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2008 FIN – Bossard’s Dean: More Market Changes Than Just Prices

December 11
00:00 2012

2008 FIN – Bossard’s Dean: More Market Changes Than Just Prices

July 22, 2008 FIN – Veteran purchasers for the Bossard Group are finding more changes than just higher prices, David Dean, CEO of the Switzerland-based international supplier of metric fasteners, reports. “We face a situation that our most experienced buyers with 30 and 40 years of experience have never seen before in their career:
• Open orders are partially not honored or only fulfilled with retroactive repricing.
• No longer term orders can be placed, quotes are valid only for a few days and some manufacturers will not quote until they know wire prices.
• Manufacturers asking for prepayments because they are not able to finance the increase in the net working capital resulting from the high price increases.
Dean has been with Bossard Holdings AG since 1992. He was named CFO in 1997 and CEO in 2005.
Dean described fastener buying today as “extremely difficult” and “price actions on the customer side are unavoidable unless one would be prepared to risk dire consequences.” The price increases could be “do or die” for some fastener companies. “The magnitude of those increases are such that it could put quite a number of players in the industry out of business if they are not able to pass on the price increases to their customers, Dean warns. “There are customers not realizing this risk by rejecting the needed price increases.”
The situation tempts fastener buyers to sacrifice quality for a lower price, but Dean advises that cutting quality is a “very risky and short-sighted approach. The trick is to find the optimum source without sacrifice to quality, a policy that Bossard has followed in its 177 years of existence.”
Instead, suppliers need to be more observant of quality. “It is worthwhile these days to check very carefully on the material content of fasteners,” Dean counsels. “The temptation to use lower grade steel, save on chromium, nickel is real and is happening.”
Dean notes that price increases continue despite the slowing U.S. economy. “Also in Europe there is no sign of weakening of the prices. Price increases are announced very short-term and are expected to continue in the second half of 2008 by almost all manufacturers,” Dean finds.
“The additional demand for steel in the emerging markets seems to compensate for the slow down in the mature economies,” Dean notes.
In addition to steel price increases there are labor, energy and freight increases in most markets.
Net prices are up in Europe but the “U.S. is hit much harder because of the devaluation of the dollar against almost all currencies.”
“Based on all our intelligence in the sourcing market, we see no signs of a softening of the market before the end of the year,” Dean finds. “On the contrary, price increase announcements for the 3rd quarter have continued.”

The Bossard Group reported record 2007 revenue of CHF 600.82 million (US$592.15 million). North American sales dropped 3% in 2007 while Bossard restructured its U.S. operations. Sales for 2007 in Europe totaled CHF 346.7 million (US$341.6m) and Asia CHF 85.7 million (US$84.4m). The highest growth of 35% was reported by Bossard China. Web: ©2007/2012 Fastener Industry News
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