A Talk With Index’s President

Recently, I was able to catch up with Olaf Tessarzyk, the busy president and CEO of Index Corporation, at the company’s U.S. headquarters in Noblesville, Indiana.

PM: Tell me about your background.

OT: Growing up, my parents had lathes in our home and I was operating them at the age of 10. My degree is in mechanical engineering.

After 12 years in German Army Aviation, I went back into machining full time. I ran a machine shop as the vice president of operations, and we used Index machines. I was asked by my company to look at the United States for expansion. That’s when I met Klaus Voos and Gary Seiler from Index. In 1999, I started the machine shop here in the states.

The next year, I was recruited by a builder in Detroit and took over a honing machine company. They sold primarily to the automotive industry, so I got to know how to work with the Big Three and Tier One suppliers.

Last December, the call from Index came. As a customer, I knew Index machines and the company. I took the job.

PM: What interested you about taking the Index position?

OT: Index is a premier machine tool builder—I know because I used the company’s equipment myself. Because I was familiar with the products, my education curve is much shorter than most. I can relate to our customers because I ran a machine shop for 10 years. I also bring my knowledge of the automotive industry as a supplier to the Big Three and Tier One producers.

PM: What do you think is needed at Index to move the company forward in this market?

OT: We, like most of our competition, have trouble when it comes to working with the automotive industry. To deal with it correctly means customer service. That means sending your people in on a Saturday, if needed. It means being ready 24/7. I was willing to pay a premium for that kind of reliable service, and most shops will.

I’m working hard now to get the right kind of structure in place to deal with this market. Most of our business is not automotive. My thinking, though, is that if you are structured to satisfy the most demanding customer, then the other markets you serve will benefit, too.

PM: There’s a lot of buzz about machining medical components. What does it take to succeed in that market?

OT: Everybody knows this is a growing market. Our Traub TNL machines have been successful in Europe because shops quickly found out that machining carbon steel, titanium and other hard materials completely and burr-free requires a rigid machine.

PM: How do you see the precision parts manufacturing business in the United States succeeding long term?

OT: My take is that as manufacturers, we must change or we will be changed. I suggest we think seriously about a paradigm change in our machine shops. Find a competent joint venture partner in Asia or even Mexico. Send them your older technology machine tools—multis and single spindles—and train the people to run the work you’re less competitive with. You can improve your margins, and your customers get parts cheaper but still have your shop as a fallback if delivery gets interrupted. Most importantly, you have a stronger relationship with your customers.

Take the profits from this venture and invest it in new technology for your domestic shop so you can bid on higher-value work. The work that remains in the United States is difficult, delivery-sensitive and subject to engineering changes. Get your shop in position to play in the market.

PM: Olaf, thank you for allowing us to visit.