Philipp Schack, 德国TITAL公司
Release Date: 2009-05-14
You made an interesting switch from working in the financial sector several years ago to working for a highly technology driven company, and from living in London to living in Bestwig. How did this happen?In 2004, I joined Tital as Managing Director. After a strategic review of Tital’s strengths and opportunities my recommendation to the former owner Heraeus was, that access to growth capital would be essential for the future development of Tital as it had to be able to invest in a new titanium casting facility. Tital had a major opportunity based on over 30 years of experience with titanium to enter the market of large structural parts of up to 1,500mm in size. For Heraeus titanium casting was not part of the core activity. Hence it was decided to sell Tital. In the course of that process I figured that it was a fantastic opportunity to buy-out the company myself, together with five other senior managers of the company, which we did in April 2006. Rather than selling the company to a large competitor, or anybody else, we saw buying the company as a major opportunity. Today, the management team of six people is the majority shareholder of the company. Since the buy-out the business has been moving ahead quite quickly. Since 2004 we have pretty much doubled our revenues and looking at the potential of titanium our future prospects are really exciting.
How would you describe the chemistry between yourself and Tital?
The chemistry is very good. My professional background is also in working for a medium size family business, so I pretty much know how blue collar people think and how to motivate them. Therefore, I am basically coming back to my roots here. And my investment banking background really helped in structuring the buy-out.
You stated that Tital had to increase its investment and research and development activities in titanium because titanium is the future. How did the company react to the change that you were bringing?
We have been involved in titanium for the past thirty years, essentially since the Tornado fighter program, so we had a great technology base to start from. Developing that into a large titanium part business is a major step forward, but everybody knew what would be coming because we have gone through the same process with aluminium over the past 15 years. We have developed a clear niche, reputation, and technology for developing aluminium parts in the size of this table. It requires a very particular stability in your manufacturing process, and we have a number of important patents in this field. The aluminium story, which took place in the 1990s and the current decade, was already a big success.
The question was: can we do it again with titanium and is aluminium going to be as important in the future as it was in the past? Yes, aluminium is going to be an important material in the mix, but as we all know composites are on the move. It is clear that they will account for more than 50% of the share in the new programs. Titanium is a very good friend of composites for a number of reasons, such as corrosion, mechanical properties and weight, which are key parameters in aerospace. We recognized that we had to be on time to offer large structural parts in titanium for the new programs, which lead us to a business plan. We put together the figures and it turned out that we had to invest about €10 million in a new site, and that we would need access to growth capital. This is where my investment banking background came in quite handy, because I had some experience and interesting contacts in this field. We finally welcomed DZ Bank, the fifth largest commercial bank in Germany, as a shareholder in this business. It is a very stable and solid institution which has an investment subsidiary called DZ Equity Partners, which was interested in supporting us. They provided the capital, we provided the technology, and off we went. Since December 2008 the new site is ready and we are in full production mode. Already, we have won contracts for very substantial parts for a number of European programs, not only from the airframers but also in the engine business which is the second very important market segment for large titanium structural parts. To make a long story short, we are very happy about our progress and are excited about our prospects. Our discussions with customers about titanium parts look very promising.
Titanium as a material and casted titanium products are not new. The market segment for small parts, up to 500mm, is a standard market for us. It is something that we will continue to be an interesting part of our business. However, in the market for large parts of up to 1,500mm there are not many suppliers worldwide. Essentially there are two American competitors in the aerospace market. Both are excellent at what they do, but there is room for more competition. Entering this very much US dominated market segment, which has in the past been largely engine driven, is the first priority in our growth strategy. The engine business has traditionally been the key market for large titanium structural parts, but the new market is clearly the airframe market. This market is undergoing a major shift from aluminium to composite. In order to reduce assembly cost you have to integrate a multitude of smaller parts into one integral larger one, and therefore size of the part matters. If you can offer large parts you can offer cost savings in assembly as far as a total cost approach is concerned. That is the whole story. There is clearly the existing engine market, but the new market for large structural parts in the airframe business is moving ahead quite quickly as new programs such as the A400M and the A350 are in interesting phases right now.
Just to give you some figures, the A320 uses about 3% titanium in the airframe excluding the engine. For the A380 that figure is already 10%, and the A350 will have 14% titanium. That gives you an idea about where we are heading. Complex geometries, that is what we are looking for: complex geometries at a good size.
What is the advantage of being a relatively small company competing against to large, established American players?
We are quick, we are customer oriented, and we are willing to take different perspectives on things. As a newcomer you are forced to be a bit more creative. Our competitive edge is speed, creativity, thinking out of the box, and being customer oriented.
Part of the customer focus is participating as early as possible in the design phase to optimize the benefits for your customers. To which extent are your customers open to the solutions that you propose?
New programs tend to have quite aggressive weight and cost targets, so it is key for us to be close to the design activities of our customers where we can launch new ideas and get a sense of what the mainstream design is going to look like and where we fit in there. Selling our product through the procurement side of our customers’ business is wrong, we need to be part of the thought and design process at a much earlier stage. Then we can play our cards, be cost effective and launch new ideas. Basically, the buzzwords here are concurrent engineering and design-to-cost, and that is working very well. We are not only talking about the part price, we are talking about the whole process and that makes it a smart product, but only if you are participating before the design is frozen.
Of course, cost-efficiency is a key selling point. At the same time, titanium has advantages that will also enable your customers to develop greener planes, are you playing the green solution card as well?
Yes, that entails a number of very interesting new ideas which are in the development phase right now.
You went to China two years ago to demystify the Chinese market. What was your first impression about the potential in the Chinese market?
Of course, the market is mind blowing. You are amazed by the potential, the speed, the willingness to move head, and the ambitions of the individuals you meet is just mind boggling. This is point number one that probably everyone feels who is going to China to do business. The second point was that there is a role we can play even if we deliver out of Germany, which we would not have expected in the first place. We won parts in the EC-175 program, which is a joint venture, as well as parts in the ARJ-21 program, and there are more to come. This tells us that the market is interesting, that we have a role to play, and that if we reach a certain threshold we have to think about being there with a manufacturing base.
Where would that threshold be, and do you have a timeframe for realizing this?
We need a compelling business plan to start off with. We are constantly talking to people, but it is not really a timing question. We do not have the plan to be there in 2010 or 2011. It is really driven by customers asking us to help. If the right customers ask for the right package of parts then we are very likely to move to China. It is really more opportunity driven than timing driven.
What have been your personal experiences of doing business in China?
Communication is an issue. It is crystal clear for me that you need Chinese people helping you. Germans are successful in doing business in China for a number of reasons. One reason is that we tend to be relatively precise in what we communicate, which is important when bridging a cultural gap. Also, you have got to have the breath to come back, to repeatedly meet, patience is so important when doing business in China. I am going to China twice a year, our head of sales and marketing goes there twice a year and one of our key account managers travels there four times a year. Plus we have a permanent sales agent (Melchers Ltd.) based in Bejing and Shanghai. For a medium-sized company such as Tital, we have 450 employees, this is a big commitment. But without this commitment you are not going to succeed.
When you decided to buy the company three years ago you must have shared your dream and a set of targets with the management team that joined you in the acquisition. Are you behind or ahead in realizing the initial expectations and ambitions?
We are ahead of our business plan. We basically doubled the size of the company in five years, which is better than we thought. Developing the capability to cast large titanium parts took two years, that was actually longer than we thought. But that also means that we have a stronger competitive edge. Overall, we are very happy that we are in control of this business, and the motivation of our management team is obviously driving our success. We have come along way in five years. We were a very solid, technically driven medium-sized German company. It is really interesting - this company was fully focussed on developing parts that were as refined as possible, while talking to customers was considered to be an obligation that interfered with the time that could be spent on the work floor. Developing new technology is the most difficult part. But our success over the past five years has been based on transforming the company into a more open minded, market driven, customer focussed organization. Once you have started that process people open their mind with you, which develops a fantastic dynamic.
I guess that the original business plan is somewhere in a drawer right now, where do you want to take this company in the coming five years?
Of course we have our vision. For titanium castings the potential is huge. Combining that technology with the right financial backing to fund the growth creates a pretty powerful combination. China is part of that logic. If you talk to the airframers, obviously they have all understood that you have to follow the market. The new A320 assembly line was not opened in China for cost reasons, it is there for marketing purposes. That is the key to opening the door. If that is true for our big customer then it has to be true for us as well. We are fascinated by the programs that the Chinese aerospace industry is putting together right now, and we would be very happy to offer our technology whether it is from Germany or from China. We are ready to move. We have the right product for state-of-the-art aerospace programs. That is the key message.
| Company: | 德国TITAL公司 |
| Position: | Managing Director |
| Country: | 德国 |