Italy's showcase for machine-tools

It was destination Milan for the world's leading machine tool manufacturers... Though Indian participation was next to nothing, there is scope for furthering trade and investment ties, says R. Gopalakrishnan.

``It was indeed a surprise to me that Italian capabilities in machine tools are so advanced. I wish more had been done to create awareness about it''.

This was the common refrain one heard from members of business delegations from India, Singapore, Malaysia, Thailand and Indonesia to the 22nd edition of the biennial Bi-Mu, the international exhibition of machine tools, robotics and automation, the flagship event of the machine tool industry of Italy, between October 3 and October 8 last at Fiera Milano, in Italy's foremost industrial centre.

Organised by UCIMU-Sistemi per Produrre, the Association of Italian Manufacturers of Machine Tools, Robots, Automation Systems and ancillary products (NC, tools, accessories and components), in Milan, the capital of the Lombardy region, host to the largest cluster of machine tool units in Italy, the 22nd Bi-Mu (Bi standing for biennial and MU for `macchine utili' or machine tools) witnessed the display of products and services of 2,211 manufacturers from 39 countries including Italy. Of the manufacturers, 1,530 were direct exhibitors and 361 were represented by agents/distributors. There were 1,708 companies from 38 foreign countries.

Though Indian participation by way of display was next to nothing, the delegation of Indian businesses and enterprises, both sponsored or otherwise, by way of visitors/buyers was more than 20. The Indian delegation, which included big firms like Larsen and Toubro, Videocon, Walchandnagar and TIL, also had representatives from small and medium manufacturers and users of machine tools, besides a couple of agents/distributors.

The significance of the fair this year (Bi-Mu is held in `even number years', alternating with EMO, considered the `official' European-level machine tool industry fair held in `odd number years' in Hanover, Milan and Paris by rotation) is that it is widely relied upon to help consolidate the Italian machine tool industry's emergence in 1999 as the third largest producer and exporter of machine tools - after Germany and Japan and ahead of the US. Italian production in 1999 totalled $3,750 million and exports $2,120 million.

According to Mr. Andrea Riello, President of UCIMU, and Ms. Angela Picco, the President of EFIM, the company which organises the fair as a wing of UCIMU, the current year's trends are promising. Going by the performance in the first six months, the Italian machine tool industry is likely to raise production by seven to eight per cent and exports by more than three per cent.

Divided into broad categories such as metal cutting/sawing, heat and surface treatment, fastening/marking/tubing, metal forming, lathes, EDP hardware/software and rapid prototyping, the fair revealed the penetration of automation and digitalisation in the Italian machine tool industry. According to UCIMU, 70 per cent of the machine tools produced in Italy are electronically controlled, and one-fifth of these are integrated systems, defined as cells and systems made up of more than three machines. Exhibits from most other countries too testified to the increasing electronification of machine tools.

According to the representative of a leading Indian company, his visit to 22nd Bi-Mu would result in placing orders with an Italian company for ``plate bending machines'' of value that could range from Rs. three crores to Rs. five crores depending upon the type and model chosen. The representative of another leading Indian company said purchases, again from Italian manufacturers, were likely in respect of machines called ``machining centres'' but he added that his company would try to negotiate a supplier's credit in view of the high cost of money in India.

Hopes and concerns expressed by leaders of the industry in Italy could perhaps have some relevance for India both as a trade partner and investment destination of Italy. As Mr. Riello emphasised, the 450 Italian companies in the machine tool sector (like in most others) were predominantly of small and medium size - the typical Italian company, directly run by the owner, had fewer than 70 employees, compared to 200 average in Germany or Japan.

Despite the achievements of the small firms attributable to their very size, structure and cluster-based location, Mr. Riello and his colleagues emphasised the limitations these same factors posed in an era when globalisation warranted proximity to the market, investments abroad in service centres and production units, and investment in R and D. Only seven UCIMU members at present had production units outside Italy, Mr. Riello lamented.

``Germans remain our benchmark producers. Though we have improved our volumes to one-half of German volumes, I will be happy if we achieve parity with Germany in five years'', he said, adding that the Italian industry hoped to increase its market share mainly at the expense of the Japanese.

UCIMU-Sistemi per Produrre, which operates a quality logo scheme for its members, wants Italian machine tool units to take to formal R and D programmes instead of relying solely upon innovation in the process of construction of machines and the native Italian penchant for design and creativity and to plan investments abroad in service centres and production units for the next ten years. Just as Italian companies had taken to prototype development in a big way in the past decade, they should now take to ``pre-series'' methods of R and D.

While Mr. Riello would like the Italian government to facilitate mergers of companies in the industry through the right fiscal signals, he at the same time regretted that a strong dollar facilitated acquisition of capacity and market share by foreign companies without adding to capacity by way of greenfield units. UCIMU has also sought relief from inheritance tax on businesses (Italian businesses being mostly family-owned and operated, like those of Mr. Riello or Ms Picco themselves, have to pay 37 per cent `death tax' as the Italian press calls it, upon the succession of every younger generation).

Since most machine tool units in Italy had been founded after the World War-II on the basis of US technology, the purchase price of the units is nil and hence the 37 per cent inheritance tax falls on the entire market value of the businesses, Mr. Riello pointed out. (Within days of opening of BiMu, one of the two chambers of the Italian Parliament passed a law giving partial relief to heirs to businesses).

Pavilions of several Italian exhibitors this correspondent visited showed how typical was the family-run firm. The number of employees was limited, ranging from 15 to 150 in most cases, and the product was however modern and technology-intensive. The firms' exports ranged from 30 to 60 per cent of the turnover. Though a substantial part of their exports went to other European countries, especially Germany, they also exported to North and South America, Asia and the Far East.

Apparently, export efforts of member companies have been assisted by the UCIMU special mark scheme, which covers not only ISO standards, but also financial and commercial viability and attention to safety and approval testing - characteristics which Germany buyers especially insist upon before approving suppliers. As of February this year, 118 UCIMU members had obtained the association's special mark/logo.A section of Bi-Mu (which is also known as Bi-Mu/Sfortec) is devoted to subcontracting, and is organised by UCIMU in association with the Subcontracting Associations Committee or CIS. A total of 172 direct exhibitors participated in Sfortec, which featured ``The World of Dies and Moulds'' and ``Tomorrow's Presses''. According to ``Il Giornale della Subfornitura'', a bimonthly devoted to subcontracting, among Italian subcontractors who had customers abroad 43 per cent supplied to German companies, 39.3 per cent to French, 20.6 per cent to the Swiss and 17 per cent to Austrians.

Sfortec's emphasis is on the emerging new form of industrial cooperation, known as ``extended company'', whereby large companies and MNCs outsource more and more of their requirements, expecting the supplier of products and services to offer ``packages'' meeting all aspects including quality assurance, packaging and transportation.

One suggestion that Mr. Raman Subramaniam, coordinator of Bi-Mu affairs in the Mumbai office of the ICE (Italian Institute of Foreign Trade or Italian Trade Commission), gave at an interaction session during the fair was that Italians should try to localise production in India to become competitive with their counterparts from Japan and other countries supplying to India. They should also try to establish joint ventures in India since such ventures would find it easier to order Italian machinery on merits. While expressing happiness over the fact that among exporters of machine tools to India, Italy had emerged as the third largest now, compared to the seventh rank held by it three years ago, Mr. Subramaniam regretted that some Italian companies did not seem to appreciate the importance of responding to queries from businesses in India.

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With an eye for the future

``Industry-Institute Interaction'' is a much-talked-about theme in India, with concrete action only recently seen, that too by fits and starts. The Bi-Mu machine tool fair in Milan (Italy) provided a new avenue for such interaction, through a separate section titled ``Planet Youth'' (Pioneta Giovani), conceived of by the fair organisers, UCIMU, as part of its ``factories for people'' programme.

The Planet Youth pavilion provided information and consultancy services for students on courses of higher studies and careers available, with the aid of an agency called Probest Service. Also, temporary placements for graduates in technology/engineering were offered by Randstad Italia, a subsidiary of a Dutch company specialising in this activity, facilitated by a legal amendment in Italy effected two years ago. According to Randstad, personnel temporary placed in various companies in the European Union often end up as regular staffers.

Visitors to 22nd Bi-Mu could see thousands of students, both boys and girls, throng the Planet Youth stalls, and several of them understandably also followed this up with visits to specialised machine tool pavilions, seeing much of the textbook stuff in action in their latest versions.

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