The formal hearings for the Schutzschirmverfahren (Protective Shield Proceedings) restructure plan for Tadano Faun in Lauf and Tadano Demag in Zweibrücken began on January 4th and will shortly be concluded, following a creditors meeting scheduled for Thursday February 18th.
We spoke with Tadano Demag/Faun chief executive Jens Ennen as part of an overall look into the progress and latest developments in the restructuring process - which is not too dissimilar to that of Chapter 11 in the USA.
Speaking of his appointment and the process so far, he said that the Tadano senior management was being very supportive, delegating the management of the reorganisation process to the local team, although naturally expecting to be fully briefed on the decisions they were making, prior them being finalised. He added: “We are very satisfied with the progress of the proceedings so far. By and large, this is thanks to the extremely constructive cooperation of all of the parties involved, including the consultations with the employee representatives. We would also like to thank our customers, who are firmly standing by us in a time that is not easy for any of us.”
He also said that the company remains on target to conclude the formal part of the proceedings by the end of the first quarter, although some of the immediate restructuring plans will not take full effect for a year after that, while the full manufacturing and product line transition will take a good deal longer, as the company moves towards a single product line and the elimination of any duplication of manufacturing process to reach maximum efficiency. One key change will be the creation of specific ‘centres of excellence’, with Lauf eventually becoming a dedicated crane carrier plant, from where the completed chassis will be driven to Zweibrücken where the superstructures and booms will all be built. The two parts of the crane will be joined, and the crane completed before moving to the testing and shipment areas.
The Lauf test track, which was brand new in 2012 (see: New test facility for Tadano Faun) - which covers more than 45,000 square metres of the 15 acre plot - will become the main Research & Development testing centre, freeing up space at what can be a congested test pad area at the Demag plant in Zweibrücken. Lauf will also be the base for All Terrain crane repairs, maintenance and modification work as well as become the base for an expanded used crane sales operation. The company hopes that the combination of the two manufacturers, and the increased focus on services, will help this part of the business grow significantly in the coming years.
Most of the two companies’ customer service function and related administration will be based at Zweibrücken going forward, with the single location helping with the merger of the two IT systems, bringing cost savings and efficiency benefits. The hope is that this will also simplify and improve communications with customers, along with the ongoing merger of the two direct sales and service operations. This is already complete in the UK and Germany and is currently underway in Italy.
In some areas of the business there will be less change, for example there will be no rush to consolidate engineering staff at one location. Engineers will be able to continue to work from their current offices, regardless of whether their expertise is related to carriers or superstructures, although over time one imagines that superstructure specialists might gravitate towards Zweibrücken and carrier engineers to Lauf.
Ennen adds: “In future, the establishment of competence centres will ensure better integration of production across the two locations, Lauf and Zweibrücken. This offers prospects for significantly faster production standardisation and optimisation while also leveraging the qualities and strengths of the different production sites to a greater extent.”
“We have come through a difficult time, but we have a roadmap for making our companies fit for the future. We are now looking ahead together, confident that the two operations will provide even better products and services to our customers in the future.”
The reorganisation plan has unavoidably led to the announcement - following an agreement reached between the company and employee representatives - of job losses. Zweibrücken headcount will be reduced from 1,558 employees to 1,166, while Lauf will see the current 729 jobs cut to 615 or there abouts.
In the past the Zweibrücken union IG Metall took a very tough stance against any reductions or changes at the plant, particularly during the Terex era, however that seems to have change, and it appears to be taking a relatively pragmatic and cooperative attitude to these changes, both publicly and privately. It has also stated that a fair number of those due to be laid off have already managed to line up new jobs, helped, according to a union statement, by the ramping up of a nearby John Deere facility.
All employees affected by the layoffs have the opportunity to transfer to a ‘transition company’ where they will continue to be paid 80 percent of their final salary for an average of nine months - possibly longer for older employees - during which time they can look for new employment and if successful move without a break in employment history. If, however at the end of the period they have not succeeded they can then file for unemployment benefits. A few are expected - according to the union - to refuse the transfer, in which case they will be laid off with the statutory notice period, which under these conditions ranges from one to a maximum of three months. Some may choose this seemingly unattractive route on the basis that they may be able to file a case of unfair selection for dismissal and perhaps retain their job. The union is recommending employees accept the transfer.
Ennen says: “We are planning proactively and for a recovering market, not on the basis of the current situation which has significantly deteriorated due to the Covid-19 pandemic. In close consultation with our shareholder, we have therefore deliberately designed the HR measures conservatively, as we are expecting a pronounced increase in order volume at both locations by 2025. Our top priority is to permanently secure as many jobs as possible in the given circumstances.”
“We have therefore worked closely with the works councils and made every effort to design the headcount reduction as socially acceptable as possible. In our many talks with our employees in recent weeks and months, we have been met with understanding for and confidence in our approach. We would like to express our sincere gratitude for this.”
Product line developments
When it comes to product line there is a mid to long term plan to merge the product range as new models are introduced. “It makes little sense to have two or three 100 tonners for example,” says Ennen. This will start with a standardisation of cabs and technology, Ennen would not be drawn on how long this might take but did not reject a time scale as long as five years to reach a high level of harmonisation when we ‘floated it’. As to a new single branding he stated that nothing had been decided at this point, but that they were working on it and consulting all of the stakeholders involved. Tadano Demag? There was no indication from him as to whether this one was even being considered. One thing was clear, he is well aware that getting this right is far more important than being a simple name change.
Some efficiency gains were made early on, particularly in the sales, service and marketing areas along with the supply chain. An example of one change coming into force is the boom on the 130 tonne Tadano ATF 130G-5. Until now it has been manufactured by an external sub-contractor , but in future will be produced at Demag’s Wallerscheid facility in Zweibrücken.
“The establishment of ‘competence centres’ for superstructures and carriers constitutes another measure. The quality of the assembly halls offers Tadano Faun advantages for carrier production, while Tadano Demag benefits from a strong crane system and the possibility to transport booms by shuttle, which lends itself to superstructure and boom assembly. This facilitates optimal utilisation of the core competencies of the two traditional companies, Tadano Demag and Tadano Faun,” says Ennen.
“In future, our customers will have access to a considerably broader and more complete portfolio of lifting equipment solutions, offering even greater flexibility that extends to larger package deals. We will strive above all else to enhance the customer experience. In recent months, we have already launched a number of new products, such as the AC 450-7 and the GTC 1800EX. Further models including the AC 80-4 and the HK series will follow in the first quarter. Overall, Tadano Demag and Tadano Faun will establish 15 new products on the market over the next four years.”
“The 'best of both worlds' principle remains at the heart. We will be even more strategic in leveraging the strengths of each company – Tadano Demag and Tadano Faun.”
The changes being proposed are probably a good deal better – or less bad than many might have expected. Interestingly it takes the Faun operation back to where it started in the crane business, building carriers for the industry as a whole, particularly All Terrains – Demag, Grove, Tadano, Pinguelly and others all used Faun carriers at one time.
Creditors will, we understand, have to agree to write off some of the outstanding debt from the manufacturer – ‘take a haircut’ – but it is apparently not so severe as to create an ongoing issue with the suppliers.
Tadano was always going to face problems with stepping up the efficiency of the Zweibrücken, which employs far more people per €1 million or revenue or per crane unit produced. By some strange twist of fate, the pandemic has helped accelerate this. The changes seem to have a strong buy in from all parties which will help make it work.
The biggest challenge will be how to handle any product line and brand mergers. It always seems easier than the more tangible factors, but it is fraught with danger and risks. Tadano has in the past gradually merged brands – Tadano Faun and Tadano Mantis for example, but they were both single entities building products not offered by Tadano and they did not change, but gradually evolved into a fully Tadano business over a long period of time. This one is different.
Ennen seems to be fully aware of the challenges and risks as will the senior Tadano management in Japan, and it will be very interesting to what decision is reached and how it goes.