Component Manufacturers Expand Overseas
Revamp Operations as Domestic Market Slows
By Daniel P. Bearth, Senior Features Writer
This story appears in the May 12 print edition of Transport Topics.
Major suppliers of drivetrain components, brakes and suspension parts are following the lead of truck and engine makers by expanding production and distribution outside North America, while revamping existing operations to lower costs and develop new products.
“The requirements of truck [original equipment manufacturers] are global in nature,” said Baine Adams, vice president of global sales and marketing for Hendrickson International, a producer of truck and trailer suspension systems and body parts. “The major markets in Asia are certainly more important to us today than five or 10 years ago. Today, we have ongoing business along the Pacific Rim from Australia to Russia.”
Adams and other executives with component makers told Transport Topics the sharp downturn in U.S. Class 8 truck production in 2007 has forced companies to streamline existing operations, seek global alliances, make overseas acquisitions and work more directly with OEMs and truck buyers in their attempt to expand sales outside North America.
“Historically, we are dependent on the North American Class 8 market,” said John Hyre, director of corporate communications for Commercial Vehicle Group, New Albany, Ohio, which makes interior trim and seating systems, mirrors and wiring harness assemblies for truck cabs. “It is still very important, but we are looking to diversify geographically and with products.”
The company saw its total sales tumble 24% to $696.8 million last year from $918.8 million in 2006. North America represented about 65% of CVG’s overall business in 2007, but that figure was as high as 95% in 2000.
Kevin Frailey, a business development specialist at CVG, said the U.S. downturn provided the opportunity to buy out several weaker suppliers.
One such purchase was the fabrication division of Gage Industries, which makes extruded plastic panels for high-end sleeper cabs used in trucks by a manufacturer that is also CVG’s largest customer.
Another transaction provided CVG with access to a new customer, PEKM Kabeltechnik, a German firm that made wiring harnesses for European truck builder MAN AG.
CVG also is shifting some of its production to factories in the Czech Republic and Ukraine from the United Kingdom and Belgium.
“Our customers are moving there,” Frailey said. “That’s where we have to go, for cost reasons.”
Similarly, ArvinMeritor purchased Mascot Truck Parts, a major remanufacturer in Canada, in December, and in March signed a major supply agreement with Navistar Inc. to provide remanufactured transmissions and axle carriers.
ArvinMeritor also moved its existing axle carrier remanufacturing operations from Florence, Ky., into a new plant in Plainfield, Ind., where the company will also rebuild brake shoes, transmissions and trailer axles.
The company recently announced it would open a branch in Moscow to help service the increase in used U.S. trucks in Eastern Europe. In addition, it plans to separate its automotive and light truck business from the commercial truck business, a move Chairman Chip McClure said would better align them with their customer bases.
“Our North American operations remain essential,” said Sam Martin, chief operating officer of SAF-Holland Inc., a German-American company that supplies coupling and lifting devices, braking and suspension systems for trucks and trailers. “Our goal is to strike the right balance between investing to maintain our core markets while also investing for growth in emerging markets.”
As an example, Martin said, SAF-Holland recently acquired China-based production operations of Austin-Westran to expand its business in what is now the world’s third-largest and fastest-growing market for commercial vehicles.
In addition, Martin said the company will establish its own U.S.-based axle production later this year to replace axles purchased from competitors.
“We think it’s important to produce critical products in key regions ourselves,” he said.
Dana Corp., a leading producer of axles and driveshafts, slashed costs by nearly $500 million annually by consolidating some of its manufacturing operations in North America and shifting production to factories in Mexico and other countries.
While Dana was under bankruptcy protection, it renegotiated the terms of contracts with some of its customers and labor unions.
Mike Burns, Dana’s outgoing chairman, said the moves left the company ready “to compete vigorously in the global automotive, commercial vehicle and off-highway markets.”
Other original equipment suppliers, including Federal-Mogul Corp. and Delphi Corp. — both major suppliers to General Motors Corp. — have taken similar steps in response to pressure from auto and truck manufacturers to lower costs.
Federal-Mogul, a Southfield, Mich., company that can trace its history to the beginning of the automotive era in 1899, said that in 2007 its sales in the Americas dropped below 50% for the first time.
Aftermarket parts supplier Affinia Group has closed 29 facilities over the past three years — including a foundry in Sudbury, Ontario, as part of a plan to “realign our global manufacturing footprint,” President Terry McCormack said.
Affinia, which produces Raybestos brakes, Spicer chassis parts and Wix filters, started production at a new filter manufacturing and distribution facility in Krasilov, Ukraine, in April. Along with a second plant in Poland, the company will make products for sale in Eastern Europe and Russia and for export to North America.
Affinia also has formed a joint venture to manufacture brake pads in India; consolidated the production of chassis parts in Oklahoma City; and purchased the assets of Brake Pro Ltd., a Canadian firm that made friction components.
CVG’s Hyre said to further insulate that company from fluctuations in truck sales, it is putting more emphasis on aftermarket sales.
“It’s a good market,” he said, “because when people are not buying new trucks, they are buying and repairing existing trucks. And there is a pull-through benefit for our brands, such as National Seating or Moto Mirror, that helps us when that customer goes back to the OEM.”
About 12% of CVG’s sales are now to the aftermarket and that number “is growing,” Hyre said.
The company also has stepped up production of parts for military vehicles and recently opened a research center to develop products with better insulation properties.
Reyco Granning, a maker of air-suspension systems for trucks and trailers, said doing business outside North America required a change in the way it sold its products.
“We looked for strategic alliances,” said Lynn Engel, Reyco Granning’s vice president of sales. “We want to partner with local organizations and leverage their expertise.”
In China, for instance, instead of a direct sales force, Reyco partnered with a trailer equipment supplier to gain access to Asian manufacturers. But in Australia and South America, the company teamed up with local sales organizations.
“It’s a joint development strategy,” Engel said. “We did not want to go to market alone.”
She said sales outside North America currently account for only 15% of Reyco Granning’s sales, and the company, which is owned by British industrialist Jay Tuthill, is also pursuing new applications for its products in military vehicles and high-end recreational vehicles.
Norgren Global Vehicle Technologies sees the trend of globalization as an opportunity to work more closely with OEMs and their customers to develop new products.
“We changed the process of going to market,” said Pete Nylen, business development manager for Norgren, a Chicago-based company that makes pneumatic and fluid-control valves for diesel engines and other industrial machinery.
“We engage in constant dialogue with our customers to discover the most economically relevant technologies we can deliver to help them create more success in their day-to-day business,” said Norgren’s president, Jim Mannebach.
The first new product to come out of Norgren’s approach to research and development was Posi-Clik, a technology that allows installers to feel and hear when a fitting is secure, reducing the possibility of leaks caused by imprecise connections.
Jay Pittas, president of Remy Inc., which makes electrical parts, said vehicle assemblers “more often look to the supplier community to help solve new design problems.”
“The challenge for the supplier is to partner with customers and still produce a return-on-investment that is acceptable,” he said.
Executives at Accuride Corp., Evansville, Ind., which makes wheels and body parts for virtually all truck manufacturers in North America, said the company may be forced to relocate production to countries with lower cost structures.
“A small number of OEMs are able to exert considerable pressure on component suppliers to reduce costs, improve quality and provide additional design and engineering capabilities,” Accuride said in its 2007 annual report to shareholders.
Remanufacturing is another area of interest for component suppliers.
Demand for remanufactured components is coming from carriers in the U.S., which may be looking to keep trucks in service longer, as well as from overseas fleets more accustomed to operating older trucks.
This story appears in the May 12 print edition of Transport Topics.
Major suppliers of drivetrain components, brakes and suspension parts are following the lead of truck and engine makers by expanding production and distribution outside North America, while revamping existing operations to lower costs and develop new products.
“The requirements of truck [original equipment manufacturers] are global in nature,” said Baine Adams, vice president of global sales and marketing for Hendrickson International, a producer of truck and trailer suspension systems and body parts. “The major markets in Asia are certainly more important to us today than five or 10 years ago. Today, we have ongoing business along the Pacific Rim from Australia to Russia.”
Adams and other executives with component makers told Transport Topics the sharp downturn in U.S. Class 8 truck production in 2007 has forced companies to streamline existing operations, seek global alliances, make overseas acquisitions and work more directly with OEMs and truck buyers in their attempt to expand sales outside North America.
“Historically, we are dependent on the North American Class 8 market,” said John Hyre, director of corporate communications for Commercial Vehicle Group, New Albany, Ohio, which makes interior trim and seating systems, mirrors and wiring harness assemblies for truck cabs. “It is still very important, but we are looking to diversify geographically and with products.”
The company saw its total sales tumble 24% to $696.8 million last year from $918.8 million in 2006. North America represented about 65% of CVG’s overall business in 2007, but that figure was as high as 95% in 2000.
Kevin Frailey, a business development specialist at CVG, said the U.S. downturn provided the opportunity to buy out several weaker suppliers.
One such purchase was the fabrication division of Gage Industries, which makes extruded plastic panels for high-end sleeper cabs used in trucks by a manufacturer that is also CVG’s largest customer.
Another transaction provided CVG with access to a new customer, PEKM Kabeltechnik, a German firm that made wiring harnesses for European truck builder MAN AG.
CVG also is shifting some of its production to factories in the Czech Republic and Ukraine from the United Kingdom and Belgium.
“Our customers are moving there,” Frailey said. “That’s where we have to go, for cost reasons.”
Similarly, ArvinMeritor purchased Mascot Truck Parts, a major remanufacturer in Canada, in December, and in March signed a major supply agreement with Navistar Inc. to provide remanufactured transmissions and axle carriers.
ArvinMeritor also moved its existing axle carrier remanufacturing operations from Florence, Ky., into a new plant in Plainfield, Ind., where the company will also rebuild brake shoes, transmissions and trailer axles.
The company recently announced it would open a branch in Moscow to help service the increase in used U.S. trucks in Eastern Europe. In addition, it plans to separate its automotive and light truck business from the commercial truck business, a move Chairman Chip McClure said would better align them with their customer bases.
“Our North American operations remain essential,” said Sam Martin, chief operating officer of SAF-Holland Inc., a German-American company that supplies coupling and lifting devices, braking and suspension systems for trucks and trailers. “Our goal is to strike the right balance between investing to maintain our core markets while also investing for growth in emerging markets.”
As an example, Martin said, SAF-Holland recently acquired China-based production operations of Austin-Westran to expand its business in what is now the world’s third-largest and fastest-growing market for commercial vehicles.
In addition, Martin said the company will establish its own U.S.-based axle production later this year to replace axles purchased from competitors.
“We think it’s important to produce critical products in key regions ourselves,” he said.
Dana Corp., a leading producer of axles and driveshafts, slashed costs by nearly $500 million annually by consolidating some of its manufacturing operations in North America and shifting production to factories in Mexico and other countries.
While Dana was under bankruptcy protection, it renegotiated the terms of contracts with some of its customers and labor unions.
Mike Burns, Dana’s outgoing chairman, said the moves left the company ready “to compete vigorously in the global automotive, commercial vehicle and off-highway markets.”
Other original equipment suppliers, including Federal-Mogul Corp. and Delphi Corp. — both major suppliers to General Motors Corp. — have taken similar steps in response to pressure from auto and truck manufacturers to lower costs.
Federal-Mogul, a Southfield, Mich., company that can trace its history to the beginning of the automotive era in 1899, said that in 2007 its sales in the Americas dropped below 50% for the first time.
Aftermarket parts supplier Affinia Group has closed 29 facilities over the past three years — including a foundry in Sudbury, Ontario, as part of a plan to “realign our global manufacturing footprint,” President Terry McCormack said.
Affinia, which produces Raybestos brakes, Spicer chassis parts and Wix filters, started production at a new filter manufacturing and distribution facility in Krasilov, Ukraine, in April. Along with a second plant in Poland, the company will make products for sale in Eastern Europe and Russia and for export to North America.
Affinia also has formed a joint venture to manufacture brake pads in India; consolidated the production of chassis parts in Oklahoma City; and purchased the assets of Brake Pro Ltd., a Canadian firm that made friction components.
CVG’s Hyre said to further insulate that company from fluctuations in truck sales, it is putting more emphasis on aftermarket sales.
“It’s a good market,” he said, “because when people are not buying new trucks, they are buying and repairing existing trucks. And there is a pull-through benefit for our brands, such as National Seating or Moto Mirror, that helps us when that customer goes back to the OEM.”
About 12% of CVG’s sales are now to the aftermarket and that number “is growing,” Hyre said.
The company also has stepped up production of parts for military vehicles and recently opened a research center to develop products with better insulation properties.
Reyco Granning, a maker of air-suspension systems for trucks and trailers, said doing business outside North America required a change in the way it sold its products.
“We looked for strategic alliances,” said Lynn Engel, Reyco Granning’s vice president of sales. “We want to partner with local organizations and leverage their expertise.”
In China, for instance, instead of a direct sales force, Reyco partnered with a trailer equipment supplier to gain access to Asian manufacturers. But in Australia and South America, the company teamed up with local sales organizations.
“It’s a joint development strategy,” Engel said. “We did not want to go to market alone.”
She said sales outside North America currently account for only 15% of Reyco Granning’s sales, and the company, which is owned by British industrialist Jay Tuthill, is also pursuing new applications for its products in military vehicles and high-end recreational vehicles.
Norgren Global Vehicle Technologies sees the trend of globalization as an opportunity to work more closely with OEMs and their customers to develop new products.
“We changed the process of going to market,” said Pete Nylen, business development manager for Norgren, a Chicago-based company that makes pneumatic and fluid-control valves for diesel engines and other industrial machinery.
“We engage in constant dialogue with our customers to discover the most economically relevant technologies we can deliver to help them create more success in their day-to-day business,” said Norgren’s president, Jim Mannebach.
The first new product to come out of Norgren’s approach to research and development was Posi-Clik, a technology that allows installers to feel and hear when a fitting is secure, reducing the possibility of leaks caused by imprecise connections.
Jay Pittas, president of Remy Inc., which makes electrical parts, said vehicle assemblers “more often look to the supplier community to help solve new design problems.”
“The challenge for the supplier is to partner with customers and still produce a return-on-investment that is acceptable,” he said.
Executives at Accuride Corp., Evansville, Ind., which makes wheels and body parts for virtually all truck manufacturers in North America, said the company may be forced to relocate production to countries with lower cost structures.
“A small number of OEMs are able to exert considerable pressure on component suppliers to reduce costs, improve quality and provide additional design and engineering capabilities,” Accuride said in its 2007 annual report to shareholders.
Remanufacturing is another area of interest for component suppliers.
Demand for remanufactured components is coming from carriers in the U.S., which may be looking to keep trucks in service longer, as well as from overseas fleets more accustomed to operating older trucks.
