Blog - Weathering the Covid-19 storm: Diversification, liquidity, and maintaining contact

By Rory Pasquariello · On July 24, 2020

No one saw a Covid-19 pandemic coming. Big changes were made virtually overnight. Most in the sector report decreased sales, project delays, supply chain disruption and warehouse shortages. The pandemic is expected to reduce power consumption in U.S. commercial and industrial sectors by more than 4%, according to GlobalData.
Yet there are encouraging signs. Oil prices have rebounded somewhat, and infrastructure projects are restarting as economies cautiously reopen. For example, GE completed its first major onsite inspection project since the Covid-19 outbreak in China.
Turbomachinery International interviewed turbomachinery industry leaders to see how they’re faring, what’s changed, and how they are responding. Companies such as Mitsubishi Hitachi Power Systems, Howden, Rotoflow, SSS Clutch, Velo3D, Sullair, Voith, MTU Power and PAL Turbine Services reported on how they are adjusting to social distancing and other guidelines. Some of them said they are pivoting from onsite work to remote maintenance services. Others are investing in new technologies such as digitalization and the Internet of Things (IoT) or providing employees with better training. More than a few have stripped down their operations to focus on core competencies.

Howden
Howden, a manufacturer of compressors, steam turbines, heaters, fans, and blowers, noted postponements and cancellations of planned outages with subsequent cancellation of spare part orders. That’s hit their bottom line.
In response, Howden expedited the launch of a new remote service that uses an augmented reality annotation technology with real-time communications based on the Chalk app from PTC. It connects remote product experts to on-site field technicians and customers. The company also hired a dedicated IoT Strategy Manager to improve its digital solutions.
“We see opportunities in remote monitoring and support; as well as customer self-service interface points as key elements of a post-Covid world,” said Darryl Halter, Vice President, Aftermarket at Howden. “As customers continue to place requests for quotes, we see that as a good indication that they are looking to proceed with projects when this is over.”
Halter’s advice? Adapt and innovate. “When situations like this arise, we are leaning into it, not fighting it. Accept that this is the reality. Adapt to it and innovate in ways that benefit the customer and the company.”

Sullair
Sullair, an Indiana-based manufacturer of portable and stationary rotary screw air compressors (a subsidiary of Hitachi), has felt Covid’s impact, particularly in its operations and facilities in China. It is continuing to focus on its core business. With no trade shows on the horizon, it is stepping up efforts along other marketing channels.
“We are actively looking at other means we can communicate our message including virtual events,” said Brian Tylisz, Senior Vice President of Sales for the Americas at Sullair.
After mandated shutdowns ended, Sullair ramped factory activity back up. But when business-as-usual will return is anybody’s guess.
“Nobody within our industry had this in their business plans for 2020,” said Tylisz. “With nearly six months to go in the year, it is difficult to predict a full-year impact.”
While thankful for tools that make it easier to communicate digitally, he said that nothing can replace face-to-face interaction.
“There is nothing like sitting down, having a meal and looking somebody in the eye while talking business,” said Tylisz.

MHPS
Despite Covid, business at Mitsubishi Hitachi Power Systems (MHPS) is doing well. The company had a record year, and ranked first in market share by megawatts for gas turbine orders in the first quarter of 2020. The MHPS remote monitoring and diagnostics centers have helped the company leverage real-time data to help users make risk-informed decisions on delaying planned maintenance safely.
“Right now, it’s all about flexibility and ensuring that our customers are able to reliably keep the lights on while so many other factors in our lives remain unknown,” said Marco Sanchez, Vice President and Head of Intelligent Solutions at MHPS Americas.
The current crisis has made it clear that plant operators need remote operating solutions to improve operations and protect employees. As a result, MHPS is focusing even more on its Tomoni Autonomous Power Plant initiative.
“Going forward, we expect many inspection and maintenance tasks will be supported from an offsite location instead of in person,” said Sanchez. Both artificial intelligence (AI) and machine learning will allow the knowledge of today’s experts to be captured for the future.”
Sanchez’s advice to others in the turbomachinery sector? Have flexible contingency options in case of future disruptions. This should include cyber-secure communication channels with sufficient bandwidth for the desired level of implementation.

SSS Clutch
SSS Clutch, a Delaware-based manufacturer of automatic overrunning clutches for high-power and high-speed applications, was remodeling its UK facility when the world went into lockdown. It paused construction for six weeks, delayed employees from moving in and instituted remote work.
“Things were far from perfect and seamless, but there has not been a huge disruption,” said Morgan Hendry, President, SSS Clutch. “The situation has helped us to establish better workflows and practices for the future. It prompted us to make positive changes.”
SSS Clutch obtains about a quarter of its business from marine propulsion, a quarter from mid-stream and down-stream oil and gas and from half power generation. Hendry said the company hasn’t skipped a beat on the operations side.
“We expect bumps in the road but not a fall off,” he said. “There will be some delays and cancellations within our oil & gas portfolio, but we believe our overall business will not see a material effect.”

Rotoflow
Rotoflow, a manufacturer of companders and expanders, has been operating at full capacity. It implemented heightened safety procedures for those allowed to remain at work in its manufacturing facilities. Office employees worked from home.
The effect of the crisis on the company for 2020 overall is uncertain. But one good sign is that it recently achieved record production in the industrial gases space.
“Once the crisis is over, we are looking forward to re-engaging with customers face- to- face, offering even more value-added solutions, and introducing new products,” said Sarah Farnand, Rotoflow’s Global Sales Manager, New Equipment. “One potential opportunity from the pandemic has been time to spend on some of our product development initiatives.”
Her advice to the turbomachinery world: “Focus on what you can control, keep your employees safe, and don’t let your guard down.”

MTU Power
For MTU, which offers diesel and gas power generation system services, protecting customers from disruptions has been top priority. It temporarily scaled back to emergency staffing levels at its Berlin facility where GE LM series turbines are serviced. As well as protecting employees, this was a result of supply chain disruptions. With reduced staffing, the company maintained minimum service levels, carried out field services and received delivered engines and parts. This minimized disruption for customers.
“We intend to flexibly adjust shop capacities to meet demand going forward as we monitor the supply chain situation, COVID-19 developments and regional trends daily,” said Gregor Stoecker, Director of Sales, Industrial Gas Turbines at MTU Power. “We can also support the ramp-up operations of our customers by offering intelligent repair solutions, flexible lease and rotable services, and sourcing of serviceable material.”

Voith Turbo
The German-based Voith Group, which manufactures drive components and systems for turbomachinery, has weathered the crisis relatively well. It has carefully monitored its supply chain to keep it up and running. A few suppliers from regions like Italy and India struggled. But overall, its supply chain is almost back to normal.
That said, some large capital expenditure projects, especially in the Middle East, have been postponed. Further, travel restrictions have caused challenges in the aftermarket, especially in Europe and the U.S.
“Thanks to our global service footprint, we benefit from close customer proximity and the situation in China improved much earlier than in many other areas, so China strongly supported our business in the past weeks,” said Rolf Schweizer, Executive Vice President & CEO Voith Turbo.
The drop in oil and gas prices hit Voith particularly hard. It specializes in drives for electrically driven gas compression for up-, mid-, and downstream applications. In response, it is strengthening its capabilities in the retrofit area.
In the short-term, Voith sees potential in service and aftermarket businesses.
“We will continue to invest in new products and solutions (such as VoreconNX variable speed drives, the VECO-Drive VFD, AeroMaXX turbo gear technology or new condition monitoring solutions) that provide competitive advantage,” said Schweizer. “The current crisis has uncovered significant potential for digital collaboration, autonomous operation and remote maintenance.”

VELO3D
Only a few months ago, for VELO3D, a metal additive manufacturing (AM a.k.a. 3D printing) solutions provider, AM applications in aviation and oil and gas were still vital sales targets. However, all signs now point to those sectors scaling back capital expenditure investments. VELO3D has had to make some operating and capital adjustments but still intends to launch new machines into the market later this year, such as their 1-meter tall Sapphire system. The company was able to secure an additional $40M in funding amid these unprecedented times and hopes to be profitable by mid-2022.
“As a smaller business, we are more agile and can shift our focus a little more easily than larger, publicly listed companies,” said Benny Buller, founder and CEO of VELO3D. “We are targeting other industrial segments like aerospace, defense and energy. We are also putting more investment into marketing and business development.” The company also recently landed a $20M order from an existing aerospace customer.
One potential opportunity is in printing parts traditionally manufactured via casting. 3D printing offers much shorter lead times and lower cost for small quantities. Buller’s advice to others in the turbomachinery sector is to stay agile.
“Agility is your strongest asset,” said Buller. “Make investments in technologies that will enable you to be flexible to keep costs down and respond to customer and market needs quickly.”

PAL Turbine Services
PAL Turbine Services, a subsidiary of Pond and Lucier, a field engineering services company focusing on legacy gas and steam turbines, is an example of the unforgiving nature of market disruption. The company has virtually ground to a halt with purchase orders drying up, according to Dave Lucier, owner and general manager.
He complained about public utilities and many private owners of gas turbines (refineries, process plants) looking with fondness at the lowest bid instead of insisting on experience and technical capability. As a result, PAL’s 20 full and part-time engineers (each forty-year plus veterans) don’t have much work.
“Clients don’t want us to retire, but they won’t send us business until they are in trouble,” said Lucier. “Even then, they want us to accept reduced rates, though we charge about half OEM rates.” ■

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Weathering the Covid-19 storm: Diversification, liquidity, and maintaining contact

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