In an exclusive interview with Drives & Controls, Christian Schmidt, chief executive of Europe’s third largest motor maker, ATB, talks about his company’s plans for the recently acquired Laurence Scott & Electromotors, and developments at its Brook Crompton subsidiary.

June, 2007 - The new owner of the British motor-maker, Laurence Scott & Electromotors (LSE), has pledged to keep the company in the Norwich area. In an exclusive interview with Drives & Controls, Christian Schmidt, chief executive of the Austrian motor manufacturer ATB, said, "we will definitely stay in Norwich – it doesn’t make sense to move; the knowledge is with the people in Norwich".

ATB, Europe’s third-largest motor manufacturer, bought LSE from the administrators last month after LSE ran into cashflow problems blamed on one large creditor.

Schmidt (below) says that ATB has started negotiations with LSE’s landlord, FKI, to extend the lease which is due to run out next Spring. LSE’s previous owner George Clair bought it in 2005 from FKI which had been planning to close the business. At the time, he negotiated a three-year lease for the valuable Gothic Works site, which is due to expire next Spring. Schmidt is optimistic that the negotiations with FKI will produce a "positive result".

When the administrator, Kroll, took over LSE at the beginning of May, it dismissed 79 of the 197-strong workforce. Schmidt says that ATB will continue to run LSE with this level of staffing but adds that "we will look at what’s necessary to fulfil contracts – if we increase turnover, we will need additional people".

The business will be known in future as ATB Laurence Scott. Schmidt says ATB intends to re-organise the company’s production to meet modern standards and points out that there is plenty of space at the present site to increase production. He reports that "the order pipeline is full" and that there are "excellent" prospects for the company to increase turnover.

In the two years since he bought LSE for £4.1m, Clair raised the company’s sales by around 40%, from €13.7m to €19.3m. LSE’s order book is currently worth around €25m.

"Lack of cash is not going to be a problem again," Schmidt declares. "We will inject cash into the company to restart it." He won’t be drawn on precise figures, but talks of "a couple of million pounds". A new business plan will be drawn up by the third quarter of this year.

Former owner George Clair had been planning to set up additional production facilities for LSE in Louisiana to serve the US market. Schmidt says that he has no plans to continue with this plan because there is plenty of space and production capacity in Norwich, as well as specialist facilities for testing large motors.

Schmidt says that ATB did not show an interest in LSE when FKI was planning to close it in 2004 because, at the time, ATB had just started to move into the UK market and was focusing its attention on its acquisition of ATB Morley, the Leeds-based mining motors specialist.

When LSE’ entered administration in May this year, there was a "short and intensive" period of negotiation, leading to the purchase.

Schmidt says that there is no overlap between LSE’s activities and those of ATB’s German subsidiary, Schorch, which it acquired when it took control of Singapore-based Lindeteves-Jacoberg (L-J) last year. Schorch is strong in continental Europe, but not in the UK. And LSE is active in sectors such as nuclear power and military applications, which are not big markets for Schorch.

"There could be a lot of synergies with Schorch," Schmidt argues, such as two businesses’ need for similar materials. "We can now use both companies to concentrate the production of different types of component on different sites," he adds.

Business at Schorch is "booming", according to Schmidt, and he expects it to achieve sales worth more than €80m this year, compared to around €60m last year. He says work is still going on to improve production and efficiency, and to cut lead times at Schorch’s Mönchengladbach plant. However, one problem facing ATB is that it is now "almost impossible" to find suitably skilled personnel in Germany. Production of some Schorch components is being transferred to ATB’s factory in Serbia.

Schmidt admits that the British motor-maker Brook Compton (also part of the L-J Group) has experienced "serious problems" over the past two or three years, but adds that the company is being stabilised this year. He reports that sales are increasing again after plummeting in recent years. "We must convince customers that we can deliver on time, and to a high quality," Schmidt declares.

He says that production problems at Brook Compton’s Tamel plant in Poland have now been overcome and lead times are now down to "a couple of weeks". ATB has been injecting cash into Brook Crompton which is now "back on track", according to Schmidt.

He adds that ATB is investing in new ranges for Brook Crompton, which he expects to reach the market in 2008 or 2009. "We must invest to improve the technology," he says.

ATB now holds a stake of around 60% in Lindeteves-Jacoberg – which owns Western Electric in Australia, as well as Schorch and Brook Crompton. It is planning to raise the stake to around 70%.

Schmidt hints that ATB is still on the acquisition trail, but may turn its attention next to the North American market. "It doesn’t make sense to export there," he points out, because of the distance and the different technologies and standards used there. "To be successful in the US, you have to be based there," Schmidt says, "so we will probably need an acquisition". He adds that he has no specific targets in mind and that the acquisition could be anywhere in the NAFTA (North American Free Trade Agreement) area.

Back in Austria, ATB has been reorganising and renaming its operations. The former industrial motors business is now known as Serial Motors, the explosion-proof business is now Project Motors; and the former domestic appliance and garden equipment operation is now known as Home Appliances. According to Schmidt there is still a lot of restructuring work to do, but it should largely be completed by the end of this year.

The industrial motors operation (Serial Motors) still accounts for more than half of ATB’s business, but the high-margin Project Motors activities now account for 20–25% of ATB’s revenues – up from less than 10% a few years ago. This growth has been driven largely by ATB Morley which has doubled its turnover over the past three years.

Schmidt describes Morley as "an excellent business with an excellent reputation". The company has benefited from a boom in the coal-mining industry, especially in China, where it is considering setting up an assembly operation. Schmidt says that this will not affect UK development and manufacturing – "we need specialists in the UK".

ATB is also moving into new technologies, such as permanent magnet motors. It has already started to produce PM motors for one customer, and plans to offer PM machines as part of its standard range soon.

In the first quarter of this year, ATB recorded a 69% surge in revenues to €103.5m, compared to the same period last year, driven by a combination of organic growth and the L-J acquisition. Following the LSE acquisition, "there is potential to increase this progress," says Schmidt. "We have an excellent product portfolio and can now act as a full-line supplier."