Sweden's SKF to shift automation into higher gear as markets flag

Swedish engineering company SKF aims to use a demand slowdown to its advantage, its chief executive said, stepping up an automation program that has already sent capital expenditure soaring.

SKF, which supplies bearings to automotive and industrial markets, has automated manufacturing at a string of plants, but the bulk of its 94 factories still need to be tackled.

“There has been a long period where we have had to fight to keep up with the high demand in some factories, and you can’t rebuild plants in a situation like that,” Alrik Danielson told Reuters.

“So it’s clear that some of these activities will accelerate now.”

The world’s biggest ball-bearings maker, which supplies the likes of carmakers Tesla and Volkswagen (VOWG_p.DE) as well as wind turbine makers, in July posted its first quarterly decline in organic sales since 2016.

That pause to years of sharp growth was accompanied by a forecast for slightly lower demand year on year in the third quarter, with stable demand for its industrial business and lower volumes for automotive.

Danielson, at the helm since 2015, has pushed a revamp of the factory network, cutting the number of plants, moving manufacturing to better match customer demand and investing in automation, bringing job cuts in their hundreds on affected assembly lines.

The Gothenburg-based company, the products of which are found in most machinery with rotating parts, expects 2.8 billion crowns ($288 million) in capital spending this year, up 50% from 2016.

Danielson said that higher future investment is being considered and lauded the payback on previous projects.

“I have to say that the returns on these investments are very good, so I am not worried about that.”

SKF has previously automated parts of its production in Gothenburg as well as at its plant in Schweinfurt, Germany, and a U.S. factory at Flowery Branch, Georgia, among others.

It has already flagged plans for a new factory in Xinchang, China, while slimming down in Bari, Italy, where it would build an automated production channel.