Machine tools Switzerland: Franc Disaster- Schaublin-CEO Rolf Muster comes clear
Schaublin Machines is representative of Swiss quality and precision machine tool building. As regards the new currency situation, Schaublin CEO and co-owner Rolf Muster and Douglas Spiesser (sales manager) discuss in an SMM exclusive interview where are we heading.
SMM: Mr. Muster, firstly congratulations on 100th anniversary But you would have definitely wished for some other birthday present than that on 15th January.
Rolf Muster: The exchange rate release of Swiss Francs is not a present, it is a disaster. I am working for 35 years in the machine tool industry. I am seeing a dark future for the first time. And I have already lived through some of the crises. But the accumulation of events is our problem. This started with the crisis in 2009/10. Then there was a second incision in 2011 for Switzerland as Euro dropped from 1.60 to 1.20.
The activity area however coped with the 2009 and 2011 incisions.
R. Muster: This is how it looks. But when you compare the Swiss MEM industry with the German industry, you realise that the German industry has gained a lot. Though the Swiss industry has recovered, it had however once reached the turnover volume of 2002 in 2014. That is not growth; that is standstill. Nevertheless, we have coped with both the incisions in 2009 and 2011 on account of restructuring, process optimisations and working in new markets, but we would have developed a lot better with some other rate of exchange. Now, another incision was added with the appreciation of Euro-Franc exchange rate. Now we are up to our neck in it, and this still sounds quite positive.
How did the new currency situation affect the MEM industry?
R. Muster: From the point of view of our company Schaublin Machines SA and from the point of view of many businessmen I know, the release of exchange rate causes an earthquake in the MEM industry. For some, the strength of the earthquake was perhaps 2, for others, it was 8. It was in the upper range in our case. The machine tool industry is substantially affected. Since 15th January, we have lost two third of orders received as against the same period in previous year. Cause: the exchange rate release of Swiss Francs. In June/July, it was luckily again somewhat better. The reason for this was the better currency situation of countries China, USA and Russia.
Why is it currently so difficult?
R. Muster: We must cope with the strong Franc from 1.60 to 1.05 Euro in 4 years. That is a very short time period in order to adjust to it as an export oriented enterprise. What particularly disturbs me in this regard is that the federation and cantons do not at all take care for our industry. We are talking about over 500,000 persons who are employed in the industry. There are 330,000 employees with Swissmem member companies alone. The industry is the greatest employer in Switzerland. But, if this continues, we can eliminate thousands of jobs.
Would your purchase policy also be different due to the Euro-Franc rate?
R. Muster: I do not have an option. Due to the strong Franc – and I assume that it would be even stronger – I have to rethink my purchase policy. I must produce at a reduced rate. This is a disaster for the activity area of Switzerland. The small and medium scale enterprises are important for the Swiss economy. Our government would realise that only when the MEM industry would have reduced many employees. The sad part is our know-how would be lost. There would be deficit of technological knowledge. The small and medium scale enterprises, which would disappear, would also not train any apprentices. This would lead to a complete collapse of Swiss industry, as in France. Our government and cantons do not see any call for action. Some national councils are aware of it, but our Federal Council is way too far from the industry with the exception of Mr. Federation Council Burkhalter, who did an amazing job for our industry.
But the Swiss government is generally rumoured to have economic closeness.
R. Muster: Then it must make it professional. Look at the decision regarding Gripen. For the first time, the Swiss people have voted against such a decision. But they have not voted against Gripen. They have voted against a very “poor communication”. I understand Swiss people that they have said no. One has to win majorities. This is however applicable only to the binding personalities in federal council who represent the majority in the population. We have representatives in Federal Council, who polarise greatly. But that’s the way it is. We have to live with our government and cantons.
Do you see the future of Swiss MEM industry parallel to England and France that had a very strong industry once?
R. Muster: England and France had an excellent machine tool engineering. Today, this sector is practically non-existent in England and France today. Their governments and trade unions have destroyed the industry. They were placed excellently. But, you cannot be competitive internationally as a firm with 35 hours a week. Peugeot produces its vehicles in Romania and Czech Republic.
And how is the scenario of French ancillary industry?
R. Muster: I had made an enquiry for specific ancillary components in France recently. They were dearer than my Swiss suppliers. Something could be wrong with the system. French companies are heavily taxed. That is a disadvantage for the location France. Therefore I wish that the Swiss government and cantons are not going in the same direction as the French government. But with the strong Swiss Franc, we are going exactly in the same direction.
In your opinion, what could the government do?
R. Muster: I do not expect subsidies, but accompanying measures. Firstly: Vocational technical colleges buy reasonable machines from Asian region. The colleges must obtain funds to invest in the high-quality Swiss machine tools. Secondly: The State should support the companies who clearly invest in training. Thirdly: If we have to work on short time, the industries such as construction and development should be able to fully work through in case of the corresponding payment from the unemployment insurance fund. Fourthly: Swiss companies should be supported in foreign trade fairs, in the same way as our European neighbours. Fifthly: In 1970s, our government had provided investment goods to the developing countries for their educational centres – such as machine tools of Tornos, Mikron, Agathon, etc. Today blank cheques are issued to invest in the investment goods of other nations.
Back to the drop in order. Are you assuming a temporary drop
Douglas Spiesser: We have two categories of customers in Switzerland. The ones, who work for Euro zone, cannot invest any more currently. That is a clientele, which we have lost for a longer time period. The second category includes companies that do not work for Euro zone. They are currently very uncertain. They are watching how the economy is developing. In case of these customers, I assume that we can request them again in the near future.
Which MEM industries are running acceptably?
R. Muster: The watch industry and the medicine industry are running acceptably, but they also have margin problems. The machine tool industry would live through, but with other means. I do not see 100 percent darkness, but it is very difficult for us. I see it less critically for tool manufacturers; they can adjust relatively well.
Back to your situation, how many machines do you produce every year?
R. Muster: In a good year 500, in a bad one 250. Currently, we are away from this target. I must have dismissed 10 employees and massively introduced short-time work and I would possibly dismiss more depending on the situation.
What are our organisations and Swiss policy undertaking?
R. Muster: There are rounds of talks, but very little comes out at the end of it. The Jura region is greatly affected. We are in the heart of manufacturing industry. Every day there are notifications of dismissal. Policies and our national bank are looking away. It seems as if the government and cantons do not care about the future of MEM industry.
How are you reacting as an entrepreneur in the current situation?
R. Muster: You know me well and know that I am a representative of the activity area Switzerland. So far, we have always purchased from the Swiss suppliers. However, it is no longer possible in the current framework conditions. If I want to keep pace with our competitors from Europe, USA and Japan, I must relocate my purchase and also a part of manufacturing abroad and this shall hurt our small and medium scale firms. This would weaken the activity area Switzerland ultimately, despite its undoubted strengths.
One of the strengths of the activity area Switzerland is the high quality level and also the subject of our annual main edition: “” Swiss Made – the strengths of Swiss quality”. How has the activity area Switzerland worked on this call in your opinion?
R. Muster: Because Swiss products are exported worldwide and are absolutely reliable and very long-lasting. And that too over a long period of time. Irrespective of whether it is machine tools, tools, pocket knives or aeroplanes. Everything that we produce here in Switzerland, is at the upper end of the quality rating scale. There is almost nothing above it.
Which aspects play a role?
R. Muster: Several aspects play a role. Firstly, the quality of apprenticeship is top-class. In Switzerland, we have very well-trained employees in production, service and assembly. In order to preserve that, we have to act cross-generational so that the know-how of older employees is passed on to the young generation. Secondly: Our engineering colleges and universities so an amazing job. They provide us a very high quality which comes in useful to the students and lastly to us as companies in the form of know-how.
Thirdly, the political and financial stability of Switzerland must be highlighted. And fourthly, Swiss and their companies are reputable, reliable and have very high work ethics. These are all the aspects that are conducive to be able to maintain a high quality level.
How does your company mange to maintain a high quality of machine tools?
R. Muster: Firstly, we are here at the heart of Swiss machine tools engineering, with a long tradition; we celebrated our 100th anniversary on 3rd July 2015. Challenging machine tool engineering is living on its precision and reliability. And we are living both since 100 years. Our employees have the “virtues”, so to speak, in their blood. What does that mean? We live in a very peaceful region, with a very balanced rhythm of life. Our employees come to the company at 6 o’ clock, take a break from 09:00 am to 9:15 am, there’s soup at 12:05 pm; at 12:15 meat and at 12:30 coffee; 04:00 pm is the finishing time. Now you must be thinking why am I mentioning this? But this rhythm of life is substantive for the work in tool machine engineering. It is the discipline which characterises the people here in this region and in all aspects of life. It disturbs our employees even if the actual size deviates by one micrometer from the target size. This discipline, paired with great rigour and work effort, are basic prerequisites for qualitatively high-class machine tool engineering. And they are also evident in the quality of our products. In the company, I also have 13% of my people working in development department – one single development will not keep you going ahead. We have developed 22 new products in the last 13 years.
What are your unique selling points as a machine tool manufacturer
D. Spiesser: The Swiss machine tool company that produces 5000 machines per year is no longer possible today. We must act in the niche market, make specialities, which others are not ready to make. Primarily, we must develop manufacturing solutions, which would bring added value to our customers.
What does Schaublin favour in this regard?
R. Muster: Schaublin stands from a very high precision as well as customer-oriented manufacturing solutions. That is a high school. Moreover, we also have a sophisticated spare parts storage. Even for machine that are 70 years old, you can get original spare parts from us. We have archived the complete construction documents including modifications of all the produced Schaublin machines. This is an extra-ordinary unique selling point.
Spare parts division belongs to service; and thus it plays a very important role for you?
R. Muster: I would say service is very important for a long-term trustful co-operation with our customers. We have branch offices in Germany, India and England as well as 80 agencies worldwide. We provide training in our branch offices and agencies 2-3 times a year. The service functions very well worldwide; Schaublin therefore enjoys a good reputation in the industry.
What are the unusual strengths of Swiss machine tool industry?
R. Muster: Quite clearly reliability and precision and that too in the prototype stadium of machine tools. Switzerland has an absolutely reliable machine tool engineering. Basically, the Swiss machine tools are developed and adapted in a customer-oriented manner. If you look at the Swiss machine tool manufacturers, you would always find machines that have unique selling points. That is, in my opinion – besides a very high quality – the special feature of Swiss machine tool engineering.
Can you give an example from your company?
R. Muster: One of our youngest developments is the Schaublin 202TG (TG – turning/grinding), in which the processes of turning, milling and grinding are integrated. We introduced it 2 years ago; it is unique in the market. Such a machine is not required in every company, but there is a good demand for such machines. For us, that is an excellent niche. However, to operate this niche, an extraordinary know-how is required in order to integrate the different processes in the machine and run it properly. Grinding, milling and hard turning are also completely different processes as regards control technology.
What role does quality play for you and what are the significant aspects in your opinion that the Schaublin machines have a very high qualitative level?
R. Muster: Quality plays the central role. We have a sophisticated quality check right from goods receipt, entire manufacturing, production and assembly to goods issue. An example: Each of our spindles – we rely on internal production know-how even here – is delivered below 0.5 µm rotation. 0.5 µm rotation is provided also by some other manufacturers, but there’s a great difference: Most of them guarantee it only for a time period of 6 months; we guarantee 0.5 µm for 5 years. A spindle stock is extremely complicated if it has to operate at such long-term tolerances.
You are operating internationally. In which countries, at present, do you have highest sales and in which markets you see growth opportunities?
D. Spiesser: We have 250,000 machines in the market worldwide. 70 percent of our machines are exported. But: Sales market number 1 is Switzerland, followed by Russia, China, Germany and India. Germany is currently the only country that is doing well in the Euro zone. We could have sold better in China if we were more present and active there. We must invest in a branch office there. India also has potential, but it is – positively expressed – a complicated country. But India shall come.
Why is USA not among the first five export countries?
R. Muster: In USA, we had a standstill agreement with a machine tool manufacturer located there. Though the standstill agreement is not applicable any longer for capturing the market, it is difficult and it is almost too late. If we wanted to operate there, we would have invested in a branch office there.
European machine tool manufacturers are increasingly buying from Japanese and Chinese. What do you think about this development?
R. Muster: I get a request almost every month whether we want to sell or are interested in a joint venture. Or enquiries from governments whether I would like to relocate the production. That is almost a kind of sport..
Is there not a technology clearance sale coming soon?
R. Muster: That is absolutely right. China and Taiwan are very active here. They invest a lot in European machine tool companies. If this continues in the same manner, the Japanese, Chinese, Indians and Taiwanese shall rule the machine tool market in few years. I hope I do not see that happening. The Japanese are technologically excellent, at times better than Europeans. The Taiwanese becoming better; I have lived there for two years. At that time the quality was still not that good. Today, they are well positioned in case of simpler machines.
Which advantages does the label “Swiss Made” bring to you as a manufacturer of machine tools?
R. Muster: Swiss Made has an excellent reputation worldwide. Therefore Swiss Made must be protected at all costs. Many Swiss people think that the bank crisis has somewhat damaged the reputation of Switzerland. That is by far not the case.
How much of Swiss Made is there in Schaublin machines?
R. Muster: I am convinced about the strengths of activity area Switzerland. Practically everything that is there in our machines comes from Switzerland, except for control. We purchase even the casting from Switzerland – 300 tonnes per year. We rely on Swiss casting because it is technologically top-class.
What are the most important prerequisites, in your opinion, that such a high quality can be produced in the activity area Switzerland?
R. Muster: Reliability, engagement and know-how of employees and we must develop machines which are ideally tailored for the markets of future. In precision, we have reached far above; this status must be preserved by all means. We do not have to go in the nano field as yet as the market there is too small.
What is role of education, traditional mechanical art as well as experiences and process know-how in today’s high-tech machine tool engineering?
R. Muster: We would not exist without well-qualified employees. Therefore we must continuously educate our employees further. That is important. We rely on internal and external advance training in all sectors – technology, assembly, development as well as integration of IT at all levels. Software plays a greater role when we are alluding to the field of automation. Interestingly, it is easy for us to find software specialists. Engineers can also be found easily. But we are trying to find a poly mechanic. That is a problem. They form the basis, the foundation of our machine tool engineering. Now I could again begin to speak about political activities of a part, but now I would contain myself.
Scraping is typical in Swiss machine tool engineering. Would scraping still exist in the 10 years?
R. Muster: Scraping is representative of Swiss made. It has a long tradition in Switzerland. And that is not for no reason. There is no grinding machine that could replace scraping even today. Perhaps there would be one; I think it would take another decade. I personally do not believe that it can be replaced. It is a very complex and extremely precise process in the micrometer range. I have worked with Dixi for 12 years. We have scraped up to 500 hours for a machine. This was important for the precision on work piece. The surface structure, which Schaben has reached, reflects 100 percent Swiss Made; incidentally, my father was a scraper in Tornos for forty years.
Now for automation. What is the percentage of customers relying on automation?
R. Muster: It is a routine in automobile industry. Even in the medical technology, it is going more and more in the direction that highly automated processes are implemented. Automation is a routine even in tool production. In the field of aerospace, there are often small series up to single parts. Even here, the subject of automation is very important. However, it is a lot more difficult because automation must be adapted to the continuously changing work piece spectrum.
What does that mean?
D. Spiesser: Flexible automation at acceptable prices is the issue of the present. We are in close collaboration with Stäubli Robotik in many projects in order to produce individual customer solutions. Flexible manufacturing, 24 hours, seven days a week of automated operation is the goal.
How do you respond to individual customer requests with respect to automation in this regard?
R. Muster: We must meet the wishes of customers; we make offers with various robot manufacturers for him/her. The “sale” of manufacturing solutions is becoming more and more costly because we have to develop quite a complex system tailored to the requirements of customers. For this, our sellers and constructors must work together in close collaboration to create an offer. Earlier, one could sell 100 machines over telephone. That is no longer possible today.
Matthias Böhm, Chefredaktor