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2. Freudenberg-NOK: A family affair

To expand overseas, a supplier does not have to acquire other companies - or even follow a particular customer. Consider the case of Freudenberg, the German seal maker.

In pre-war Europe, the family-owned company was internationally known for its leather-making expertise. After World War II, it moved into a new market niche: automotive engine seals. In 1953, Freudenberg established ties with Japanese seal maker NOK. And in 1960 - long before automakers decided to globalize - the two companies created a formal alliance.

The families who controlled each company began to form personal ties. And those ties deepened in 1987, when they formed a joint venture to penetrate the North American market.

This cooperative strategy has allowed Freudenberg and NOK Group to maintain a major presence in each region. Last year, Asia accounted for 40 percent of the partners' $4 billion revenue; Europe accounted for 36 percent; and North America generated 24 percent. Here's how they do it: Freudenberg and NOK coordinate marketing, manufacturing and research operations. Moreover, the two companies treat their North American joint venture as an equal partner. As far as customers are concerned, these three entities act as if they are one company.

An automaker will negotiate with one customer representative who negotiates on behalf of all three companies. Freudenberg will produce components for that customer in Europe; NOK will manufacture components in Asia; and the joint venture will handle production in the Americas.

If one company decides to build a factory in a new market, the two partners provide financial backing plus contracts to buy parts. The partners also share technical breakthroughs and standardize their manufacturing operations.

This extraordinary partnership allows the partners to efficiently supply customers in all regions. And they can do it without undue financial risk. The result: In the fragmented market for engine seals, the partners have expanded without making major acquisitions. One of its two main rivals, Federal-Mogul Corp., was not so lucky.

You can reach Chaz Osburn at autonews@crain.com

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