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Interview

Pascal Fouache – President, CMR Group – France

28.07.2015 / Energyboardroom

The president of CMR, a provider of electric engineering solutions, outlines the evolution of his company from its inception in Marseille to the establishment of a global Asian hub in Singapore. He strongly believes that oil and gas, especially in the United States, will continue to contribute to the company’s success in the future.

You have been heading CMR for more than 20 years. What have been the main evolutions of the company from its origins in the shipping channels of Marseille to reaching every industrial hub in the world?

The company was born in 1959 and we originally operated in the marine business. We later specialized in control alarm and monitoring for diesel and gas engines. In 1980, I created CMR Fast East in Singapore to tackle the Asian market. Our most important activity in Asia today is actually located in South Korea and China to a lesser extent. Towards the end of 1996-1997, there was an evolution in shipyards, requesting services related to electricity distribution. We therefore completed the acquisition of a company specialized in this sector, which has encouraged the introduction of a business line in oil and gas. Today, thanks to its Siemens license, CMR has become one of the main suppliers of switchboards for oil and gas platforms. In the oil and gas industry, our activity is concentrated in Singapore, which has become a hub dedicated to our addressable markets.

You initiated the diversification into the nuclear and offshore sector in the 1990’s. What are your main products designed for the oil and gas industry and what needs to they respond to?

Oil and gas represents roughly one third of the company’s turnover. In oil and gas we simply deliver our products. In respect to engines, we are original equipment manufacturers. We own many production facilities across the world to serve engine builders efficiently. We are the main suppliers of companies such as Caterpillar or Mitsubishi, and it is important to note that we develop our products together with our customers.

CMR boasts patents, innovations and consistently introduces new technologies. What does this “open innovation” philosophy consist of?

We manufacture and create solutions together with engine makers. When an engine manufacturer conceives a new engine, it relies on CMR to build the sensors, the alarms and so on. In the oil and gas industry, we conduct the engineering and the study for our clients. Our dedicated research and development center is located in France, in Marseille to be precise where we are also headquartered.

You have publically shared your objective of a 30% sales increase in the near future by addressing changing trends in the market. Which ones have you identified and what is your perception of current global tendencies and their impact on your business?

New sensors in energy are becoming increasingly sophisticated because they need to address issues related to pollution. For instance new regulatory constraints are forbidding ships to travel in certain areas if they do not comply with certain environmental standards. The advent of these new trends presents tremendous opportunities for CMR. In France, our research and development center focuses on electronics, new alarm systems and new sensors.

We are very concerned with the issue of engine pollution. Today, only 30% of engines in the world are equipped to comply with tier 2 and tier 3 regulations. In important engine producing countries such as China or India that have not yet adopted these new trends, CMR can drive significant growth levels. For example a new law on carbon emissions passed in July 2014 stipulates that if engine makers do not comply with these norms, they will be sentenced to substantial fines. This will lead us to double or triple our turnover in the next years. The production of engines will not necessarily rise, but since they must all comply with new standards, every engine maker will seek our services.

You chose Singapore as a gateway, a strategy that is shared by many players. Which obstacles did you encounter in that part of the world, considered by many as a very competitive environment?

In Singapore, we have an independent production company related to oil and gas. It actually stems from a mistake I made during the 1980’s when I tried to implement our services in Singapore, considering the absence of any real engine maker and very little marine activity. Furthermore, contrary to common belief, Singapore does not constitute a gateway to the Chinese market. Thirty years ago, I even thought that Singapore could be an entry point for the Korean market! Now I have understood that in order to integrate a new Asian country, one needs a direct local partner. We now have offices in China, India, Singapore and in the Philippines. My main regret is not to have had the means to develop a significant marine activity in Asia back in the 1980’s… My systems at the time weren’t sophisticated enough and required considerable R&D efforts to become more advanced. At the time I was focusing on the transition to oil and gas and disregarded this possibility.

Although Singapore was initially not the wisest choice, it has become a fantastic success! I also take pride in what we built in China. Our production facility delivers innovative and highly advanced engines and systems. I built a close partnership with Weichai, one of the world’s largest producers of diesel engines.

You recently appointed Madhura international as a local Indian partner to drive your sales. Does this illustrate the challenges of penetrating such a market without the help of a local player? How successful are your activities in India at the moment?

We set up our business in India in 2008 and opened a factory in 2012. In India we carefully examined our performance before further investing. There are undeniably significant administrative and bureaucratic constraints in India. It took us two years to open an office with the help of a local partner. The entry barriers are high and we deployed considerable efforts but we are now finally well implemented.

CMR has also expanded and positioned itself in the shale oil and gas sector. You named the era post 2010: USA Focus. From a personal point of view, what is your perception of this massive game changer and what are your future prospects in North America?

We inaugurated an American office 20 years ago in Pittsburg Pennsylvania. We are more focused today on engines and work on behalf of General Electric, Cummins, and Caterpillar. We now follow our partners in the oil and gas industry and are obviously positioned in the fracking industry, which requires a lot of power. We have built ties with our clients’ dealers, especially in Texas. Further expansion in the United States is deeply enshrined in our strategy for the future. We are currently seeking to acquire an oil and gas local partner and actively looking for pertinent targets.

Let’s imagine we come and meet you again in five years’ time, what would you have accomplished for CMR?

In the next five years, we will have significantly developed our Chinese and Indian activities. I hope that we will have come back to Brazil, where we shut down our office 20 years ago. As an SME we have to carefully examine prospects for international expansion but we cannot afford to allocate important budgets in a non-viable venture. We are also hoping that the top tier oil and gas French firms will be more supportive towards their SME contractors and help them gain worldwide exposure.

We take pride in our “can do attitude”, which implies that CMR is able to carry any task for its customers. There are no limits to the demands and expectations we are ready to match – the sky is our only limit! I am absolutely confident that CMR will weather this crisis and further develop its oil and gas activity in the near future.

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