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The New Saurer

The sale of Oerlikon's Natural Fibers and Textile Components businesses to Jinsheng Group made way for the new Saurer Group.

Jim Borneman, Editor In Chief, and Janet Bealer Rodie, Managing Editor

On a recent visit to the United States, Daniel Lippuner, CEO of Switzerland-based Saurer Group, took the opportunity to share Saurer's new vision and structure with Textile World editors. The July 1 sale of Oerlikon Group's Natural Fibers and Textile Components businesses to Chinese investor Jinsheng Group made way for the new Saurer Group, bringing back to light a well-respected brand that fell under the radar after Oerlikon acquired the original Saurer Group in 2006.

As Lippuner explained: "Saurer never was lost. Memories are very long. For the Saurer brand, it was an open door, so we didn't have to push hard. People recognize the brand - we didn't have to introduce it from scratch.

"We are a European company with European DNA, but with a worldwide footprint - and now, with a Chinese instead of a Russian investor," he continued, referring to the fact that Oerlikon Group's largest investor is Russian billionaire industrialist Viktor Vekselberg.

Lippuner's appointment as Saurer's CEO is in keeping with the company's determination to ensure continuity with the prior Oerlikon business units. Previously, he served as Oerlikon Textile Components' managing director, and before that, as Oerlikon Group's corporate controller.

Saurer AG is based in Wattwil, Switzerland. The company traces its roots back to 1853, when Franz Saurer established a foundry in a suburb of St. Gallen, Switzerland.

Decentralized Business Structure
The new corporate structure is extremely flat and decentralized - a major change from Oerlikon's organization. Former Saurer CEO Heinrich Fischer chairs the new Board of Directors, which comprises four European and three Chinese members - including Pan Xueping, the main investor and founder of Jinsheng Group, and Ye Guan, president of the Jinsheng Group Machinery Sector. There is an extremely small corporate layer of about 10 people, mostly in finance, and everything else is pushed down to the business units, Lippuner explained. "I believe in small units that are very strong that can make decisions very close to the customer and implement them very fast. That was very different in the Oerlikon organization - a huge hierarchy with several management layers that led to very long decision-making processes and very slow speed to implementation. We want to be different. We have five business units: Spinning, which is the biggest; Twisting; Embroidery; Pre-Spinning; and Components."

Within those units are the brands, which will be promoted by Saurer. Business Unit Spinning includes ring spinning machinery under the Zinser brand, and open-end spinning and winding under Schlafhorst.

Twisting features staple fiber twisting machinery under the Volkmann brand, carpet and glass yarn twisting under Volkmann, and tire cord under Allma.

Embroidery comprises Saurer Embroidery - and was the company's basis when it was founded in 1853.

Pre-spinning features Saurer Jinsheng as a mid-range player for blow rooms and carding machinery in the Chinese market.

Saurer Components includes Accotex and Texparts in the staple area; Daytex, Fibrevision, Heberlein and Temco in the filament area; and a non-textile area in which Saurer will leverage the brands' various manufacturing capabilities. One example is a dental implant made of ceramic that goes through the same machine as Heberlein air jets.

"But again," Lippuner explained, "these brands are decentralized. They have their own manufacturing locations and R&D. Starting from the beginning of July, people are extremely excited about this because now they have empowerment to make decisions. They have to take more responsibility, but they like that. The change created huge enthusiasm among management and also among all the employees."

Lippuner went on to say: "There was in Oerlikon times a drive to consolidate. I don't believe in that. I think it's better to have several locations, where the brain is there, the R&D is there. If you consolidate, you lose all that. In Europe, unlike in the U.S., people don't move. If you want to move employees 40 miles down the road, they would rather change their jobs. If you don't have the people to innovate the products, you're lost. And in Europe, it's not so easy anymore to find young people to join the industry because we are not the most sexy industry for university graduates."

He continued: "We have a footprint worldwide and will keep competence centers that pair R&D with manufacturing centers. All R&D is in Europe - this will continue. Some manufacturing will also be in Asia - in India, Singapore and China. We will invest more in R&D. Without that, you can't turn out innovation. Without that, our entire reason for being would be lost - we must keep one or two steps ahead of competitors."

Saurer Group CEO Daniel Lippuner

Focus: Customers, Innovation And People
"If you have highly satisfied and motivated employees, you usually automatically have highly satisfied customers, because employees do everything to make the customers happy. And, if you have highly satisfied customers, you usually have above-average profitability," Lippuner remarked. "So, instead of managing profits, you should manage your employees and your customers. We focus very strongly on customer satisfaction, so we do extensive surveys to ask customers about their happiness with deliveries and service. We measure our performance for service - repair cycle time, complaint cycle time, quality measures. We strongly focus on that because of the model I described.

"We have in some areas also some homework to do because we are not on the desired level. We are working very hard to push that up; to be recognized as a machinery provider that customers can trust; to be sure that the quality is right, aftermarket service is right, and so on," he added.

"Innovation is key. We are going to invest more in innovation capacities and capabilities in Europe," Lippuner continued. "During Oerlikon times, the R&D function was cut down a little bit, and we have to reverse that and hire people in order to churn out more innovation in a shorter time - to cater to the changing needs of our market. We will really focus on our people by listening to them, which has not always been the case in the recent past, and try to promote people from within rather than bringing outsiders in. Our tagline is 'We Live Textile,' and this is exactly because our people have been in this industry for so long - many times, half of their lives are textiles."

Chairman of the Board of Directors Heinrich Fischer

When asked for more information regarding Saurer's investors, Lippuner replied: "Jinsheng Group is a young company formed in 2000 by Mr. Pan Xueping, who came from a textile machinery company and started a spinning company that today has 420,000 ring spindles running in China. In 2009, he invested in EMAG - a German company that makes CNC [computer numerical control] machinery. He also has investments in real estate and pharmaceuticals. Jinsheng Group had about $1.2 billion in sales without Saurer. Now Jinsheng owns Saurer, which will be managed through the Board. Mr. Pan wants to keep the European DNA intact - day-to-day management will be left to the European management team. And Mr. Pan wants to maintain the skill and experience levels at their peak."

Global Market
Regarding the global spinning market, Lippuner provided perspective: "Fifty percent of the installed base is in China. In ring-spinning, there are 220 million spindles globally - 110 million in China, 45 million in India, and 8 million to 12 million in mid-sized countries like Pakistan, Bangladesh, Indonesia, and Central Asia. Turkey has 5 million spindles; the U.S., 2 million - in the U.S., you have a big open-end market. Brazil has less and less - it also is an open-end market. Because of denim but also for other reasons, more ring-spun is going to denim for high-end jeans."

Looking more closely at the Chinese market, Lippuner continued: "The Chinese government set a minimum price for cotton about 30-percent above worldwide cotton prices to support cotton farmers in China. It gave them a higher living standard, but it hurt the Chinese spinning industry. It created a tectonic shift, and a lot of this market went to other countries. India is exporting a lot of cotton yarn to China. Pakistani, Indonesian and even some U.S. yarn is going to China. Is this sustainable? Short-term, probably not: Chinese spinners are suffering so much that most probably, the government will reduce this artificially high price. Mid-term, however, in China's five-year plan, they want to go to higher-added-value industries. They consider ring-spun rather low-end, and they are encouraging spinners to upgrade machinery - which is definitely necessary - or go to other places than the coastal regions, where you have today labor shortages. So either you go to Xinjiang [in northwest China], or you go abroad, mainly to Vietnam."

Lippuner noted that many Chinese spinners choose to upgrade their equipment. "This is great for us because upgrading means they are going towards automation," he said. "We have known automation since the 1980s, when the U.S. and Europe automated. In China, the local competitors don't know automation, and they struggle to adopt the system because here, they can't just copy-paste. They have to understand a little bit more about the process than just taking a drawing and doing the same."

He continued: "The idea is that spinners can have the same or more output with fewer people, so you free up people for other added-value industries or tasks. In India, it is the same, but not because of a labor shortage - about 85 percent of newly installed spindles are autodoffed with linkages between ring and winder even though labor costs are extremely low." He noted that Indian workers today have more choices as to where they will work and can choose, for example, to work in an automotive plant rather than a spinning plant.


Capacity Expansions
When asked about global spinning capacity, and the potential for growth and investment, Lippuner responded: "There is new capacity being built up in other Asian countries because Chinese capacity is not fully utilized and production has moved to these other countries. And in India, about 30 percent of yarn produced is exported to China, so the Indians are building up capacity. The Chinese want to go to higher added value, and the Chinese government prefers investments in man-made fiber, not in natural fiber. In India, it's the opposite: the Indian government is strongly focused on natural fiber because 15 percent of the population lives somehow from natural fiber."

"The U.S. has two things happening," he continued. "First of all, everywhere, labor costs are going through the roof from their respective levels, so it's not that cheap anymore to run a mill in China or in Indonesia if you have labor at all, and in China, most of the installed base is manual, so the output is significantly lower than in more advanced economies. So, if you look at the labor cost per unit, the gap between China and the U.S. is not that big anymore.

"The other thing is energy," he said. "Energy costs in the U.S. are among the lowest in the world. Everywhere it is increasing - also in the U.S., but from a much lower base. So, we see now some projects in the U.S. that I wouldn't have thought of two or three years ago. It's not big yet, but who knows? Maybe things can become bigger. There's also this excellent agreement with Central America [CAFTA-DR], which is great for the local spinning industry."

Saurer And The U.S. Market
"Here in the U.S., we are very well-positioned," Lippuner said. "We have an excellent setup with our sales office in Charlotte; and in the U.S., we have one of the highest customer satisfaction levels. Our guys here have a very close relationship with their customers. They also walk the last mile and do everything for their customers, and we're very, very pleased. This is one way we keep our market share, not only by providing the best machinery for this market, which we always have done, but also by excelling in our services."

When asked about a recent visit to the floor covering mills in Dalton, Ga., Lippuner replied: "I love it. This is a typical cluster development. Now, there are two or three huge companies that basically serve the world - yes, the U.S., but the U.S. is more than 50 percent of the world market for carpet. It makes life easier for me because I don't have to travel so far, and I can visit three or four customers in one day. And you have this tightly knit community - everyone talks about the same industry, everyone knows one another. I'm particularly keen to be in the U.S. - I crisscrossed the country twice when I was younger."

Saurer is quickly implementing its decentralized corporate structure, with its reliance on local leadership and decision-making to enable it to respond quickly to customer needs with innovative solutions. The new structure and the continued recognition of its brands in their respective markets are expected to serve the company well as it settles in to reclaim its position in the global textile machinery marketplace.

September/October 2013