Howard Graphic Equipment

Home | HGE Website | Stocklist | Contact Us

		Click here to return to Talk of the Trade index
		Nick Howard, C.E.A. President Howard Graphic Equipment Ltd. “You’re wrong!” – Words I have heard too many times over the past couple of years when visiting a printing company to evaluate a used press. This particularly irritated owner then echoed what so many others have such a hard time believing, “There is no way my machine could be worth such a low amount. I have always been able to sell my equipment for as much or more than I paid for it.”

Believe me, I feel their pain, having spent the past 40 years of my career both as a re-seller of printing machinery, as well as a certified appraiser. I come face to face with executives seeking to understand what their assets are worth, but not always liking what they hear. I did not have the heart to tell this printer that if he wanted I could list his used press next to a Crosfield Magnascan and Miehle Horizontal. The printing industry is right now in the midst a watershed moment, which is most obviously being determined by the many new forms of on-screen communications and online media. It is quite clear that printing’s fear of the demographic shift in media consumption is now fully underway. The public consumption – demand – of graphic communications in terms of print versus on-screen was always going to be determined by age, not if but when younger generations so tightly wound with the World Wide Web took on the majority of purchasing power in the economy. Just as these Internet generations have matured and stabilized, so has the World Wide Web and all of the very cool devices used to access it. All economies of the Western World are starting to be powered by professionals who have no affinity for print, and our industry must quickly accept this fact to stay relevant in the media mix. We can no more stop the momentum of on-screen communications than the dramatic drop in the value of used offset machinery, which is why most commercial printers are seeing that the industry has reached a watershed moment. This is not an easy business environment to accept, but lasting changes in the valuation of offset equipment are clearly underway. Game-changing moments Press manufacturers have seen this digital communications environment coming for years, in terms of overall market shrinkage and in the ongoing potential for offset. Granted most offset press makers were taken off guard with the degree of change underway, because of the huge financial fallout, but the situation has been hovering like a dark cloud for nearly two decades.
Arguably, one of the most important moments in press evolution over the past half-century came in 1990 with Xerox’s introduction of its monochrome-based DocuTech engine. For years, printers viewed this machine as a fancy copier, but most offset press makers were immediately aware that they were facing a new competitor – digital printing – that would ultimately be better suited to the new world of communications. Xerox had been evolving its digitalprinting technology for decades, making a true breakthrough all the way back in 1959 with the 914 model, noted by the company as its first automatic plain paper copier.		Joseph Wilson, Xerox CEO from 1946 to 1966, with the company’s first automated copier, Xerox 914, a key piece of printing machinery evolution.
At the same time, of course, offset machinery was also evolving by leaps and bounds to reflect market needs, whether focused on adding more colour, quality, speed or automation. For example, although Heidelberg did not invent or even build the first 8-colour 4/4 perfector, the German giant is rightly credited with developing a workable, productive machine. This was also a game-changing moment in the traditional commercial-printing sector. Long perfectors, as these presses are sometimes called, have, in their own way, hastened the deterioration of assembly-line machine manufacturing. Throughout the late-1980s and early-90s (before the advent of online, at least in the sphere of the general public, and despite the meteoric rise of personal computing) competition in the business of communications was still only taking place amongst the various methods of printing, as press makers and printers alike tried to determine what would be the right technology for the future. The long perfector, for example, essentially wiped out the non-process colour market in favour of full colour, because work could suddenly be produced for the same price as monochrome jobs – often for even less price. Then with the arrival of computer-to-plate imaging, predominantly and proudly developed out of Creo’s Vancouver facility in the 1980s, print manufacturing became relatively quick and cheap by the 1990s, just as Xerox was starting to exert its DocuTech changes on the market, enhanced of course by the arrival of Benny Landa’s Indigo press design in 1995. Similar to the effect of long perfectors, the Indigo machine showed it would soon be possible to produce full-colour digital as cheaply as monochrome digital. With the official launch of Heidelberg’s powerful SM 102-8P during drupa 1995, I suspect that many of the company’s executives, while they understood this press would be game-changing, also felt its arrival marked the end of an era. That the arrival of this impressive new press was hitting a market peak, soon to be followed by an unheard of decline in offset press manufacturing going forward, although nobody from any of the big press makers could have predicted when such an environment would truly take hold. As we now read Heidelberg’s quarterly financial statements, the company, along with all of the other major press makers, are publicly stating that they cannot expect to build and sell nearly as many machines as in the past. Much of the attention around the decline in offset press manufacturing is certainly placed on Heidelberg, because of its long history as being the largest press maker and its sudden financial challenges, but make no mistake, all of these giant manufacturers are facing similar challenges. The press makers have in fact been trying to adjust their manufacturing focus for a couple of years now. Gone, or nearly gone, from all of the major press builders are the 4-colour, 5-colour and 6-colour machines with, for example, 2/4 perfecting capabilities. These presses are now replaced with coaters as the essential feature. As of late, various builders have also thrown in the towel on what might be referred to as basic machines. These presses were essentially stripped of certain automation and delivered to price conscious printers. Such machines, in reality, carried the same press architecture but were targeted at particular rogue players ready to undercut everyone in the market. But inevitably, this environment was going to hit a dead end, which I believe is where we are now all standing, and it is becoming very difficult to breakthrough or to find a new direction. Market-defining moments How does any company of huge manufacturing proportions deal with an evershrinking market base? This is a question that all the big-iron players are now dealing with. Some have decided to focus their growth on building larger XXL format machines, but even they would be quick to point out that this is a relatively small market already with a stable install base. While many market surveys have been published indicating that this extra large offset format is growing in popularity, the reality is that advancing such press technology is very expensive in terms of R&D spend. We also hear a lot about the benefits of lean manufacturing, which is certainly a viable strategy but one that is really a formula of dollars-and-cents for large-size printers and a formula of common sense for most small- to -medium-sized printers. In other words, in pressrooms where large print runs still take place lean manufacturing takes hold because every cent saved multiplies, every hour shaved means margins. Meanwhile, most traditional commercial printers deal with a different manufacturing axiom: Run lengths shorten, pricing pressures remain constant and manufacturing costs continue to escalate. Both the builder of equipment and the user are dealing with exactly the same issues. Heidelberg could not afford to delay the launch of the long perfector just as Toyota could not delay the hybrid car. If they didn’t someone else would. Now with stability returning to the printing industry, will there ever be as many machines sold as before? That is a question of which the answer may very well be no. One 8-colour perfector can out work two or three straight 4- and 5- colour presses if the work is all colour which most of it is. That alone should indicate the units sold per year will be less. The other important ingredient is speed and make-ready. These presses all outperform technologically deficient equipment made even five years ago. The press boardrooms in Augsburg, Heidelberg, Offenbach and Tokyo are busy determining the next steps in how to bring offset equipment to market. Make no mistake, these are major decisions being made today about the true future of printing, whether focused on various factory reductions, changes in R&D spend, or ultimately determining how to key facilities to build certain machines. Most of the press makers are looking very hard at alternate forms of imaging, which can be integrated into 29- and 40-inch format presses, run at high speeds and produce virtually zero waste. For example, based on Heidelberg’s relationship with Gallus, or Komori’s Chambon subsidiary, packaging printers may one day soon see press technologies that feed from a roll and completely finish a box. With all of these press makers so intently focused on upgrading performance, their recent innovations have a significant impact on the pricing of used machinery. The general malaise in the Canadian and U.S. markets seems to have created an environment in which only printers in developing countries are searching for used equipment. This situation, along with higher technology demands here in North America, have led to a free fall in values as only those foreign customers with smaller budgets are bidding. This is a major reason why prices are so low. Price-adjusting moments Further pressure is placed on the price of used press, because of the fact that new equipment has never sold for less in this country. Today, meanwhile, printers cannot afford to invest in old technology, if they hope to remain competitive not just with fellow printers but also with the immediacy and relatively cheap cost of producing on-screen communications. The cost of printing has dropped so much that older presses are not capable of producing a profit. The way forward is pretty clear: If our industry does not search out for the most-advanced equipment, we can never maintain our place in the communications mix. Of course, this introduces another major hurdle in that the availability of financing has become a major roadblock for most printers hoping to make new capital investments. Several key lenders have either retrenched or are exiting the printing industry. However, there is enough stability back in the economy so that credit is loosening up and, at the end of the day, this general lack of access to financing does have a silver lining for printers who have been running a fiscally responsible business for years. I seriously doubt we will ever again see the day when the generosity of press manufacturers puts a start-up printer in business for the sake of market share. I worry, however, that even with more positive signs starting to emerge for the industry, some printing companies may still not accept the need for modernization in the pressroom. Nick Howard, C.E.A. President Howard Graphic Equipment Ltd.

2230 Meadowpine Blvd.
Mississauga, ON L5N 6H6
Tel. (905) 821-0000
Fax. (905) 821-0055
Email:
sales@howardgraphic.com
Website:
www.howardgraphic.com