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German rivals voice concerns over Heidelberg's 'government bailout'

William Mitting and Simon Nias, printweek.com, 19 June 2009

Press manufacturers KBA and Manroland have both voiced concern over a state bailout that is to be handed to rival Heidelberg, reported to total 850m euros (£720m).

The two companies spoke out after German authorities agreed to grant Heidelberg a €300m loan and to provide guarantees for the majority of around €500m financing line.

Speaking at KBA's AGM, Helge Hansen, the manufacturer's new chief executive, said KBA was "concerned about possible competitive imbalances" following Heidelberg's application for state support.

The concerns voiced by Hansen reflect unease among rival manufacturers about the advantage that Heidelberg would be given after the imminent receipt of up to €800m of state aid in the form of loans and loan guarantees.

Speaking at a media event for the Print 09 trade show in Chicago, Illinois, Manroland US chief executive Vince Lapinski also expressed similar concern about the state support being provided to Manroland's biggest competitor.

"An €850m bailout for a leading supplier to the printing industry is very serious," he said.

Lapinski added that Manroland was "financially stable" and said the company would not be applying for any German state-funded aid.

While KBA has applied for a government guarantee effective from next April, Hansen claimed that the company had no need for a "state prop" in reference to media reports on the German press manufacturing sector and Heidelberg in particular.

He warned against generalisations and emphasised KBA's strong financial and liquidity base.

"At present, we have no bank debts. On the contrary, in recent months we have improved our net financial position to a good €36m and our operative cashflow is positive," he said.

One rival, who did not wish to be named, told PrintWeek: "There are times when life just doesn't seem fair."

At KBA's AGM, Hansen said the volume of new orders at the group was "well below" the target for the year.

"At present the only bright spot is the security printing sector," he said.

However, the pace of the decline in sales is slowing with a 20.7% decline in new orders for the first five months of the year, significantly better than the Q1 year-on-year fall of 40.7%.

Hansen said: "Following last year's substantial loss, we have a real chance of achieving our ambitious goal of posting a balanced result, even if sales are just shy of €1.2bn."

Also see: Heidelberg profits tumble in 'most difficult year in the company's history'

Comments

William Joyce - 19 June 2009

The 'bail out' is not a 'gift', there are strings attached. It is not specific to the printing industry; a total of €120 billion is available. Nor is it the private fishing pond of Heidelberg.

If H's rivals think the deal is so attractive that it gives H an advantage then they are at liberty to ask for a slice of the cake for themselves.

If, on the other hand, they think it is not attractive, nobody is forcing them to take the money.

However, if they make a commercial judgement and decide not to apply for aid that is potentially available to all, they can hardly complain if another company comes to a different conclusion and decides to apply.

Syd Kondo - 20 June 2009

Sir

Please tell me exactly what are those "strings attached".

I am very interested to know.

Thank you in advance

William Joyce - 20 June 2009

What Heidelberg has applied for/received is access to funds under the 'Wirtschaftsfond Deutschland'.

Details of this can be found on the German Ministry of Economics and Technology \(whose minister is fortuitously named Guttenberg) web site: www.bmwi.de; some parts of this site are available in English.

The fund is subdivided into various categories but overall it covers all sectors of German industry and sizes of company -- the major proviso being that recipients/projects must be deemed to be economically viable.

It is not a programme for any specific sector of industry -- such as printing or printing supplies, it is not a specific support package for Heidelberg, it is not a package for any company whose problems are deemed to predate the current financial crisis or be more deep rooted.

Although there are various mechanisms and categories -- which are detailed on the web site [mostly in German] -- what the fund does is provide loans [indirectly] or guarantee loans.

Ultimately, what is being provided is a loan, not a grant, subsidy, injection of capital.

It is a loan that will ultimately have to be repaid and interest is charged -- the rate of which is described as being based on capital market rates, the financial and economic situation of the company and the security.

So, Heidelberg will have to pay it back, they will have to pay interest. Any other company, from any industry could also apply and have any equal chance of success.

How have Heidelberg gained a competitive advantage?

Is the allegation that undue favouritism been shown to H in approving its application whilst denying those of K and M?

Last time I heard, the German government was planning to actively raise awareness of this fund and encourage applications.

In short, if it's good deal why don't M & K take advantage of it; if it's bad deal, more fool Heidelberg

'Not A Doctor' (NDCT) - 20 June 2009

Is there a similar fund in the UK for British press manufacturers?

William Joyce - 21 June 2009

You must be thinking of the one that saved Crabtree Vickers, Cobden Chadwick, Strachan Henshaw...

I think that it did such sterling service that there's no longer any need for it.

'Not A Doctor' (NDCT) - 21 June 2009

Don't forget the good old Thompson Crown - top speed 8000 iph. Sadly the things never ran at that speed - once you were over 4000, register was shot to pieces. Shortly thereafter, the Japanese and German presses wiped the floor with them.

It's only when you consider this that you realise the government's pious utterings about apprenticeships, entrepreneurs, manufacturing, etc is just irrelevant piffle.