Motor firm revs up to beat market inertia

By MELANIE CARROLL of NZPA

Auckland-based motor designer Wellington Drive Technologies (WDT) has found its greatest challenge is market inertia.

WDT has had a chequered history since its launch in 1986 in trying to establish a niche for its new products.

After a disappointing performance, it was relaunched in 1998 with a new chief executive, Dr Ross Green, and a new strategy.

"It fired the cannon before it was properly loaded, and spent a lot of money on promotional activities in the United States and Europe without being able to follow up," Green says.

"The difficulty with the company is that it had made a lot of promises, and in this market the products haven't changed to any significant degree in over 100 years."

WDT is a motor, controller and fan designer for the domestic and light industrial appliance market.

Small, light, efficient motors like WDT's will probably change the appearance of household appliances which now use heavy, bulky conventional motors.

"Ours still use copper and steel, it's just that we use the material much more efficiently. The laws of physics are the same for all of us, of course, " Green said.

The laws of accounting have not been so kind to WDT. Last year the company's full-year loss widened by almost 50 per cent to $2.96 million, on expenses of $3.2 million and sales of just $334,000.

This year the figures improved slightly to a loss of $2.3 million on revenue of $950,000.

Green believes WDT can become profitable by retaining control of its intellectual property and capturing market share.

"We could do [consultancy] and very quickly have modest profitability, but that's not the mission. I'll be happy when we're strongly into eight-figure profitability."

WDT had a "substantial" offer to buy the rights to some of its technology recently, but the offer included too many hooks.

One of the company's largest problems is overcoming inertia in a conservative industry.

But change is about to be forced on motor manufacturers and it is working to WDT's advantage. Conventional motors are likely to be legislated out of existence in favour of more energy-efficient options.

Green said he knew change was coming when he joined WDT. The company had gone full circle, from trying to find a place for a "brilliant idea" in an uninterested market, to offering a solution to an eager audience.

One source of inspiration was Swiss watch company Swatch, which revolutionised a staid industry with its mass-appeal watches.

"There are a number of companies that have succeeded, from quite modest bases, in changing very large stable industries and it's primarily a matter of timing, a matter of focus.

"I guess the one thing I've brought to the company is the need to focus, to complete. New Zealanders are very good at starting things, very creative, but they're not good at completing things."

WDT's shares listed at 81c, and fell to a low of 20c in March 2002. They now trade at about 74c, but with help from loyal investors WDT has grown from a $1.5 million company in 1998 to one with a market capitalisation of $98 million.

"I think overall we've been treated fairly kindly by the markets, given what we are and New Zealand's lack of familiarity with companies like this," Green said.

WDT has signed deals with Turkish domestic appliances manufacturer Arcelik, Vent-Axia in the UK, and Aweco in Germany, which is one of the biggest names in the whiteware industry.

The Aweco deal came 18 months after WDT entered the European market, and has opened the door for more customers.

This week, the company announced a deal to supply 20,000 motors and controllers to its Belgian partner P Lemmens Air Movement Company.

New Zealand provides a good environment for building strong companies because Government support was "really quite minimal", Green said.

"New Zealand is very open, and ultimately that is very good, but we are competing with economies where the Government is not so stand-offish."

For example, Finnish giant Nokia, with Government support, evolved from making rubber boots and chopping down trees to dominating the cellphone handset market.

"We've still spent $18 million - for a similar company in the United States that's literally little more than the stationery bill," Green said.

"To do anything serious with advanced technology you can expect to make investments of several hundred million New Zealand dollars ...

"These are difficult decisions for a country like New Zealand to take because it's not used to having to make those decisions.

"In Germany they say, you've been around since 1985, your products look pretty good now. You must have made a lot of mistakes in that time, we like to see that you've got it right now, so we've got confidence in you and your products.

"Whereas in New Zealand, what we get is, you've been around since 1985, you're still not making money.

"It's very negative."