Oerlikon Group

Oerlikon is a leading global technology and engineering Group providing market-leading solutions and services for surfaces, manmade fiber production and drive technologies in diverse industries. The Group is structured into three Segments:  Surface Solutions, Manmade Fibers and Drive Systems. Each Segment offers technologies and solutions under well-established industry competence brands and adopts strategies specific to customers’ needs and requirements in the respective market. Globally, Oerlikon operates 186 of its own sites in 37 countries. Publicly listed on the SIX Swiss Exchange, the Group has a solid innovation culture and long-standing customer relations and market presence in Europe, the US and Asia, in particular China and India.

Globally, the Group serves core end markets from key locations through innovation and production hubs, as well as service centers. Going forward, the Group will be strengthening its focus and engagement in the key industries of aerospace, automotive, tooling, general industries, energy and textile (apparel & industrial), as well as eight key countries (China, France, Germany, India, Japan, Russia, South Korea, and the USA).

Oerlikon is committed to adhering to the principles of good corporate governance; in particular, the guidelines defined in the Swiss Code of Best Practice for Corporate Governance by economiesuisse. Apart from the Articles of Association, in which the purpose of the company, the corporate bylaws and statutes are officially filed, the Group has a clearly defined Code of Conduct covering the ethical and legal framework for all its business activities.

Sustainability at Oerlikon cuts across all areas of the business, from customer service, R&D, innovation and operational excellence (covering manufacturing, supply chain, health and safety and environment) to HR policy, risk management and compliance with legal, regulatory, ethical and internally-defined requirements.

In 2017, Oerlikon conducted a range of initiatives to improve business and operational excellence, and also took steps to further streamline the organization in order to make it more efficient.

Closely partnering with customers to understand their complex production processes and systems, and to jointly engineer and develop solutions that they need, is key to Oerlikon’s successful long-term working relationships with customers worldwide. Reflecting Oerlikon’s commitment to customers, the Group continued to optimize its global network to improve proximity, strengthen key account management and improve customer services in 2017. Services represented 33.7 % of the Group’s total revenue in 2017.

The Surface Solutions Segment increased its focus on improving customer services. For instance, it introduced the shop-in-shop concept in the USA and has placed a stronger focus on field service agreements and the cross selling of components and spare parts in China and the USA. It has also built up key account management in promising fields such as semiconductors and the high-end deco market. The Manmade Fibers Segment relaunched its webshop, which provides customers with comprehensive online services including latest product specifications, processing and tracking orders online, as well as checking processes relating to maintenance, updates and supply of original parts. The Drive Systems Segment has also launched an online customer service – SparePartsShop – which gives customers easy-to-use access to its online catalogue for its extensive range of replacement components such as gears, components, Shifting Solutions™, automotive transmissions and on/off-highway drivelines.

In 2017, the Surface Solutions Segment opened and expanded, also through acquisitions, 11 new production and services sites, including in France, Germany, USA, Japan, Malaysia, India and Sweden. The Manmade Fibers Segment opened a new service station in India to provide innovative and sustainable

solutions to customers, and also won new long-term maintenance contracts, including agreements to run maintenance workshops at three customers’ production sites (in China and India). As per end of December 2017, Oerlikon operates a global network of surface solutions sites at more than 156 sites in 37 countries.

In order to foster closer cooperation with customers, Oerlikon also held numerous customer technology or innovation days. For instance, the Surface Solutions Segment conducted Tech Days with Renault (France), Cummins (USA), Meusburger (Austria) and Groupe PSA (France). The Drive Systems Segment organized Tech Days with TAFE (India) and CNH (USA) for agriculture drive technologies and with Maserati (Italy) for electromechanical, electrical and hybrid propulsion systems. Furthermore, Oerlikon continues to receive awards in recognition of its technologies and customer services. Among others, the A3TS innovation award for BALIFOR M, the Bosch “Preferred Supplier” award for the third consecutive year, the THK Rhythm Award, the Cummins supplier award and the Delphi Pinnacle Award for its surface solutions business, as well as new product development awards from Volvo and John Deere for its drive systems business.

Oerlikon has also strengthened its additive manufacturing service offering by adding two EOS M400 metal AM printers in Atlanta, which have the largest build envelope of any existing powder bed fusion printers. In doing so, Oerlikon is able to offer a highly differentiated service in the AM industry and can cater for a broader portfolio of components for AM production. In addition, Oerlikon has developed an aerospace qualification program for aerospace OEMs, and aims to become a partner of choice for OEMS from the beginning of their journey in developing technological solutions for deployment in aircraft.

In 2017, the Group continued to invest 4 % of its annual total sales in R&D, corresponding to CHF 107 million, and filed 91 patents worldwide. The innovation pipeline is fed by a distinctive research and engineering approach that addresses customer needs and market potential. Through collaborations with academia and industry experts, Oerlikon’s R&D aims to contribute to the development of advanced science and technology projects that can also meet the requirements of larger technological, social and environmental needs such as energy savings and improved environmental sustainability.

Oerlikon brought numerous technologies and solutions to the market in 2017. Some examples of products introduced by the Surface Solutions Segment include BALIFOR M – a molybdenum nitride coating that is highly compatible with lubricants and additives for automotive applications; BALIQ UNIQUE – a palette of unique coating colors to differentiate and distinguish tools while also enabling early recognition of wear; BALINIT DIAMOND – coatings designed for tools used in machining challenging aerospace alloys, like titanium and nickel, to improve the cutting parameters for aerospace applications; a new Friction Systems

Systems solution in the S3-family; coating solutions for heating devices used in electric cars and for brake disks in cars; insulation-bearing coatings for high speed trains; semiconductor coating specification and application, and MultiCoat-Pro – a new coating system platform that can control a number of thermal spray processes simultaneously. In addition to equipment and technologies, Oerlikon also launched five new alloys for the AM market in 2017.

In 2017, the Manmade Fibers Segment introduced the new WINGS FDY 1800 to the market, which can boost yarn production by another 20 %, and has optimized the process for synthetic staple fiber spinning solutions to enable more efficient spinning production and better fiber quality. In 2017, the Drive Systems Segment launched the new synchroniser for the new CNH Dual Clutch Transmission in partnership with customer CNH to reduce shifting time and improve the durability of driveline technologies for premium agricultural tractors. In addition, it introduced the single-speed transmission for battery electric vehicles – EMR3 – and a new scalable hybrid rear axle module (HRAM) with a fully integrated electric motor directly connected via two gear ratios to the wheels.

Centrally led by the Group Business Services function, the Oerlikon Operational Excellence (OOE) program is designed to optimize the Group’s operational performance in the areas of manufacturing, procurement, health, safety & environment (HSE). The goal of the program is for Oerlikon to achieve a world-class level in all these areas.

Since the inception of the program, the ongoing initiatives have been gaining traction, delivering material results including improvements in efficiency and productivity in production and supply chain processes, raising safety awareness and lowering accident frequency rates. Ultimately, the OOE program supports the creation of a safer workplace while generating cost savings for the Group.

Under Oerlikon’s Operational Excellence program, in 2017, manufacturing processes led to innovation, efficiency gains and cost savings. These included:

• A large number of Oerlikon sites worldwide conducted value-stream-analysis projects, delivering improvements in areas such as working capital, lead time and cross-departmental communication.
• The Surface Solutions Segment conducted extensive operational excellence training in 2017, which will continue into 2018 in order to improve productivity and efficiency. Due to the large number of locations worldwide, a global project monitoring tool has been introduced. This allows the status of the project and implementation steps to be recorded and checked. As part of the program, the management team and employees identified a number of optimization options in 2017, which will be successively implemented in the following years.
• At an Oerlikon Metco site in the Netherlands, the programs for machining of next-generation turbine blades were optimized and a new generation of machines with automatic process control functions were installed.
• At the Oerlikon Metco Salzgitter site, workflows were optimized both in production and in the areas adjacent to production, creating the prerequisites needed to produce for the aviation industry.
• The Business Unit Automotive Solutions of the Surface Solutions Segment is developing a concept for the automated handling of parts to improve efficiency and use of resources, while easing strain from repetitive work on employees.

• The Manmade Fibers Segment developed a software in Remscheid, Germany, to improve existing communications and manufacturing processes and to make them more comprehensible.
• The Manmade Fibers and Drive Systems Segments both expanded shop floor management to all of their production sites. Line managers use this tool to make the production processes and manufacturing status transparent to their employees. This transparency, in turn, makes it possible to introduce and solve problems using an integrative bottom-up approach.
• New value stream optimizations in the Drive Systems Segment led to the production processes being optimized to the extent that new customer orders could be generated after customer audits.
• Three-quarters of the employees in the operational and service teams of the Manmade Fibers and Drive Systems Segments worldwide were involved in ongoing process improvement activities. In order to facilitate the continuous improvement of processes in the organization, employees were dedicated to this task. Weekly meetings ensure that suggestions for improvement from the teams are implemented directly on the shop floor.

Further efforts were made in 2017 to bring supply chain management to the world-class level:

• Savings were achieved with increased supply chain management efforts being applied in the Surface Solutions Segment and proactive support of the newly established Additive Manufacturing Business Unit.
• The integration of Corporate HQ with the Surface Solutions Segment also brought further alignment and benefits from synergies in supply chain management.
• Further benefits were achieved through the maintained focus on implementing supply chain initiatives and programs in the two Segments (Manmade Fibers and Drive Systems).

• The supply chain academy was enhanced to ensure that all procurement employees worldwide have received the relevant ad hoc training (conducted both via e-learning and face-to-face classes).
• The implementation of eProcurement was continued to take advantage of opportunities in an increasingly digitalized world in order to attain the excellence level for procurement.
• Regional councils are running and a new regional shared services concept for procurement will be implemented so as to leverage local synergies.
• Supplier process performance level and value-add levels were maintained or increased through engagement programs and quality and development activities.

In 2017, Oerlikon continued to make the occupational health and safety of employees a priority, with the vision of achieving “zero harm to people”. Health and Safety remains an integral part of the Group’s business processes, and further initiatives have been launched to reduce both the frequency and severity of accidents, as well as improve the health and wellbeing of employees.

Aiming to reach the next level of safety performance, Oerlikon introduced the total accident frequency rate (TAFR) as the leading safety KPI of the Group.

In comparison to the lost time accident frequency rate (LTAFR), which only considers accidents with lost time (i.e. causing absence of one or more days), the TAFR includes, in addition, medical treatment accidents such as lighter accidents (i.e. injuries requiring the treatment of a medically qualified person such as a physician but not causing absence). The TAFR was reduced to 0.86 in 2017 compared with 1.33 in 2016 (a reduction of 35 %). At the same time, the LTAFR was further reduced to 0.36 from 0.39 in the previous year.

The health and safety organization has been streamlined through merging the former HSE committees of the Group and that of the Surface Solutions Segment, and is led by the Head of Group HSE. The definition of HSE guidelines and processes, as well as the monitoring of the implementation of the programs and performance, are coordinated by the HSE committee. Its members are in direct contact with the legal entities or sites within their scope, which allows for better top-down, bottom-up and interdepartmental communication and collaboration. The milestones achieved in 2017 include:

• In order to raise awareness of the importance of health and wellbeing, the motto of the third annual global HSE day was “Fit4Life”. The focus was on five contributing factors to health and wellbeing, and what should be done and not done in order to stay fit. These factors were: physical activity, eating, sleep, stress and toxins (such as alcohol and drugs).
• The implementation of Oerlikon’s “Health & Safety management system”, launched in 2013 and updated in 2015, was completed at all sites according to plan, which was by the end of 2017.
• The Safety Observation Tours were improved through training and coaching for supervisors with the focus on safety behavior.
• Working instructions on the safe use of cutters and knives including guidance on which kind of equipment is allowed or forbidden were prepared and provided to increase safety.
• Personnel received training on the simplified risk assessment process so that each individual knows what they should do if a situation that appears to contain risks occurs; this included the right and obligation to stop work and to seek expert support if situation is considered unsafe. Furthermore, a process and training for last-minute risk assessment has been rolled out.

• The HSE balanced scorecard (BSC), which was already implemented in Oerlikon’s thin-film business lines, was rolled out to the entire Group. This scorecard allows factual tracking of the implementation of preventive action tasks and provides a score per site, with a target to be achieved set at 100.
• A change in process management and a specific program for chemical safety were rolled out at the Balzers Industrial Solutions Business Unit.
• The Oerlikon Balzers site in Pune was awarded the silver prize in the medium-sized (Low-Hazardous) category in the manufacturing sector of the 6th FICCI Safety Systems Excellence Awards for Industry. The selection was based on a rigorous three-stage process, i.e. application evaluation, on-site audit and final presentation to the Hon’ble Jury.
• Oerlikon Metco Friction System Italy was one of two companies which received an award for developing a consistent Safety Management System and reaching continuous improvements in health and safety aspects. The award was given after passing three different levels of evaluation and after an audit check by experienced HSE auditors.
• The Manmade Fibers Segment trained almost 300 temporary workers in order to manage the fast ramp-up in operations to handle orders, while still managing to reduce the TAFR by 30 %.
• The Drive Systems Segment won the annual safety excellence award for the “Global alignment within the Drive Systems Segment HSE community” and achieved an outstanding reduction of the TAFR by 57 % as compared with the previous year.

As part of Oerlikon’s efforts to contribute to environmental sustainability, Oerlikon’s technologies and solutions are designed to help reduce energy consumption and emissions and to save resources. Within Oerlikon, the Group also takes steps to advance these goals. In 2017, some milestones achieved were:

• A Group-wide environmental incidents database was implemented.
• Almost all Metco sites, one third of the thin-film sites and 80% of the Drive Systems Segment’s sites have been certified for an environmental management system according to ISO 14001. These concerned sites also successfully passed the recertification or monitoring audits.

• All German sites of the Manmade Fibers Energy Management System were successfully recertified according to DIN EN ISO 50001.
• The first year of operation of the new thermal power station (Blockheizkraftwerk) at the Manmade Fibers Segment’s site in Remscheid successfully registered a sustainable saving of energy (approximately 90 % degree of efficiency). The performance of the thermal power station is comparable to the energy demand of 1 500 households.

Oerlikon’s code of conduct and core values of Integrity, Team Spirit, Excellence and Innovation are the backbone of the type of behavior encouraged by Oerlikon to create an inclusive and respectful working environment for all employees.

Aiming to be a preferred employer of choice for current and potential new employees, Oerlikon took in 2017 further steps to create a more cohesive and conducive workplace that facilitates diversity, engagement and development.

Employee engagement

To foster stronger inclusiveness and engagement of employees, a company-wide, multi-Segment and global “Employee Engagement Survey” was conducted with the support of external consultants to facilitate confidentiality and openness. The survey was provided in 26 languages to around 13 500 permanent employees across all three Segments at all sites.

A high participation rate of just under 80 % was achieved, which is a strong indication of the energy and willingness of Oerlikon’s employees to share their thoughts. The initial results provided encouraging feedback and presented opportunities in areas on which Oerlikon can focus in order to make the company a great place to work and one that employees are proud of.

Employee growth and diversity

With the clear aim of being an employer of choice, Oerlikon has taken action to facilitate employee growth and diversity both in terms of age and gender.

In 2017, 1 640 new employees were hired, of which 34 % were sourced in China and India. Just under 60 % of the new hires were under the age of 35, reflecting Oerlikon’s drive to introduce young talents into the workforce and to create a more balanced age diversity within the Group. Furthermore, approximately one fifth were female.

The culture of a company plays a key role in how teams cooperate and work together, and the level of efficiency and productivity in a company. To cultivate a more collaborative culture within Oerlikon, the following initiatives were conducted in 2017:

Launched in 2016, Oerlikon’s “Leadership Principles” were implemented in 2017 through four individually-themed workshops, targeted at all hierarchical levels across Segments. The rollout of the “Leadership Principles” program began with the Manmade Fibers Segment and then at Oerlikon’s global headquarters in Switzerland, and was swiftly followed by key front-line and management staff in Asia, Europe and the Americas.

A Head of Transformation was appointed, reporting directly to the CEO, to manage and drive the cultural transformation across the global organization.

The “High Performance Team Culture” development program was introduced. This is aimed at engaging the entire organization and fostering stronger collaborative teams, motivated to achieve higher performance. The program started with the Executive Committee and their teams in summer 2017. It will run for at least 18 months to ensure that the respective management teams and culture-change champions are able to cut across and reach all levels of the organization.

In order to attract, identify and enable talent to develop and contribute to the growth of the Group, Oerlikon has initiated a fast-track program for young talents.

Under the name of “Oerlikon Horizons”, this global fast-track program is designed to groom the next generation of talents for leadership positions. It is open to nominees across all Segments.

The first candidates will be welcomed into the two-year program in May 2018. In the Manmade Fibers Segment, a second intake of candidates for the young leaders program was concluded. The program attracts candidates from the whole Segment, and this year included more than 15 employees.

To support the learning and career development of employees, Oerlikon runs training and development programs and also offers online training for employees. In 2017:

“LeaD”, the cross-Segment middle management course, attracted 50 managers from Asia (40 %), Europe (40 %) and the Americas (20 %). LeaD is a 7-day intensive leadership development program, covering experiential learning over three separate modules. Such programs are run globally, to facilitate and cover the geographical scope of the participants.

In the Surface Solutions Segment, 19 sales training sessions were run worldwide.

Over 300 individual sales employees and sales managers took part in the training, which provided them with support, tools and skillsets to grow and spearhead our sales efforts.

In the Drive Systems Segment, the “Enablers of Change” program enjoyed continued success. This is a program aimed at transforming mindsets and attitudes toward change, personal power and accountability. About 130 employees were trained as facilitators, and by the end of 2017, more than 1 300 employees had concluded the program.

Placing a greater focus on internal promotion and knowledge retention, Oerlikon introduced a revised process to calibrate and recognize its highest and best performers in the summer of 2017.

The company gradually rolled out a series of pilots across the Segments. The new approach allows for a more robust analysis of the succession pipelines and succession risk, especially for white collar employees.

This will enable the organization to be better prepared for future growth and place a greater focus on internal promotion and knowledge retention, supplemented by the buy-in of external talent only when strategically necessary, for example when expanding into new markets or product lines.

As Oerlikon strives to create a better workplace for employees, it has received external recognition in the form of certifications and awards.

In 2017, the Drive Systems Segment in India received a certification from the Great Place to Work® Institute – a global authority in building, sustaining and recognizing high-trust, high performing workplace cultures. The Great Place to Work Institute’s methodology is recognized as rigorous and objective and considered the gold standard for defining great workplaces across business, academia and government organizations.

The findings are published annually in prestigious media channels across the globe, such as Fortune, Handelsblatt, The Economic Times and Le Figaro Economie. Organizations that are great workplaces perform three times better than the general market indices and experience up to 50 % less employee turnover.

The certification reflected and confirmed the result from the “Speak Up” survey conducted in the Segment, in which a high engagement indicator with a “Net Promotor Score” of 64 % was achieved.