Interview by Noah Graff
Today’s Machining World Archives October 2008 Volume 04 Issue 10
In 2006, at age 34, Dr. Thorsten Schmidt became a member of the Management Board responsible for Sales and Service at DMG, Germany’s largest machine tool manufacturer. Previously, he was in charge of East Coast Sales and Service at DMG’s American branch and served as the Managing Director of DMG Asia.
NG: First, give me your story. How did you come to work for DMG?
TS: I started working for DMG at the beginning of 2002. The first contact was during a couple of consulting projects which I was doing previously. One was a large market survey for Gildemeister. That morning I got in touch with Dr. Kapitza (Chairman of the Management Board of Gildemeister) and I was very positively surprised. Even though I’m coming more from the business side – business, sales, marketing of B2B products – all of a sudden I saw a company that was quite fascinating in regards to technology and market orientation. As always, you need to have some kind of mentor – a person who carries you forward. And this I found with Dr. Kapitza.
NG: Then you came to the U.S.?
TS: I started in 2002 as a business manager responsible for business development. I had a couple of merger and acquisition projects I took care of, in dealer sales in our headquarters, and after a year I moved to the U.S. There I became the managing director of DMG Charlotte (North Carolina). I was in charge of East Coast sales and service activities for DMG for two years as the managing director, and then I moved to Shanghai and was in charge of our Asian operation. I lived in Shanghai and Singapore for two years and ran our DMG sales and service capacity throughout Asia – from India through China, Southeast Asia, Japan, Korea, and Taiwan, where we have all of our technology centers. Then I was asked to join the board of Gildemeister. That’s now close to two years ago.
NG: Can you give me a bit of background on DMG?
TS: DMG itself has a background of 135 years. It’s a company that initially was founded with the name of Gildemeister, a very traditional turning machine manufacturer in Germany that started with a manual lathe, and of course it’s still now focusing on lathes. In the late 1990s, we purchased Deckel Maho. Deckel and Maho, also former competitors at one point, produce our milling machines. Deckel-Maho-Gildemeister leads to our brand DMG. [It’s a company of] 6,200 employees, focusing only on CNC metal cutting machines. We have 12 production facilities and 73 technology centers worldwide. The company itself has a turnover this year of €1.8 billion and an order intake of €2 billion or $3 billion. And this year, if things go as expected, we will sell roughly 7,000 machines worldwide. We’re under represented in the U.S.
NG: They said at the DMG press conference that few Americans know of the great DMG technology. What does that mean exactly?
TS: Of course it’s a fact that DMG is mainly still a European player. We’ve also had some success in the U.S., but it’s not comparable of course to European markets. In Germany, for example, we have a market share of 25 percent. No company [there] would buy a machine tool without considering the DMG equipment. Here it’s something different. Yesterday I talked to a company with 250 employees and they were not aware of the company DMG, and because of the size of the [U.S.], you have the end-user dealer structure with a lot of distributors still involved. With our direct sales and service channel, it’s of course a challenge to penetrate everybody who potentially uses our equipment.
NG: What is DMG doing to try to better penetrate the U.S. market?
TS: First of all, we have a new product line called DMG ECOLINE, quite an interesting and attractive productline that is able to help our end-customer to migrate to higher technology levels. With this new product line, with 2- and 3-axis lathes, 3- and 4-axis milling machines, and highly aggressive pricing we can pick up a lot of U.S. machine tool users at their current technology level. So companies who are using Korean, Taiwanese, partly Japanese, partly U.S. manufactured equipment, now see that they can transfer to DMG without going to 5-axis, or to turn-mill centers on the turning side. They can migrate to equipment with the number of axes they are used to. We provide them with a more stable machine with a better control system and in a year, or two or three, they can upgrade their technology level even further. Another approach of course is to expand our representation in the U.S. There’s the question of how many sales [people] and service engineers to have, and where to have technology centers. We just installed a technology center in Los Angeles. Houston will be next. Boston is under consideration. We have to diversify and regionalize our presence because we all know that a U.S. customer expects somebody in driving distance to help him out, to support him. And I think he has every right to ask for that.
NG: Why not use distributors like other machine tool companies?
TS: It’s a strategic decision of the company to mainly go direct. In the key areas where machine tools are being consumed, we are also working with distributors in the U.S. We believe in building up a direct communication channel and relationship to the end-user. If we are able to supply them with the application support, with a good service team locally, I believe that the added value that a distributor can bring is quite limited. And the distributors here and there have the tendency to also sell the customer the machine for which they get the highest commission, which might not be the ideal machine.
NG: Do you see the ECOLINE as a competitor to Haas?
TS: I would say that Haas is exactly our ECO market. I truly believe that Haas is doing a good job, but our ECOLINE is clearly a competitive line against Haas.NG: Do you think the new economic stimulus plan in the U.S. is going to help your business?TS: I hope so. So far DMG has sold 60 percent more than last year. So we are on the right track. The machine tool business itself in the U.S. is also going quite well. After all, the market is plus 17 percent until July, so it’s developing positively. Of course, we ask ourselves: What is the dollar to euro ratio going to do after the election? I’m a small guy to make any suggestions, but I would suggest that the new president take a close look at the further economic development of the country.
NG: Any plans to manufacture inside the U.S.?
TS: Of course. DMG is currently analyzing and developing a business plan of manufacturing in the U.S. We see it in our ECOLINE especially. We see products that need to be manufactured close to our end-customer. If you produce them in Europe you have to do the sea-worthy packing, the transportation, the custom duty. For machine tools you pay I think 4.4 percent custom duty to bring it in the country. This leads to the lack of being close to the end-user, as well as the [tough] cost structure itself. We want to be a little bit more flexible there. We believe the U.S. market will be in the top five countries in regard to consumption for machine tools for the next couple of years.
NG: Which countries make up the top five?
TS: As you may know, we have factories in Germany, in Italy, Poland, and China. The factory in the U.S. would add to our global approach of sourcing equipment locally and providing customers not only the sales and service, but also on the production side by being closer to them and being able to react to them.