Transcript:

MT:

Deprag is an engineering company headquartered in Amberg, Germany, that produces industrial screw-driving machinery, industrial automation systems, pneumatic motors and tools, and gas-expansion turbines. Deprag has a large global footprint with several subsidiaries around the world, including in the United States, the Czech-Republic, China, the United Kingdom, France, Mexico, Sweden, and Malaysia. Throughout my two-month-long internship at Deprag here in Amberg, I have had the opportunity to acquaint myself with the company’s technical and sales divisions. 

Today, I have the privilege of interviewing the Chief Executive Officer of Deprag, Dr. Erik Hallmann. Dr. Hallmann received a Doctorate Degree in Economics from the University of Passau and worked as an investment banker for a number of German and international banks. Dr. Hallmann began his leadership of Deprag in 2001, primarily on the commercial side of activities.

Dr. Hallmann, thank you for your willingness to conduct this interview.

You were in the midst of a very successful career in the banking and finance sector at the time that you started at Deprag—so what motivated you to change course and take over the helm at Deprag? Could you share some of your thoughts that went into this decision?

EH: Well, the reason was fairly simple. My father-in-law died, and my wife became the majority shareholder of the company. I was in my early forties, and my wife is younger. We sat down together, and we said, “We are going to do this. We are young enough and aggressive, and we are going to take the company to the next stage.”

MT: Could you please briefly re-cap the history of Deprag and its product development timeline?

EH: Deprag’s history goes back to the year 1931, when the back-then manager of that company that belonged to a German conglomerate took it private, that is, he performed what today we call a “management buyout.” The company went into tools and compressors, and the compressor business was given up in the 1960s, when it was decided to concentrate on the screw-driving business. From there on, the screw-driving business expanded into special machinery because you have a complementary side of the business offering feeding technology to feed the screws into the driver and in addition XYZ systems on a gantry to start automizing the process. This went on to whole robotic cells for the screw-driving assembly process in various industries. From there, we expanded in even more complex special machinery that led to opening up new markets and new customers. The turbines were always an integral part of back-then the pneumatic drivers because there’s a turbine inside, so it was a natural step also to produce turbines for the general market. It should be noted that, due to the quality of these turbines, we do have quite an edge in these products in Japan. In the later years, the drivers had become electric, meaning that you can steer the process in a much more accurate way, and, of course, you can document the assembly process. So that is a tendency throughout the industry, and we have developed electric drivers that are state of the art in terms of having the most advanced software because the customer will expect the drivers to work on the mechanical and electric side anyway. So the added value today is the most advanced software.

MT: When you took over, did you identify any particular areas that required your immediate attention? 

EH: I would say that, product-wise, we were on a very good track. Those were the heydays of the cell-phone producers, just to mention the names of Ericsson and Nokia, that were very big players, Motorola, by the way. I thought, in the next step, we should expand our range of small-torque drivers in order to service that industry even better. The other thing I had to fix was expanding to the Far East because we had a lot of drivers in operation there.

MT: Under your leadership, Deprag’s global expansion has continued. Can you describe in principle why global expansion for a company like yours is important?

EH: That one is easy because our customers are global companies, and this means that we want to serve our customers in all corners of this planet the best way, the way they should rightly expect. This means that we have new operations in a number of countries where, in fact, the production activity has been soaring over the past few years, and this explains why we are, in fact, present throughout the time zones.

MT: Since the expansion projects into other countries and continents did not all occur at the same time, can you please explain the sequence or order of those projects in more detail?

—What prompted the expansion into other European countries?

—What prompted the expansion into Asia?

—What prompted the expansion into Mexico?

EH: Well, our first foreign operation was in the US. As early as 1981, we went to Dallas, Texas. Why Texas? Well, we had a number of customers there in the electronics industry. I should just mention Texas Instruments and Motorola. Then, of course, the Dallas-Fort Worth metroplex is a very convenient area because there is a large airport, and it’s in a very central location. Let’s not forget, the business climate in Texas is, yes, well, definitely a good one. Asia, that’s different because we started a joint venture in Seoul, South Korea, as early as 1990. However, the big expansion into Asia came with us opening in China in the year 2002. Again, the reason for having an operation there was that probably 5,000 of our drivers were in operation in China, and this required service - they’re customers. From the service obviously, well, it’s an easy step to go into sales. The people we hired back then were also excellent salespeople. This is why today, China, now, with the dynamics of course of that economy, has become our most important foreign operation, be it from sales numbers or from, personally, the number of people working there. Central and South America, well, that’s a bit different. We don’t have an operation in Brazil, but we do have an agent there who has been working with us for over a generation. By the way, German is spoken there. And Brazil is an important market in South America and will always be, because of the sheer size of the country and the population and the need for higher-quality production and also the ability of Brazil to act as a third-party producer for other countries. One of the most recent expansions from our side was into Mexico, and Mexico, obviously, is, well, the production, I would say, maquiladora, they say in Mexico, the production hub for the US, for North America, and we’re talking skilled workers, we’re talking skilled engineers at an affordable price and of course I think a huge potential now in terms of what is going to happen next. Just think of it: Mexico has attracted more foreign investment this year in the first quarter than in the past three years taken together. So, Mexico is going to be a very important hub for us in terms of serving, again, our global customers.

MT: How does your company manage to stay competitive internationally?

EH: Fair question, given the energy prices in Germany and then of course also the upcoming labor shortages in societies where the age pyramid is inverted, which is not the case in the US. But, I believe that quality is the answer. You need to offer quality tools or quality machines that will basically enable the customer to go for 24 hours on 24 production without any glitches. That quality will also create loyalty. Price is not always the determining factor because, at the end of the day, the most expensive tool is basically a tool that is cheap. So, the cheapest tool is not always the best solution because it will break down, and you will have down time on production, and this will cost a lot of money. So, quality is what counts, and innovation. I believe that in the field of industrial electric screwdrivers, we do have the most advanced tool in the market.

MT: Can you discuss your strategies to ensure a stable supply of highly qualified workers and employees?  What role do the “Duales Ausbildungssystem” and the German apprenticeship system play in this?
EH: We believe in growing our people on our home turf. That means we have a sort of training quota of about 10% of an operation that is almost 500 people here in Amberg. So, this is sizable, and we believe in training the people ourselves. Of course, you’ve got that dual system in Germany, meaning that two days a week they are in school, enabling them also to grow in intellectual stature with the different tasks that they have to fulfill. After those two-and-a-half to three years, they are highly qualified people who are very much sought after, and, obviously, it is within our interest to keep them within the company, although, as you can imagine, there’s huge competition in the market place, in Germany especially, in HR. And some of them, although they would love to stay, prefer to continue their education at a graduate institution. What we hope, obviously, is that they will come back. But, at the end of the day, in order to secure a sound and skilled workforce, we believe in growing them within, obviously, our own walls.

MT: Recent global supply chain shortages during and following the Covid-19 pandemic had negative effects on several industries, including manufacturing and machine building. Was Deprag affected by this shortage? If so, how was Deprag able to recover in the face of such shortages and in the face of global turmoil?

EH: Like everybody, we were very affected by the late lockdowns in China in the fall of 2022. A lot of our machines at, I would say, 90%-finished simply stood idly on the shop floor because they couldn’t be shipped out. We got very creative in that period in sourcing parts basically from all hemispheres on this planet, even in China, where our Chinese colleagues were very creative in opening various sources of parts and material. At the end of the day, what happened then was, when things got almost back to normal in 2023, the machines could be shipped out, and it basically provided us with a super year.

MT: Deprag has recently experienced one of its most successful years to date. What would you say are factors that contributed to this success?

EH: Well, I mentioned one factor, which was the sort of catch-up effect in the first quarter. But, I would say that after the Covid epidemic, there was obviously a catch-up effect within, well, the whole economy, starting from consumer goods to durable consumer goods to of course investment in industry, and us being in the investment goods sector, we saw a huge surge in demand, and we were able to satisfy that demand. Obviously, our lead times became longer, but, nevertheless, the customers got what they wanted.

MT: What has been the motivation behind Deprag’s new expansion into the field of Green-Energy Turbines? 

EH: We do see increasing demand, in fact, for environmentally friendly solutions, in fact, solutions that will recoup waste-energy, so there’s a trend out there which we embrace, and this is why we’ve been getting into the field of Green-Energy Turbines because there are a lot of applications out there where you could recycle excess energy and, well, convert it again into energy. So, I believe that this is a growth market, but it is very different from our more traditional markets in terms of, yes, well, the way you talk to industry on certain assembly issues, whereas here, the obvious way to embark on projects is to go through a common design and development with a customer and then, yes, bring out a product that would be apt to satisfy the demand on the market.

MT: What fields do you see Deprag developing more extensively in the coming years?

EH: Well, I believe we will push even further in terms of integrating Artificial Intelligence into our drivers. There will be a day when our drivers will service themselves in a more-or-less autonomous fashion, and we will definitely take into account the newest trends in feeding technology to act, again, as a complement, and we will also monitor the expansion of new fields in industry where we are, I believe, in a very enviable position to act as a lead player.

MT: Dr. Hallmann, thank you very much for your time and for answering my questions.

EH: It was a pleasure, and I wish you, Max, all the success in your career.