Wirtschaftsverband Stahl- und Metallverarbeitung e.V.

1. Wirtschaftsverband Stahl-und Metallverarbeitung e.V. Dipl.-Ing. Ulrich Galladé President Innovations in the steel and metal processing industry – Challenges for medium sized companies and the entire value chain METEC InSteelCon 2007 Düsseldorf, June 12, 2007

2. Contents Innovations in the steel and metal processing industry – Challenges for medium sized companies and the entire value chain 1. WSM 2. SMEs in Steel Processing Supply Chain 3. Innovations 4. Conclusions

3. 1. WSM – Market Data Steel and Metal Processing in Germany: • 4.600 Companies • Family owned Business • 410.000 Employees • 72 bn. € Turnover • 24 Associations

4. 1. WSM – Supply Chain • Semi-finished Products and Components • End-Products • Industrial Service and Treatment • www.wsm-net.de

5. 1. WSM - Diversity • e.g. Cold Forging, Cold roll forming, Steel Wire, Iron Wire, Plates, Sheets, Strip Metal, Cold drawn steel, sections • e.g. Fasteners, Chains, Springs, Gates, Wire Products, Tanks, Vessels, Sheet metal working, pressed and drawn parts, Powder Metallurgy, tubes • e.g. Surface-, Heat-, Hardening- or Mechanical- Treatment

6. 1. WSM - Core Characteristics • Steel and Metal Processing Material Costs up to 60% and above • Medium-sized Companies • Market Pressure by Supplyers and by Customers „Sandwich-Position“ • Politics in favour of SMEs e.g. Innovation Policy for SMEs, International Accounting for SMEs, Energy Policy, Tax Policy, Competition Policy

7. 1. WSM - Key Data Companies in Steel and Metal Processing 5.000 4.800 4.600 4.400 4.200 4.000 3.800 3.600 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 7 WSM Wirtschaftsverband 7

8. 1. WSM - Key Data Employees in Steel and Metal Processing 420.000 410.000 400.000 390.000 380.000 370.000 360.000 350.000 340.000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 8 WSM Wirtschaftsverband 8

9. 1. WSM - Key Data Turnover in Steel and Metal Processing Tsd. € 80.000.000 70.000.000 60.000.000 50.000.000 Ausland 40.000.000 30.000.000 Inland 20.000.000 10.000.000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 9 WSM Wirtschaftsverband 9

10. 2. SMEs in Steel Processing Supply Chain • EU-Definition of SMEs: 250 employees per company 50 million € turnover per company per year • Steel and Metal Processing in Germany: 100 employees per company (average) 15,6 million € turnover per company per year (average) Family owned business culture

11. 2. SMEs in Steel Processing Supply Chain • Market Pressure Steel Industry as a Supplier highly concentrated in Germany and in Europe Automotive Industry as an important Customer highly concentrated in Germany and in Europe High horizontal Competition from inside Europe and from outside Europe, especially from „low cost countries“

12. 2. SMEs in Steel Processing Supply Chain • Challenges for SMEs in the supply chain • Differentiation from competitors - Excellence in price, in quality, in service • Cost-Efficiency • Attractive for young academics and skilled personnel • Global supply chain management

13. 3. Innovations • SMEs meet many challenges by Innovation • Innovations and sustainable quality are means of differentiation, esp. from producers from low cost countries • See examples from WSM-publication „Innovations – Values - Growth“, 2006 • Innovations in steel quality and in production process may also reduce costs significantly • Innovations attract young academics and skilled personell

14. 3. Innovations • Structures of Innovation in Steel and Metal processing • Hardly ever R&D-results from an SME‘s own research department only • Cooperation – Vertical (with Supply Chain partners) • Cooperation – Horizontal (WSM: „FSV“ / „GAK“) • Cooperation – with Universities and Research Labs • Exchange of talented Academics / Networks • Role of R&D Funds (WSM et al.: „AVIF“) / R&D State Aid

15. 3. Innovations • Shortcomings of Innovation in Steel and Metal processing • Lack of political incentives for transfer of technology • Lack of Engineers • Lack of Financial Ressources - equity ratio often too low - own innovation not booked as an asset in ballance sheets - revenues often do not cover costs sufficiently - customers often do not pay for innovation and know-how separately • Lack of effectiveness in R&D-financial support (bureaucracy)

16. 3. Innovations • Improving Innovation in Steel and Metal processing • Steel and Metal processing must be advertised by the whole supply chain as „innovative“ in order to attract young academics • - Suppliers must focus on down stream customer‘s demands - Customers must pay adequate prices for innovations / know-how • Government should give better incentives for better transfer of technology to more flexible SMEs - Freedom and Competition for Universities / Research Labs - „Forschungsprämie“: program extension for horizontal research cooperations of SMEs - Develop concept of Universities and Research Labs as „non-profit scientific service providers“ • Procedures for R&D-financial support must be better tailored for SMEs and should be less bureaucratic

17. 4. Conclusions • Steel and Metal processing is an innovative sector, characterised by SMEs • Innovation is a challenge for the entire Supply / Value Chain • Concerted advertisement for innovations in networks • Fair pricing • Focus on Down Stream Demands • Better Regulation: Government must focus on „transfer of technology“

18. Wirtschaftsverband Stahl-und Metallverarbeitung e.V. Dipl.-Ing. Ulrich Galladé President Thank you for your attention! METEC InSteelCon 2007 Düsseldorf, June 12, 2007