German lighting and electronics supplier Hella KG Hueck & Co. is eager to expand outside its home market.
The private company, with headquarters in Lippstadt, Germany, ranks No. 47 on the Automotive News list of the top 100 global suppliers with original-equipment automotive parts sales of $2.78 billion in 2004.
CEO Rolf Breidenbach talked with Automotive News Europe Correspondent Edmund Chew about the steps Hella is taking to increase its global competitiveness.
How are you changing Hella's manufacturing footprint?
The heart of Hella beats in Germany. That means that we control our worldwide production and r&d activities from our competence centers here. But to be competitive it's very clear that you must find a mix, in Europe for example, between your eastern European locations and your German locations. And that doesn't only apply to eastern Europe, but also to China, NAFTA (the United States, Canada and Mexico) and all the other important regions.
Where are the strong and weak regions for Hella's businesses?
I think our Asia business is running very well. We are also growing in the NAFTA region. But there is fierce competition in Europe, especially in lighting in the passenger car sector. The electronics business is growing, but there is a significant price reduction in the electronic area.
What measures are you taking to counteract the rising cost of raw materials and the pressures from automakers to reduce your prices?
With most of our customers it is possible to find fair solutions. It's clear that our customers cannot compensate for the entire material price increase; every partner has to take a fair share.
The only way to realize an acceptable margin is to increase our cost-reduction efforts. In Europe, especially, we must become more and more efficient every year, not only in terms of staff productivity but also capital productivity.
It's an ongoing improvement process, and there is no end in sight to this cycle.
Could you specify what you're doing to reduce costs in Europe?
We have to revise our overhead structures again and again - in the administration area, our production activities - and we have to increase our r&d efficiency every year. We have to streamline our r&d processes and see how, with the same input, we can develop more projects through standardization and other factors. So we are not concentrating on one specific part of the value chain, but rather, we are trying to find improvement potential over the entire value chain we control every year.
What initiatives have you undertaken in the last six months or do you expect to undertake in the next six months to accelerate cost reductions?
Cost reduction is not a 100-meter dash but more like a marathon. That means that we are not relying on short-term measures to quickly bring us a lump sum, but on our continuous improvement process. We proactively reorganized our big lighting plant in Lippstadt last year. We always try to be ahead of these cost-reduction rounds; to realize our potential before we have to give the savings to our customers.
What do you feel are the fastest growth areas?
Electronics is one highlight, especially body electronics and driver assistance systems.
Have the key success factors for a large supplier changed?
Quality aspects are becoming more and more important, particularly in electronics. I think this will be the big factor in success of an electronics supplier in the future.
How are you addressing this?
We are addressing this on all levels of our value-added chain, which means we need a benchmark supplier management system. In other words, the quality our customer expects from us, we in turn expect from our suppliers. Different approaches such as supplier support systems, training of the suppliers and good supplier competition are all important.
Of course, we have to continually develop and revise our electronic processes, and test procedures will become more and more important in this area. We have to test the whole system, not only our components. Building up a very close relationship and a seamless interface with the OEM also will be more and more important in the future.
Where do you see growth opportunities?
We are very successful in Europe, and step by step we are building up a footprint in NAFTA and Asia-Pacific. We also see very attractive new fields of business such as electronic remanufacturing. The whole field will become more and more important, and we see a lot of interest on the OEM side, too.
Is there anything systematic in the way that you approach the market that enables you to capture growth markets?
I think that the core element is our network strategy. When we think that we could be stronger and deliver much better services with partners, we build these alliances.
I think this is a core element of our success all over the world. Not only do we build up these alliances on a product base but also on a regional base.
We are very satisfied with our global alliance partners, in Japan with Stanley (Electric Co.), in Korea with SL and with our joint-venture partners Behr, Plastic Omnium and Leoni.
Does having a partnership slow decision-making?
No, because we try to build alliances with companies like Behr that not only fit a global product pattern but also a cultural pattern, which is also very important. After a short period of building up relationships with the partners, the decision-making process is very fast and is very straightforward.