DETROIT—The Freudenberg name in automotive is synonymous with seals, gaskets, vibration-control products and chemicals. But that's only one part of the German company. Freudenberg is a diverse group of industrial businesses with little awareness of one another.
The privately owned company wants to fix that. Freudenberg believes bringing the technologies and intellectual resources of its automotive, medical, industrial and textile businesses at least a little closer together will yield a new era of synergy, innovation and operating efficiency.
The company is bewilderingly complex. Its units operate independently, with separate CEOs. In North America, its biggest automotive business is Freudenberg-NOK, a joint venture with Japan's NOK Corp.
Bob Evans is president of the entity that coordinates the various North American businesses: Freudenberg North America, of Plymouth, Mich. Evans represents the North America region on Freudenberg's Global Executive Team and heads the conglomerate's Regional Corporate Center, providing guidance to all Freudenberg businesses in North America and managing cross-divisional cooperation of those largely independent businesses. He spoke with Lindsay Chappell—news editor at Automotive News, a sister publication of Rubber & Plastics News—in April.
Q: Freudenberg said in April that it will spend $2 billion to buy Trelleborg's half of your joint venture, TrelleborgVibracoustic. What's the history there?
A: The vibration-control business was always a part of Freudenberg. It was something that we viewed as attractive, and we wanted to grow our Vibracoustic business. That's our brand. Separately, Trelleborg was in that market, which had a lot of players and was ripe for consolidation. Trelleborg was much bigger in North America than Vibracoustic. In Europe, Freudenberg was bigger. We had strengths in certain of the products in that business, and they had strengths in others. So it really matched up well.
And the thinking behind the buyout?
Trelleborg ultimately was looking for a way to get some value from the venture and maybe redeploy it in its other businesses, and it was exploring the potential for an IPO to take the venture public. Freudenberg's interest was to continue with it. So as it happened, market conditions changed and gave us an opportunity to work with them.
For us in North America, it's great because Trelleborg's presence was bigger than ours. So now, as a 100 percent owner, Freudenberg's total presence in the vibration-control segment increases meaningfully in this geography. It has almost 2 billion euros ($2.22 billion) in annual revenue and almost 10,000 employees.
Is it a viable business on its own?
It was a fully independent joint venture, with all of the functions and expertise needed to operate independently of either parent.
One of the remarkable things about Freudenberg Group is that it's a privately owned family business.
Yes. A 167-year-old business.
Is the family really involved?
Some family is involved. We have a couple of family members involved at a very high level, on the board, as well as in management.
For instance, the CEO of the Freudenberg Chemical Specialties business, Hanno Wentzler, is a family member. His brother is the chairman of the supervisory board. And there are a few other Freudenberg family members who are still in the business. That family ownership really brings a great sense of history and long-term focus. The way we manage our business is totally different. A private company with 167 years—that's an incredibly stable picture.
Freudenberg is very decentralized. Has that been a key to its longevity?
Yes. A key part of our heritage is a strong entrepreneurial spirit. So the businesses have a high degree of autonomy in terms of how they go to market, and how they develop and expand their technology. The Freudenberg Group management board and the corporate resources, the long-range r&d, corporate communications, real estate, legal, tax and talent management functions are all there to help.
But it is all up to the business groups to manage the actual approach to the market, to determine what the market needs, how best to deliver it and how to advance the technology. The CEOs of our 11 business groups report in to the management board of Freudenberg & Co.
“The products and the markets of our various companies may be different. But they can find common ground through their technologies and solutions.”
How is the company going to evolve now?
There was a conscious decision about 20 years ago to give more freedom to each of the businesses in the portfolio, to allow them to think for themselves, almost as independent businesses, about what they wanted to be and how they wanted to enhance their markets. And there was great growth over that period of time. That strategy was known as Project Fokus.
But we developed with a wide disparity of different systems—in IT platforms, our approaches to compliance—you name it. It probably increased the inefficiency of the total company.
We're now implementing Fokus 2.0, which started in 2014. We're now trying to do more on a collective basis and identify best practices and processes on the administrative side. We will see a reduction of administrative expenses, which will allow for increased r&d spending. There will be more communication flow and more collaboration among the businesses. Quite frankly, for a long time, colleagues from Chem-Trend probably had no awareness that Freudenberg-NOK was at all related, let alone that we had a filtration business in Hopkinsville, Ky., for example.
So it's an opportunity to bring a work force of 40,000 people together in a more collective way, generating more spirit on a groupwide basis and getting behind the brand to innovate.
Is it your role to see that information flows from one company to another?
It's part of our responsibility to facilitate that collaboration. There is a groupwide chief technical officer, and he has a technology council with representatives of each of the businesses. But it's important to communicate the activity. We can always do better in this way.
At the same time, the company is changing its marketing image.
We have a new branding. Our new tag line is, “Innovating together.”
Innovation is clearly key to us. But that concept of togetherness speaks to partnerships at all levels. This is another very interesting aspect of Freudenberg. We've been very successful at joint-venturing around the world. Freudenberg-NOK, which is our largest business in North America, the one that most people would know, is a joint venture that was founded with NOK of Japan in 1989. A lot of joint ventures don't last very long.
But it's not just marketing, right?
You will also see us begin to share more technologies among our business groups. And it's already happening. EagleBurgmann makes large, metal, mechanical sealing devices that are used in chemical and petroleum processing plants. They are not small parts that might go into an automotive engine or transmission, but they're still in sealing technology generally. So there's an opportunity to share there. And the elastomeric seals of Freudenberg-NOK are common to our Freudenberg Medical business.
Will this new brand awareness help in automotive? Is there something to be gained by the industry being clearer about the Freudenberg name?
When it comes to business development, the automaker's purchasing people are focused on particular aspects of the vehicle. So the person making buying decisions in powertrain is going to be different than the person buying headliners or air springs.
But still, at a higher level, for us to be able to show our collective technology, capability, attention to quality, innovation across a number of different product forms—yeah, I think that's the story for us. That's a compelling piece of information to the OEMs and the Tier 1 companies. It's important that we are known for our breadth of product offerings. The person buying our sealing technology might not appreciate that we also do all these other things, like cabin air filters. But I think trying to do more with the brand might give us a better opportunity to tell our story.