Machine Tool Scuttlebutt

By Lloyd Graff

Doosan Group chairman Park Yong-mann. Courtesy of The Korea Herald.

Doosan is a mess. The signs of Doosan’s current struggle are striking, even to a machinery dealer far from its Korean home. Beautiful 3 to 4-year-old machines are being auctioned off in Texas, Singapore and China with more to come.

The word came down days ago that Doosan Machine Tools is being sold to private equity firm, Standard Chartered of England, which has a strong recent history of doing deals with the Doosan Group. The deal is for $1.2 billion, well under the $1.7 billion asking price.

The machine tool division is one of the gems of the Doosan Group of companies. They sold it partly because they grossly overpaid for the Bobcat division of Ingersoll-Rand in 2007. They borrowed a ton of money for the almost $5 billion purchase, just before the worldwide recession hit. Their timing could not have been worse, and they have been struggling to cope with the debt ever since. This sale to Standard Chartered is the biggest bandage on the wound.

The construction slowdown in 2008-2009 hurt the company, but the machine tool division rebounded nicely as it took advantage of the commodities run-up worldwide. The oil boom in North America was a boon for Doosan. Its Texas dealer took full advantage, selling Doosan machines like they were boots and Stetsons.

Since 2005, when Doosan bought Daewoo’s machine tool group, they have become one of the pre-eminent brands in American manufacturing. But back in Korea they were pulling the heavy sled of the Bobcat debt, which culminated in the sale of the machine tool division.

One of the interesting aspects of the sale is the strange position of Ellison Machinery, Doosan’s new primary distribution partner in the United States.

Ellison had been the dominant dealer for Mori-Seiki before DMG decided to sell the brand direct in 2015. The company, owned by Mitsui Bank, made a quick pivot to pick up the Doosan line nationally. Mitsui has close connections with Doosan in Korea, so it looked like a skillfully arranged marriage. But today the marriage is suffering strains. Ellison has heavy commitments to take machines monthly from Korea and we hear they are struggling to digest them all.

After promoting the Mori line for many years it must be a bit difficult for Ellison people to go back to their loyal Mori clientele and promote Doosan. We also hear morale is down at Doosan’s American headquarters with K.Y. Lee, its popular leader, now gone from the firm.

Back in Korea, there was a huge layoff of staff after the company demanded everybody file for retirement benefits, so they could choose who to keep and who to let go.

Standard Chartered of England is buying a damaged company, albeit one with an excellent reputation for delivering fairly priced machinery.

The company’s success in selling into the oil boom is now working against it with $30 petroleum. In many respects Doosan is the poster child for the collateral damage of the commodities crash. Construction machinery faltered, sullying the Bobcat deal, and machine tools were hit by the destructive downdraft in 2015.

We hear that Lynx, a Korean company that makes machines sold by Doosan, is now looking for American distributors to sell its product because its  relationship with Doosan is in disarray.

In Korea, the Park family, which controls the publicly held Doosan Infracore Group, has come under much scrutiny, particularly after paying out more in dividends than the company earned in 2014.

Park-Yong-mann, a member of the founding family of the company that controls 44% of the stock, had been a hero when the company was really rolling, but with hard times comes critique. He had advocated a General Electric style of leadership, less autocratic than the norm in Korea. But then the tough times forced drastic measures like mandatory retirement, and he lost his popularity.

Doosan is still a superb machine tool builder, but 2016 will be a difficult test for the company and its new owner. Will the family leadership be pushed out by the private equity firm? Did they buy it to put it back together, then flip it? Private equity always has an exit strategy. Doosan users will be watching closely for the clues.

Question: Has the drop in commodities prices hurt or helped your company?

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18 thoughts on “Machine Tool Scuttlebutt

  1. Albert B. Albrecht

    What the machine tool industry doesn’t need is another series of buyouts, changes in ownerships, Nidec purchasing Minster, Fives taking over MAG;s prior ownership of Giddings & Lewis and Cincinnati, and now Doosan by Standard. Every time such take overs happen the companies involved are frequently downsized, restructured, and loose their identity. It is not healthy for the U.S. machine tool industry. The companies loose much of their prior customer base, and status within the world market.
    Orchids to companies such as Gleason, Hardinge, Haas Automation who continue to survive in what is a cyclical industry in a changing economy..

     
    +2
  2. Jack DeLaughter

    You need to get your facts right before you print something. Ellison did NOT TAKE DOOSAN NATIONALLY . We are and have been a distributor for Doosan and before that Daewoo in Oklahoma and most recently Kansas and were Dealer of the Year in 2014. We continually sell and service the Doosan Line as other Doosan dealers do that were in place before Ellison came along. We have great support from those management people in New Jersey and have a great inventory of machines available to sell which for a Customer is a Great time to buy with the discounts and promotions currently available. A retraction would be appreciated.
    Jack DeLaughter
    CEO

     
    +50
  3. Lloyd GraffLloyd Graff

    Ellison does not distribute nationally in the U.S. but they have a big portion of the country covered.

     
    +1
  4. Alan Lockery

    Jack is totally correct,
    Your facts are skewed, First based on your article Doosan has 100% market share in Texas and Oklahoma. I think the marketing people at DMG Mori, Mazak and Okuma would debate you on this. As I do get auction flyers and emails I see as many of the above brands of similar vintage available as well as Doosan in the oil country.
    You mention the Korean builder Lynx? I have been a Doosan/Daewoo dealer for over 25 years and still am, having been to the factory over a dozen times and having visited the vendors of Doosan. The only Lynx is the Doosan Lynx 220 and 300 lathe models we sell which are built buy Doosan and some of their vendors. There is no builder to anyone’s knowledge that I talked too, named Lynx.
    Lastly, Doosan made a decision to change their distribution model in areas covered by Ellison, Yet you make no mention of DMG Mori doing the same thing?
    Your article borders on sensationalism (*see def below) and you called Doosan a mess. The only mess I see are most of the facts stated in this article.

    *SENSATIONALISM
    (especially in journalism) the use of exciting or shocking stories or language at the expense of accuracy, in order to provoke public interest or excitement.

     
    +18
  5. Rob Philips

    Your comment regarding the Texas dealer who “took full advantage, selling Doosan machines like they were boots and Stetsons” leads me to wonder what should they have done according to you? Did other OEM’s turn down orders? Based on what market principle should they have not sold machines to customers requesting them? Is it now Today’s Machining Worlds stance that it is the Dealers responsibility to properly forecast if an industry really needs new / more machines or not?

    As far as Ellison now promoting Doosan rather than DMG/Mori – I searched for an article with this negative reporting by you when they switched from Okuma to Mori years ago – I came up blank.

    Who is this “Lynx” company you refer to? Please practice standard journalism practices and provide a reference to the business and any documentation of them looking for a distributor on their own?

    I could go on but you should be ashamed to have published a piece devoid of facts or any critical thinking about a subject you are obviously biased to. The “we have heard” as references would not pass in a high school writing class.

     
    +10
    1. Jack

      Not sure if the “we have heard” was partly directed at me.
      I was recently told face to face by someone from Ellison that they were going to be THE distributor for Doosan in the USA.
      I was very surprised to hear that.

       
  6. Randy

    This article is filled with many wrong and in-accurate statements. It was clearly written by a person who does know some about the machine tool industry, but does not know enough of the facts about what they have published. To start with, the auctioning of used machine tools is a sign of the times, everyone knows that with $31 per barrel of Oil and $2.14 MMBtu for Natural Gas, has created a difficult times here in the USA and world wide, please see the latest Wall Street Journal and USMTO reports for these facts. In ending, you are correct, “Doosan is a superb machine tool builder”.

     
    +7
  7. Lloyd GraffLloyd Graff

    I stand by what I wrote. Ellison is now the primary distributor of Doosan in the U.S. Which is what I wrote. The company was just sold because of financial problems at the parent company in Korea.
    Doosan makes fine machines but the oil decline has hurt sales.
    A private equity company has bought it and we do not know how they will run it.
    Maybe, you should read the blog again.

     
    +63
    1. Alan Lockery

      Mr Graff,
      If that is what you wrote I am sure there would not be any rebuttals to your article. But if you truly compare your 1/15/2016 reply to you origional article, your litarary license would be revoked!

       
      +5
  8. Kevin

    What an absolute embarrassment of an article. Mr. Graff you have gone way out of your range on this one. There are over 14 “other distributors ” besides Ellison who would dispute you on this. It is apparent that you have an agenda in mind here as you have websites for both Miyano and Okuma posted here (both competitors to Doosan). Maybe if you have a Doosan website posted here you would be saying different ! Your supposed facts are way off on this so put your pen down and pickup a crayon ! A coloring book would suit you just fine!

     
    +11
  9. Bryan Willman

    Oddly, I’m mostly with Graff on this one.

    Granted – I’ve never heard of Lynx as a supplier to Doosan and couldn’t find any discussion of it elsewhere – perhaps a search failure on my part. (I do not speak or search in Korean.)

    Granted also – if you are a Doosan dealer who isn’t Ellison and has kept the line, well you don’t want your customers to be confused – so I get why Mr. DeLaughter is unhappy. I suggest Graff’s blog is the least of your problems….

    As for the rest of it Graff asserts (and other sources seem to support) that Doosan sold a lot of machines (generally highly regarded) and a lot of them went into the oil industry. News that Doosan was selling things to offset the bobcad debt, and has sold the machine tool business, can be found in such places as bloomberg and the wall street journal.

    I suppose you could argue that Graff is implying more Doosans than Okumas being sold in liquidations, I didn’t read it that way. And even if that were TRUE, I wouldn’t view it as indicative of anything – much too easy for various timing and cyclic economic events to cause such patterns. (Like, suppose Doosans were a better business deal, so more startup oil shops bought them on credit. Maybe more of them are now at auction. That’s a sign of their goodness not a problem with them.)

    Will being sold off be good or bad for Doosan? Have Fives been good or bad for G&L? (Seemed likely they would be good…) Maybe Standard Chartered will do a great job with a great asset?

    In the mean time, in my local market Ellison is now the Doosan dealer, the former Doosan dealer is now the Mazak dealer (!), DMG/Mori now has local staff and a local office. No flying pigs are visible out my window, but I’m keeping the bacon shot handy in the bird gun.

     
    +16
  10. Andy McNamara

    To all readers of Machine Tool Scuttlebutt and Lloyd Graff:

    “the rumors of our demise have been greatly exaggerated”. While it is true that Doosan is selling its Machine Tool Division, that is more about Doosan’s past, than our future. The article is correct that Standard Charter will purchase the machine tool business of Doosan. We are excited about this and feel the change in ownership is a good thing that will help take us to a new level. New investments always bring new opportunities and we are looking forward to having Standard Charter as our new owner.

    Regarding the other alleged facts of this particular article, yes it is true that machine tools are being auctioned. This actually happens every day whether or not the economy is good or bad. Additionally, machine tools from every builder are auctioned every day, not just Doosan machine tools. This is simple economics related to supply and demand.

    Regarding the supposed lynx company, this is actually one of our brands of machine tools along with Puma, Mynx, and several others. The Lynx product is and will remain a key part of our turning center lineup.

    Regarding the popular leader KY Lee you referenced, we are not sure who you are referring to since we do not have anyone by this name that has run the company.

    Regarding Ellison, yes they are our newest dealer and yes they do cover a large section of the US. We are happy to have them on board. In addition to Ellison, we also have other excellent dealers in the US, Canada, Mexico, and South America. We have a great team representing our product.

    Regarding Doosan being a superb machine tool builder, you are correct; we are a superb machine tool builder. We are proud of our company and our dealers and we expect to continue this excellence for many years to come.

    And finally, there are new and exciting things coming from Doosan and we hope that your readers contact the dealer in their area to talk about our excellent products and see us in action. Additionally, we hope that you and your readers will visit us at IMTS this year to see the new and exciting machines that we will unveil.

    Andy McNamara
    Director of Sales and Marketing
    Doosan Infracore America

     
    +21
  11. Gloria

    To answer Lloyd’s question, the drop in Commodities prices has both helped and hurt my business. It’s great to have cheaper gas prices at the pump and cheaper raw materials prices, but it also hurts with customers who are in the oil and gas industries. They have slowed down, hence we have slowed down.

     
    +3
  12. Da Truff

    Andy are you stating that Ellison has not been given the exclusive territory rights to the United States. Who will handle Doosan parts in the future?
    Are you saying that the Lynx factory is at the main factory and is owned completely by Doosan? I understand you have the brand but the article is not saying that.

    Speak da truff

     
    +35
  13. Randy

    Ellison executive management seems to have made a strategic error. After several years of slowly moving away from their original core values, they have created a top heavy group of over paid execs with a disproportionate sense of entitlement. The end result is a mass exodus of employees and a new business model that could be compared Similar to selling Mercedes last month and selling Yugo’s this month.
    An unfortunate shift in the MT industry and the many MT users out there.

     
    +5
    1. Mr. Mazak

      Meanwhile Mazak is doing great. Poor Jack, it’s just a matter of time that Ellison is the dealer in Oklahoma and Kansas. Customers in Kansas are still upset with the way Doosan and you treated their old dealer PSS. You know what they say about Karma?

       
      +128

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