00:00First of all, I just want to see how the war in Iran has impacted you. Inflation has gone up.
00:06Has it changed the way that you have to operate? Yeah, actually. So first of all, thank you for having
00:15me for the time here. I'm very happy to speak. The Iran war actually did not have such a severe
00:23impact on the machine tool industry so far. Of course, it created uncertainty generally.
00:29And some customers are hesitating to do some investments and they are shifting a bit. But the real major impact
00:37we see is the increase in cost for energy and for oil. And that is, of course, impacting transport cost.
00:44And machine tool builders, they have big products. And when they ship the products overseas, it costs a lot when
00:51the prices are going up. But that's more or less the only real impact.
00:54I think the bigger impact is when we look what is happening in U.S., looking at tariffs and also
01:02looking at the currency exchange rate. This is substantially more impacting us.
01:09Mr. Wright, when you say that clients, I guess, are having questions about the cost of this, do you think
01:16they're delaying orders or for the moment they're on pause and they'll see what happens in the future?
01:21Mr. It's, again, the one or the other customer is a little bit maybe shifting investments to see what's going
01:30on. But it's not a big impact so far.
01:33Again, I would even say that on the other hand side, the boost of AI connected with the ramp up
01:40of data centers globally is positively impacting us generally much more than the negative impact of the Iran war.
01:49Because a data center consists of two major things. One is chips and the other is sheet metal. And both
01:55are part of our business. So that is positively impacting us.
02:01Yeah, I don't want to talk about AI in a second because actually I'm also here at Viva Tech and
02:05the buzz is absolutely incredible. We saw a signing, you know, 60 days to negotiate between the U.S. and
02:12Iran.
02:12Are you expecting things to become much easier in the shorter term or are you still a little bit in
02:17a wait and see situation?
02:21Of course, I think all these signs are positive. No one wants this war to continue. We see already the
02:28decline in cost for transportation.
02:30We see already also a positive outlook of our customers. So, yes, I think it goes in the right direction.
02:40Hopefully the signing is not only a signing because we all know that there still need some discussions to be
02:48done for a final, final agreement.
02:50So, I think we're all crossing fingers that finally they really come to a long term agreement.
02:59Talk to me a little bit about China. Is there, you know, one of the biggest debates in Germany and
03:03elsewhere is how still over reliance not only European businesses but actually German businesses with China.
03:10How do you see that and what does it mean actually for your components and tools?
03:15Yeah, that's a very good question, Francine. Thank you. So, so when we look at China, we have to discuss
03:20about two different marketplaces.
03:23One marketplace is the Chinese market for us, which is a very important market. But the other one is the
03:28European market.
03:29I start with China. Ten years ago, China was very, very attractive for machine tool builders. They, the local competitors,
03:38they did not have the technology.
03:39So, German and European machine tools were very attractive and we were able to ask for a good price. We
03:46did a nice margin.
03:47And it created a lot of jobs here in Europe to provide China with high tech, with machine tools. But
03:54over the last ten years, this has completely changed.
03:56And now the local suppliers in China, they learned how to also produce, let's say, good enough machines, which maybe
04:05are not meeting our safety levels
04:07and maybe not the precise productivity and precision levels, but they are good enough for the market. And therefore, today
04:14we are have we have our issues with getting a good margin
04:20and a good volume in China as the local brands are good enough. So now the focus much more shifts
04:28on Europe to make sure that in Europe we still make we are competitive.
04:35And if you look at the trade deficit between Europe or between Germany and China, you see that over 20
04:43years it was somehow equal.
04:44But the last five years, you see a huge gap evolving. So we are substantially importing less machines to China,
04:53whereas China is pushing substantially more products to Europe.
04:57So that, I would say, is now the much bigger question, how to, let's say, defend the European market against
05:06the very cheap machines.
05:07Yeah. But, Mr. Meyer, I mean, we've also seen a stagnation of, you know, the German economy for quite some
05:14time.
05:15What do you think is needed at the German level or the European level to make you more competitive, to
05:21make business more competitive?
05:22What would you ask today? Yeah, a couple of things, of course. I mean, first of all, it's on us
05:30to improve the efficiency, the productivity of our products.
05:35So, of course, there is a technological race and we need to invest to be and to stay.
05:42I would not even to say become because we are competitive, but we have to stay competitive.
05:47And therefore we invest a lot of money into more automation, more software, more digital improvements.
05:54AI is a huge opportunity for us to boost productivity in our products. So that is one thing.
05:59But on the other hand side, we also need to make sure that the environment here is competitive.
06:05Looking at labor costs, looking at the number of hours we are working compared to the number of hours our
06:12competitors in China are working.
06:15Bureaucracy, I think it's everywhere. And bureaucracy is not only taking a lot of time, it simply also creates a
06:24lot of costs.
06:25And maybe the environment for that in China is different. So we have a lot of homework on our side
06:31as industry, but as well on the political side to finally bring better conditions to stay competitive here.
06:43Mr. Meyer, talk to me a little bit about AI. So you've actually used it and it's helped you quite
06:50a lot.
06:50Do you think it's a real game changer for industrialization? I had a great panel yesterday looking at, you know,
06:57the reindustrialization of Europe in the face of AI.
07:01These two forces look like they're competing, but actually, can they really help each other?
07:06Yeah, absolutely. It's a huge game changer. And I explain to you why there are two directions.
07:12The one direction is other internal processes. When customers purchase spare parts, there are people in house who process this
07:22ticket.
07:22You can automate this when customers calls us with a question because the machine is down.
07:28You can apply AI to answer that question. So a lot of processes which take a lot of effort, manual
07:36effort can be automated based on AI.
07:39So that is a huge potential. I would say 20, 30, 40 percent of our internal process efforts can be
07:47eliminated.
07:49And I'm talking about a very short timeframe where we can implement it. And then on the other hand side,
07:54we can apply AI in our products itself to make them better.
07:58How? Today, many of our machines are connected. So we get every day, every second, we generate data exchange between
08:08the machines in the field at our customers and our Trump ecosystem.
08:13And by analyzing this data, we can, for example, predict a breakdown of a machine and send spare parts before
08:22the machine even broke down.
08:23So by that, we can boost the productivity, the output per each machine or we can observe if our customers
08:30run the machine correctly and improve how they operate the machine.
08:35And this can be boosted by AI substantially.
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