The secret of success in the U.S. robot industry isn’t too hard to figure out: sell lots of machines to car companies.
Since the auto industry is far and away the nation’s largest user of industrial robots and other automated manufacturing equipment, it’s clear that the company that sells the most robots to the biggest auto company will have a pretty good shot at taking over the top spot in robotics.
After just three years in business, GMF Robotics, based in this Detroit suburb, has followed that basic formula with a vengeance. A 50-50 joint venture between General Motors and Fanuc Ltd., a Japanese robotics firm, GMF has suddenly emerged as the most dominant robotics company in the United States, almost entirely on the strength of the huge orders that it has been receiving from GM for hundreds of robots that are supposed to help modernize the auto giant’s domestic car plants.
Last year, orders from General Motors--which accounted for about 70% of GMF’s business--helped GMF nearly quadruple its unit sales in one year and vaulted the joint venture into first place in the robot industry for the first time. The company sold 1,208 robots last year, compared to just 332 in its first full year of operations in 1983.
Big Market Share
Its dollar sales of $102.8 million were almost double those of the old leader, Cincinnati Milacron, giving GMF a commanding 26% of the $395-million robotics market in 1984, according to Prudential-Bache Securities, which compiles authoritative figures for the industry. Cincinnati Milacron is now a distant second with a market share of just 13.3%.
“We’ve grown even faster than we thought we would,” GMF President Eric Mittelstadt notes.
GMF has won its leading position by becoming the main robotics supplier to many of GM’s biggest projects, including GM’s new, high-tech Poletown assembly plant in Detroit and its “Buick City” manufacturing complex in Flint, Mich. And, with GM set to make even larger robot purchases in the near future for its proposed Saturn small-car plant and its ambitious intermediate-size car project known as GM-10, industry observers predict that GMF will become even more dominant, since it has an excellent chance of winning the majority of those orders as well.
Laura Conigliaro, a robotics industry analyst with Prudential-Bache, predicts that GMF’s sales will grow by more than 50% this year to $155 million and that its share of the fast-growing market will rise to 28.4%. Mittelstadt says the company’s long-range goals are even more ambitious--to hit the $500-million-sales mark by 1990 while maintaining a market share of at least 27%.
Although the joint venture doesn’t make public its financial results, GMF turned a profit for the first time last year, earning about $3 million, company officials say.
GMF’s payroll, meanwhile, has already jumped from 345 at the start of 1984 to about 520 today, and company officials expect to add 80 more by the end of the year. Most are in professional, marketing and technical positions; almost all of GMF’s robots are built by Fanuc in Japan and are then integrated into custom-designed robotics systems by GMF engineers here. GMF only assembles one line of robots in the United States--expensive, complex painter systems for auto plants.
Close Ties With GM Executives
But GMF’s instant success at selling robots to GM has prompted GMF’s competitors to complain that the auto maker has been playing favorites with its fledgling joint venture. GMF denies the charges, but other robot makers say that GMF built up its No. 1 position over the last year or two by taking advantage of the close ties between its executives (many of whom, including Mittelstadt, had transferred from GM when GMF was established in 1982) and the GM officials buying robots for the company’s plants.
“They have the inside track at GM because most of the GMF people came from GM and can get audiences with their old buddies,” says one disgruntled executive at another major robot maker. He adds that some firms have lost General Motors business to GMF even when they have turned in lower bids than the joint venture.
While legal, such practices would go against GM’s initial pledge to treat GMF no differently than any other robot supplier. They would also violate at least the spirit of the auto maker’s longstanding policy--designed to keep its parts operations cost efficient--of forcing its own components divisions to win GM business through competitive bidding against outside suppliers.
Some companies have been so irritated by what they see as an “old boy” network in action between GM and GMF that they have complained openly to General Motors. One GM official says that company executives constantly hear such griping at robot trade shows and conferences, even from officials of companies like Cincinnati Milacron and Prab Robots, a smaller firm based in Kalamazoo, Mich., that still do quite a bit of work for GM.
“The ground is not completely level” in the competition for GM’s robot orders, says George T. Rehfeldt, a Cincinnati Milacron group vice president in charge of robot operations. Rehfeldt insists that he has never complained directly to GM but adds that “obviously, GMF is a captive supplier (to GM), so the ground can’t be level. GM is giving preference to its in-house supplier. That’s a business reality.”
It’s easy to see why robot makers are so sensitive about what happens at GM. The auto maker is already the industry’s largest customer, and the robot market inside GM just keeps getting bigger.
Richard C. Beecher, GM’s manager of advanced manufacturing engineering and its coordinator of robot purchasing, says GM expects to have about 10,000 robots either in its plants or on order by the end of 1985. He adds that GM’s earlier estimate that it would have a total of 20,000 robots in its plants by 1990 has been significantly revised--upward.
As a result, GM dwarfs every other customer of the robotics industry by comparison. In 1984, the entire industry sold a total of just 5,136 robots in the United States, according to the Robotics Industry Assn.
“GM has been buying a lot more robots than we thought they would,” Mittelstadt says.
And Conigliaro adds that being successful with the industry’s largest customer has already helped GMF build momentum in the marketplace. She says sales to GM are giving GMF the economies of scale and experience necessary to become a top competitor for non-automotive robot business as well.
“Regardless of why they are winning the (GM) business, the point is they are winning it, and so they are benefiting from it,” Conigliaro says.
Still, Mittelstadt argues that GMF has won its GM business on merit. He claims that GMF is already first in robot sales to non-automotive customers, which he says proves that his firm is winning business on its own abilities.
“Some of our competitors would have you believe we’ve become No. 1 because of our big brother,” he says. “But GM tells us we earned every bit of the business we got.”
GM executives tend to agree, although they privately acknowledge that there may have been “isolated cases” of favoritism when GMF first started bidding for GM work. They also concede that GMF continues to benefit from the fact that so many of its executives came from GM and so know what kinds of robot systems GM needs and understand how to get things done inside the GM bureaucracy.
Low Prices Help
By contrast, GMF has done very little business with Ford or Chrysler, spokesmen for those companies say.
But GM officials and outside analysts still agree that the low prices that GMF charges for its Fanuc-built robots have helped GMF take over industry leadership.
“Fanuc robots are considerably cheaper than the competing products,” observes Conigliaro.
In fact, price cutting by GMF has already shaken up the industry. GMF spokesman Jack Saunders claims that robots designed to perform spot-welding functions--one of the primary tasks of robots in auto plants--cost about $120,000 apiece before GMF entered the market but that GMF has since forced the average price down to about $70,000.
Mittelstadt also argues that GMF has been successful in part because it has emphasized custom designing its systems to fit the manufacturing operations in which they will actually be used, rather than trying to dazzle customers with the most sophisticated equipment.
“The robotics industry is no longer one where the guy with the latest technology will win,” Mittelstadt says. “You need to be current, but it is more important to match the technology with the job.”