TRAVERSE CITY, Mich.—Global companies need to think local in order to capitalize on opportunities in individual markets.
That was the message Torsten Maschke, Freudenberg Sealing Technologies president of automotive sales and marketing, delivered at the 2014 Center for Automotive Research Management Briefing Seminars in Traverse City in August.
Maschke's presentation focused on China, where car production output is projected to grow to more than 30 million units in 2020, but the overriding theme was clear: automotive suppliers that do not have a local presence in a given region will be at a disadvantage.
“We believe that you need to produce locally in order to really understand the market demands and requests,” Maschke said in a subsequent interview. “It is not easy to serve the market from Europe or the U.S. because you are so far away. You have logistics issues, and you're not close to the customer to understand their engineering requirements. You do not have the same flexibility with production output.”
He said one factor driving the need to have a local footprint is original equipment manufacturer's recent focus on reducing the number of vehicle platforms they produce. There is a global trend of harmonizing platforms, producing fewer variants on a particular vehicle and increasing the output per vehicle platform in order to improve quality standards and standardize the manufacturing process worldwide.
This means OEMs need to have the same kind of supply base in all regions of the globe from suppliers, and the ones that can service local production while maintaining a global presence will give themselves an advantage, Maschke said.
Freudenberg, with its Japan-based joint venture partner NOK Corp., has more than 70 locations with 6,300 employees and 23 manufacturing facilities in China—three of which focus on sealing products. The firms also have partnered on joint ventures in India and the U.S. Maschke said the overall relationship between the companies extends back about 60 years.
He said Freudenberg-NOK's sales have grown by 500 percent over the last decade.
Freudenberg's sealing presence in China focuses primarily on rubber to metal bonding, or radial shaft seals. The firm is also producing gaskets, O-ring boots and recently started making piston accumulators for the double clutch transmissions of Volkswagen in 2013. Maschke said the firm has plans to develop its other product families, such as special sealing products, in China for 2015 or 2016.
Deciding how to service the local market is just one of the challenges that suppliers face. Maschke said the Chinese market has a number of technological and legislative issues that remain unresolved. One of them is finding the right source of raw material supply because, according to the executive, the quality of raw materials is not always the same as those in Europe and North America.
To combat this, suppliers must have in place proper screening procedures for potential Chinese suppliers.
Maschke said this not only includes equipment to qualify and audit suppliers on a sustainable base, but also to have supplier development programs to ensure standards are communicated clearly and provide suppliers the opportunity to grow and develop with their customers.
On the legislative side, Maschke said varying fuel standards throughout Chinese provinces is a major issue that directly affects the quality of products.
He said Freudenberg counted at least seven different standards for fuel methanol.
“In China, you have a lot of different degrees of used methanol in fuel,” Maschke said. “Therefore, this has an impact on our rubber materials on whether they are usable or not. This is an issue the government has to drive in the future.
“This has a huge impact on our rubber materials. We have to make sure that our materials are in alignment with all the different fuel standards.”