelberg.' In 2005, I was then astonished to hear that 'our customers simply don't want that technology' and as late as 2008: 'Compared to digital printing, offset still offers the best valué proposition'. Well at least his head of sales, Juergen Rautert, said in an interview:'Our sales channels are under-utilized, why not sell digital devices, OEM or originally branded. We are just about to start.'
How is that for a strategy? Try to capitalize on the Heidelberger brand again? I think we will have to get used to the idea that some of the shining lights of our traditional industry will disappear, as they have simply ignored the sign of the times.

 

By Michael J on Jun 26, 2009

Re the price v quality question. I think we've learned from what happened to color separations, that "good enough" is good enough when the buyer and consumer thinks it's good enough.

Patrick,
If you have some links to the Chinese and Indian manufacturers, it would be great to learn more about what's going on in those regions.

 

By Patrick Berger on Jun 26, 2009

Michael the information about the Chinese and Indian presses has been available for years. Just google.



The following are press manufacturers that are gone or absorbed.


Harris sheetfed and web gone.
Meihle gone.
Hoe gone
Motter gone
Color King gone
Solna sheet fed gone
ATF gone
Webendorfer gone
English MAN gone
Crabtree Vickers Gone
Nebiola gone
Consolidated Oris gone
Davidson gone
AM multigraph gone.
Didde gone
Hamilton gone

So what is happening in today's press manufacturing market is nothing new just different names.

 

By William E. Borklund on Jul 01, 2009

We have been in a service based economy in the USA for 25 years. The only growth has been in the service sector for that time. In addition the only growth has been in the small business segment of the economy for that time. These changes are effecting the global economy now and the world needs to adjust just like we needed to adjust.

Manufacturing firms need to stop making stuff we don't need. They aren't too big to fail they are too big to survive.

The construction industry kept building houses that people couldn't afford without the government backing a bogus mortgage. We know what happened as a result. The press manufacturers did the same thing by pushing equipment onto the printers that they didn't need and couldn't afford by giving them sweatheart deals. The consequences should be obvious.