Wolfgang Ziebart is deputy chairman of Germany's Continental group and the board member responsible for Continental Automotive Systems, which supplies braking and steering systems and automotive electronics. Ziebart, the former head of product development at BMW, says Continental's main challenge is to be profitable in flat or down markets. He spoke with Automotive News Europe Staff Reporter Edmund Chew.
Q&A: Continental learns to profit in flat markets
There has seldom been a year with so many uncertainties. As long as we do not see clearly what is going on in Iraq, it is nearly impossible to make forecasts. We see a year that is stable or stagnant - and in some areas declining - with no recovery in Germany or Europe on the horizon.
The premium manufacturers will continue to perform better than average. This year, especially in Europe, we have a situation where mainstream products such as the Volkswagen Golf, Ford Focus and Opel Astra are reaching the final parts of their life cycles. The new models will not affect 2003 sales.
Learning to cope with stagnant markets - our profitability in the past was too dependent on growth. We needed growth to stay or to become profitable. We have to learn to stay or to become profitable even if the market is stagnant or down.
In the short term the whole area of brake stability control systems is a very dynamic one. Our long-term vision is that active safety systems will merge with passive safety systems to form one integrated safety system. There are some preliminary solutions on the market already, such as the new roll-stability control introduced by Volvo and the pre-safe system from DaimlerChrysler.
Cars equipped with full electromechanical brakes will take considerably longer to arrive than we originally supposed. The reason is not that the technology will not be available, but the technology has certain requirements on the infrastructure in the car. For instance, we need 42-volt systems to generate the brake forces we need on the front axle.
Considerably slower than other technologies such as electronic stability programs. The penetration of ESP happened extremely fast. The electrohydraulic brake is a sophisticated technology that will be limited to high-end vehicles for quite a while.
I don't think that the 42-volt system will have a breakthrough in the next generation of cars. At least in the foreseeable future, we will not see a widespread introduction of 42 volts.
In the United States, there has been a lot of focus on rollover situations in the sport-utility segment. Previously, rollover was more or less tied to tire problems. But as everybody has seen from analysis of accident data, it is much more than a simple tire issue. The best system to work against rollover is a stability system. We see a big potential for stability systems to penetrate the SUV market very fast.
The U.S. penetration rate is lagging considerably behind Europe. It stands at 6 percent, and that mostly comes from the imports. But we see this changing very rapidly. The domestic automakers are very strong in sport-utilities, and we see them moving very fast to protect this business.
In electronics we are growing roughly at twice the rate of the rest of the automotive market. So big portions of our investment are going into this area. It is mainly the Temic part - airbag controllers, comfort electronics, body electronics - but also drivetrain electronics, electronic brake systems and stability control.
In the last decade there was a clear trend for car manufacturers to go from components supply to systems supply. Today, it is becoming more diverse. There are some manufacturers who are continuing to go into systems or module supply.
But others are either continuing as they were, or even going back to building up stronger in-house resources. This varies not only from one manufacturer to the other, it is also different between projects. When it comes to core models, the car manufacturers tend to do more development in-house rather than giving a strong responsibility to the supplier. But in niche models, we see big portions of development work - and also in some cases of manufacturing work - given to suppliers, even complete cars. So overall we see a higher degree of diversity.
We have separated the system engineering work in our organization from the component work. In the past, we tried to cover system-integration activities in the cost of components. If you do that, you become uncompetitive in your components. So we have separated this type of work. If the customer requires system integration work, we charge separately.
They are in favor of this model as it gives a clearer picture of the real cost structure. Previously, there was an unclear charge for integration work on each component.
When volume changed, a discussion always came up about fixed-cost compensation. This type of discussion ends if you give the automakers a clearer picture of the real cost.
We are close to the integration of sensors and transponders into the tire, for instance. We hope that in the next generation of cars we will see applications of this technology in five to seven years.
The commitment of the European car manufacturers to reduce emissions to 140 grams of carbon dioxide per kilometer in 2008 forces the car manufacturers to exploit every potential for fuel saving - and brake energy recuperation is a very good opportunity. We have developed new systems that are much more cost effective than previous ISAD (integrated starter alternator damper) systems. We now meet the cost requirements for fuel saved set by the OEMs. Every automaker has a requirement for how much money they can spend to save fuel, and we typically now meet those.
In terms of growth rate, the most attractive areas are Asia, excluding Japan, and Eastern Europe, but they are still on a very low basis. In absolute terms, the United States is an important growth market, and we hope that sooner or later growth will catch up again in Europe.
The same development that took place in the relationship between OEMs and Tier 1 suppliers in the last decade will happen between Tier 1 and Tier 2, and then downstream to the Tier Xs, with a certain time delay. We will have fewer Tier 2 and Tier 3 suppliers, and it will also change the way we interact with those suppliers. Many of the very good structures - logistics, quality systems and engineering procedures - that we set up with the OEMs will now also penetrate down the supply chain.
One important way to profitability is making a business simple. We have now organized all of our businesses in business units, to bring profit and loss responsibility as far down the organization as possible. So in the last two years, we have set up product lines and profit centers with their own responsibility for whole business - very much like a company within a company.
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