Barmag AG - Company Profile, Information, Business Description, History, Background Information on Barmag AG

Leverkuser Strasse 65
D-42897 Remscheid

Company Perspectives:

Our success and our future is supported by several pillars of great importance to Barmag: Customers give us orders and thereby preserve our jobs. We, the workforce, guarantee that orders are filled as quickly as possible, efficiently and with a high quality. Suppliers provide us promptly and reliably with necessary tools and machine components. Shareholders entrust us with their money which is invested in research and development and new equipment. "Hier bin ich richtig." [I'm in the right place here.] This guiding phrase connects us with our customers, suppliers and shareholders at all times. Only when all our business partners are convinced and say "Barmag. Hier bin ich richtig," can we say it too.

History of Barmag AG

Barmag AG, with a market share of about 40 percent, is one of the world's leading manufacturers of plants, machines, and equipment used to produce and refine synthetic fibers. Yarn-spinning machines, textile machines, and chemical pumps made by Barmag are used to produce fibers with specific qualities such as water- and wind-proof fabrics for outdoor sportswear, and stress-resistant technical yarns for high-speed tires, airbags, and safety belts. Another Barmag specialty is machines that make high-quality fibers for carpets. About one-third of Barmag's sales comes from Asia, another third from Europe, and 27 percent from NAFTA countries. Barmag's main subsidiaries are located in Germany, Switzerland, China, India, Brazil, and the United States. The Swiss Saurer AG, which is one of the world's top makers of textile machines, owns 75 percent of Barmag's stock.

1922-52: The First 30 Years

On March 27, 1922, two synthetic fiber makers--the German Vereinigte Glanzstoff-Fabriken AG and the Dutch N.V. Nederlandsa Kunstzijde Unie Enka--founded a company to supply each of them with the machinery necessary for their operations. The new company was called Barmer Maschinenfabrik AG and was located in Barmen in the German Ruhr, a small town that later became part of Wuppertal. As one of the first of its kind in the world, Barmer Maschinenfabrik began designing and producing machines for the then brand new chemical fiber industry. The company made yarn spinning machines and spinning pumps for Viscose and copper silk. In the following years Barmer Maschinenfabrik added button thread machines and spooling machines to its product line. The company's market expanded so rapidly that the Barmen plant was not able to accommodate the facilities needed for the growing production. In 1925 Barmag acquired an existing production and office building in Lennep and moved its headquarters there.

The year 1935 marked an important milestone for Barmag. In that year the company constructed its first double-strand thread machine. It was based on the principle of turning a thread twice during one full turn of a spindle, a technology that had been known for half a decade. However, Barmag patented in 1930 a special component--the so called Speicherscheibe (a special take-up disk for the new thread)--which made it possible to apply this principle in industrial scale machinery for the first time.

Barmag's invention had a significant impact on yarn spinning technology throughout the world. Another of Barmag's technical hallmarks was its precision spinning pumps. Based on cogwheel technology, these pumps were at the heart of chemical fiber production. The pumps forced the plastic mass through spinning nozzles at high pressure in consistently equal amounts. Out of the nozzles came the popular synthetic fiber threads for Viscose and Acetate. These pumps not only had to meet high precision standards, they also had to withstand the high temperatures and caustic chemicals used to refine or color the thread to which they were exposed.

Barmag's progress was interrupted by World War II. Beginning in 1939 textile machine building was restricted by the German government, and all industry was focused on war production. As many other German companies, Barmag used foreign slave workers to replace its employees who were called to the front, according to German business publication manager magazin, citing the American Jewish Committee. Two years after the war was over the company was granted permission from the military government to resume operations. In the economic boom which followed the war, Barmag strove to make up lost ground in technology development. The company started developing machinery for the new chemical fibers being marketed at the time, such as Nylon and Perlon made from polyamids. It also focused its research and development on technologies that cut costs and enabled the chemical fiber industry to produce higher quality products.

1954-90: Diversification and Going Global

In 1954 Barmag started producing another kind of machine for synthetic fiber production: the texturing machine. When used to make synthetic textiles, the slick spun yarn, called filament, was mechanically fluffed up to make it softer and more comfortable to wear. Barmag's first generation of texturing machines reached a roll-up speed of 100 meters per minute. Models made in the 1990s were able to roll up the synthetic yarn 15 times as fast.

In 1958 Barmag again expanded its production line and started building extruders for the fast-growing plastics processing industry. The company bought a license for these machines from American extruder manufacturer Midland-Ross Corp. An unexpected synergy effect emerged from the new venture. The extruder technology was used to develop much faster machines for spinning synthetic fiber than other common at the time, and older machines were soon replaced by Barmag's spinning extruders. The new technology was used for the rapid spinning of endless synthetic yarn from a bundle of single threads. This yarn was taken up at a rate of up to 8,000 meters per minute with one spindle carrying up to 120 kilograms of yarn. In 1973 Barmag also ventured into hydraulics when it acquired shares in several hydraulics companies. Another new market was entered when the company started making vacuum pumps for the automobile industry.

In the late 1950s Barmag took on a more international focus, opting to introduce its machines to the world markets. This decision resulted in sustained growth and a growing share of exports in its total sales. International subsidiaries were set up to establish a presence in major markets. In 1965 American Barmag Corporation (ABC) was founded in Charlotte, North Carolina. A subsidiary in Brazil was set up in 1973 to bypass Brazilian import restrictions. Another growing market emerged in the Far East where Barmag's first subsidiary, Barmag Far East Ltd., was established in Hong Kong in 1973. Barmag Far East laid the groundwork for a major expansion into the emerging Asian markets in Taiwan, South Korea, and China.

In 1984 Barmag succeeded in breaking into the Chinese market when it became a preferred supplier for the Chinese synthetic fiber industry, defeating the Japanese competition. Cooperation agreements were signed with three Chinese machine building companies--Shanghai No.2, Wuxi, and Jingwei--for manufacturing polyester yarn spinning and texturing machines. The cooperation later led to two joint ventures with Barmag's Chinese partners. Another Asian country in which Barmag became active was India where the company helped build the synthetic fiber industry. In 1988 a joint venture was founded in the southern India town of Coimbatore. The products of Lakshmi Synthetic Machinery Manufacturers Ltd., in which Barmag held a 30 percent share, were distributed and marketed by Barmag's Bombay-based subsidiary Barmag India.

1991-94: Going Public and Dynamic Growth

In 1990 Barmag changed hands, and Frankfurt-based industrial holding company Aktiengesellschaft für Industrie und Verkehrswesen (Agiv) became the company's new parent. Barmag's former major shareholder, Dutch chemical concern Akzo NV, headquartered in Eindhoven, sold its package of about 85 percent of Barmag shares to Agiv after a strategic decision to concentrate on its core business. However, Agiv quickly decided to lower its Barmag shareholdings to 55 percent. In 1991 Barmag AG offered about one-quarter of its share capital in an initial public offering on the German stock exchanges in Frankfurt and Dusseldorf. At the end of 1991 Barmag took over the former East German Spinn- und Zwirnerei Maschinenbau GmbH in Chemnitz. The new subsidiary was renamed Barmag-Spinnzwirn GmbH and equipped with new machinery.

The year-end results for 1991 showed that Barmag had become the world's leading manufacturer of synthetic yarn-spinning and texturing machines with an average market share of more than 50 percent. These machines accounted for three-quarters of Barmag's total sales that year. Also, despite fierce Japanese competition, Barmag's efforts in China started paying off. In 1991 Barmag had an 85 percent market share in the market for Polyester spinning machines; it served 160 Chinese customers, and had total sales of over DM 200 million. In India business was growing too, with sales between DM 60 and DM 80 million annually. On the other hand, Barmag's plastics processing machine division was not faring as well due to an industry downturn that was created partly by the public discussions on the environmental impacts of plastic packaging. The division's share in total sales slipped below ten percent while hydraulic aggregates for elevators and airplanes accounted for 13 percent.

In 1992 Barmag passed the DM 1 billion sales mark for the first time. Exports had become its most important income source. Some 80 percent of the company's total sales were generated outside Germany. Europe, including Germany, accounted for about one-third of Barmag's sales. Over 50 percent were generated in Asia. Barmag earned about 14 percent of its total sales in the United States. The year 1993 became the most successful in the company's history, due largely to its takeover of Braunschweig-based Ingenieurgesellschaft für Verkehrsplanung und Verkehrssicherung GmbH (IVV), in 1992 and a boom in orders from Asia. Sales totaled DM 1.44 billion, a growth of 22 percent compared to 1992, doubling its results from 1987, in just five years.

However, signs of a less dynamic future growth were on the horizon. Manufacturers of synthetic yarns were becoming more cautious with their new investments. The competition focused increasingly on price, slimming the industry's profits. In the growth markets Korea and Taiwan, Japanese competitors lowered their prices by no less than 20 percent. Furthermore, some of Barmag's Chinese partners indicated there were problems financing the machines they ordered. A new investment program initiated by the Chinese government focused on modernizing the country's infrastructure, drawing funds from other areas of the economy. To secure its strong position in China, Barmag's most important export market, the company actively worked on transforming its agreements of cooperation with its Chinese partners into joint ventures. Barmag raised its share in one Chinese joint venture, founded to deliver assembling and maintenance services for Barmag machines, from 25 to 50 percent. The company also began efforts to establish manufacturing plants in China that would lower production costs.

1995 and Beyond: Reorganization and a New Majority Shareholder

Because of the unfavorable market conditions, Barmag abandoned its hydraulics division in 1995 in order to concentrate on its core business. At the end of the year Barmag was DM 105 million in the red. A rigorous restructuring program of the production divisions, including significant downsizing of the work force by about 1,100 employees, was started in 1996. The 1996 year-end results showed first signs of success. While sales dropped by about 30 percent, losses were diminished by 75 percent, amounting to DM 25 million. This success was due mainly to the higher prices Barmag charged for its products, the result of innovative new technologies and higher product quality, but also due to a more selective approach to the orders accepted.

In January 1997 German industrial conglomerate Metallgesellschaft announced that it was interested in taking over a nearly 50 percent share of Agiv AG. Barmag's parent company had met with financial woes during the previous years and had slipped DM 40 million into the red in 1996. This deal threatened Barmag, since Frankfurt-based Zimmer AG, a subsidiary of Metallgesellschaft, was an important customer as well as competitor of Barmag. If the deal went through, Barmag management speculated, it could lose about half of its business. However, the deal fell through. After working hard for a month or so to smooth relations with Barmag's business partners, company executives were able to concentrate on the restructuring program again. After another loss year in 1996, the company further reduced the number of employees, from 3,486 in 1996 to 2,730 in 1999.

In August 1998 parent company Agiv upped its stake in Barmag another 19 percent, acquiring shares held by the Allianz Group and increasing its total shares to 75 percent. However, only one year later, in October 1999, Agiv management announced that it would sell most of their Barmag holdings. A few weeks later the Swiss Saurer Group, the world's largest manufacturer of textile machines, announced that it would be taking over Agiv's 75 percent share in Barmag for DM 318 million.

At the end of 1999 a new Barmag subsidiary was set up in Liberec, Czech Republic, to help lower production costs. The new company was named Barmag Spinning Company Liberec s.r.o. (BSC) and manufactured components that were integrated in spinning machines in Barmag's Swiss subsidiary in Zug. In 2000, Barmag took over Neum&uuml#tersche Maschinen- und Anlagenbau GmbH (Neumag), another leading manufacturer of textile machines. Both companies had facilities for synthetic carpet manufacturing and filament spinning equipment. Neumag's filament spinning equipment production was integrated into Barmag. By the end of the 1990s more than 2,000 tons of polymers worldwide were refined per minute by using Barmag-made extruder systems. In 2000 Barmag held a world market share of about 40 percent.

Principal Subsidiaries: American Barmag Corp.; Barmag-Spinnzwirn GmbH; Wuxi Barmag Hongyuan Machinery Co. Ltd. (China; 53%); Barmag Far East Ltd. (Hong Kong; 99.99%); Barmag GmbH (Switzerland); Neum&uuml#tersche Maschinen- und Anlagenbau GmbH; KAS Management Services GmbH; Barmag do Brasil Ltda. (Brazil; 99.58%); Shanghai Barmag Machinery Co. Ltd. (China; 51%); BB Engineering GmbH (50%); Beijing Jingma Chemical Fibre Co. Ltd. (China; 50%); Barmag Spinning Company Liberec s.r.o. (Czech Republic).

Principal Competitors: Atkins Machinery, Inc.; Burlington Textile Machinery Corp.; Speizman Industries, Inc.


Additional Details

Further Reference

"Agiv stockt Beteiligung an der Barmag auf," Frankfurter Allgemeine Zeitung, August 20, 1998, p. 19."Angeschlagene Barmag baut 1100 Stellen ab," Süddeutsche Zeitung, December 15, 1995."Barmag: Abkühlung beim Auftragseingang," Frankfurter Allgemeine Zeitung, May 3, 1994, p. 20."Barmag erwirbt Neumag von Babcock Borsig," Frankfurter Allgemeine Zeitung, June 14, 2000, p. 22."Bei Maschinen von Rezession keine Spur," TextilWirtschaft, May 19, 1993, p. 85."Der Rest der Agiv wird zerschlagen," Frankfurter Allgemeine Zeitung, October 8, 1999, p. 19."Die Barmag kommt wie geplant voran," Frankfurter Allgemeine Zeitung, December 2, 1996, p. 25."Drückeberger?," manager magazin, February 1, 2000."MG-Konzern nimmt die Agiv ins Visier," Süddeutsche Zeitung, January 14, 1997."Saurer kauft die deutsche Barmag," AFX--Swiss, October 29, 1999.

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