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Heidelberg, A New Vision for the Future?

Last week the following significant announcement was made about the future of Heidelberg. Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG (Heidelberg), will not be extending his management contract when it expires midyear 2013 and will be leaving the company at the end of 2012.

By Andrew Tribute
Published: July 24, 2012

Last week the following significant announcement was made about the future of Heidelberg. Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG (Heidelberg), will not be extending his management contract when it expires midyear 2013 and will be leaving the company at the end of 2012. He is handing over the company's chairmanship after almost 13 years in charge. His replacement as Heidelberg CEO will be Dr Gerold Linzbach and this will take effect from September 1, 2012.

Bernhard Schreier took on the role of Chairman of Heidelberg Druckmaschinen in late 1999 having joined the company in 1975 and worked through a range of different management positions He joined the Management Board of the company in 1997. He has managed the company through the most difficult period in its history during which time the total printing industry has downsized and been in recession, and he has had to organize the restructuring of the company throughout that time. He took over from previous Chairman Harmut Mehdorn, whose policy was to grow the company by acquisition. This acquisition strategy, without fundamental changes to the sales and distribution and operational strategy of the company, saddled Heidelberg with a number of non-profitable companies that did not fit in with the overall organization. Mehdorn was a very aggressive growth oriented manager who since leaving Heidelberg was head of Germany’s largest public company, the national rail operator Deutsche Bahn. He is now head of Germany’s second largest airline, the financially troubled AirBerlin.

Schreier started the first major operational changes of Heidelberg in 2002 when 2,200 people were made redundant and manufacturing restructuring started. The first key change was closing down manufacturing in Kiel, the plant that had been acquired when Linotype-Hell was taken over by Heidelberg. This was the center of excellence of Heidelberg’s prepress and digital printing operations. The next, and most significant change was announced in 2003 when Heidelberg decided to get out of both web offset and digital printing. Goss and Kodak took over these two operations in 2004, however at substantial cost to Heidelberg.

Another major problem for Schreier was in the ownership of the company. When he became the Chairman and CEO, the largest shareholder in the company was RWE, the leading German electricity utility company. Other leading shareholders were major German financial institutions. RWE decided it wanted to sell its stake in the compan; Schreier and his financial team had to manage the change in ownership of the company where today the majority of its shares are in the public domain. Over recent years its share price has plummeted from more than €40 in July 2007 to around €1.00 in the past week.

During Bernhard Schreier’s time running Heidelberg there was a major area of expansion. In 2005 he announced that the company would develop a range of VLF (Very Large Format) offset presses. This was an investment for the company of over €1 billion as it required a new factory unit being build at the company’s major Wiesloch manufacturing plant. I am advised that Heidelberg is being successful today in selling such presses and is probably the market leader in new press sales. However I feel that it is unlikely that there is a good financial return on this investment. Having visited the Wiesloch plant many times where it seldom seems busy, I feel that Heidelberg could have entered the VLF market by adapting existing manufacturing facilities rather than going to the huge expense for a loss making company of building the new press manufacturing complex.

Looking forward to what will happen to Heidelberg after Schreier departs, it is perhaps interesting to look at how the company has developed. Dr Gerold Linzbach the new Chairman and CEO is coming into the company from the outside with no experience in the printing industry. He has held major positions in a number of international companies working in both Europe and the USA. Heidelberg’s policy is wherever possible to appoint senior managers from within. It is only Harmut Mehdorn and Holger Reichardt the sales and marketing director who left in 2003 that have come onto the board from outside positions. Schreier joined Heidelberg straight from university. Another senior director was Wolfgang Pfizenmaier who joined the company in 1974 and later headed up R&D before running the digital operations of the company. It is my understanding it was his strategy in the 1990s to build the massively over-engineered and hence expensive Nexpress, rather than taking on worldwide distribution for graphic arts of one of leading digital printing companies products that was on offer to Heidelberg at the time.

Heidelberg is predominantly an engineering driven company that relies on decisions by management that have never worked outside the company. The German operational structure is to have a Supervisory Board as well as a Management Board. The Supervisory Board is made up of representatives of the workforce and external executives mainly from industry. From what I have seen there have not been any members of the Supervisory Board with experience in the IT markets that could assist the Heidelberg Management Board in decisions. Heidelberg’s direction is more towards IT related business today. Heidelberg has its main production operation is Wiesloch where the other major employer is SAP. Why does Heidelberg not have a Board member from SAP on its Supervisory Board?

For the future of Heidelberg a key question will be what can Dr Gerold Linzbach bring to the company to drive it forward and to give it a new vision. Bernhard Schreier had a very difficult job in restructuring a bloated engineering driven company in a time of massive change in the printing industry. In that time he relied upon vision mainly from people whose background was purely from within Heidelberg and who had predominantly come from an engineering background. Dr Gerold Linzbach now has the challenge of finding a new vision and identifying how to take the company into a new future in an industry that is still undergoing major change.

 

Discussion

By Charlie Corr on Jul 24, 2012

Bernhard Schreier indeed faced difficult times, as Andy points out. I didn't always agree with his decisions (e.g. moving away from digital) but he felt it was what he had to do to save the company. I admire the strength of his convictions and ability to navigate in difficult times.

The future is at least as challenging as the recent past. I fear the customer intimacy once enjoyed by Heidelberg is tarnished. It is clearly a case of how the mighty have fallen. A strong Heidelberg is good for the printing industry and I wish them well.

 

By Rossitza Sardjeva on Jul 24, 2012

Moving away from digital, having in mind that digital is the only perspective way for the printing industry, was absolute wrong act at that time (2004) and Schreier is responsible....

 

By Andrew Tribute on Jul 24, 2012

I'm afraid I have to disagree with you Rossitza. In fact my analysis nine months before Heidelberg announced their withdrawal stated that Heidelberg's only hope for survival was to get out of digital and possibly web offset. The original Nexpress, while a good machine was massively over-engineered and cost more to build than it could be sold for. Managing to get Kodak to take over Heidelberg's share of Nexpress was a good deal that Schreier should be complemented on. The problem was Heidelberg should have never gone into that deal as they did not understand the requirements for digital. Instead they should have taken the deal they were offered some years before by one of the leaders of digital printing to have worldwide distribution rights for graphic arts. They were too arrogant thinking they knew all about building presses of any type. The other thing Heidelberg should have done was to take their expertise in inkjet that they showed with the world's fastest monochrome printer at drupa 2000, and become the world leader in production inkjet.

 

By Chuck Gehman on Jul 26, 2012

The history of this formerly great company is still being written, but I have to agree that getting out of digital, especially in the unbelievably awkward and desperate way they did, has already proven to be a terrible and disaster which continues.

Certainly, going exclusively digital was not the way to go, and they were resource constrained, but from a forward-looking technology perspective they are really left with an very old portfolio of stuff that will continue to decline in sales over the next few years.

Perhaps "unloading" Nexpress on Kodak was good for the short term, but abandoning your loyal customers who trusted you is never good. Waiting years to re-establish a presence in digital printing and then re-emerging with a weak copier strategy shows an incredible lack of vision. I think most printers would agree, the device of choice to complement high-end Heidelberg press installations is HP Indigo. I don't think a press release with Benny Landa (love him though I do) is going to fix that problem.

So please, Andy, answer the question that got me to read your article-- what is Heidelberg's new vision for the future?

 

By Erik Nikkanen on Jul 26, 2012

IMO Heidelberg's fault was not in dropping digital printing but in staying with a 100 year old model of the press for the offset process.

Offset still has a lot of potential but press manufacturers, such as Heidelberg have not been serious about reinventing their technology.

If the aircraft industry developed in the way press manufactures think, we would still have biplanes but they would be "state of the art" biplanes. :-)

If modern offset would perform as some marketing types claim, then the digital printing would not be making such an advance. There would be no space for Landa in his market sweet spot.

But the industry has always had this problem of not wanting to face reality. Instead of finding out what causes the process from being consistent and predictable, the preferred action is to add expensive technologies to try to compensate for the problem, which does not require any deep thinking effort. They chose an intellectually lazy approach.

Heidelberg should have and still should deeply investigate its own process. Understand it so that it can compete with digital printing in the areas that are most important. Even Landa knows this important run length range.

There is still time to change things for Heidelberg but not if other press manufacturers change first. Delaying action could be its biggest mistake.

 

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