The Remanufactured Armageddon – Part Deux

I’ve had over a half a dozen people reach out to me privately since I published my first article foretelling the death of the US remanufacturing industry. I would like to thank everyone who has bravely waded through my ramblings and reached out to me.

The number of views and responses which my articles have now generated is quite simply amazing. I’ve never considered myself a writer and I always feel a certain amount of trepidation every time I hit the submit button and release a new piece.

Thanks for your support!

When I talk about the death of the remanufacturing industry, this isn’t just a US death being foretold, this is the extinction of the global, toner cartridge remanufacturing industry as we know it.

I’m going to try an explain my thought about this a little more here, and in several upcoming articles.

To clarify my position and passion for this; I’ve been working in the remanufacturing and imaging industry since I was right out of high school (1991), and I really do love ink & toner but after 26-years, I know exactly where I’d put my money today, on red…

I will recant, slightly, my forewarning about the imminent death of global remanufacturing. It may not be, "stick a fork in it" done yet but I am here to prognosticate that The Remanufacturing Industry Armageddon is surely upon us.

It’s down to a couple of major companies, who amongst them hold most of, many of the cards and in their quest for business just end up just swapping a lot dollars back and forth. You can surmise your own opinions about this but I'm not alone in the belief, regardless of what we're being told, that there's not a lot of new market share growth being created.

When you include the major players in the US, EMEA and the non-Chinese Asian markets and analyze that business vs. the known business of gov. backed Chinese remanufacturers. Then factor in everything the Chinese now influence or control and there's no way that anyone other than the top two or three can even afford to play this out to the end.

Let’s look at this way…

The believed Extinction Level Event for everyone involved is the Chinese influence/ownership of the major components markets. With the Chinese gov. having ownership in a lot of these, who's going to get the best price? Sure, you can still source bits and pieces from the Japanese and a few other independents but even with that, Chinese manufacturing cost are partially subsidized by a government which is hostile to US businesses. So, what hope is there for anyone else in play, regardless of who they buy from?

It looks to me as if the game is fixed and it’s down to market manipulation at this point. Honestly, if it wasn’t for color products, I think that we can all agree that the Chinese would have even a larger market share than they do.

A few years ago, I provided some in-depth, historical/future market analysis for PE during an acquisition and spelled out this exact scenario in my projections. I still have my data which supports the opinion that we’re way past a recovery point. Just look at the financial gaps between the top three players – massive to say the least. If it wasn’t for European loyalty supporting European companies, well then in my opinion Holger would have sold controlling interest in Turbon to Jim years ago.

It’s coming down to everyone still left in the game is trying anything to increase their market value. Fact, the first major player who sells out is going to be the ultimate winner. After that sale happens the market value for everyone else starts to decline quickly. Then it just becomes a waiting game for the Chinese.

When your business partner is a major world government, you can afford to play it slow and wait people out but when you have fiduciary responsibility to public shareholders or if you’re backed with a huge amount of PE then creating value and maximizing ROI are first and foremost. The other significant factor – if your business starts to stagnate or backslide too much, you lose your negotiating positioning which will ultimately impact your exit strategy.

So, you sell too soon and you leave tens of millions on the table, or worse yet, wait too long and they take your business away piece by piece and slowly erode your value.

My friends, it’s a sad world series of poker, where the chips are toner cartridges and someone’s already won the pot. Everybody who's still sitting around the table is just playing for second place.

Here’s some additional subjects in upcoming articles:

Empties (You Need Them and The Chinese Don’t Care)

New-Builds (The Toxic-Waste of Imaging Supplies) 

OEMs (Driving to Reclaim Consumables Market Share)

Valued Added Services (What Importance, If Any Will VAS Hold in The Future)

Distribution and the Channel (How About Those Even Lower Margins)

Part One, if you haven't read it: