Tony Gilroy is COO of LucasVarity PLC, the company formed when Lucas Industries PLC and Varity Corp. merged in September 1996.
In the fiscal year that ended Jan. 31, LucasVarity reported sales of $7.8 billion. Gilroy was interviewed by Edmund Chew of Automotive News Europe. An edited transcript follows.
Is there a strong move to complete systems in the brakes area?
No, it's still a mixed bag, and more so in Europe than in North America. Each company has its own house style. Where we are still working in a fragmented way, we recognize it is the customers' wishes. But where we've done systems, we are nearest to perfection.
When you have responsibility for a whole system, you are better able to satisfy all the needs, and if there is ever an issue, the customer has to come back to only one person. For example, a noise issue with brakes. Although it is brake-related, it may, in fact, start in the suspension.
How does 1998 look in Europe and North America?
There is pressure on certain sectors, and others are quite strong. In North America, there is pressure from Asian imports because of the strength of the dollar. The Japanese are taking a bigger stake. That has little effect on us as a company because our major strength is the light-truck sector.
In Europe, we think all the markets are moving in a positive direction again, but some pockets are less strong. France is recovering from last year, and Germany is going reasonably well. Exports of United Kingdom-based manufacturers are less profitable because of the strength of the British pound, but that is not affecting overall demand, which is still quite strong.
How are prices in the component industry? Any surprises?
It varies by market and product, but by and large we will see prices going up only where we have products that are fundamentally different, that have many more features.
Are brakes an area of particular pressure?
I don't see brakes being any different from anything else. It is a very cutthroat business. In any sector today, you do well only if you set out to understand the environment you're in. Our brakes margins for the year were up, not as much as they were for the whole group. But they were up 7.8 to 8.6 percent.
Are there opportunities for major cost savings this year? In what areas?
We said at the time of the merger we were going to save $67 million last year and $83.5 million this year, and we're confident we will deliver the 1998 savings. We said we were going to sell 13 non-core businesses, and we sold the last three within the last month.
There is a whole series of actions, all the way from our ability to buy consumable materials around the world, to our travel and our telecommunications - literally hundreds and hundreds of items. They are all assigned to people, and we are able to monitor where we are. That's the only way we can live in today's competitive environment.
What operational changes have you introduced recently?
We have set the target of flawless new-product launches. Often when you have an introduction, you have problems that incur incremental costs and you have to change your design. We set out to look at the whole process and see how we can we do it right first time and not have that waste.
We have a new product introduction process, which we call 'PIM' (Product Introduction Management). Every new program is driven as a project on its own, like a mini-company.
How soon before the start of production of the new model does the program kick in?
It starts at the concept stage, and the leader of that team will stay with that project from concept through to production. One of the targets is to allow us to make decisions at the latest moment possible so we have what we believe to be the ultimate solution before we spend capital.
How long has the program been running?
We started before the merger in parts of the company, but we launched it throughout the company after the merger. So, effectively, it has been running in some parts for 18 months and some parts for 12 months. Its impact on customers has been very positive.
Is there a move to go beyond brake systems to full corner modules?
Where people have already invested either in suspension components, axles or steering for example, I think it will take time, and it is more likely to happen in partnership rather than total ownership. We have some corner modules, and in one of our joint ventures in China we are doing a complete axle assembly. Because this is low volume, they are allowing us to experiment in terms of how can we change the paradigm and make it more effective.