Manufacturing success despite economic turmoil
October 9, 2012
by Matt Powell, Assistant Editor
Canadians likely think of Italy more as a romantic vacation destination and are more aware of its cultural characteristics than its many industrial qualities.
Indeed, the country is beautiful and the food so magnificent, so deliziouso, yet there’s much more to appreciate than its fascinating history, ancient and elegant architecture, some of the world’s most beautiful artistic treasures and many fabulous wines.
Much of the recognition Italy is getting these days has more to do with its precarious economic condition and its contribution to the potential unravelling of the euro zone, thanks to a debt that is 120% of its economy and the likelihood of remedies that will involve steep spending cuts and tax increases.
Export or die
Yet, despite the ongoing economic turmoil in Italy and the 17-country euro zone, Italian manufacturers are weathering the storm and enjoying growth; a victory most companies attribute to a refined mix of innovation and R&D, added value and healthy export markets.
PLANT took part in a media delegation to Milan and Bologna hosted by the Italian Trade Commission (ITC) and Machines Italia in May to get an up-close look at Italian manufacturing. The delegation was also hosted by Federmachine, a governing body for more than a dozen specialized, sector-based industry associations that develop individual components of Italy’s manufacturing economy.
The trip focused on all sectors of Italian manufacturing, from metal forming machinery and equipment to fluid power and plastics. Despite their differences, most companies seem to follow a similar formula.
“When you have a population of 60 million, you can only go so far in a domestic market because it’s too small to support growth,” said Bart Pascoli, project coordinator at the Italian Trade Commission. He notes exports also alleviate pressure on the bottom line because downturns in local economies aren’t felt as harshly.
As a percentage of GDP, Italian exports represent 29%, matching Canada’s performance. The notable difference is that Italian manufacturing’s percentage of total merchandise exports topped 82% in 2010, while Canada’s manufacturers exported 49%, according to the World Bank.
Italy is also the second largest (after Germany) OEM producer in Europe. Ironically, Germany purchased more than $1.3 billion worth of Italian metal machinery and equipment, according to Federmachinne’s UCIMI – Sistemi per produrre, Italy’s association for machine tools, robotics and automation companies.
Sales of Italian-made metal machinery and equipment are expected to top $6.2 billion this year, a 13.5% increase over 2011, said newly-appointed association president Luigi Galdabini during a press conference at the Bologna-based Lamiera metalworking trade show, where 42% of its 400 exhibitors were from abroad. Galdabini said the industry expects exports to jump by 25% this year, reaching a value of more than $4.2 billion – almost 70% of total sales.
The recently appointed president of UCIMI – Sistemi per produrre also owns local manufacturer Caesare Galdabini, which specializes in material testing instruments. It exports 83% of its production.
Galdabini is an unabashed booster of Italian manufacturing.
“Italians are champions of specialized machines,” he said. “We are showing what automation of the future looks like and how connectivity will continue to change the way machine shops operate.”
As a smaller company, Caesare Galdabini’s approach to R&D responds to Europe’s troubled economy: focus on personalization and applied innovation for individual customer needs. And value-added is key, even more so than boosting productivity.
“Enhancing productivity is still crucial, but we’re starting to move away from emphazing it to focus on personalization and customization to boost efficiencies, which eventually boosts productivity,” he said.
He contends doing so has helped boost Italy’s competitive advantage over competitors such as Germany, China and Japan, and combined with growing exports, is also crucial to innovation.
“Exports allow the Italian producers to innovate because they know they need to export to survive,” said Pascoli.
Saes Getters Spa., a Milanese innovation company, specializes in producing components for ultra-high vacuum and gas purification applications for industrial customers. It once provided vacuum sealants and ultra-pure gases for liquid crystal display (LCD) televisions, until that business tanked when electronics manufacturers moved to light emitting diode (LED) displays. The lost business amounted to $115 million.
Despite the massive loss, the company continued to innovate, devoting at least 10% of revenues to R&D.
“We’re still here because of our continuous R&D and innovation practices,” said Giulio Canale, Saes Getters’ managing director.
The investment is paying off. In 2011, the company rebounded from its worst sales year ($164 million in 2010) to earn more than $190 million thanks to its recent focus on developing shape memory alloy technologies.
Shape memory alloy actuators replace the need for bulky DC and electronic motors. The alloys, in ultra-thin wire grades, recover their shape with the application of heat, making them ideal for compact, powerful and silent actuators, replacing traditional technologies made of wax.
The company, which employs 1,000 people at 10 facilities worldwide, has also developed a way to harness hydrogen in lithium-ion batteries for electric vehicles that allows automakers to use larger units without worrying about overheating. Chevrolet fell victim to this when some of its Volt hybrid electric cars experienced dangerous engine fires late last year.
Saes Getters says automakers are currently using what essentially comes down to a few laptop batteries packed together, something the company hopes to change to make electric vehicles more efficient and boost range.
Novamont, a Torino-based commercial and consumer bioplastics producer, also takes innovation very seriously. It employs 150 people, 30% of whom are dedicated to R&D and innovation.
“Sustainability” and “environmentally friendly” are not words easily associated with the plastics industry. Bioplastics are helping to change that.
Novamont, founded in 1989 as Fertec, is one of Italy’s largest producers of commercial and consumer products focused on innovation through sustainability. It produces more than 80,000 tonnes of biodegradable, compostable bioplastics annually, which are used in garbage and shopping bags, toys, hygiene products and car tires.
The Italian firm also has a Canadian presence. W. Ralston Inc., a Brampton, Ont.-based producer of polyethylene film and plastic garbage bags, uses Novamont’s vegetable resin-based Mater-Bi products in its BIOSAK compostable bags.
For Canadian manufacturers struggling in a global market where they must contend with a high-value dollar, high costs, rising global competitive forces and less than ideal economic conditions, Italian manufacturers demonstrate that it is possible to thrive even when circumstances are not ideal with the right combination of R&D and innovation investment, exporting, focusing on specialization, and adding plenty of value.
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This article appears in the September 2012 edition of PLANT