The delicate balance: Expand in N.A. but keep exclusive aura

Recaro's elite-seat strategy

The delicate balance: Expand in N.A. but keep exclusive aura

a worker at Recaro's Auburn Hills, Mich., plant gives a seat the personal touch.
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The ice cream business has its Ben & Jerry's. The golf ball business has its Titleist.

In the world of car seats, there is Recaro.

Small, low-volume and still unfamiliar to many in America, Recaro nonetheless has built a brand cachet that is out of proportion for what it is -- the thing on which a driver sits.

Sports car enthusiasts and performance shops swoon over the brand. And automakers intent on raising their own brand awareness for sportiness are increasingly buzzing about "Recaros."

The brand is a worldwide emblem of racing coolness, coming as standard factory equipment on such ultraposh European models as the Porsche Carrera GT, the Lotus Evora GTE, the Lamborghini Gallardo and the $300,000-plus Ferrari 599 GTB Fiorano.

Now the German-born seating line is turning its attention to a long-untapped opportunity: winning OE contracts to supply American auto assembly lines.

It's off to a decent start.

This spring, the redesigned Chevrolet Camaro will carry Recaros as standard equipment on its Z/28 performance model and as options on the more mainstream SS and ZL1 models. Next year the redesigned high-volume Ford Mustang will have a Recaro option. Recaros are now offered on the Ford Focus ST and the Fiesta ST, and Cadillac is offering Recaros on its CTS-V series.

Markus Kussmaul says Recaro is discussing seat deals for a number of U.S. vehicles. "It all looks very promising," he says.

Other future Recaro-equipped U.S. models are under discussion, says Markus Kussmaul, who is running the company's North and South American business from Auburn Hills, Mich., under the title of vice president of Recaro Automotive Seating.

"It all looks very promising," Kussmaul says.

The seats also have been appearing like trial balloons in concept cars that might or might not get green-lighted by the automaker. Nissan has incorporated Recaros into its proposed Sentra Nismo, and Nissan's Infiniti brand is displaying them on its Q50 Eau Rouge concept car.

Starring at SEMA


At the SEMA show in Las Vegas last fall, more than 40 car models were fitted with Recaros, like a brand of Italian shoe sweeping the fashion industry.

"We're a synonym for performance, and it's nice to be in that spot," Kussmaul says. "If a few companies use that synonym to give their cars a sporty touch, why not? It's what we stand for. As far as I'm concerned, the OEMs are more than invited to use us for that need."

But translating Recaro's German racy hipness into American mass-market bonanza will be a delicate task, he admits. And he is not entirely sure how far the company can really take it.

"If we just pursue volume, we'll kill the brand," he says. "If we become like our competitors, then we won't be Recaro.

"If you get into big programs, you have to be everything the customer needs. Big pickup trucks have seats that can accommodate virtually everyone. But as soon as you make that seat sporty, some people might not fit into it. So for us to seek higher volumes, we would have to accommodate a wider and wider range of drivers, and the automaker would have to judge whether we are still a premium performance seat."

Owned by JCI


In truth, Recaro is already as American as apple pie and Mustangs. Almost three years ago, Recaro's privately held German owner, Recaro Holdings, sold the century-old auto business to U.S. seating giant Johnson Controls Inc., the biggest car seat maker in the world. Recaro's global finances are contained in the bowels of JCI's. And Kussmaul makes it plainly clear that "Recaro Automotive Seating is a business unit of JCI."

But the ownership arrangement is not altogether traditional.

Recaro's brand name continues to be controlled out of Germany. And Kussmaul himself reports to a boss in Germany at the company that JCI purchased. JCI has "licensing rights" to the Recaro name in automotive. But Recaro Holdings in Germany continues to own the name and to produce Recaro seats for airplane makers and as office chairs. The German group also lists automotive seating on its Web site as a Recaro business unit, even though the site makes clear that that business is owned by JCI in the United States.

"JCI wants to keep us as independent as possible," Kussmaul says.

This spring, Recaro seats will be standard on the redesigned Chevrolet Camaro Z/28 performance model and optional on Camaro SS and ZL1 models.

Keeping its identity


And Recaro has no plan to fold neatly into JCI's U.S. seating operations. Recaro has developed its own North American manufacturing base in Auburn Hills, with a small assist from another plant in Mexico. Kussmaul says the idea of using JCI's robust North American seat assembly lines to produce Recaros "just wouldn't work."

"It doesn't work the same at a mass production factory that produces hundreds of thousands of seats a year as it does when you produce only a thousand a year," he says.

In an age of giant suppliers, Recaro is carving out a North American business based on smallness. Recaro's Auburn Hills plant built just 43,000 seats last year, with a work force that fluctuates between 150 and 200, depending on whether it is racing season.

Unlike the industry's big modern seating plants, which use advanced assembly automation and synchronize their seat production with specific vehicle build schedules, Recaro has employees producing seats by hand. Raw material and cowhides come into the shop.

Workers who undergo at least six months of training inspect the hides for blemishes. Workers hand-cut the materials and manually sew them into trim covers.

This is not the normal American mass-production auto industry business model.

Global seating suppliers have amassed vast product platforms to become some of the industry's biggest players. JCI posted global revenues of $22.5 billion in 2012. The No. 2 U.S. seating maker Lear Corp. had worldwide revenues of $14.6 billion. The industry forecasting and supplier-tracking company IHS Automotive does not include Recaro in its North American forecasts.

The norm today is for seat makers to set up assembly plants at the doorstep of their customer's auto assembly plants. Some newer vehicle factories have seat plants integrated into their real estate, with freshly assembled seats arriving on conveyers that pass from seat assembly line to car assembly line.

Kussmaul is well aware of what U.S. automakers expect of their seat suppliers.

"We're not able to open plants wherever we want," he says. "But if a program is big enough, we will become as cost-competitive as we need to be. At the end of the day, we sit in front of the same purchasing guys as all the other seat manufacturers."

He says he can envision a scenario in which JCI and Recaro work together on a seat project, with the specialty brand supplying the performance versions of a mass-production model. In the case of the new Mustang, Recaro actually will be supplying performance seats, while JCI competitor Lear handles the mass-production seats.

Kussmaul even mentions the possibility of someday using a JCI seat factory location, but operating a "plant within a plant" arrangement. But even then, under a shared roof, the two seat makers would have to operate separately. Seat mass production is based on what automakers call "takt time," in which assembly lines move in measured, choreographed precision, like a ticking metronome dictating the pace of a musical performance. Recaro's hand-built seats won't work that way.

Pierre Loing, Nissan product planning vice president for the Americas, recognizes Recaro's challenge.

"Recaro as a brand adds value," he agrees. "But they're a purchasing department nightmare. The automaker wants the supplier to be next door. You can't really do that in low volume."

In the case of the Camaro, Gino LeDonne, General Motor's lead seating engineer for the program, acknowledges that there will be some challenges to feeding hand-made Recaros into the vehicle assembly line.

"On other programs, if you have an issue and need to special order a seat in a hurry, you can call up the manufacturer and have a seat delivered within the hour," he says. "With this arrangement, it's going to be a different story."

But for the Camaro project, there was no doubt about using Recaro, says Mark Stielow, program manager on the Camaro Z/28.

"From the inception of the Z/28 program, we wanted those seats," Stielow says.

To make the proposed low-volume supply plan more competitive, GM actually helped Recaro by sweetening the deal.

"To help spread out all the cost of the development, we added it as an optional seat on the other models," Stielow says.

A Recaro worker builds a seat by hand in Auburn Hills, Mich. The result: classy — but costly.

The Z/28, scheduled to reach showrooms in the second quarter with a sticker price of around $75,000, was designed to be "the most track-capable pony car ever produced by GM," Stielow says. That not only meant having seats that fit drivers like a leather glove for maximum control and comfort on track twists and turns. It also meant having a seat that underscored the Camaro's brand image. The performance segment is becoming more competitive now, he says.

"We went through a dark period, but performance cars are really coming on strong now," he says. "You want that name-brand recognition that gives you a little bit of carry."

How Recaro does on programs like the new Camaro and Mustang could also stimulate the brand's fortunes elsewhere in the United States -- most notably in the performance shops and aftermarket garages.

Autobahn Power in Wichita, Kan., a shop specializing in top-of-the-line performance parts, does a steady trade in aftermarket Recaros. Car owners and some local auto dealers typically spend $2,000 to $3,000 to have Autobahn swap out factory-issue seats for Recaros, including charges for mounting brackets and installation. A single Recaro sells there for as little as $700 to up to $2,799 for a racing-environment Recaro seat made with carbon-fiber back.

"If Recaro can get stronger in the OEM business, it's good for us," says S.T. Harris, who co-owns Autobahn with her husband, Bob. "It gets their name out there. The more people sit in them, the more people will be talking about them."

Harris expresses the same attitude for the brand that automakers seem to be sensing - that the Recaro mystique of high-performance coolness will cause a consumer to spend a little more.

"You could blindfold someone and have them sit in different car seats, and they'll know when they get into the Recaro," Harris says. "If they sit in it, they'll want it."

You can reach Lindsay Chappell at lchappell@crain.com.


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