The Management Board of Heidelberger Druckmaschinen AG has taken tough measures in order to reduce structural costs and improve the company’s profitability. In other words, the printing press manufacturer is once again being restructured. Cost reductions and improved profitability are the objective.
Bernd Zipper: Mr. Hundsdörfer, you have a lot on your plate right now. Recently, there have been a number of things in the press about Heidelberg – not just nice things. Meanwhile, you have announced a series of measures, a ” rescue package”, to make Heidelberg profitable again. But now the Corona crisis has interrupted this. How do you perceive this in the printing industry right now?
Rainer Hundsdörfer: It is a far-reaching shutdown in various areas of the world. At Heidelberg, we can monitor this very closely as we receive data from several thousand presses all over the world and therefore we know how many jobs, what runs and so on our customers have printed – and that’s where we see a drastic slump. However, the situation varies greatly from country to country. The good news is that China is just coming back, producing again, so are our Chinese customers, and our factory in Shanghai is running at pre-crisis levels again. The hope is there that life will return to normality in a few months’ time.
Bernd Zipper: You have more than 11,500 employees worldwide, many of whom work at the main plant, Wiesloch. What does it look like there?
Rainer Hundsdörfer: Our plant has been shut down – the crisis has left us with too few orders. But there are exceptions: We are maintaining an emergency operation to supply customers. We are important to the system and have the highest proportion of machines in the world in packaging printing. For the most part, all packaging printers are still running well and are supplied with spare parts, services, a back office and all the help they need. And, of course, production of components and parts for our plant in China is up and running. The factory has been running once again since mid-March – and has been back at 100% since the beginning of April.
Bernd Zipper: Another effect of the crisis is that drupa has been postponed until April next year. From your point of view, how do you see these changes?
Rainer Hundsdörfer: That is regrettable. We were all looking forward to drupa. But trade fairs today no longer have the outstanding character that is needed to show innovations. Innovations are there continuously – even outside the drupa cycle. We launched many of our new products even before the postponement. We would have liked to have focused on them at drupa, but now they are being presented without drupa.
What is missing, however, is the social aspect of a trade fair like drupa, where the industry meets once every few years and maintains personal contacts or makes new ones. An important element for us is always the visit of 5,000 to 6,000 customers who come to the Wiesloch plant – this is not happening this year but will hopefully be made up for next year in April.
Bernd Zipper: In my opinion, April is a rather unfavorable date since everything is concentrated. Do you think that drupa will be as successful as a drupa held in summer or May?
Rainer Hundsdörfer: It will be a challenge for everyone. Especially since many manufacturers have saved their news for drupa to show it there. They will also want to launch their products now and will have nothing new until April 2021. This means that the novelty effect will be somewhat lacking.
And travelling will be different in this world after Corona. There will be less. We are all in the process of learning that many things are going online where we used to think: ” I absolutely must go there”. Now we cannot go there, and we are finding new ways. I’ll tell you one thing. Our travel budget could be cut in half. Certainly not with the service technician, but many other things will probably stay online.
Bernd Zipper: I also believe that a lot will change – especially in connection with digitalization. This is now once again an incentive, a boost for everyone to communicate digitally. What is it like within your organization? Are there many people working from home? How do people work together there?
Rainer Hundsdörfer: Practically everyone who is not actually required to produce anything is working from home. Due to our activities in China, we took care of Corona very early on. A crisis management team has been in place since January, and we have very quickly taken measures all over the world to protect our employees and keep them operational. But also, to be able to supply and support our customers. Home office is a well-rehearsed concept for us. Even the last Supervisory Board meeting was online.
Bernd Zipper: But what will happen to the printing industry now? Many questions cannot yet be answered today. However, you have taken a step and written a letter to the Minister of Economic Affairs in which you expressly point out once again the relevance and at the same time the plight of the printing industry.
Rainer Hundsdörfer: I have done this quite deliberately. Not in order to deceive the associations, which have their own functions and tasks, but to effectively support the industry in the interest of the customers. It is precisely because the saying “print and paper are dead” is in people’s minds that we must once again make politicians aware that the subject of print and paper is a) not dead and b) systemically relevant.
That is one aspect, and the other: I value my clients. Customer focus is not an end in itself. All companies live from the fact that their customers are doing well and doing good business. That’s why Heidelberg also wants to enable its customers to survive and do good business again in the future.
These are the two main motivations that led me to write Mr. Altmaier an open letter. I know him personally – he will certainly have read the letter. He told me not so long ago that the printing industry was close to his heart.
Bernd Zipper: Good idea. But there are those who criticize it and say: Now Mr. Hundsdörfer wants to save the customers – for his own sake. Yet it’s not wrong to try to help customers, is it?
Rainer Hundsdörfer: We are doing everything we can for our customers today. However, we are not in such a good financial position that we could simply allow our customers around the world to wait for our services over the next few months. Heidelberg cannot stand that either. This is a systemic task, a task for the public, for governments, which must maintain what is systemically relevant.
Bernd Zipper: Still, it would be nice to say, “Heidelberg offers better prices.” Can you do that?
Rainer Hundsdörfer: We support wherever we can and wherever it is possible. But as I said, the funds are also limited at Heidelberg. Nevertheless, we accommodate our customers financially wherever we can. In addition, we try to help with advice and action as much as we can. For example, if a customer does not know how to deal with the issue of short-time work. We help there within the scope of possibilities and liability. You have to be careful, of course – but experience helps.
Bernd Zipper: I, for one, think it’s good that you take the initiative. But there are also reactions to your open letter from the industry – and of course many grumblers. Doesn’t something like that get on your nerves? You want to do something and then someone comes along and starts nagging again?
Rainer Hundsdörfer: Mr. Zipper, I’m used to that. If you don’t do something, criticism will follow. But if you do something, there’s always someone who knows better. If you follow that line, you’ll never get anywhere. You have to choose your own path, walk that path, and just let naggers drop off.
And to the accusation of self-interest – yes, of course I do that out of self-interest as well. Because customer care is ultimately a matter of self-interest. I want my customers to be happy. And if I can put in a word for them, because Heidelberg has a greater influence than a medium-sized printer with ten employees, then it might help a bit to focus attention on these small but not unimportant customers.
Bernd Zipper: Let us return to the Heidelberg set of measures. What concrete steps will Heidelberg take in the future? The Primefire and large-format presses will be discontinued, there will be a reduction of around 2,000 jobs, and €375 million will be returned to the company from the Heidelberg Pension Trust. These are – each measure in itself – already big numbers.
Rainer Hundsdörfer: Yes, but Heidelberg’s economic situation last year was unsatisfactory. To put it in a nutshell: We burdened our profitable core business with things that are technically mature but not economically viable because they accumulate losses. Sooner or later, these would have got Heidelberg into serious trouble.
We knew that, but the idea of how to solve this problem was missing. After all, discontinuing products, reducing overcapacities and personnel also cost a lot of money in the first place. We are now breaking new ground, daring to do so and tackling it courageously.
But it is not as if we are taking something away from someone. Heidelberg founded the pension fund in 2005, when the company was still rich. To make it less attractive for a hostile takeover, money was taken out of the fund. Because at that time it was not unlikely that someone would take over Heidelberg, take the money out and sell it to somebody else. To avoid this, the pension fund was set up – which is why it was open to the public. And it is very important to me to note: All pension entitlements are unaffected. Even in the somewhat unlikely event of Heidelberg’s insolvency, the claims will be covered by the Pension Security Association as normal. With the money taken out, we can now implement things that we were unable to do in the last three years.
Bernd Zipper: Was the strategy in recent years wrong?
Rainer Hundsdörfer: No, it was not wrong. We wanted to achieve profitability through growth. But we failed for two reasons. Digital printing technology has not taken off in packaging as we had hoped. And the second is a global economic situation that has been deteriorating for a good year. So, we had to act.
Bernd Zipper: Those are pretty tough steps for the company and the employees …
Rainer Hundsdörfer: The board of directors has been reshuffled to create unity there. It stands 100 percent behind all the measures that lie ahead of us. The same goes for the employees’ side. Now it is no longer a question of whether, but only of how – and we will find solutions.
The issue of product streamlining is of course a bitter one, even for people like me who are enthusiastic about technology, who can enjoy the pressure, who can really get excited about modern developments. To have to adjust something like that really hurts. But this is not Heidelberg’s farewell to digital printing, it is the farewell to a product.
Now the focus is on the core business, restoring profitability and building up equity. We owe this to our employees, we owe it to our shareholders and, last but not least, we owe it to our customers: So that Heidelberg remains a reliable partner for the world’s best printing presses in the future.
“Rainer Hundsdörfer has taken the initiative and, in the interests of the industry, has written a letter to the Minister of Economic Affairs in which he expressly points out once again the relevance and, and at the same time, the plight of the printing industry. This deserves great respect.” – Bernd Zipper.
Bernd Zipper: Now that was a big blow all around. Thank you for that, but I still have a few more detailed questions.
If you look at the recent years’ rollout – introduction of this machine, discontinuation, software here and yet no software there – it’s hard to find a “reliable partner”. What happens now with the customers who bought the Primefire?
Rainer Hundsdörfer: We will discuss this with our customers. Those who want to keep the Primefire may keep it. We will support them. Heidelberg stands by the products. And those who want to return it, can return it. We also offer these customers solutions in offset printing – thanks to the digitalization and high level of automation in Sheetfed, this fits in well with some customers.
Bernd Zipper: There have been one or two comments that Heidelberg should have entered the print services sector itself. Would that have been a possible way forward?
Rainer Hundsdörfer: I don’t know if it’s so smart to become a competitor for your customers. After all, there are some of our customers who don’t like us making subscription models because they argue that competition is distorted. Which isn’t necessarily true – but you can see the sensitivities and how careful we have to be.
We are not in competition with our customers. Where we provide direct service and go into production, these are areas where none of our customers are currently on the road. Such a future topic is currently being developed: This is the printing of organic electronics. There we will not sell the machines, but the products. We are building up a completely new business here as a producer of printed sensors.
Bernd Zipper: Restructuring once again – many people cannot imagine what restructuring means. What is that supposed to look like? Are there new departments now? The board has been reduced, okay. But what happens now?
Rainer Hundsdörfer: We are currently reorganizing our management structures. The board is downsized. The next level is an executive committee, where all of the major operational functions are represented. This is basically the body that will run the company operationally in the future.
Bernd Zipper: How should I imagine a board meeting of this kind? I remember the Heidelberg board of directors, I think there were seven people, then at some point there were five and now there are only two. That’s always a short board meeting, isn’t it?
Rainer Hundsdörfer: These days it is a meeting with this committee, which currently consists of seven people representing functions from development to production and sales. Everything that has to be decided and then implemented is discussed very briefly and very constructively. The meetings are much shorter than before and there are no longer any transformation or translation problems. Those who have to implement it have decided it together. In this form, we will also continue to reduce the number of management levels and the number of managers downwards – that is the one restructuring approach.
We will become a bit less formal, more medium-sized. We will of course have to cover the legal conditions. That is why the management board will consist of only two people, who will then also be personally liable – with all the consequences.
Another important element of the restructuring is of course that we are gradually changing our structures as a whole. We will reorganize our sales organization differently; we will use much more digitalization in sales. We will optimize our product management. We are already breaking down individual storage silos and delivering end-to-end solutions. This includes software and platforms, for example, but no longer as just any satellite, but as part of Heidelberg’s core business. And the core business is printing. Printing from prepress to the loading dock, including consumables, software, service and consulting.
“Now the focus is on the core business, restoring profitability and building equity. We owe this to our employees, we owe it to our shareholders and, last but not least, we owe it to our customers: So that Heidelberg remains a reliable partner for the world’s best printing presses in the future.” – Rainer Hundsdörfer.
Bernd Zipper: Such restructuring takes at least one year to 18 months. Now you’ve brought in a specialist, DLA Pieper. What does a restructuring specialist do? Can’t Heidelberg do it itself?
Rainer Hundsdörfer: We have already tried many things ourselves – with moderate success. There are things that you don’t do every day, but only once in a lifetime. That requires specialists. DLA Pieper, for example, were the ones who helped us to open the pension fund and make it legal and proper. Thus, we will continue to use specialists in order to implement things correctly and quickly.
Bernd Zipper: You have already generated cash by selling Hightech Coatings to ICP for € 25 million. Are there any other approaches?
Rainer Hundsdörfer: There are more, but it is still too early to say anything about them, because we will continue to reduce our focus to our core business. In any case, this is not about selling our Chinese activities. Who would sell their future? Our factory in China is one of the best, perhaps even the most modern printing press factory in the world, has the best price/performance ratio, a quality standard that is considered a benchmark, and is located in the only real growth market in the world for offset printing presses.
Bernd Zipper: When I look at the market value of Heidelberger Druckmaschinen, I could actually buy the company for a small mark. But how would that work? Heidelberg’s real estate holdings alone are almost ten times the market value.
Rainer Hundsdörfer: Heidelberg is certainly worth much more than our current market capitalization.
Bernd Zipper: The streamlining of the group and its transformation into a digitalized medium-sized company that is active in over 80 countries is a mammoth task. I actually only see you on a magic carpet on your way from A to B.
Rainer Hundsdörfer: Well, first of all I have a lot of supporters and I have a management team that is sworn in. Then there are the specialists to structure the whole thing. External consultants can only give the recipes for how to do it. The doing is up to us. And we are in the middle of starting things up. Our experienced managers are under great pressure, but I have confidence in them.
Bernd Zipper: Now there are a lot of people out there who think they know better and say: “Why don’t the Chinese just increase their share and then everything will be fine.”
Rainer Hundsdörfer: We don’t want that. Heidelberg is a German company; we also want to determine our own path and have therefore taken precautions. We still welcome the involvement of Masterwork, Masterwork is a valuable partner for us, but a partner. And we have an agreement that Masterwork may only increase its shareholding with the approval of the Management Board and Supervisory Board – and not by more than 20%.
Bernd Zipper: There’s still some room for improvement. Right now, it’s 8.5%.
Rainer Hundsdörfer: …and only through a capital increase. But it’s not necessary at the moment, so there’s no reason to give Masterwork more shares.
Bernd Zipper: Why isn’t there a big investor? We have great companies in Germany that invest really well. Why don’t they invest in German mechanical engineering companies?
Rainer Hundsdörfer: That brings us to the topic discussed at the beginning, why I had to take up the cause of our industry and write a letter to the Minister of Economics. The opinion is: paper and printing is dead or at least dying. All investors believe that and that’s why everyone here is making the rounds. This is a joint task that we as industry must finally solve – then Heidelberg will quickly become a highly attractive investment.
Bernd Zipper: As you know, I am not of the opinion that print is dead – on the contrary. I believe we are fighting on the same front. That’s why I’m so concerned. We have recently seen that the Antitrust Office has thwarted their efforts regarding MBOs. I keep asking myself the question: “Koenig & Bauer and Heidelberg. Why don’t they go together? They would actually be great partners – in terms of turnover or production technology – that would be ideal.
Rainer Hundsdörfer: If the planned takeover with MBO fails because of the Antitrust Office, then a partnership with Koenig & Bauer is not even necessary. Our industrial policy has not yet progressed far enough to understand this.
We are already trying to cooperate to a large extent in areas that are not competition-related, such as trade fairs and public affairs. That is also permitted as a competitor. However, the other issues are currently taboo in Germany.
Bernd Zipper: Well, we got the confirmation: MBO is now with a Japanese competitor. That hurts a bit, doesn’t it?
Rainer Hundsdörfer: Above all, it is a missed opportunity for our industry in Germany. Our approach in bringing the two companies together was to have a crucial size in order to be able to make the necessary innovations. With the innovations in automation, digitization and integration into workflows, we would have created the necessary amount of crucial material. There would have continued to be two product lines that would have had differentiation, two brands and two distribution channels. The Antitrust Authority nevertheless took a different view.
Bernd Zipper: Do you think that there would have been a different decision under the influence of the Corona crisis?
Rainer Hundsdörfer: I am not sure. Officials do not usually react quickly to changes. They follow their laws very closely. There may be little room for interpretation there. I think we need to find other legislation that makes this possible. I do not want to blame the officials at the Federal Anti-Trust Office, but our legal position must be changed.
Bernd Zipper: Of course, what we are naturally also interested in after the whole restructuring: the strategy. Heidelberg is now focusing more on package printing and more on digitalization. Does this mean that commercial printing no longer exists? Just packaging?
Rainer Hundsdörfer: No, commercial printing is still our largest business sector. Commercial printers are still close and valuable to us and we will continue to develop them and support our customers there as a matter of course. We will also bring even newer digital solutions to the market there. The same applies to package printing. The strategy is clear: we will continue to develop our digital divisions, which we have very successfully launched over the last three years, and our range of contracts up until the subscription stage. We will also find financing partners. Before Corona, we were close to our goal, but now everything has shifted. However, we will continue to work on this, push it further and even help our small customers who are now in need – when things are back to normal.
Bernd Zipper: Of course, you need a financing partner who is involved in the process, otherwise it’s only detrimental to the balance sheet if you have a large number of machines waiting in the wings…
Rainer Hundsdörfer: That’s right. We can’t afford it. It would only lead to more trouble. But we have solutions in sight.
Bernd Zipper: You have often spoken about a platform. What are you trying to achieve?
Rainer Hundsdörfer: We are working on our ecosystem and we bought Crispy Mountain so that we can continue to work on this issue. But we have to look at the crisis and see what comes next. What can we afford and how quickly? We will continue to work on the ecosystem.
Bernd Zipper: But what is the vision? Machines talking to each other? A print pool, similar to the one HP once initiated, in which Heidelberg printers join together in a network and also shift print capacities? Or is it simply an e-commerce system where you only sell consumables?
Rainer Hundsdörfer: My vision is that we have networked machines – first in the company, then at some point beyond the company. Ultimately it has to be a platform that is accessible to everyone. We have too many examples that the limited private platforms have failed or are about to fail. We will not make that mistake.
Bernd Zipper: At the Online Print Symposium, you said quite clearly that JDF does not necessarily have to be the system that connects everything. In which direction is that supposed to go?
Rainer Hundsdörfer: We are working hard on it: What will data formats of the future look like? They are a prerequisite, but they do not exist today. There is a lot of discussion, but that is still up in the air.
Bernd Zipper: But the question for me is really: how long should it take until something is ready for the market?
Rainer Hundsdörfer: We actually intended to have such a product defined by drupa at least to such an extent that it could have been discussed sensibly with everyone. The crisis will postpone this somewhat. But it is a prerequisite, otherwise I will not need a platform.
Bernd Zipper: Another topic is of course small format. At the moment there is an OEM product in the digital printing sector that they are using. What about smaller offset presses, is there anything else coming?
Rainer Hundsdörfer: A large part of the small-format offset market has been largely substituted by digital printing. This must simply be acknowledged. Here we continue to offer our customers both technologies but are working closely with our partner Ricoh on future digital solutions.
Bernd Zipper: But what is the future for Heidelberg and digital printing?
Rainer Hundsdörfer: We have said goodbye to a product, not to digital printing. We have one of the greatest competencies, especially in Europe. We will retain this expertise in a suitable manner and are also in close contact with our OEM partner Ricoh. We will definitely continue and further develop this area. We also have Labelfire for the production of individual and personalized labels.
Bernd Zipper: Okay, let me recap: Subscription remains, and will be developed further and a financial partner is in sight who can cover the interim financing. Digital printing has not been abandoned, but is being pursued further, in whatever form. The digital platform is being expanded. That’s quite a lot, which in fact requires more people. But you actually have to send people home. How is that supposed to work?
Rainer Hundsdörfer: There are always other people needed to do that. We just have to see how much money we can invest in which area to drive things forward profitably. We can reduce a certain number of people, a considerable proportion of them by socially acceptable methods. We have a huge number of existing part-time retirement contracts in Germany. We can bring several hundred more people into retirement with decency, in other words in a socially acceptable manner. At the same time, the production of standard machines will go to China. That’s not new either, as I’ve already said on several occasions. Everything that concerns high-performance machines will remain in Wiesloch. Everything has been planned, the projects are underway and will now be accelerated, and then we will make the corresponding reductions in a socially responsible manner. In the indirect area, in the administrative areas, efficiency can also be achieved through digitalization and automation.
Bernd Zipper: Of course, I still have to ask a heretical question. It is naturally nice to hear you say that we have the people for software development, we have the ideas, and with Crispy Mountain we have new people. But it’s also a fact that many Heidelberg software projects in the past didn’t work out the way you would expect. I’m thinking of Meta Dimension, of the collaboration with Creo many years ago. I’m thinking of prinect, a software that is still on the market, but is actually not really maintained anymore. A disaster, actually. Can you manage to build a Tesla out of this old piece of equipment?
Rainer Hundsdörfer: That’s certainly a challenge. So, we are now offering our software more and more in line with demand via the cloud, which is very popular with customers. There are other companies that have been very successful in moving from rubber boots to mobile phones, or from steel to mobile phones, or others that once built cars and are now successfully building household appliances. I do believe that a company can change and crisis, exacerbated by Corona, demands new thinking, because pressure helps, and I am firmly convinced that Heidelberg can do this. It is not the skill of doing everything possible, the skill of strategy is above all to decide what I am not doing or at least what I am not doing now. One of the reasons why Heidelberg hasn’t done many things so well in the past is that too often we couldn’t part with things, weren’t prepared to say: I’m just not doing that anymore. We have tried to do everything – and that is not possible.
Bernd Zipper: You’re an experienced engineer, you’re an experienced CEO, but the man you brought in for the digitalization, Dr. Herrmann, is no longer on board. How’s that going to work?
Rainer Hundsdörfer: I hold Ulrich Herrmann in high esteem, both personally and as an expert. He has brought a lot of good ideas to the company, for example the subscription, contract business, these are all things where he has been involved. But in a phase of focusing, where we are, where you cannot and should not implement a new idea every day, but on the contrary have to put some good ideas on ice due to lack of resources, we set other priorities and parted on good terms. In the current phase, we are better off with a relatively small committee that implements things quickly and agilely.
Bernd Zipper: Now we have the crisis and we hope that it will be over soon. Will pressure be the same as before the crisis after the crisis? What do you think?
Rainer Hundsdörfer: The world will not be the same and the pressure will probably not be the same. But it’s a little too early to say what will happen after that. We have to start by tackling the now and the here, we have to keep our cash together, we have to help our customers, we have to see that our employees are safe and as soon as we see the recovery, we have to get up and deal with the new situation.
Bernd Zipper: Well, let’s look into the future: Where will Heidelberg be in three years?
Rainer Hundsdörfer: I am firmly convinced that Heidelberg will be a financially sound company again in three years’ time. We will not only have maintained our position as the market leader in sheetfed offset printing, but perhaps even consolidated it further. We will be able to offer solutions for the workflow, for the production of print products, end-to-end from prepress to the ramp. That is our goal, and we will achieve it. And we will certainly be there in a suitable way, even if digital printing has developed in the segments that are accessible to us. Heidelberg will be much more stable, for our customers, for our employees and hopefully also for our shareholders.
Bernd Zipper: Where will you be in three years?
Rainer Hundsdörfer: In three years, I will be 65, and then I will be able to devote a little more time to my hobbies. That’s what I’m assuming for the time being.
Bernd Zipper: But the goal is first of all to digitalize the system and make sure that the company gets back on track.
Rainer Hundsdörfer: Mr. Zipper, you don’t leave a company in a difficult situation.
Bernd Zipper: Mr. Hundsdörfer, thank you for finding the time to come to our improvised, small studio in Essen. I wish you a safe journey home and keep my fingers crossed for you, for all Heidelberg customers and for the industry. I think the ideas are important! So, thanks again.
Rainer Hundsdörfer: Thank you very much, I was happy to come, Mr Zipper. It was my pleasure.