How is supply for you at the moment?
We are doing well in terms of supply. We need to produce quite close to where our customers are, and we don't buy many parts from areas such as China. Overall, I see very limited impact. I think most of the problems are because of demand rather than supply.
You talked in your Q1 release about the need for a drastic cost-flexibility measures. What did you mean?
We could see lower volumes not only this year but for years to come. Therefore, most of the companies working in this sector will need to address their fixed expenses. That's absolutely clear. In some cases, this could include restructuring.
Automakers were already preserving cash ahead of the pandemic. What fundamental changes will they be forced to make that they weren't already doing?
Cash is going to be important for them. They cannot stop investing in crucial vehicles, so they will probably reduce investments in non-crucial programs. They will also try to attack their fixed expenses, which means they may increase outsourcing to preserve cash.
Does this mean the crisis could present an opportunity for Gestamp if they outsource more metal stamping?
It’s too early to say. We currently only see the problems caused by the pandemic, but there will always be opportunities. As happened in previous crises, there will be some consolidation of the industry. There will be some suppliers that are more impacted. In the coming months, we will probably see suppliers facing a financial situation that is not very comfortable.
Gestamp was able to grow in the aftermath of the financial crisis of 2008-09, right?
Yes. In 2010 we bought the first company [the hinge and control systems unit of Edscha], and one year later we bought Thyssen Krupp’s metal forming division. We reacted quickly and as a result we incorporated different kind of activities into the group. We need to see what is going to happen after this crisis.
Are you in a financial position to do something similar now?
Our financial situation in terms of liquidity is OK. We have been able to really improve our position, but we need to determine whether this will allow us to undertake further consolidation. It’s very important to really understand whether we are going to have three, four or five years with volumes that are below what we had in 2017. Even in 2008-09 there were countries such as China and India that did very well. This time every country has been impacted; therefore, we don't see these the same kinds of opportunities.
Do you do get an early warning on plant closures such as Nissan’s decision to shutter its factory in Barcelona?
Our customers tend to be quite quiet about this, but with some common sense you can figure out what could happen. Nissan had a very aggressive growth strategy for roughly a decade, but in the last two years they realized that just growing would not be good. The Nissan plant in Barcelona was not as competitive [as alliance partner Renault’s factories in the country] because volumes were very low for the last three years. In addition, some Renault factories in France are not the most competitive. Therefore, most decisions to scale down a footprint are common sense.
Will the politics that come with shutting a plant in Europe impact these common-sense decisions?
The managers of these big companies need to make the decisions they think are best for their companies in the long run. That being said, the social and political environment in Europe will make things very difficult. We will see governments try to save companies that they might have been attacking three or four years ago due to environmental reasons. It's going to be nice to see some equilibrium develop between keeping industry going, preserving jobs and pushing for the greener vehicles.
North American was the only region where Gestamp increased revenue in Q1. Why?
We have made some investments in the last two years and focused on some specific programs, for example, with Daimler in Tuscaloosa [Alabama], in South Carolina for BMW and also Fiat Chrysler Automobiles around our hot-stamping technology. The programs were running well until the COVID-19 crisis started. We are absolutely convinced that the activity will come back, which would mean that our sales in North America could be more than 20 percent of our global sales in the next few years. It’s a very good diversification for us that reduces our exposure to Europe.