Will the Pauwels Phoenix rise from the ashes of CG transformers?
Mechelen, Belgium: The announcement by the Belgium courts to proceed with the liquidation of CG Power Systems and CG Holdings in Belgium earlier in this year, has given rise to speculations that the time may be ripe for a new owner to resurrect the Pauwels transformer brand.
The liquidation announcement followed the decision by the Commercial court in Mechelen in January 2020 to appoint curators to investigate the financial situation in Belgium and to advise the court on the ability to restructure and continue the company under the new ownership. It had been no secret that the embattled CG had been heading for troubled waters for some time. Whilst it was widely reported in the Belgium and international media that the alleged fraud reported in CG India contributed to the financial woes and final liquidation decision, it was clearly an over simplification of a much wider management problem within the transformer power interest of CG.
The Belgium transformer manufacturing company had been making losses for years and the profits by the Services and Systems business had simply not been able to cross subsidize and sustain the manufacturing plant.
The liquidation decision did not impact the Belgium entities only. CG Power Systems also own the transformer factories in CG Ireland and CG Indonesia. The CG transformer factories in Hungary and India are not impacted by the liquidation.
In 2016, it was widely reported that the CG interests had been up for sale. A year later the interest expressed by Pierre Bastid, the French entrepreneur and former President and CEO of the Convert Group as well as the Spear/ First Reserve International investment consortium, came to an end. The deal estimated to be worth $125 M (€115 M) failed.
The failure to conclude the Spear transaction saw the replacement of Jean Michael Aubertin as Executive Vice President of CG and President of the Power Business Unit, and the appointment of KN Neelkant as CEO of CG Power and Industrial Solutions in February 2016. It marked a new era where India asserted greater influence over the remaining European transformer companies. Yet decisions to reduce the global management team, decentralize management and manufacturing responsibility, reassign customers and markets to different factories, do away with a centralized international transformer sales network organization as well as the appointment and transfer of Sajal Mukherjee as CEO from India to run Belgium, could not save the Belgium companies. Similarly, the sale of the transformer interests in Canada to PTI Holdings for an estimated $20 M, America to WEG for €37 M in 2017 and the JV shares in SPTC based Saudi Arabia, had no impact on the financial position of the Belgium entities.
Financial woes are not new to the transformer industry and the Pauwels transformer factory in Mechelen would prove to be no exception.
Emmanuel Pauwels started Pauwels transformers in 1958. In 1986, Pauwels bought the transformer interests from ACEC, a transformer manufacturer in Charleroi in the French speaking part of Belgium, and shortly afterwards he bought ACEC Service Division. Under the leadership of Vic Pauwels and through hard work, a clear understanding of market dynamics, sound engineering and design and a fiercely loyal work force, Pauwels managed to establish a reputation for reliable and robust transformers. Exports worldwide contributed to the recognition of the Pauwels brand as a truly international brand. In years to follow, the Pauwels factory and brand was to become one of the crown jewels of the Belgium industry. However, the fortunes of Pauwels were about to change. In 2003, after a reported loss of $21.7 M (€20 M), it was clear that the company was in trouble.
In 2005 the Indian Crompton Greaves bought Pauwels for $34.7 M (€32 M). It capitalized on the world-renowned reputation of Pauwels. Under the management of Laurent Demontier, appointed in 2011, a conscious effort was made to launch the CG brand thus breaking the link with Pauwels. In subsequent years, large volumes of CG transformers where produced in Canada, the USA, Ireland, Hungary, Saudi Arabia, Indonesia, Belgium and India. The brand soon gained international acceptance.
In the years thereafter, the transition from a renowned Belgium brand to a new international brand had been reinforced and completed.
The liquidation of the Belgium entities brings into question the continued use of the CG brand by the factories in Belgium, Ireland and Indonesia. A single bidder for the combined transformer interests in Belgium, Ireland and Indonesia is not certain. Furthermore, the continued use of the CG brand is not a forgone conclusion given the fact that the transformer factories in India and Hungary are not impacted by the liquidation. Will this result in the CG IP and CG brand name struggle amongst the liquidated companies or will the transformer world see the return of the Pauwels brand?
It is something the customers would certainly always think about when recalling the reliability of the product and after sales service support under the Pauwels brand.
The future will show.
Author Chris Gerber