Freudenberg-NOK Shuns Mega-Merger Approach
16 September 1998
Freudenberg-NOK Shuns Mega-Merger Approach, Focuses on Getting Better; Announces New Technology Center and Customer Satisfaction Metrics
PLYMOUTH, Mich., Sept. 16 -- While some automotive suppliers
are creating confusion and potentially detrimental situations by concentrating
on getting bigger through mergers and acquisitions, Freudenberg-NOK President
& CEO Joseph C. Day says his company will grow by focusing on getting better.
"My customers are telling me that they are hesitant about doing business
with suppliers who are intently focused on getting bigger, often making hasty
acquisitions and business marriages made for all the wrong reasons," Day said.
"We are not interested in playing the mega-merger game which could be
detrimental. Our strategy is to focus on getting better, not just bigger ...
across the board, every day."
Day noted that many suppliers have become obsessed with getting bigger to
obtain economies of scale, appease investors and, perhaps, gain reverse
leverage on their automaker customers. He said their obsession on getting
bigger has caused them to lose sight of the most important factor in the
supplier equation: the customer.
By focusing on getting better, the global Freudenberg and NOK Group --
currently a $3.5 billion automotive supplier -- plans to win new business
through customer satisfaction and grow its American business unit to $1
billion in sales by the year 2000. The group's global automotive business is
targeted to reach $5 billion by 2005, with $1.5 billion from the Americas.
Day said his company's ongoing quest for continuous improvement will help
to satisfy what his customers really want from their suppliers:
* Truly global capabilities -- 50 automotive operations and 23,000
automotive employees worldwide, balanced among the Americas, Europe and the
Asia Pacific region, which have been developed over 35 years;
* Real expertise -- annually producing more than 9 billion components
worldwide, with 75 percent produced in lean, robust one-piece flow processes;
* Stability -- offered by the long-term perspective of a 150-year-old
company which doesn't need to cater to Wall Street's whims;
* Innovation -- a history of many firsts in powertrain/chassis sealing,
NVH control and precision rubber molded components -- including the total
engine sealing concept; over 3,500 patents (more than any of its competitors
in these product areas); and capital investments of $580 million over the past
five years to drive new developments and support product launches;
* Responsiveness -- customer support offered around the world due to a
standardized approach to business structure, product and process;
* Predictability -- a proven track record in processes, performance and
quality, gained by laser-sharp focus, standardized best practices and
expertise in its product areas; and
* Global single-source support -- a globally integrated team working in a
common lead center business structure with global product lines to meet a
common customer need.
"The kind of global 'oneness' we offer our customers -- the same product,
made with the same processes, of the same materials, with the same assurance
of quality and completely interchangeable anywhere in the world -- doesn't
come easily or quickly," Day said. "For the Freudenberg and NOK Group, it has
been built through years of hard work, a shared business culture built on lean
systems and an unwavering, common commitment to the customer. Over the past
35 years, we've learned how to harmonize the cultures and decision-making
processes of our global company."
Tech Center Coming, Customer Satisfaction Metrics Created
As evidence of his company's focus on getting better, Day announced two
new developments: the $14.5 million technology center facility being built at
Freudenberg-NOK's headquarters in Plymouth and the creation of a proprietary
customer satisfaction measurement process.
The new 55,000-square-foot technology center, costing $6.5 million to
build and housing some $8 million in development and testing equipment, will
be occupied in March 1999. The facility will focus on helping automakers to
prevent leaks; remove noise, vibration and harshness; eliminate warranty
costs; and improve ride and performance of future vehicles. It will include:
* A material development laboratory, a mechanical test lab, and a noise
and vibration lab with shaker, chassis roll and servo-hydraulic test
equipment;
* Engine dynamometer, seal test heads and package test stands; and
* Pilot processing facilities to help de-bug new production processes for
smoother, faster product launches.
The new technology center will boost employment at the Plymouth site by
130, most of which will be new jobs. Some technicians will be transferred
from Freudenberg-NOK plant and divisional laboratories.
Day also announced that his company has developed new customer
satisfaction metrics -- called PATTH (Priority Action Through Team Harmony) --
that will enable the company to evaluate and fine-tune its performance by
focusing on 10 key factors deemed most important by its top 20 customers.
"Most suppliers don't measure themselves by customer standards, they just
wait for the customer to tell them how they're doing," Day said. "That's like
trying to shoot an arrow at a target that's hidden by a curtain -- you have a
sense of where the target is, but no idea where the bull's eye is. It's tough
to improve your aim that way."
The PATTH metrics will enable Freudenberg-NOK to continuously track its
performance for each customer, benchmark its best practices and standardize
these practices throughout all of its operations.
Piloted with customers earlier this year, PATTH is now being rolled out
throughout Freudenberg-NOK facilities. It measures the top 10 performance
factors as viewed by the customer, including: on-time quotes, PPAPS and
delivery; technical response and support; cost-target achievement; defect
rates under 15 PPM; and superior supplier management.
Plymouth, Mich.-based Freudenberg-NOK is part of the Freudenberg and NOK
Group Companies, which have total annual sales of more than $6 billion. With
global automotive sales of approximately $3.5 billion, the Freudenberg and NOK
Group ranks among the world's top 25 independent automotive suppliers.
Through a global network of facilities spanning 24 countries with some
23,000 automotive employees worldwide, the supplier group offers its
automotive customers globally integrated products, including total sealing
packages for engines, transmissions, brakes and steering, NVH components and
modules, and all rubber, plastic and PTFE components for suspension,
electrical and fuel systems.
The Freudenberg and NOK Group also offers an extensive portfolio of
precision-molded products for the aerospace, appliance, business machine,
fluid power, marine, medical, off-highway equipment and recreational vehicle
markets. For more information, visit the Freudenberg-NOK web site at
http://www.freudenberg-nok.com.