Sunday, 20 November 2011

Episode Three - Reverse Engineering

Brazilian electric motor giant WEG is in the process of acquiring Austrian gearbox manufacturer Watt Drive Antriebstechnik GmbH, for an as yet undisclosed sum.  Watt Drive turns over €30M per year and the purchase represents the first in a series of movements by WEG into the gearing and power transmission business.

Watt Drive is represented in Australia by Southern Engineering Services and it will be interesting to see how this purchase will affect existing distribution relationships and agreements.

$3.6B WEG has also entered into a joint venture with Brazilian gearing manufacturer Cestari Industrial, with a view to develop and market an entirely new range of complete geared motors.

It would appear that WEG’s view to continued growth lies outside its traditional spheres of electricity generation, transmission and control.  The linkup with Cestari will probably see WEG coming out with compact modular gear units, much in the same mould as Bonfiglioli’s compact range, SEW and Nord.  Australian electric efficiency standards - known as MEPS - make it mandatory for all motors to meet IE3 premium efficiency in 2013, unless the motor is attached to a gearbox and removal would render it inoperable.  The WEG / Cestari joint venture could take advantage of this loophole. 

The Watt Drive acquisition and Cestari joint venture deal are WEG’s first foray into the gearing world and signify a medium-level investment without the need for infrastructure spending.  WEG itself might be immune from a retaliatory response from any of the gearing manufacturers that these recent movements challenge, as an entry into the electric motor manufacturing world is far less lucrative.

The ink is still drying on a deal which sees Altra Industrial Motion add Bauer Gear Motor to its list of brands.  German-based Bauer has been in operation since 1927 and has an impressive list of OEM customers and applications.

Bauer joins other Altra gearing brands such as Boston Gear and Nuttall Gear, as well as a comprehensive range of power transmission equipment including Warner and Wichita.

Altra Industrial Motion is based in Braintree, Massachusetts, and has a turnover of more the $600M per annum with a staff of 3000.

SEW is in the process of expanding its Melbourne assembly workshop, buying the site next door to their current Tullamarine facility as it gears up for an expected increase in demand from the mining sector. 

The $10M capital investment by the geared motor goliath will be gobbled up quickly, with the purchase of a 50 tonne crane and the implementation of a new painting facility.

Gear Expo 2011 was held in early November in Cincinnati, Ohio.  4600 attendees filtered past 180 gearing-related exhibitors, with visitors hailing from 28 countries.  Reviews of the event have been mostly positive, and the 2013 Gear Expo is planned to be held in Indianapolis in September 2013.

After both New South Wales and Australian governments announced new innovation taskforces to help source manufacturing opportunities, the South Australian government has formed a whole department.  The departments of Primary Industry and Trade have been merged to form the Department of Manufacturing, Innovation, Trade, Resources and Energy and putting the word Manufacturing’ first is an indication of the department’s primary function.

I received a tweet after episode two of the Australian PT Podcast from the Australian Carbon Expo, advising me that entry to the trade show was $300.00 for three days, but only $100.00 for a single day entry.  Sorry about that, I said that it was $300.00 to get in. 

It looks like the Melbourne event was a success, coming fresh off the heels of Australia’s new Carbon Tax legislation passing through parliament and being attended by some major players, both in politics and industry.

It has been called many things; from reverse engineering to outright knock off.  The geared motor industry is in the midst of a rush of cheap imported product, where the designs are passed off as those of major brands.

A significant portion of the knock offs are coming to western shores on capital machinery imported from China, utilising geared motors sourced domestically.  Issues are found when a premature equipment failure hits the end user and when replacement time comes, sizing and fitment problems come to the fore.  It is usually only then that the copy is identified.

Pass offs are an issue for many manufacturers, with the main victim of choice being SEW because they have the most easily-recognisable product range.  SEWs R series of in-line helical gearboxes comes in for the biggest hiding.  Motovario’s range of wormboxes also seems to be a copier’s favourite, as are Var-Spe, Flender and Sumitomo.  Even though a lot of the SEW product in the world is actually manufactured in China, the SEW hierarchy is quick to point out that this is to an exacting standard that doesn’t do anything to lessen their brand.

Clean room design is a useful defence against charges of copyright infringement, but these offending articles aren’t even concerned about defending themselves.  Clean room design is a reference to enough components of a reverse engineered article being different enough from the item it is copied from to be considered a new design.

Last year we had one of these copies apart in our workshop after it had failed after less than three months in action.  In addition to none of the gears being hardened or ground, a spacer for the output gear was hand cut by a hacksaw from a piece of water pipe.  Whoever assembled it actually had two goes at cutting this bit of pipe as it had an extra slice in it, not square of course.

The real victim of counterfeit gearboxes entering the marketplace is unquestionably the end user, who may or may not be suspecting to get a cheap copy of a name brand.  I’m positive that anyone who knowingly buys a knock-off with a view to saving money on an application will not be replacing it with another knock-off when replacement time comes, normally within 24 months.

Does this unfettered counterfeit behaviour signify the start of something bigger between Chinese manufacturers and the companies whose products are being copied?  Many gearing companies have at one stage or another had dalliances with outsourcing components to other countries; it would seem that many are only now starting to see some hidden costs that don’t come up on the profit and loss statement.

Just as an aside, probably the most famous reverse engineered product in recent history was the Soviet Tupolev TU-4 strategic bomber, which was ripped straight from some commandeered American Boeing B29s immediately after the Second World War.  If nothing else, at least the Soviets had the good sense to change everything from imperial to metric!

Time for a quick product update.

Nord have released a range of bevel-helical geared motors aimed at the washdown market – primarily food manufacturing.  The range features a die-cast aluminium housing that has open sections to aid cleaning, and a torque output range of 90 to 660Nm across five sizes.

In my opinion, the openings around the bevel output make the gearboxes look spinely and a little out of place.  I suppose the goal is to make them look very different to the SEW profile, which is nearly ubiquitous in food manufacturing.  Time will tell how popular they become.

The big news as we put the last episode of the Australian Power Transmission Podcast to bed was that car manufacturer Holden was looking to ship the design of the iconic Commodore offshore and close the local design facility, a claim that was vehemently denied by the Holden top brass.

Australia has three car manufacturers; Holden, Ford and Toyota, all subsidiaries of overseas parent companies and who have all received government funding to keep their doors open at one time or another.  Toyota used its assistance package to begin local production of the Hybrid Camry, while Ford and Holden have both used the money to get their latest product offerings to market.  Even so, retrenchments abound.  The federal government originally planned to fund automotive innovation until 2020 but cut it short when the money was needed to rebuild Queensland after natural disasters in 2010.

Domestic car production has basically halved in the last six years, to now be under 200,000 cars per year.  This slump has had a major impact in the outlook of not only the auto manufacturers themselves, but also the significant Australian automotive component industry.  It is this component industry that stands to lose the most if the number of vehicles produced falls below the viable critical mass.  Already, the Commodore sports a number of imported components and this is only going to keep increasing with each new model, the same goes with new Fords and Toyotas.

It goes against all sound economic theory to have either any tariff or any subsidy for industries in which an economy is not globally competitive.  The problem is, the car industry in Australia does not stand alone; it supports the component industry which serves them but also does a fair bit of the rest of manufacturing in Australia.

Car manufacturing processes utilise a lot of power transmission equipment, both in consumables and new projects.  If one of the three manufacturers were to pull up stumps and become a sole-importer a la Mitsubishi and Nissan, there will be a significant reduction in PT requirements right across the manufacturing base. 

There is no denying that costs in Australia are high, across the board.  Car manufacturers have implemented automation processes where possible to reduce the labour content of each product in an attempt to limit variable costs, but there is only so much that can be done.  Design, engineering, production: three very important, high level skill sets that we are told repeatedly are important to Australia’s manufacturing future.

Episode Three - Hot off the Press

Monday, 7 November 2011

Carbon Expo 2011

In episode 2 of the Australian Power Transmission Podcast I shared my dismay at the entry price of $300.00 to visit the trade show part of Carbon Expo 2011 in Melbourne.  Carbon Expo tweeted me to advise me that it is only $100.00 entry for members of the trade (the $300.00 I had quoted was for a three day pass). 

I apologise for any misleading statement.  It is, however, still a fair whack for something that is looking to go mainstream.  I think I'll follow the tweets but that's about it.

Saturday, 5 November 2011

Episode Two - Yellow Pages, IP Ratings

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I would like to start episode two of the Australian Power Transmission Podcast by thanking everyone for their communication and ideas. I will take nearly all of them on board as the show grows and plan to make this podcast a better product. To be honest, I was blown away with where some of the feedback was coming from, Germany, the UK, the US and Australia, so thank you to everyone who has been in contact.

If you would like to contact the show, you can send me an email at, a tweet at ozptpodcast or visit the show’s anorexic-looking website at Also, we’re on iTunes if you search Australian Power Transmission.

The New South Wales government has established a Taskforce to develop an action plan for the next ten years to help combat its shrinking manufacturing base.

The Manufacturing Industry Action Plan will take 12 months to get ready and will focus on specific sectors that the New South Wales government thinks it can gain an advantage in, namely food, metals, machinery, biomedical, defence and renewables.

Not content with having a state lead the way, Australian Prime Minister Julia Gillard will chair a taskforce of her own. Tasked with getting to the bottom of the employment woes in manufacturing on a national basis, this task force will feature 23 individuals, representing manufacturers, unions and the government.

Well, Australian states have been at each other’s throats for decades in trying to secure major manufacturing contracts. Whenever defence contracts come up, governments bend over backwards with assistance packages to help get jobs in their jurisdictions. 10 years ago Victoria wouldn’t stump up with some cash to keep Arnotts biscuits in Melbourne so Sydney, Brisbane and Adelaide facilities were expanded and Melbourne was closed. This scenario plays out all the time, so it will be interesting to see how both the New South Wales Action Plan and the federal version will look at generating new business rather than shifting existing business between states.

BHP Billiton has received approval from the Australian Federal Government to expand its Olympic Dam mining operations. Copper, uranium, gold and silver are extracted from Olympic Dam in South Australia, and the expansion will make it the world’s largest open cut mine.

It is projected that the expansion will deliver $8B of benefit to the South Australian economy, whilst mining engineering and infrastructure spending also stands to benefit the mechanical power transmission world.

Regardless of the philosophical objections to a mine that looks set to exploit around one quarter of the world’s known uranium reserves, there is little doubting the scale of the benefit from the expansion. The uranium bubble of 2007 is long over, where prices peaked at $300 per kilogram. The current price of around $100 per kilogram will still reap major rewards, although the bulk of the revenue will come from copper and gold.

Australian smallgoods manufacturer Primo continues its capital investment program in Queensland, spending $131M in consolidating its existing operations and expanding Wacol’s production facilities. This flies in the face of some recent reversals in the food sector and is welcome news for Queensland.

United Dairy Power has bought the Murray Bridge and Jervois cheese-manufacturing assets of Lion and is looking to add milk production to the South Australian production facilities for the local market.

Japanese-owned Lion is consolidating its dairy production with a renewed focus on Tasmania, in light of posting financial reverses resulting from the loss-leading milk war being fought by supermarket oligarchs Coles and Woolworths.

The news of the purchase by Victorian-based UDP is a relief for the more than 100 staff at the two plants, who only a few months ago had an uncertain future.

Electrical measurement company Fluke is conducting a series of workshops in Brisbane, Melbourne and Perth starting on November 10.

The main focus of the workshops will be looking to understand the diagnostic fault process of three phase electric motors.

The practical demonstration and troubleshooting sessions are aimed at maintenance staff and will set each attendee back $199.00. Find the link in the show notes to episode two.

Well, from once being the tome of advertising to “I think we have a Yellow Pages but I couldn’t tell you where it is”, Sensis-owned Yellow Pages has been an Australian staple for over 80 years. As business directories go, the Yellow Pages is pretty much synonymous.

As you can guess, people still let their fingers do the walking to hunt down what they are looking for, but are moving away from the book to the computer – as well as tablets and mobile phones. The real question now becomes, does Yellow Pages still offer value for Business to Business customers?

The power transmission, electric motor and bearings categories have long been numerous pages each in past editions of the Yellow Pages, but each of these now has under one page of listings. The size of the individual advertisements has also decreased. This must surely dent the revenue stream of what once was a very sizeable cash cow.

Sensis hasn’t had its head in the sand during this digital evolutionary period. It has increased its value to advertisers by belatedly linking up with Google and going mainstream with their own website and search engine. The Google linkup is with adwords and other Google products such as Google Earth and Streetview. Paid advertisers get premium consideration on Google searches as well, above standard Search Engine Optimisation techniques.

So, what is the definition of value in a B2B context? A medium sized, three-colour advertisement in the Yellow Pages will set you back just over $10,000 per annum for a major market like Sydney or Melbourne. For your money you also get a good presence online.

There’s no real way of measuring the effectiveness of the Yellow Pages in hardcopy form, short of asking every new customer that calls how he or she found you. As with all things that require an outlay, the money has to be made on the other side to cover it, so in effect we’re looking at 30 to 40 grand in sales to cover a 10 grand spend.

The best known off-line alternatives are trade magazines, trade shows and sponsorships, as well as handling your own Search Engine Optimisation on-line. Each of these cost varying amounts, but none of them are good enough to carry the full weight of a B2B marketing effort on its own.

In the power transmission world, any marketing effort is worthless unless it is backed up with a skilled and motivated outside sales and supply team. The technical nature of the problems and products in power transmission require more than what a purchasing officer or engineer can simply type into a search engine. Of course, relationships are the key to understanding the exact details of what is required, but this is a conversation for another day.

In answering the question I posed about the Yellow Pages being good value in a B2B environment, I think that the days of the $40,000 annual spend are long gone, but some presence is still a must. It still presents a way to come up pretty high on Google – always on the first page for your product group – which is probably better value than adwords alone.

The Yellow Pages is always going to be around to find mechanics, floor sanders, panel shops and adult services. It has not been a force for B2B customers for a few years and will need to keep adapting its product as the digital environment evolves.

It’s time for a quick refresher for electric enclosure ingress protection – known in many countries as IP ratings.

IP ratings are used to identify how protected electric motors are to the elements, both solids and liquids, and are represented by two numbers. For example, IP54, which has a protection to level 5 solids and level 4 liquids.

The solids protection levels are from 0 to 6. 0 is no protection to solids, 1 is to over 50mm, 2 is to over 12.5mm, level 3 is to over 2.5mm, 4 is to over 1mm, 5 is called dust protection and level 6 is called dust tight. This is not to be confused with DIP or dust ignition proof, which is used in grain handling.

The liquids protection levels are from 0 to 8. 0 means don’t get it wet, 1 is protection against vertical dripping water, 2 is for vertical with a 15 degree tilt, 3 is against spraying water, 4 is against splashing water, 5 is for water jets, 6 is protection against super water jets, 7 and 8 are for immersion in under 1m and over 1m of water.

The US has its own system of ratings which was originally prepared by NEMA or the National Electrical Manufacturers Association. The NEMA ratings are actually more complex than the IEC’s IP ratings and cover additional things such as corrosion protection, giving ratings that are linked to specific environmental applications.

Most electric motors in Australia these days are TEFC or totally enclosed fan cooled and have an IP rating of IP54 as standard. WEG has standardised its W22 electric motor range as IP66 and many manufacturers are heading in this direction with their standard offerings.

Following on from episode one where I touched on Australia’s looming carbon tax, I thought I’d do a bit of further research on some of the ways businesses can reduce carbon emissions – especially in a manufacturing sense. I was happy to see that Melbourne was hosting Carbon Expo 2011 in early November and was about to register to attend, before finding out that entry to the trade expo portion of the event on its own would set me back $300.00. If I wanted to see a conference during the day, that would be $750.00.

I suppose the Carbon Market Institute and the Investor Group on Climate Change would like to keep the riff-raff out of their Expo and make sure only genuine visitors come through the doors. I wonder if they’ll have bouncers as well.

I have an interest in finding out ways companies are looking to innovate, especially when it comes to global warming, but I think I’ll be doing my carbon emissions reduction research online.

Links mentioned in episode two:

Episode Two Out Now

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