In December 1999 Swedish rubber specialist Trelleborg AB agreed to purchase the antivibration systems (AVS) business of British engineering group Invensys plc. The antivibration business was part of the automotive division of BTR plc, which merged with Siebe plc to form Invensys in February 1999. The A250 million deal made Trelleborg the world's largest supplier of antivibration systems, with 16 percent of the global market. Automotive News Europe's Edmund Chew talked to the Trelleborg Automotive Systems CEO George Caplea at the group's European technical center in Hoehr-Grenzhausen, Germany.
How is business going in your main automotive markets?
Things are going very well this year. Sales are up because volumes are up. North America is especially strong because of light-vehicle and utility-vehicle sales. The South American and European economies are still slow, but Europe has picked up and is stable.
What are the major issues facing Trelleborg this year?
The big issues for us are the integration of our Trelleborg Automotive units with the newly acquired AVS business of BTR, both in the USA and in Europe. Another issue for us would be the rise in the cost of raw materials.
What benefits are you looking for from the AVS acquisition?
We hope to benefit in several ways. First, Trelleborg Automotive will be able offer its customers a wider product portfolio. That portfolio includes full powertrain system capabilities that we did not have before. We can also offer an improved range of chassis components.
How are you looking to cut costs?
We expect to gain from economies of scale. We have to consolidate the way we do business so that we can streamline and centralize administration, accounting and engineering in Europe and the USA. We have to reduce our operating costs. While we maintain and increase our sales, we have to try and do that with fewer factories than we had before. Our annual sales are currently about $850 million.
What is the timetable for the integration?
We would like to have it in place over the next two years. We hope customers will start seeing some benefits by the end of 2000.
What raw material prices are rising?
Petrochemical-based raw materials are an issue. Aluminum costs are starting to rise, and the price of steel might possibly go up. So it looks as if there will be some increase in the price of our raw materials on all fronts.
What percentage of your final product cost is accounted for by raw materials?
It varies with product mix and product line, so it can be anywhere from 45 percent of total cost up to 65 percent.
Has the consolidation of vehicle makers affected you?
They (the consolidations and takeovers) are all handled differently, although the rate of consolidation has been faster than we thought. We don't expect to be affected initially, but maybe in the long term the changes will have an impact if they result in combined powertrains and fewer engine combinations. Also consolidation of the supplier base is occurring at a faster rate than I might have imagined a year ago.
Has there been any change in manufacturers' demands?
They have been pretty consistent in their demands for reduced prices, for higher quality products delivered on time, and for suppliers to design and develop systems themselves. Over a period of time, more or less all of the (development) responsibility for component systems has transferred to the supplier base.
Any changes in terms of product characteristics?
Cars are getting quieter, and the demand is for products that help manufacturers deliver quieter cars to their customers.
How do you expect e-commerce to affect your business?
(The implications of) e-commerce can be good and bad. We can buy all our raw materials as the whole Trelleborg group, which is considerably larger than just Trelleborg Automotive. Also we can leverage buys on both continents through e-commerce.