Rising trade protectionism will drive companies to bring more production back to the US and Europe from Asia, and they will need automation to reduce their costs, according to a leading industrialist in Europe.
Mats Rahmstrom, managing director of Atlas Copco, Sweden's largest company by market capitalization, told the Financial Times that he was expecting large growth rates in automated manufacturing as companies tried to recoup some of the costs from onshoring production.
“If you bring this type of manufacturing back to Europe or America and work manually in France, Sweden or the UK, you are not competitive. You will see automation accelerate, ”he added.
There is a growing debate about the future of supply chains as mounting trade tensions between the US and China, as well as the coronavirus pandemic, prompt companies worldwide to review how they source products and where they manufacture.
Atlas Copco makes compressors, power tools and vacuum technology for industries from automotive to semiconductors and is known for its decentralized management approach that has made it a preferred investor in recent years.
The Swedish group suffered a 4 percent drop in sales and a 15 percent drop in operating profit on Thursday, but still posted an operating margin of 19.7 percent, one of the highest among European capital goods firms.
Mats Rahmstrom, Managing Director of Atlas Copco
Mr Rahmstrom said he expected tensions between the US and China could continue, whoever wins the US presidential election next month. Atlas Copco has focused on building dual supply chains and increasing its local production in Asia, the US and Europe since the global financial crisis.
The Swedish group made two acquisitions this year to strengthen its position in automation. She bought the German Isra Vision in February and the US Perceptron in September. Both companies are part of a newly created department called Machine Vision Solutions, which uses technology to examine surfaces for defects in the production line, such as glass or paint on cars.
"It's very exciting. We believe this could be a great platform for growth for us," said Rahmstrom, adding that, due to the prices paid for the acquisitions, Atlas Copco needed double digit percentage growth in sales to justify this.
Atlas Copco's chairman declined to comment on the broader implications of Sweden's decision last week to ban Huawei and ZTE from its telecommunications networks. The news sparked anger and threats of retaliation against Swedish companies in Beijing.
"In our case, we are able to ensure that we are more local in manufacturing than the local manufacturer." We believe that we can cope with most protectionism scenarios, ”added Rahmstrom.