AMSTERDAM - Business is booming for Europe's leather suppliers as carmakers react to an increasing demand for upmarket interiors from customers.
Leather suppliers were the dominant group at this year's Interauto exhibition in Amsterdam, an event that attracted mainly Tier 2 suppliers. Although tanneries have traditionally concentrated on the clothing and furniture markets, the importance of the auto industry is growing.
'We are extremely busy at the moment,' said Graham Jones, sales and marketing director of Connolly Leather Ltd., based in London, UK. 'Our volumes have probably never been higher.'
Austrian supplier Wollsdorf Leder reported volumes up 20 percent in the past year. Wollsdorf, with sales of DM100 million ($56 million), is a market leader in the supply of steering-wheel leather. It supplies to Tier 1 companies such as Petri in Germany. Wollsdorf produces 240,000 leather steering wheels a month, as well as trim for door parts and gearshifts.
Gerhard Lang, general manager of Wollsdorf's automotive parts division, said leather steering wheels are now fitted on 80 to 90 percent of all Mercedes-Benz, BMW and Volkswagen cars.
There are growth opportunities in the USA, where leather steering wheels account for only 50 percent of the market, and in Japan, where penetration of leather steering wheels is only about 10 percent.
'We expect lower production of cars but a higher volume of leather interior,' said Lang. 'Every company is trying to evolve the inside of the car. That means they are looking for better quality and more natural types of leather. Volkswagen in particular is spending a lot of time and money developing high-class interiors for its cars.'
Spanish tanner Tenerias Omega SA has also seen a big increase in volume this year.
'The first six months have been very good for us,' said Commercial Director Alberto Navarro. 'Sales were up around 30 percent.'
Tenerias Omega has sales of about $70 million a year, mostly to the automotive and aircraft industries. Its major customers are Seat and Ford in Spain, but the company is also expanding in Germany.
Navarro said the automotive industry disapproves of the use of chrome in the leather process. Chrome is used in tanning, but is not environmentally friendly.
'It means that we have to change our tanning process, resulting in a lot of investment for the tanneries,' Navarro said.
Leather suppliers are usually at Tier 2 within the supply chain, delivering their products to seating and trim specialists. But the suppliers deal directly with the vehicle makers because the quality of their product is essential to the look and feel of the finished article.
'The first contact for a new project is always the car manufacturer,' said Helmut Popp of German leather supplier Bader GmbH. 'The designers have to work with the material to see how it looks in the car. The car manufacturers decide the colors and the leather type and so on. After that we work together with the system suppliers like Lear or JCI.'
Suppliers say a two-tier market in automotive leather is developing. Top-range carmakers such as Daimler-Benz and Toyota's Lexus are raising standards and demanding more than traditional black leather. Fashionable new finishes, such as nubuck, are becoming widespread. Leather with embossed patterns is also popular, as are wood/leather combinations for steering wheel or other trim applications.
Business is growing as these new interior styles are developed.
'A few years ago we were only supplying leather hide,' said Popp. 'Now we supply cut parts with lamination for seat covers or for door trims.'