PH: A good value proposition

Marc Von Grabowski
President
MHE-DEMAG (PHILIPPINES), INC.

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Marc Von Grabowski knew exactly what he wanted after finishing high school and military service in Germany. Upon the encouragement of his father, who came to the Philippines in the 80s to do business for the construction industry, Grabowski enrolled his college education here to chart a career of an expat.

With his knowledge and deeper understanding of the local culture, no other German expat can come close to Grabowski, who now heads MHE-Demag in the Philippines.

More than ever, Grabowski sees the unprecedented opportunities in the country. Along with that is MHE-Demag’s aggressive positioning of its German-made equipment and machineries in almost all industries in the country.

Career

Grabowski was only 20 years old when he joined his father, who was into the business of industrial sealants and consumables in the country.

The objective of landing a good job targeting global German company was very clear: “I have my foot in the door in this booming market.”

If he will study in Germany, he will be just like any German expat who does have a deeper understanding of the local culture. So, despite the difficulties inherent to an emerging economy, both father and son held on to the Philippine promise.

The young Grabowski enrolled at the University of Asia and the Pacific where he finished his business management degree and at the same time earned his Master of Science in Management in just five years. He is set to start his MBA in the US at the Columbia business school this month.

He admitted that he was shocked at the backwardness of Manila compared to his hometown in Munich.

“Of course, I was shocked for around six months, but that mindset has changed,” he says.

According to Grabowski, every time he went back to Germany he had the chance to look at the situation from another point of view because when he was in Manila, his tendency was to always compare the Philippines to Germany.

“Then I started to see all the small annoying things in Germany which I was completely ignoring while I was here,” says Grabowski. He realized that there are things that are not great in Germany, too. He also agreed that there is no need to see the other side for it being greener. Instead, he set out to make better with the opportunities at hand.

“Big opportunities have happened in Europe after World War 2 when the economy industrialized, but those days and market are not there anymore,” he adds noting this shifted to southeast Asia, and the Philippines.

Grabowski landed a coveted job at MHE-Demag. He began his career in MHE-Demag in the Philippines in 2009 as product manager. He has been with MHE-Demag for 9 years already and responsible for turning the company around quite quickly. Prior to moving to MHE-Demag, he held a product management position at AIG.

The company

Established since 1972, MHE-Demag is the name for material handling. MHE-Demag engineers, manufactures and maintains a comprehensive range of industrial cranes and hoists, warehousing equipment such as lift trucks, forklifts and dock levelers, aerial work platforms, building maintenance units for safe working at heights, as well as automated car parking systems.

Its customized solutions serve a wide range of industries from general manufacturing to aerospace, covering a broad customer base.

A joint venture between Jebsen & Jessen (SEA) Pte Ltd and Demag Cranes and Components GmbH of Germany, MHE-Demag is headquartered in Singapore and operates within its close-knit regional network in Australia, Brunei, Cambodia, Indonesia, Laos, Malaysia, Singapore, Myanmar, Papua New Guinea, the Philippines, Taiwan, Timor-Leste, Thailand and Vietnam, among others. Its operation is supported by 11 manufacturing facilities and 63 strategically located branches in the region.

In the Philippines, MHE-Demag began in 1990 as it expanded its presence in all major ASEAN countries. This gave them a visible and practical advantage over its competitors as they have direct on-site and could deliver solutions straight away.

Some of their equipment are manufactured at its plant in Bicutan because these are very bulky cargoes if imported.

While MHE-Demag sells directly to end users, the company has also a strong revenue stream from its rental offering. These equipment for rent are largely forklifts as some contractors just want to focus on their core business and don’t need to buy these machineries.

“We have in a total 10 locations in the Philippines offering sales and service to our customers. So, if there is a breakdown or they need service support we can dispatch our people easily, there is no need to bring these units to Manila,” he adds.

MHE-Demag equipment offers various uses for various industries, such as manufacturing, power, mining activity, aircraft maintenance, anything that has to lift something or something that is too heavy and needs forklift or cranes.

“The joke is only dentists do not use us,” he adds.

The business of MHE-Demag has been robust, registering double-digit growth. In fact, this is a challenge because the top management insists they should do higher than the GDP growth rate of the country. The government is targeting between 7-8 percent GDP for this year.

“We are fortunate that we double our size,” he adds noting that this significant growth does not yet include the potential business they could generate as they start to participate in the Duterte administration’s huge infrastructure development push.

Expansion

Indeed, business is good. MHE-Demag is investing R400 million to expand its operation in the country in new 2-hectare manufacturing plant in Batangas inside the First Philippine Industrial Park. The plant is basically a steel fabrication facility, especially for the production of cranes. It will also house its building maintenance unit.

Project construction is ongoing and is expected to be completed in the second quarter of next year.  It will have a capacity to produce around 250 to 300 cranes a year. Its current plant can produce a maximum of 100 cranes. Last year, production was close to 100 cranes. Sizes of cranes vary from two tons to as big as 100 tons.

“We can go all the way to fully automated cranes where there are no more people involved, and everything is customized,” he adds.

In fact, Grabowski noted that only 20-30 percent of their cranes are imported, most of them are built locally. Keppel Shipyard in Batangas is using their cranes for shipbuilding.

“We have very high local content, we create value locally,” he adds.

Partnership

MHE-Demag also launched in December last year an exclusive partnership with Wacker Neuson to provide a new product line to support the growing needs for modern machinery.

Together with Wacker Neuson, MHE-Demag will provide affordable mini-excavator that will mean savings for its customers.

Wacker Neuson’s mini-excavator is a more efficient equipment for digging or demolition. This equipment is smaller than other types of similar equipment and they are generally used for small or medium-sized project.

“The best part of using a mini-excavator is that it brings a lot of power to a small space. It is small but it is very powerful to manage even the tough tasks. You can also use mini-excavators for almost any project that is too large for a shovel to handle like repairing sewer lines, flattening landscaping, digging garden ponds and other kinds of projects,” he adds.

MHE-Demag Philippines is not just distributing these equipment and servicing them here in the Philippines, but the entire Southeast Asia.

“We have the equipment to move the materials around.  So, these machineries will keep us busy once more,” Grabowski adds.

Efficiency

Grabowski said they are focusing on compact construction equipment to address the narrow city streets of the country when doing road repairs.

“The whole idea is you don’t clog-up the road because if you bring down the power and telco pipelines you will be creating traffic chaos,” he adds. The smallest mini excavator weighs 800 kilos and the biggest is 8 tons as against the traditional excavator equipment which weight starts at 20 tons. The size is just half of the old models to be able to fit into tight spaces.

“These equipment have very unique features with zero tail so that even if the body rotates, it does not swing out over the dimension so it will not hit somebody nearby. These work well in big cities where all roads have been built already,” he adds.

This also creates value for employees, who become more efficient because instead of 20 people working in one project alone, these 20 people can already operate 20 machines.

“What we want to achieve is move along with the industrialization of this country because right now we see a lot of manual backbreaking work. You hire 20 Filipinos with shovels, working all day long. This is not the way to bring the country to the next level. If we want to make wealthier population give them employment opportunities that create more value, not to shovel the whole day,” he adds.

To undertake these huge infrastructure, he said, “You must have modern machineries because if you do it manually you will not finish all these works in the next 50 years, no way.”

While MHE-Demag is not really focused on the big infrastructure projects, there are quite exciting jobs for small contractors that offer big monetary value.

As such, MHE-Demag offers financing schemes and rental opportunities for small contractors so they can earn back their money faster. For those short of financing, they offer short term rental of R2,500 a day. They have over 100 forklifts in active rentals, although still quite small than the market leader.

The company also strengthens its network in various locations in Manila, Clark and Batangas for the Luzon area. They also have offices in Cebu, Bacolod, Iloilo, Ormoc and Tacloban in the Visayas. In Mindanao, they are in Cagayan de Oro, Davao and South Cotabato.

“We have our own trained people, who can offer sales and services and we have spare parts. They know how to fix these equipment to give our customers satisfying experience no matter where they are,” he adds.

The engineering and designs of these construction machineries are done in Germany and manufactured either in Austria or Germany.

Grabowski said they also maintain good level of inventory because it takes 3-4 months to manufacture one unit while shipping takes around two months.

The target is to sell 100 units this year from 20 units last year. These already include all equipment from dumpers, excavators, cranes, forklifts, etc. They also offer competitive pricing. For excavators, the price ranges from R1.5 million to R4 million, depending on the size.

MHE-Demag is known for quality. In Europe their brands are the most expensive. But, they have to compete with other brands from Japan, Korea and US, although none of these companies have offered the compact construction equipment or the mini excavator and packages, making MHE-Demag the first mover in the country in this category.

Competition is becoming stiffer but manageable as they offer better service than the rest. As such they’ve managed to conquer market leadership in certain product categories. MHE-Demag offers the highest quality to address cost, enabling contractors to do their job efficiently, resulting in higher savings.

Most of their clients for the compact excavators are landscaping contractors, construction firms and even some cemeteries.

“Agriculture is also a big sector and we are hopeful that it will be a key growth driver because the amazing fact is that 30 percent of our workforce are working in agriculture but they only contribute 10 percent of GDP, while the BPOs contribute the same 10 percent with smaller employment. So, agriculture has to modernize, you need to create higher value by modernizing the agriculture,” he says.

What is key, he said, is that employment opportunities are being distributed across areas as airports and seaports are being built across the country to decongest the existing ones. Mining could still become a big economic contributor should the government changes its mind. MHE-Demag also counts mining as big industry client.

Paradise

Grabowski, who calls the Philippines a beautiful vacation country, did not plan to stay this long here.

“Not ever thinking I would live here or stay so long, but this is really a great place and people are extremely friendly. It is also convenient because the culture is the closest to Germany in southeast Asia because of the religion and I am also a Catholic and people speak very good English, so the culture is very relatable,” he says.

“People think I am always on a vacation especially when it is winter and ugly in Europe, people get envious because it is really nice here, it’s like living in paradise and it has always been a nice combination of people, culture and environment and very good economic set up,” he says noting that he has been around the country, but there is always something else to be seen.

People do questioned his decision of staying and studying in the Philippines. “But that is only for people who don’t understand. They changed their mindset after seeing and staying here not just for a  week or two but living here for extended time. Things are slightly different, but you also get to understand that things can be done,” he adds.

Grabowski stands by his choice that the Philippines offers the best value proposition.

“I strongly believe that you make your choices based on the best information at the time. So you have to make the best of whatever situation you’re in. You can never be content, so I just focus and appreciate with what I have here,” says Grabowski. He refused to think of what might have been had he studied and lived in Germany saying that would just distract him as he focused on what he can do for himself and others around him.

Grabowski witnessed how the country progressed, the development of Makati and BGC and the EDSA.

He saw the greenfield of Fort Bonifacio and was amazed at its transformation into a bustling business district. He wondered as urbanization crept into what used to be just the outskirts like Sta. Rosa, Laguna and Subic Freeport

“And we cannot really see any stop, any halt to this trend because all the fundamentals are there,” says Grabowski as he cited all the positive factors an optimist businessman can see in the country at present.

“We are the second largest population in southeast Asia, well-educated, well English speaking people, a demographic sweet spot. In Germany, that is the other way around, as in the other developed economies, less kids and people live longer because they can afford the best healthcare but more people are not contributing and less people to pay for the retirees. So that alone will give the Philippines the edge,” he adds.

In fact, he does not need to learn the local language because everyone speaks English. But he can understand Tagalog.

Grabowski has 300 workers overall and most of his colleagues are engineers. He is a definitely a very-hands on manager and demands that he knows the goings on in the company.

One of his subordinates said that his being a German is an advantage because it lends credence and integrity to the company and its products.

All these make Grabowski definitely demanding and expects his people to be professional and knowledgeable of their products. This is the same culture of the company that its people think, behave and act in a professional way and respect the standards.

“It could be very challenging but those who are up to the challenge will also find a very rewarding environment,” he adds.

The Philippine operation though is easier because Filipinos love to have fun. “We got that feedback we have generally a good company culture so we grow so much with outstanding result.  Filipinos like to have fun and sing and there is pizza party somewhere and people are generally pleasant,” he adds.

“Life has to be fun and at the same time we work real hard,” he says adding the company has also been contributing to society. They are an active partner in the government’s K to 12 Program.

MHE-Demag is accredited by internationally recognized quality certifications, ISO 9001, EHS 14001 and OHSAS 18001. “Hopefully we can inspire others,” he adds.

Grabowski, a motivator and a leader who keeps praising minor successes of his subordinates, admitted he has definitely imbibed some of the Filipino traits having lived and studied here.

His relatively young team is a bit of a challenge because he has to deal with lots of millennials, although he finds it a good mix of the young who are gung-ho with their work, and the wisdom of the older ones.

There are only three expats in the company. Grabowski is no longer sure if he is still considered an expat.

For the past 15 years, Grabowski witnessed Manila’s progress, not as a bystander, but as an active participant as the scenes continue to unfold.

SOURCE: https://business.mb.com.ph/2018/04/24/ph-a-good-value-proposition/