ESSLINGEN, Germany -- Fluctuations in the price of precious metals led to a sharp decline in revenues last year at exhaust systems supplier Eberspächer.
The German company reported a 14 percent drop in sales to E1.64 billion in 2002.
Precious metals such as platinum and palladium account for about 40 percent of the price of a modern exhaust system. Precious metals are used in catalytic converters.
Eberspächer has about 20 percent of the European market for catalysts and exhausts, and is the fourth largest exhaust supplier globally after ArvinMeritor, Tenneco and Faurecia.
Managing partner Gunter Baumann said price pressure from its customers was strong. Even customers such as BMW, DaimlerChrysler and Audi, which have been less affected by the automotive downturn, are now to some extent suffering from weak markets, Baumann added.
The value of sales to Renault, another big customer, fell because of model changeovers. Eberspächer suffered as production of old models declined and new models ramped up.
The supplier's after-tax profits fell from E9 million in 2001 to E5 million in 2002.
Baumann said he expects a tough year in 2003. Eberspächer's sales in the first quarter were down 1 percent to E19 million, and order intake fell by 6 percent to E312 million.
But current investments will provide the foundation for future growth, Baumann predicted.
Eberspächer is now working on several new contracts. These include exhaust systems for cars built off the new Renault-Nissan B-platform, and new business for its high-end customers. Eberspächer will also supply a new particulate filter to Renault starting this summer.
Altogether, Eberspächer's exhaust system sales will rise by 50 percent by the end of 2005, said Peter Jarkel, head of exhaust systems.
Eberspächer is also investing heavily in North America to fulfill five contracts that it has won there. The company will supply the exhaust catalysts for the new Mercedes-Benz M class built in Tuscaloosa, Alabama, USA, and will assemble the complete exhaust systems in a just-in-time facility.
Eberspächer supplies the current M class through a joint venture with Calsonic Kansei.
Eberspächer has built a $26 million (E22 million) development center in Novi, near Detroit. The center houses 40 engineers working to develop exhaust systems for four future programs for DaimlerChrysler and General Motors.
Eberspächer will supply the first of these programs, Chrysler's LX platform, from a just-in-time plant at Brampton, Canada, starting in 2004.
Eberspächer also suffered from weaker-than-expected markets in its other major automotive business, auxiliary heaters. Auxiliary heaters account for a quarter of the group's sales.
Almost half of sales in the auxiliary heater market are to the commercial vehicle industry, which saw sales decline 12 percent in Europe in 2002.
Eberspächer is also the market leader in the supply of electric add-on heaters for faster cabin warm-up in cars with efficient diesel engines.
The German supplier expected this market to grow last year in line with the increasing popularity of diesel engines. But Baumann said cost pressures at some carmakers have led them to make the heaters standard equipment in only the coldest markets, and an option elsewhere.