INTERVIEW: R&D is key

Tirschenreuth is about two hours’ drive from Munich, set amongst the hills and forests of northeast Bavaria. The Hamm headquarters were revamped in 2008, and the complex is an impressive an unexpected sight to behold in such a rural area.

The entrance to the main corporate building was built to look like a roller drum – just one of the many nods to Hamm’s compaction legacy that have been integrated into the fabric of this futuristic building.

The large, modern assembly hall covers an area of around 22000m², building every machine to customer order, while the new research and development centre cost €100 million to build alone. Over 850 people work at the site.

Hamm has a long and proud history – it was founded in 1878 by brothers Franz and Anton Hamm, producing agricultural machines, and was acquired by Wirtgen Group in 1999. Privately-owned manufacturing giant Wirtgen also owns the Vögele paving brand, Kleemann crushing and screening brand, and Benninghoven batching plant brand.

Reinhold Baisch has been rolling Hamm forwards since he joined the company as a member of the management board in 2002, and has seen plenty of changes since then – from the complete overhaul of the company’s headquarters to its global expansion into one of the largest compaction equipment manufacturers in the world.

“The Wirtgen Group has heavily invested here in research and development for Hamm,” Mr Baisch said. “The investment in R&D in particular changed the profile of the company and gave us the chance to serve our customers better around the world, and to gain market share year-on-year.

“We are also proud of our R&D facilities and our facilities in general here, we want to be able to attract good engineers and good people – if you want to have talent with high potential, you have to offer them a quality working environment,” he said.

“For us it’s not only a building, to offer the best environment for people to be as productive as possible, it’s also to do with communication and to facilitate the running of an international business. We said the building has to be in line with our company profile and our company values – our customers invest in us, and we want them to see that we invest in ourselves too.”

Wirtgen has five manufacturing bases in Germany for its five brands, while outside Germany it has production facilities in Brazil, China and India.

“We sold more than 8000 Hamm units around the world in 2015,” Mr Baisch explained. “Today we sell more than 90% of the products which are produced in Germany to markets outside Germany. But it doesn’t matter where you buy your Hamm product – it’s orange, and as long as there’s a Hamm sticker on that machine, you know you’re getting quality. We don’t differentiate when it comes to quality.”

He said one of the key challenges the company was facing when designing new machines involved marrying regulatory demands for sophisticated new engine technology for reduce emissions with customer demand for machines which are easy-to-use, maintain and service.

Rental potential

Mr Baisch said large national and international rental houses as well as smaller and medium-sized local rental firms around the world were key customers, investing mainly in the company’s compact range of machines with operating weights from 1 to 5 tonnes.

He said larger machinery, like 5 and 7 tonne soil compactors were also fairly typical rental machines, but even bigger models from 10 tonnes upwards tended to be owned by contractors rather than rented.

“We believe that for our compact line of machines, more than 60% of what we sell is going to the rental industry,” he said. “The UK definitely has the highest rental penetration, with Germany, Scandinavia, France and the US also strong.

“When I started here we sold around 300 machines in the compact class, now nearly every second machine we sell is compact class – so last year around 4000 machines. We believe today that the rental share within a typical construction company is slightly higher than it was before 2009. And whatever will happen in the future, we believe rental will always grow faster than the rest of the construction equipment market.”

“When you look at China, for instance, the market dropped dramatically, but the only sector that grew for us was the compact line – repair and maintenance is now a big trend in China, this market is playing a more and more and important role. And when it comes to repair and maintenance – this is a key rental sector.”

Mr Baisch said South America was another key market – and it wasn’t a question of if the market would recover, rather when.
“We are looking very closely here, we believe that when the market comes back, the customers will be asking themselves if they want to buy and invest or if they want to rent. They are looking for financial flexibility.

“Rental offers contractors more cost transparency – and in general for us, we find that the rental industry is a pretty good indicator when it comes to planning, budgeting and forecasting. We look at how optimistic the rental industry is for the coming year.

“We were a nobody in the rental industry ten years ago, and no we have dedicated teams of people around the world that only concentrate on the rental market – in the UK, in North America, in France and hopefully in Spain again soon.”

Relationships

Mr Baisch said it took time for Hamm to develop a close relationship with large rental houses around the world. “It doesn’t happen overnight,” he said. “But we are now more in a partner role, and we share information – we know it will always be a price sensitive industry, but with some of our rental partners we have 12 month deals, and if we know their investment cycle, and they know our production cycle, we can work together to make sure the season doesn’t start with them being short on equipment.

"When it comes to planning, rental companies are the best customer base – it is an advantage for them and for us. They spend millions on equipment and they are careful about what they buy – they have sophisticated IT systems and can track how their fleet is performing.

"And they are pretty open when it comes to utilisation and also to quality issues – they tell us exactly what their customers like and what they don’t like. I really appreciate this partnership.”

A manufacturer's limits

He said a key factor in preserving these hard-won relationships with rental companies was not to tread on their toes.

"We have sense around the world that some manufacturers dominate in certain rental markets too, directly or indirectly. And we discussed it at Hamm and with the Wirtgen family, and we realised we believe we are customer focussed – sales and after-sales support is where our focus should be, so that’s why we need such strong R&D; that’s the reason why more than 10% of the people working here work in R&D.

"We believe that we don’t have the competence to offer rental, and we don’t believe that mid-term or long-term we can compete with the existing rental industry. We’ve built up a level of trust over the years, and it would be very difficult to do both. We actually think this is a key advantage for us.”

This is a feature from the September/October 2016 issue of IRN. To read the full article, with extra images and information, subscribe to the magazine: http://www.khl.com/subscriptions/magazines/international-rental-news/