Increasing trade protectionism will push companies to bring more production back to the US and Europe from Asia and they will need automation to reduce their costs, according to one of Europe’s leading industrialists.
Mats Rahmstrom, chief executive of Atlas Copco, Sweden’s biggest company by market capitalisation, told the Financial Times that he was expecting big 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 the Americas, if you do it manually in France, Sweden or the UK you won’t be competitive. You will see an acceleration of automation,” he added.
There is a growing debate around the future of supply chains as heightened trade tensions between the US and China, as well as the coronavirus pandemic, cause companies worldwide to review how they source products and where they have production.
Atlas Copco makes compressors, power tools, and vacuum technology for industries from automotive to semiconductors and is well known for its decentralised management approach that has led it to become an investor favourite in recent years.
The Swedish group suffered a 4 per cent drop in third-quarter revenues and a 15 per cent fall in operating profit, it said on Thursday, but it still posted an underlying operating margin of 19.7 per cent, one of the highest among European capital goods companies.
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 since the global financial crisis on establishing dual supply chains and increasing its local production in Asia, the US and Europe.
The Swedish group has made two acquisitions this year to boost its position in automation, buying Germany’s Isra Vision in February and Perceptron of the US in September. Both companies have become part of a newly created division called machine vision solutions, which uses technology to inspect surfaces for defects on the production line such as glass or paint on cars.
“It’s very exciting. We believe it could be a big platform for growth for us,” Mr Rahmstrom said, adding that the prices paid for the acquisitions meant Atlas Copco needed double-digit percentage growth in revenues to justify it.
The Atlas Copco chief executive declined to comment on the broader corporate impact from Sweden’s decision last week to ban Huawei and ZTE from its telecoms networks. The news sparked fury in Beijing and threats of retaliation against Swedish business.
“In our case, we have been getting in a position of making sure we’re more local to local in manufacturing. We think we can handle most scenarios of protectionism,” Mr Rahmstrom added.