Business Model
Dürr is one of the world's leading suppliers of systems, services and products for the car making industry. We are present on the ground with our sales, services, engineering and manufacturing capabilities at all locations where cars are manufactured. We achieve about 85% of our sales in the automotive business. We also supply equipment to the aviation industry, the machinery industry, and to the chemical, pharmaceutical and printing industries. About 55% of our activities are in plant engineering, 45% are in the machinery industry.
Dürr is represented in 20 countries at 45 business locations (thereof 25 with production facilities). As a systems supplier, Dürr plans and builds paint shops and final assembly facilities, mainly for the automotive industry, but also for the aircraft industry. Our range of products and services also includes industrial cleaning systems, automation systems and balancing machines for the production of engine and transmission components, and also assembly, testing and filling systems for final vehicle assembly. Dürr also offers environmental technology, specifically air pollution control systems for automotive paint shops and for the non-automotive sector. About half of the just under 6000 employees work in Germany. The percentage of employees in the emerging markets has increased steadily to over 23% in recent years.
The operating business is subdivided into six business units. Five of the six Dürr business units are world market leaders in their area of activity. The youngest business unit, Aircraft and Technology Systems, is currently gaining foothold in the market, and with its systems for the assembly and painting of aircraft, has the aim of joining the leading group of competitors. In some sectors Dürr has a market share of about 50%. No other competitor has a comparable presence in the regional markets of the world. Besides a few global competitors there are some competitors in local markets.
Production depth within the Dürr Group of about 25% altogether is relatively low both in plant engineering and in machinery engineering and in the product business. As a result, Dürr can react more flexibly in the current economic downturn, and has a smaller business risk than companies with a high production depth. Material costs are rather more of a transitory nature because every order in the project business is calculated with actual material prices. The ROCE of just under 18% in 2008 is well above the average of German machinery and plant manufacturers. Due to Dürr's global standing and the high share of added value in local markets, the influence of exchange rates is small.
Dürr depends on the long-term capital spending behavior of the automotive industry, whereas the short-term behavior of consumers is of less significance. In the longer term, the capital spending behavior of Dürr's customers follows the development of production and sales worldwide. The market environment in the automotive industry is currently difficult, however, experts expect demand to increase from 2011 onwards at the latest. Over the past few years, automobile production has steadily increased worldwide; growth is driven by the emerging markets; with China in the lead. The share of the emerging markets in Dürr's incoming orders of nearly 50% is very high.
Strategy
The goal we are pursuing is to increase our profitability on a sustainable basis. For us, the continuous optimization of our business processes is an ongoing issue. Apart from the increased internationalization of our portfolio, our efforts are also focused on the extension of our service business. This is achieved thanks to the widespread sale of our machinery and equipment to customers around the world. About 60% of all automotive paint shops and about 50% of all assembly plants work with Dürr technology.
Dürr's strategy is to actively address trends and face challenges in the automotive industry, and to come up with developments and solutions promptly. With its "LeanLine" concept, the company has responded in time to the demand for simpler, low cost standard equipment for Asian customers. One of the factors making LeanLine so attractive in terms of costs is Dürr's high share of added value in low cost countries. As technology leader, Dürr systematically develops solutions to help customers reduce their costs per unit in production measurably and significantly. A milestone product presented by Dürr in mid-October 2008 is the EcoDryScrubber paint spray booth concept which saves as much as 30% energy in the very energy-intensive process of automotive painting. EcoDryScrubber ties in with the so-called "Green Paintshop" concept developed by Dürr; this is a role model of a paint shop with a high level of environmental compatibility, and extremely good results in terms of energy consumption and use of resources.
We conducted an analysis of the perspectives and potential of our business units and the Group as a whole in the second half of 2007 and used the results to draft our Dürr 2010 strategy. The four cornerstones of this strategy are: increasing customer benefit, pursuing growth initiatives, optimizing processes, and value creation. The subsequent chart gives an overview about the four cornerstones and the measures based on the cornerstones.
Dürr has responded to the economic downturn with an extensive action plan to reduce capacities and cut costs. In the first quarter 2009 there were job cuts in France and the USA, and the majority of the external labor hired worldwide was shed. This will be followed by further adjustments abroad in the second quarter. There will be a slight increase in short-time working in Germany. The exact extent will depend on capacity utilization at the individual locations. All in all, Dürr will probably reduce its capacities by 15-20% this year. Further job cuts might be necessary in individual countries depending on the market situation.