FRANKFURT Siemens VDO Automotive is on track to rebound from a $261 million loss two years ago to achieve a 5 percent operating margin this year, CEO Wolfgang Dehen says.
The turnaround plan adopted after Siemens Automotive absorbed Mannesman VDO in 2001 is maturing in the current fiscal year ending Sept. 30, Dehen says. In the plans first year ending last September, Siemens VDOs operating profit was a modest $65 million.
But Siemens VDO wants to get to around 5 percent earnings before interest and taxes by the end of the year, Dehen says. Then we want to reflect if that is enough or whether we can do more.
Dehen joined Siemens VDO from French supplier Valeo SA in July.
The improving margins mostly come from purchasing, he says, although merging operations also helped by creating a bigger customer base for electronic parts.
Siemens VDO is also achieving savings from optimizing designs and processes. Dehen says the group is positioned for future growth because of its strength in electronics. Siemens VDO is the No. 3 supplier of automotive electronics globally. But Dehen said the electronics content of all of Siemens VDOs parts averages 50 percent, which he says is the highest among major Tier 1 suppliers.
Siemens VDO projects 65 percent growth in the electronic share of its business over the next three years.
Other suppliers also expect electronic content to boom. A study by Mercer Consulting and Hypovereins-Bank predicts the value of electronics in the average car will grow from 22 percent in 2001 to 35 percent by 2010. The study also concludes automotive electronics sales will more than double within 10 years, from $136.8 billion to about $300 billion.
In chassis and car bodies, Siemens VDO is No. 1 in body electronics, Dehen says. In safety systems, Siemens VDO works with airbag producers, supplying electronic control units for the airbags and sensors.
Dehen says growth in infotainment, interior clusters and information systems will outpace the rest of the industry. Electronics account for 80 percent to 90 percent of navigation systems value, for example. Automotive navigation systems volume is gaining rapidly; navigation systems are on one of every six new cars sold in Germany and one in four in Japan.
But navigation systems designed for individual models are giving way to designs suitable for multiple models, Dehen says. Siemens VDO is also developing a system called Traffic Message Channel that projects navigation instructions onto a video image of the road ahead.
Siemens VDOs powertrain operations are also growing. The supplier produces a common-rail diesel injection system with piezo actuation for PSA/Peugeot-Citroen and Ford Motor Co. By the end of 2004, Siemens VDO expects to raise its share of the high-pressure diesel injector market to 15 percent.
In March, Volkswagen AG said it would source new high-pressure pump injectors for diesels from a joint venture between Siemens VDO and VW Mechatronic.