Spurred by last year’s sharp auto-industry downturn, TRW Automotive Inc. is moving to extend its global reach in the aftermarket and to expand its core chassis-systems business as bulwarks against any future crises.
“The crisis made us reinforce our strategy on becoming a global organization,” Robert Lightfoot, TRW’s European marketing and purchasing director, said in an interview. “Secondly, we have been pursuing a policy of becoming a chassis specialist and that was strengthened last year. We mean to accelerate the program even further.”
TRW, a leading producer of automotive braking, steering, safety and chassis systems for OEM customers and the aftermarket, ranked No. 11 on the Automotive News Europe listing of the top 100 suppliers in 2009 on global sales of $11.6 billion. European sales accounted for 58 percent, or $6.72 billion, of the total.
Record year in 2009
Although the industry crisis slashed TRW’s global revenues by 23 percent in 2009, TRW’s aftermarket unit posted record sales as buyers held on to vehicles longer, creating additional demand for parts.
TRW’s aftermarket unit, which operates 14 dedicated plants in Europe, accounted for 9.8 percent or $1.14 billion of the company’s total sales last year, trailing only steering gears, airbags and brakes as a revenue generator.
“In the first half, we registered close to double-digit growth,” said Soeren Kristensen, TRW’s marketing services manager. “The second half also saw significant growth, which has continued into 2010.”
Lightfoot said he expects to see “significant growth” in TRW’s aftermarket business in the Asia-Pacific region in the next few years, especially in China, where double-digit growth is forecast for 2010 and 2011. TRW's plan is to double its market share by 2015.
“We expect to achieve market leadership in the chassis business in China in the next couple of years, from a current market share of 7 percent to 8 percent,” he said without specifying how high TRW’s chassis business share would have to rise to become No. 1.
In addition, he said, TRW expects to add two or three points of market share in Thailand in the next two to three years after creating a joint venture with a local distribution partner three years ago.
Other areas of growth are the Middle East and Africa. TRW’s current market share of 4 percent to 5 percent in the region is expected to double over the next five years, he said.
TRW also is examining options for the growing Russian market, he said, although he declined to provide details.
Looking for the right partner
Lightfoot says last year’s economic crisis is causing distributors to reconsider their longer-term partnerships with suppliers, such as TRW. Price will no longer be the deciding factor for business within the independent aftermarket, he says, with customers now wanting stronger partners who can offer “added value.”
In the second half of last year, he said, customers and distributors began questioning in earnest the long-term benefits of staying with their major suppliers.
“There were more discussions about how we saw the future during the second half of 2009 than in the last two to three years combined,” Lightfoot continued.
A key element to future success will be the quality of a supplier’s supply-chain management, he said. Increasingly, he said, distributors want to partner with component suppliers who provide the widest product portfolios.
That means having to invest in inventory management, he said.
“The supply chain has become a qualifier now in supporting your customer,” Lightfoot said. “If you’re not able to provide first-rate service, then you won’t survive for long.”
Lightfoot also said specialized, single-part producers are facing extinction because of their inability to achieve significant economies of scale.
“We are seeing the first signs of consolidation already, and we expect to see manufacturers with a wider product portfolio in the next five to six years,” he said.
Meanwhile, TRW has said it will reveal “an extension” to its product portfolio at this year’s Automechanika exhibition in Frankfurt.