In March 2020, composites industry experts Dr Michael Effing and Frank M Bruns, both based in Germany, officially brought together their 70 years of experience to provide composites companies with advice about acquisitions and divestitures, business transformation and crisis management. Four weeks later, Covid-19 lockdown began, and the two men are in a unique position to use their knowledge of the last 20 years to help companies through the next 20 years where the industry will have to adapt to a new reality in order to succeed. I spoke to Michael and Frank about the past and the future of composites.
Reinforced Plastics (RP): Tell me about your backgrounds?
Dr Michael Effing (ME): I have more than 30 years in the composite industry working for five multinational companies as general manager or president, starting with DuPont in the US, followed by Owens Corning and Johns Manville, Huntsman. I was then president of DSM Composite Resins based in Switzerland until 2012. So, I learned about the world of the raw material producers working for global companies and all ingredients of composites – from fibers to resins. And then in 2012, I created my own company, AMAC GmbH, based in in Aachen, Germany. This was, in a way, going back home, because that’s where I graduated from as an engineer in aerospace and with a doctorate in composites, many years ago. For many years I have been the Chairman of the German trade associations AVK and Composites Germany.
Frank M Bruns (FB): I have worked in the international plastic surface and composite industry for more than 35 years, including 32 years in leading C-Level positions, and for more than 20 years I have successfully been the CEO of international manufacturing family enterprise businesses in the process and consumer prints industry. I worked, for example, for Freudenberg and Lohmann Nonwovens, Dynamit Nobel Kunststoffe/Menzolit-Fibron, Constantia Industries/impress in Austria, and my last employer was the SURTECO Group/Döllken located in Germany. Since March 2020, I’ve been working as an independent entrepreneur and have founded a company called Alpha Executive Advisory, located in Heidelberg. In this capacity I act as an operational advisor for German Mittelstand and international companies. My personal experience includes from fibers to nonwovens and composites, granulates to plastics edge bands, decorative papers, semi-finished and finished goods as well as component supplying. My expertise is in general international change and restructuring management and crisis management.
RP: How long have you known each other?
ME: We’ve known each other for more than 20 years! Frank was my customer, so I supplied him fibers from Johns Manville and resins from DSM etc. When we talked to each other last year, we agreed to do something together to combine almost 70 years of composites experience between us and see what we can do in terms of supporting start-ups and M&A crisis management. We formed the partnership at the beginning of March 2020, and four weeks later the shutdown as a result of the Covid-19 pandemic began.
RP: What have been the big moments in composites over the last 20 years?
ME: There were two major events which particularly affected my businesses. One was, of course, the Lehman crisis that took place from 2008-2009. I was then president of DSM Composite Resins, and we lost almost 50% of our business overnight. The market lost almost 50% too. As a result of this, the industry looked completely different; there was a shift to Asia, a shift to the Middle East and a shift to Europe for the traditional open mold technology. From then on, windmill blades were made in China, boats were made in Poland, Middle East, Turkey, China, other pipelines were made only in the Middle East. The open mold thermoset business was gone, and did not come back – while other areas such as the sheet molding compound (SMC) industry were impacted but came back quite quickly. Because DSM was basically cut in half almost overnight it became much smaller, and was later sold to AOC Alliances.
Another event was much more positive: when BMW announced the i3, its carbon fiber composite electrical vehicle in 2012. Overnight the whole market changed – it a similar way to when the aerospace industry discovered carbon fiber in the 1990s. As a result, all machine producers, carbon fiber producers, material producers, immediately focused on the lightweight aspects of carbon fiber – and that was also the reason why I created my own company, closely linked to the new center for lightweight production in Aachen. This also led to some reality checks for the composites industry; carbon fiber is too expensive for automotive, so it will not have a breakthrough like glass fiber. I believe it will remain in certain niche markets, but this was a very vital push for the whole industry. A lot of new business opportunities came up and new products were developed such as carbon fiber tape and technologies such as high-pressure resin transfer molding (RTM).
FB: From the technology point of view, the demand for surface quality accompanying with the process stability were always the big issues in all of my industries. During my time as a CEO of Menzolit, specialising in SMC and BMC, I found that customer demands in terms of surface quality, reproducibility or requirements for process quality and stability, have significantly increased. In particularly, Tier 1 and Tier 2 automotive OEMs have emphasised surface quality as well as lighter materials, the use of renewable raw materials and reused materials, higher design freedom, and new improved technologies. The trend and the demand in the furniture industry with regard to decorative papers was the same.
RP: What technology do you think has made the biggest impact?
ME/FB: We’d like to highlight two things: long-fiber-reinforced thermoplastics (LFT) and glass-mat-reinforced thermoplastic (GMT). So, while in the last 20 years the European composites industry in general was growing at around 2% per year, the LFT industry was growing at 10%-12%, and is now very substantial. In particular, Sabic’s Stamax® long fiber reinforced polypropylene (PP), is very unique material that has better performance than the traditional LFT. It’s a big success story – Sabic invested a great deal of money into the technology, and as a result there are now production lines worldwide and they are making more than 100,000 tonnes of that material.
ME: Another example is wind energy. One of my business partners, SAERTEX developed non-crimp fabric (NCF) for the wind energy market, and from being a small medium-sized business they became the world leader. The market today in Europe is around 200,000 tonnes.
RP: What technology, has got lots of potential but hasn’t been picked up yet?
ME: My baby is thermoplastic composites. When the technology was developed in the mid-nineties, it was very promising but required an investment of time and money that was not possible at the time. LANXESS bought it in 2012 and put much more effort and money into it. Now it’s quite a sizeable business but still not huge; and it has much more potential. I think there needs to be just a few more companies developing the technology over the long term, not just the next three years. It’s vital to develop standards and norms as well. These are new materials that are competing with steel, aluminium etc that already have a lot of standards underpinning their use. With thermoplastics you have to be an expert, and the industry is sometimes not willing to share its data in terms of parameters or geometry. Luckily, we at the AVK have created a platform for thermoplastic components with the help of some of the big producers so that the information is now available in a database.
FB: From my point of view, I think that the potential of 3D printing is far from being exploited. We are talking more and more about individual products and higher requirements for surface quality and end products, and here, I think we should act and invest more purposefully to bring this technology to serious production. Last but not least, while digitisation is a big challenge, its application in the process chain will really allow companies to continuously advance automation. The potential of digitisation should lead companies to sustainable organisational and economic investments, and to increase ultimately the added value.
RP: How big of an impact on the industry has Covid-19 had, and what are the repercussions?
ME: I think the Covid-19 crisis is bigger than everything before; a lot bigger than the Lehman crisis. During the 2008 financial crisis, shipbuilding and truck businesses went down to zero in terms of production – but they came back less than a year later. With the pandemic, officials in the aerospace industry, are talking in terms of getting back to normal in no less than six years. The automotive industry in Germany has also been affected greatly, although I’m still optimistic that the next two or three quarters will be significantly better – around 80%-90% compared to the previous year, but it will take time. The impact will be large and we all hope that there isn’t a second wave that could really bankrupt a lot of companies.
FB: Different industries will react differently, and different end user markets should be considered in different regions. For example, machine builders in Germany, will want to get their business in order and control the cash, so investment will be very limited. So, I think people will try to stick to what they have and generate cash with it so investment will be much reduced.
RP: Do you think things will be quite stagnant for a while?
ME: Yes, I think so, because liquidity is a big issue, along with security, availability raw materials, and operational efficiency with respect to under-utilisation. As well as this, employees may be frightened and unsettled, and no-one really knows what will happen in the next couple of weeks or months and how quickly we will may return to our usual normality.
RP: What opportunities could COVID bring?
ME: Certainly in digitalization and the electronic sector. We may also see opportunities in the building and infrastructure market in the Middle East. In Asia, there’s already a strong trend towards composites in construction because the materials are lighter and the buildings can be taller and built more quickly. Relining is a big market also, so I think that could be an area with a high level of automation in that field. This, of course, would mainly involve opportunities for glass fiber, but there may also be opportunities for carbon fiber in wind energy, infrastructure and automotive hydrogen pressure vessels in carbon fiber for fuel cell EV.
RP: In terms of business, are there opportunities now for smaller companies in particular?
ME: I visit a lot of small company start-ups, especially, in the campus of the University of Technology in Aachen, and they all have a strong sense of initiative and openness to new ideas. These companies are researching new, exciting technologies such as laser-based tape placement and tape winding, combining fibers with glass and polypropylene. They get some sponsorship and investment, but not the level that they would get in the United States.
FB: Absolutely, yes – but It is not really a question of size, it is a question of the business model and also of the product by itself, the services, and last but not least, the added value for the customers. I’ve been coaching young start-ups for more than a year and I would say they’re extremely unconcerned about threats. They are quite optimistic and always confident in their doings in respect to e-learning or some other projects. And I would say there is a perfect fit between the old traditional companies with their existing business model, and the new IT start-ups with their own business model or with new disruptive or digital or artificial business models. So, I think this is really a big chance for small and medium sized companies to work with big companies and benefit from each other’s attitudes and experience.
RP: Will larger companies likely to want to divest some of their businesses, or are they going to wait and see what happens?
FB: There is certainly a trend in divestments, which is a big chance also for private equity companies, and also for mid-size/small companies to acquire or to merge with similar units to consolidate the market or enlarge the business models.
ME: I think that it depends on location – companies such as Sabic that are located near raw materials have been in the past more likely to acquire larger companies, and because of their position, they may do better than other companies that have to rely on a bigger supply chain.
RP: How big a part will government investment might play?
ME: It depends on the country. In Germany, the government has pledged to invest in aircraft such as Lufthansa and Airbus and maybe the automotive industry while in the Middle East they may well focus more on raw material producers and the chemical industry. In Western Europe governments may decide to focus on end user market such as aerospace and automotive, in the hopes that once they are moving more quickly, everyone else will follow suit.
RP: What’s the most important piece of advice that you would give composite companies right now?
ME: With regards to the raw material aspect: agree together on standards and norms, don’t do things differently, do it together. Jump over any hurdles and consider working together as an industry, not separate entities. The other thing I would advise is to be more patient, give new innovations time to develop, and believe that you can make it happen!
FB: I would say the most important issues for businesses at the moment are liquidity, financial security, resource hatching, fast cost reduction and spending halts wherever reasonable. That is where Michael and I come in. We can assist the composite industry, or companies in the industry, in respect to post-Covid circumstances. We are willing to exchange or offer ideas and work out a fitness program with the owners of smaller size companies, and big companies too.
ME: It’s also important for business to remember their employees, and the next generation of composite experts. Now the aerospace industry is in trouble, graduates may debate if they should still study aerospace, automotive, or something completely different? So, I think we have to look after the good engineers and keep them in our industry – don’t let them go elsewhere. A career on the shop floor might not be so attractive to young people, post-Covid, so we have to attract them in other ways. We have to learn to listen, not only to give advice. I’m fundamentally optimistic that our industry and the small companies within our industry will have a prosperous future and will survive the Covid-19 crisis.
This article was first published in November 2020.