Oerlikon Textile: Focused On The Future

“F
lexibility and energy conservation are the megatrends of the textile future, but these
trends must not result in the machinery becoming more expensive.” These are the words of Dr.
Carsten Voigtländer, CEO, Oerlikon Textile GmbH & Co. KG, Germany. In a very open interview,

Textile World Asia
learned how Voigtländer imagines the future.

Over the past few years, Oerlikon’s Textile Division has permanently grown. Voigtländer is a
fourth-generation textile industry employee. His ancestors were weavers and cloth masters. As a
14-year-old schoolboy, he had a summer job with his father; and at 19, he had a traineeship in the
textile machinery industry and first came into contact with Neumag. He studied mechanical
engineering and process engineering, earned a doctorate and began working for Neumag in 1994. Two
years later, he became an authorized officer, and four years later was promoted to a management
position. He began as a development engineer, and eventually built up the engineering department.
From 2000 on, nonwovens were part of this division.



TW Asia:
Your background means the nonwovens activities at Neumag are your own baby?

Voigtländer: Yes, I have represented everything in front of the
Administrative Board so that it came into being. I have carried out all acquisitions and, of
course, it’s part of my job now to handle consolidation. As it’s well-known, Neumag was taken over
by Saurer and then by the Oerlikon Group. I have been in management since 1998, first with Neumag
and with Saurer as of 2000, and as CEO of Oerlikon Textile since 2006.

TW Asia:
What convinced you to accept this job?

Voigtländer: This is an interesting question. I find forming things appealing, and
Oerlikon Textile operates in different textile markets – there are many chances to develop further
projects.




TW Asia:
What is your personal challenge?

Voigtländer: The challenge is the fact that the complete textile production moved
to Asia. It is a real challenge as a European enterprise to withstand worldwide competition with
production sites in Europe and Asia. The various business fields and the production in Europe and
Asia are a multifaceted task and require an enormous personal engagement. The shareholders want to
make money, employees want a decent job, customers want outstanding machinery for little money, and
suppliers have to be paid. The attractive part of this story is to form with all these parts one
unique, sound entity.

Complete Supplier

TW Asia:
What was the idea behind establishing the group as it is presented today
(See table 1)? Is it to be a complete supplier primarily?

Voigtländer: Yes, the basic idea is to cover the textile value-added chain. We
cover natural and man-made fibers – either the classic spinning mill with natural fibers or
polymerization and filament production for man-made fibers. Then we have fabric forming with wovens
or knitwear in a multi-stage process, or the direct production of the fabric in a one-step process
to manufacture nonwovens. Barmag stands for man-made fibers, Schlafhorst for cotton and Neumag for
nonwovens. Barmag and Schlafhorst are in yarn formation; and Saurer works in niches such as
twisting and embroidery. We are particularly proud of our fifth area, the component business.

TW Asia:
Have you ever considered completing your product portfolio with a manufacturer of weaving or
knitting machines?

Voigtländer: Of course, it is conceivable to become active in this area. However,
there are areas that are closer to us – for example, fiber preparation or hydroentanglement. But,
if there is an opportunity, in finishing, for example, we might get involved.

TW Asia:
What were the difficulties in establishing the group as it exists today?

Voigtländer: It was the task to unite 10 business units and reduce them to five.
Different cultures had to be brought under one hat. It’s a rethinking in the people’s head. Today
we are selling complete lines and not components of lines only. This organization was favored by
the fact that we achieved a terrific result last year. It is also important that we have maintained
the strong brands like Barmag, Neumag, Schlafhorst and Saurer.

The New Owners

TW Asia:
Have the new Administrative Board or top management had any impact on your work?

Voigtländer: Before the new major shareholders invested, they spent a day with us
in the Textile Division to see what we do. After the management council meeting, a strong
commitment to the group’s structure was communicated to the entire management group. It also was
made clear to us that one thinks not in short terms, but very strategically in long terms.

TW Asia:
These are strong words.

Voigtländer: Right, and this also was heard positively by the employees. We
achieved about 50 percent of the turnover of about 2.7 billion Swiss francs last year in the
textile division. This shows clearly its importance. We have about 8,000 employees out of 19,000
for the group.

TW Asia:
Over and over, there are rumors concerning takeovers. How do you comment on that?

Voigtländer: Oh well, these are rumors. Such rumors arise again and again in times
of change. There is nothing more to say about it. And as I said, the new owners invest in our group
because they want to earn money with it.

Clear And Simple Structures

TW Asia:
How does one manage such a large group?

Voigtländer: On the one hand, we have very clear and simple structures – that’s
why we have the five business units. We have a matrix organization that includes a CFO who works
for all business units and a technology manager who cares about synergies in the development area.
The employees who report directly to me, the managers of the five business units, form the
management team. This team meets every four to six weeks. The one thing that shouldn’t be forgotten
is commitment to the company. We have many long-term employees who contribute their share to our
success.

Oerlikon Neumag

TW Asia:
Can you comment on the focusing of the single business units? Let’s start with Oerlikon
Neumag.

Voigtländer: The focus is clear – we want to be a complete supplier to the
nonwovens industry. With the acquisition of more or less all technologies, we can practically offer
almost every possible combination of technologies. This strategy has stood for five years, and we
have put together all the components at this time. It is motivation and confirmation for us at the
same time that our competitors pursue the same strategy today. In the future, another consolidation
still follows in the machinery manufacturing for nonwovens. This consolidation already has partly
started or has already been made.

In the carpet sector, Neumag is the market leader with a 70- to 80-percent market share. Our
new machinery in the bulk continuous filament area enjoyed great success at the last ITMA and
already is highly accepted by the customers.

Oerlikon Barmag

TW Asia:
Let’s discuss Barmag. You have eliminated the recycling area of the portfolio?

Voigtländer: This is correct. We concentrate on the textile business. The most
important areas are POY,  FDY and fibrillated tapes. We have introduced a new winder that has
already sold 1,000 units. This is the future of Barmag – we want to put a similar product on the
market also for FDY. We are strong in Asia and offer total solutions. Ten years ago, enterprises
like Barmag and Neumag delivered the components to the engineering companies, today we do
everything ourselves. The interface between engineering and mechanical engineering has been dropped
out.

Oerlikon Schlafhorst, Saurer

TW Asia:
Tell me about Oerlikon Schlafhorst, Oerlikon Saurer and Oerlikon Textile Components.

Voigtländer: At Oerlikon Schlafhorst, we have the complete textile chain to a
large extent. First of all, in cooperation with Trützschler GmbH & Co. KG, we offer a
combination that works excellently. This cooperation mixes fiber preparation from Trützschler, and
all follow-up production stages come from Oerlikon. We offer products in the middle segment in the
area of ring and rotor spinning, which we predominantly produce in China. Our competitors don’t
supply either one or the other component; therefore, we are also very strong in the area of staple
fibers. We already have sold a complete fiber line in Dubai and a whole production line in
Uzbekistan with Trützschler. Many customers are happy today if they can buy a complete line and
don’t have to search for individual components.

Oerlikon Saurer is an unchallenged world market leader in shuttle embroidery. We are at the
forefront of laser cutting and sequin application. Melco, a supplier of single-head embroidery
machines, also is doing well; the decisive step was the move into international markets. We expect
growth in Asia and also in Europe to further increase.

Twisting at Volkmann and Allma is mainly for technical applications such as yarns, tire cord
and other industrial applications. We are world market leaders also in this area. With Volkmann, we
record successes in the carpet sector, but also in the cotton industry. In the whole Saurer
division, we are working in niches only, but in almost all the niches, we are market leaders.

The growth at Oerlikon Textile Components has doubled within the past few years. With
acquisitions, it extends not only to the natural-fiber area, but also to man-made fibers. We have
turnover of about 300 million Swiss francs in the area of components today. With a high in-house
manufacturing depth, this area is very much a stabilizing factor for us. However, every single
business unit has a spare parts business of its own. Customers also can order parts using the
Internet today. With our own SECOS system via the Internet, we generate about 100 million Swiss
francs.

Research And Development

TW Asia:
What does research and development mean for Oerlikon?

Voigtländer: This is virtually essential. Research and development are the core of
our activity; more than 600 employees are active here. If we thought only about costs and not about
new developments, we would not have any chance in the marketplace. We are a certain size and want
to set trends and be the first that comes onto the market with innovations. Of course, we talk
about cost reduction. However, this is only one side of the coin; new products with the right costs
are in the foreground. The most important projects are the ones through which we bring a new
revolutionary technology to the market. Every business unit is autonomous and has its own research
and development because those employees work directly with the customers and incorporate the latest
requirements into research and development. We have more than 4,000 active patents, with 330 new
registrations last year. Our development budget amounts to more than 100 million Swiss francs per
year.

Market Situation

TW Asia:
How successful was the past year for Oerlikon Textile?

Voigtländer: 2007 was the best year in the company’s history. Turnover amounted to
2.7 billion Swiss francs. We are now experiencing a downturn after the upswing of the recent years
in all markets. In the first quarter of 2008, we had an incoming order drop of about 35 percent.
There are machinery manufacturers with incoming order drops of up to 90 percent. This leads to
violent drops in turnover. But everybody has known for decades that the textile industry always
works in cycles. The crash is simply very extreme this time.




TW Asia:
Why do you think this happened in such a big way this time? Is it the financial crisis in the
United States?

Voigtländer: Well, this is connected to that fact only a little bit. You can’t put
the blame on this situation only – that would be too simple. If one has a look at Asia, great
over-capacities were built up in China within the last few years. Gross national product growth was
gigantic, with 11.4-percent growth in 2007. The government wants to slow down the growth to 8
percent now and is doing it. We see clear difficulties at the financing of our customers’ projects.
We then have high oil and cotton prices; this means our customers no longer earn so much money. The
losses were appropriately large. And what are you doing if you have losses? One does not invest any
more. And this has an extreme effect on investment goods. It is not that no money is there – the
projects are just delayed.

Of course, another problem is the exchange rate with the US dollar. Then, we have a
tremendous social reversal in China underway: Environmental protection and factories acts have been
established. Chinese workers are entitled to a contract of employment and to have a vacation now,
too. All these measures and circumstances enormously increase the expenses of our customers.
Through this, production becomes less attractive; the exports decline and make the problems even
bigger.

The boom in Turkey with rotor spinning is over, too. We see extreme investment restraint also
in India. This means that all three large markets – China, India and Turkey – have slowed. The sum
of all influences simply hits everybody. Of course, there are niches here and there, but nothing
that strong.




TW Asia
: And how long do you think this situation will last?

Voigtländer: We are rather sure that we will have similar low volumes in 2009.
However, we assume that it will get better as of 2010, but of course, everything is now looking
into the crystal ball. There are still some companies that invest counter-cyclically, and this
always results in some changes somewhere. Such a downturn, however, is a chance for strong
enterprises. On the one hand, another consolidation of the market is occurring; and on the other
hand, the suppliers of cheap machinery have great problems – for example, in China. Customers don’t
want cheap machinery anymore. They want to produce the best product. We are convinced that certain
suppliers that produce, pardon the expression, bad machinery, will be in big trouble. And now, we
are at the start again: In difficult times, you watch even more carefully expenses, flexibility and
quality. In this direction exactly, Oerlikon has moved for years, and we think that we can improve
our performance further in turnover and market share.

Megatrends

TW Asia
: And in the near future, how do you see the development of textile machinery production?



Voigtländer: It is certain that the textile world market will further increase. The
population increases, and, thus, also the need for textiles. And, if one has a look at countries
like China and India, the domestic need is massive.




TW Asia
: What is at the forefront of development?

Voigtländer: At first, flexibility and energy savings. Of course, one must not
forget the development of the costs. We hope to stay on the level with costs, but to increase
quality and productivity and reduce energy consumption.




TW Asia
: Do you see the same chances in the future for all business units in the group?

Voigtländer: Of course, the markets are different, and so are the chances. Some
develop faster, and others must gain market share. Let’s take natural and man-made fibers: Cotton,
for example, is in competition with food; therefore, acreages are restricted. Food will always be
the first priority; clothing is next. Therefore, we do not expect cotton acreage to climb. The need
for clothing is here, so the need for man-made fibers will further grow. That’s why we are further
active in the group in both natural and man-made fibers. Apart from that, the direct production of
one textile substrate, nonwovens, will further develop strongly. The future belongs to nonwovens.

TW Asia
: If you compare the requirements of the market with those of five years ago, where do you
see the greatest differences?

Voigtländer: The cost spiral always moves down further, and the requirements
increase at the same time. Every year, prices drop about 2 percent. This means we have to drop
permanently on the expenditure side in development and purchase to compensate for these prices.
Cost management is of outstanding importance. We say textile management is cost management. Whoever
does not have its costs under control will not survive. The market will further change. At the end
of the day, only big groups will survive and some highly specialized niche suppliers, whether these
are Europeans or Asians. There are already Asian enterprises that have bought companies in Europe –
in the machine tool area, for example. In conclusion, just a few companies will be left to play an
important role in the textile machinery market, and we will certainly be one of them.