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Hella looks for development assistance

Hella’s strategy
  • Reinvest earnings

  • Form alliances, joint ventures instead of acquisitions

  • Take new approaches in lighting, electronics and aftermarket distribution to third parties

  • German lighting supplier Hella wants customers to pay more of its development costs.

    “Now we tell our customers: ‘You have to come up with more financial contributions for tooling and development,’ ” said CEO Jurgen Behrend, “ ‘otherwise we are not in a position to quote for the business you have to offer.’ ”

    The growing number of body variants carmakers are developing means lighting specialists have more work to do.

    “Lighting has to be different for each model, even as the pieces per model are getting less,” said Behrend. “We have to come up with more and more new tooling with new development.”

    Profit margins are too thin in lighting, said Behrend, but “we feel we are in a position to improve this significantly, now and in the near future.”

    Hella formed a global business alliance with Stanley Electric of Japan last month. Hella has a 12 percent share of the global auto lighting market, while Stanley has 10 percent.

    Strong alliance

    The two companies agreed to work in development, production, procurement and marketing. They believe that will help them become more competitive internationally.

    The alliance between Hella and Stanley is the world’s second largest in auto lighting, after the one formed last year by France’s Valeo and Japan’s Ichikoh Industries.

    Strong organic growth helped sales at Hella increase 10.7 percent to $2.5 billion, in the 12 months ending in May.

    Hella said more than 40 percent of sales were generated outside its domestic market, with a strong performance in the North American Free Trade Agreement territory of the United States, Canada and Mexico.

    Behrend said Hella has been able to grow partly because private shareholders have not taken much money from the company.

    “Our cash flow pays for the biggest part of our investment each year,” said Behrend, “and the company’s financial situation and reputation have allowed it to raise the rest from banks and other financial institutions.”

    Hella, in Lippstadt, is Germany’s largest family owned automotive supplier. Hella posted a profit in the year to May but failed to meet its goal of a return of 5 percent before taxes.

    But Behrend said he is happy with the way business at Hella’s core Automotive Lighting Division is developing. Sales there rose 15.6 percent to $784 million.

    “In lighting, we feel we are in a comparable position to our competitors, such as Valeo, Magneti Marelli and Bosch,” said Behrend. “All our rivals have turnovers of about 2 billion deutsche marks in this area, some a little bit more or a little bit less.”

    Well-rounded business

    Behrend said Hella’s lighting business has strengthened in the last few years.

    “We have the technology and also the financial means to deal with all the issues, especially advanced technologies such as dimmer lights and advanced front-light systems,” he said.

    Hella also has interests in electronics and the aftermarket.

    In electronics, Hella is a relatively small player. Sales in its automotive electronics division sales grew 10.3 percent $673 million, in the year ending in May.

    “We cannot compete on the whole scale of electronics activities with companies such as Bosch or Denso, so we have a selective approach,” said Behrend.

    Hella sees itself as a specialist in electronics for lighting and body electrics.

    “We can also offer this electronics competence to other suppliers who do not have an electronics base,” said Behrend.

    Hella has a longstanding cooperation in climate-control electronics with Behr, and is developing a joint venture with German wring specialist Leoni. The joint-venture company, Intedis, expects to develop and market new, intelligent automotive electrical systems. The joint venture in Wurzburg, Germany, has 50 employees.

    In the third business area, the aftermarket, Behrend said Hella has a worldwide logistics and distribution network, and is No. 2 to Bosch.

    “We are strengthening our activities in the traditional spare parts market with accessories, and now we are also expanding our business into electronic aftermarket activities,” he said.

    Hella is offering its aftermarket distribution network to Siemens Automotive Corp. and other companies that have not been active in this area.

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