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Business as usual at Lares Cozzi? Yes--and no (Interview, Nov 2001)
November 14, 2001 |Estimated reading time: 8 minutes
Business as usual at Lares Cozzi? Yesand no (Interview with William Burr, Technical Director) William Burr
Productronica 2001, held last week in Munich, brought together several thousand members of the electronics industry. Where crowds gather, rumors are bound to arise. One such rumor--that Italian PCB manufacturer Lares Cozzi is experiencing serious difficulties--is addressed in the following interview with William Burr, Technical Director, Lares Cozzi SpA, conducted November 10:
(PCB007) Rumors have been circulating about the financial condition of Lares Cozzi. Some have speculated that Lares Tecno is closing. What is the truth behind these stories? (WB) Somehow it seems that difficult times tend to breed rumors: we are all concerned about the state of the market and business in general, and the desire for more information that gives some perspective on the situation probably leads to heightened sensitivity to whatever might be considered news. Unfortunately, this tendency also leads to exaggeration and in some cases provides a fertile ground for outright misinformation.
I have been very encouraged by the number of contacts I have received from friends and colleagues in industry concerning these rumors and wish to thank Olivier Cadic [PCB007's CEO] in particular for offering me this opportunity to set the record straight.
Like most other players in our industry, these days we are operating well below capacity. What this has meant for both our Paderno and L'Aquila (Lares Tecno) facilities is shortened workweeks for some departments. "Shortened" is a relative term: we were running both factories 24 hours a day, six days a week for the year and a half prior to the current downturn.
Lares Tecno is a modern factory with processes and capabilities that complement our Paderno plant. The experienced and skilled workforce in L'Aquila specialize in large format work with economies of scale that also enable cost-effective manufacturing of lower value added products. Taken together with the HDI capabilities of Paderno, the two factories are capable of a range of products, which extend from VHD micropackages up to massive backplanes. Lares Tecno is currently running, we have no plans to close it, and we are working closely with the other shareholders on options that can keep it running through an extended downturn.
How has Lares Cozzi's cash flow been impacted by the current economic slowdown? Are you waiting on delayed orders from customers, as many PCB companies are these days? We recently took the unprecedented step of circulating a letter to our suppliers from our Managing Director, Giovanni Cozzi. An unauthorized translation got around more widely, in which Mr. Cozzi was quoted as saying we were "stopping" payments to suppliers due to cash flow problems. Of course, this let the chickens out.
We are having cash flow problems. I would like to know who isn't. With the rest of the industry we have seen a number of program modifications, but more importantly we have also seen extensive delays in payment from companies that are (or used to be) landmarks of the telecommunications industry. What this means is that, like just about everyone else, we have some difficulties forecasting and managing our short-term horizons. Therefore, we felt it was ethical to advise our suppliers of this difficulty because it would obviously impact our payment terms to them. We certainly never expected that an attempt to maintain the honest and open relationships we have built up over 50 years of doing business in this industry would have been turned against us. However, this unfortunate development has not shaken our faith in our business partners, it has not shaken their faith in and support for us, nor has it led to any retreat from our basic ethics.
Would you say it's 'business as usual' these days for Lares? Yes and no. "Yes," because for quite some time now our core business has been what one of our sister companies from the Far East called a "solution provider." Lares has a long history of RF design, dating back to when we provided RF modules to the Italian consumer electronics industry. This has led to a very strong applications engineering activity, and we are impressed at the continuity and energy of new programs in which we are providing applications engineering support. I obviously can't talk about what's in the pipeline, but the future is here, right now, and it is not going to be measured in terms of cost per unit area. We are really excited about it.
One other side effect of the downturn for Lares has been the shift in our product mix. Maybe because all the existing programs dried up or went offshore, we have seen HDI move from about 20% of our production 4Q2000 to over 70% today. That has meant a significant change in the unit value of our production as well as a fundamental change in the nature of what we do and who we are. When the market recovers it's really going to be a rocket ride.
"No," because with one or two notable exceptions there has been a tendency on the part of the customer base to take as much advantage as they can of the excess capacity in the market that they themselves encouraged last year. This has resulted in a total abandonment of any rational measure of value for existing business. One of the more notorious examples places orders up for auction on the Internet with only nominal concern for whether the bidders can actually build the product. How this approach will fit with the highly custom and highly technical nature of printed circuits remains to be seen. The immediate result has been a precipitous drop in prices to levels that do not reflect the true cost/performance characteristics of the product. Against such trends, it is difficult to see how the low bidders plan to support the technology investments they have made and must make in the future to produce the products they have bid on. Time will tell.
What new projects does the company have in the pipeline? We've heard talk of wideband communication systems and HDI technology, to name two. As I said above, I can't talk about specific programs. However, in general we are seeing significant increases in structural complexity as the need for bandwidth leads to higher functional density and performance. Heat and signal quality are becoming major issues. All of this means new materials and innovative ways of putting them together.
(UC Berkeley) forecasts the amount of information processed in the next three years will be equivalent to the entire amount of information processed in the previous 300,000 years.
From your perspective, when do you see recovery for the European PCB industry? Our book to bill improved dramatically in October after three miserable months. November should tell us what the score is, but I don't expect normal business conditions to resume for a long time. There are too many conflicting signals right now and no "killer app" which can bootstrap the industry like smaller and lighter cellular phones or faster processors did in the past. There is the inexorable increase in the amount of information that needs to be managed: one reference (UC Berkeley) forecasts the amount of information processed in the next three years will be equivalent to the entire amount of information processed in the previous 300,000 years. But we are battening down the hatches, with plans in place for at least another six - eight months of this.
You have recently stood down as President of EIPC (the European Institute for Printed Circuits) after some six years in the post. Of which developments during your tenure as EIPC President are you most proud? When I took over from Erich Kirchner, he had stopped the drift the EIPC had been in for some time and articulated a vision of a common European voice. Our primary role as a technical Institute had been less important for the industry as the center of technology development had shifted to the supplier base, and the EIPC had difficulty identifying ways to serve the industry that were within the capability of their resources beyond production of one or two conferences a year.
The EIPC did have, and continues to have a major asset: the quality of our Board of Directors. Because the Institute is made up of individual companies, we had senior people from the industry who knew the business and could marshal the resources the Institute needed to move ahead.
So this is what we did. Thanks to the active contributions of the Board, we managed to jumpstart a new role for the Institute, which capitalized on our unique profile and know-how: we were the only association that was both pan-European in nature and had experience in managing a multicultural membership. This profile had kept us out of the more traditional groupings in the past and led to an ambivalent relationship with the European Union, but we managed to turn it to our advantage in a classic "role breaker" exercise.
This change of focus led to the following:
- foundation and establishment of the European Federation of Interconnection and Packaging (EFIP) as the umbrella organization for Europe's various national associations in our industry
- development of a unified and harmonious position for Europe at both the Commission and international levels: our industry was finally speaking with one voice
- Europe's industry was a founding member of the World Electronic Circuits Council
- establishment of a focused, truly European forum for our industry: the EPC show
- recognition of this new reality through nomination of Europe to host the industry's leading technology event: the next Electronic Circuits World Convention, in Köln, Germany, in October 2002
All of this activity finally brought the Institute to the point where we could bring on board the experienced professional staff we needed to move everything ahead.
Jo Warnier, Executive Director of the EIPC, will shortly issue a press release on our new Board and Chairman. From my point of view, the membership has once again returned a first-class team to the Institute, and I am honored to have worked with many of them for these past years.
William Burr Technical Director Lares Cozzi SpA
By Erica Jeffrey