Lear Corp. significantly expanded its European presence when it bought Keiper Car Seating earlier this year. Lear has 148 manufacturing facilities and technology centers in 21 countries. Greg Bonk was appointed director of European purchasing four months ago. He was interviewed by Beatrix Israel
How do you choose your suppliers? Are the considerations the same as for automakers?
Quality is still the first consideration. It is an old fashioned concept, but it is important not just to us, but to our carmakers.
The second is competitiveness: worldwide pricing is very important for our success.
Also important is a supplier's presence in all the regions where we have manufacturing plants. Most do not have this global presence.
The fourth item is technical innovation. We want our suppliers to be providing us with ideas to move forward.
The last element is fast delivery. We deliver just in time to our customers and we certainly expect our suppliers to be just in time to us.
Are you centralizing your operations in Europe?
Our intention is to link together our divisions in Italy, the UK, Sweden, Germany, etc.
We have defined the supplier base that we're going to use in Europe, and we have to make sure that it is compatible with North and South America, in order to move towards a single, global supply base.
A second responsibility is for sourcing. In the past, our divisions have sourced from whomever they wanted. Now we are centralizing our corporate purchasing activity, with the assistance of our divisions.
We have to be sensitive to the carmakers' opinions about certain suppliers and work within those guidelines. Like the carmakers, we sign long-term agreements with our suppliers where national laws don't prohibit us from doing so. We have approximately 1,800 component suppliers.
How much do you spend with your suppliers?
Today, we buy around $1.3 billion from suppliers - Keiper Car Seating accounts for $300 million of that. The way our business is growing in Europe we expect that we will buy $3 billion-worth in 2000.
Where is the greatest growth potential in Europe?
Definitely in eastern Europe, where labor rates are a lot lower: Hungary, the Czech Republic and Poland. But Turkey is also starting to get a tremendous amount of interest.
What are your goals?
The overall goal is to create value for the customer, to improve our worldwide presence and customer relationships. This is truly a global industry now. The interior systems part of it is worth about $45 billion a year. The total supply chain to the automotive industry is about $250 billion a year.
Europe is where North America was six or seven years ago. Europe presents us with tremendous opportunities for growth.
What about your relationship with carmakers?
As carmakers began to recognize the sophistication of Tier 1 suppliers like Lear, and the kind of program management capabilities we can bring to the party, they started to realize that they could slowly loosen the rope.
In letting us have more responsibility, they have gained a supply base that is more in tune with where they want to go with their interiors.
What has happened to prices in recent years?
We see some significant pricing differences between North America and Europe - prices can be as much as 10-15 percent higher in Europe. In Europe, carmakers play a big part in sourcing, and many Tier 2 suppliers negotiate prices with the carmakers. That tends to set the price of components for us.
Who are your biggest competitors in Europe?
Johnson Controls Inc., Magna and, for seats, Bertrand Faure.
Where do you see Lear in Europe in three years' time?
The big challenge is to get Italian suppliers to provide parts for German plants and Swedish plants to buy from UK suppliers.
We face two problems: A lot of sourcing is directed by carmakers, and some governments want the component suppliers to be located in the same country as the car factories.
I see Lear becoming one of the top two or three global suppliers that can supply any interior part anywhere in the world to the satisfaction of the carmakers.
Actually, it's the carmakers who will decide where we will be in three years' time.