Fuhrländer’s insolvency


September 30, 2012

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When Fuhrländer filed for insolvency last week, it was another painful reminder that in a rapidly emerging economy, things go down as well as up.

Moreover, it was a lesson that in any ambitious business, there’s a significant difference between consistently talking a good game and actually delivering one.

Fuhrländer AG was an established and internationally diverse manufacturer that sold a range of high quality units throughout its twenty-five year history.

The company developed and built a reputation for selling high quality, class-leading turbines that varied in power output from 1.5 to 3MW.

This focus, combined with some quality engineering and some smart drive train technology, ensured that its kit could be quickly and easily transported and installed in notoriously remote and difficult to reach locations. This was a key benefit. A differentiator that provided a strong level of reliability and a demonstrated a good potential return on a developer’s investment.

Heck, it even gave them the chance to meet with Premier Wen Jiabao and Angela Merkel.

So with such a positive and promising outlook, what went wrong?

Well, as the company files for insolvency and undertakes the painful task of assessing what happens next, the answer is not yet entirely clear.

Earlier in 2012, the business had already undertaken an extensive cost cutting programme, laying off 70 staff and stripping back costs to all but the essentials.

Then in May, it won investment from a Ukranian business – a country in which the firm already had an established production plant and that, according to reports, could produce and shift 15 to 18 turbines every month. Since then, a new head of sales was also appointed, who has developed an impressive track record.

And yet despite all this, it evidently wasn’t enough. The orders, it appears, simply weren’t coming in fast enough.

Add to this the increased competition from Asian manufacturers that have dragged down prices, the increasing challenge of securing project finance and extended development cycle delays and the bubble simply had to burst.

For Fuhrländer, this then appears to strike at the heart of the frustration. Since, as cash flow – the lifeblood of any business – dried up, the available options also evaporated.

Running a manufacturing business at any real scale will always require a significant ongoing investment in overheads and requires a steady stream of cash. If this isn’t coming through unit sales, then the role of the service and maintenance arm of the business quickly needs to plug the gap. A challenge that, as we highlighted only a couple of weeks back, is by no means exclusive to Europe.

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