America’s Big Three car makers have resolved to make vehicles with higher quality interiors — a turnabout that creates an opportunity for the medium-sized German supplier Grammer AG.
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North American car executives see better interiors as an important way to fight back against the perception of higher Japanese and European quality.
Grammer, based in Amberg in Bavaria, is perfectly positioned. It supplies key components to leading makers of smaller interior modules for German vehicle makers. For example, it makes an active head restraint system for the BMW 7 Series, and armrests and headrests for the new BMW 5 Series.
Grammer also has a $700 million contract to supply the central console for the Volkswagen Passat from two new, in-sequence plants near Volkswagen’s European assembly operations in Mosel and Emden.
By following the expanding manufacturing footprint of German carmakers, Grammer has already become international. It set up its first US manufacturing operation to supply BMW in South Carolina in 1997. The plant, built near BMW’s Spartanburg, South Carolina, facility, supplies a number of applications for the X5.
And Grammer has established operations in Tetla and Queretaro in Mexico to supply Volkswagen there. The new Passat contract means Grammer will establish a joint venture in China in the next couple of years to supply VW’s local production when the new Passat is introduced there.
But Eugen Geyer, senior vice president at Grammer, sees the biggest opportunities for growth with General Motors, Ford and DaimlerChrysler in the USA.
Currently, Grammer has $US120 million in sales in the NAFTA region. But Geyer says Grammer could sell five times that volume in five years’ time.
The big driver is the North Americans’ need for higher quality interiors. Geyer says American executives want quality that will match European interiors.
US consumers have begun to demand as much — partly influenced by the higher standards DaimlerChrysler has tried to introduce through its Chrysler brand. Now, he says, there is a general recognition in North America that part of the higher appeal of Japanese and European vehicles is their fine interiors.
Cost is not the main obstacle, says Geyer, though he agrees there is tremendous price pressure in the US. He says “it is our experience that working in a constructive way you can satisfy both.”
Grammer has sent out over 100 responses to requests for quotations from vehicle manufacturers based in North America. Geyer says the big obstacle to change are first tier interior suppliers.
Grammer makes central consoles, armrests, seat covers, headrests, and door panels. Increasingly, in North America, these are second tier components that are sourced by first tier suppliers with responsibility for large chunks of the interior.
The first tiers are reluctant to invest in new technology in these parts because their focus is elsewhere — on electronics or larger modules with a bigger payback. Grammer is not interested in acquiring these operations from the first tiers because its products demand a different approach.
Grammer, for example, foams headrests and then sews the cover on around the foam. In North America, most manufacturers use in situ technology – foam-in-place – where the foam is injected directly into the sewn cover.
Geyer says Grammer can manage both approaches. But its foam and sew approach, which is common in Europe, delivers the best quality, he says, without adding cost.
He sees the transition in technologies as a big opportunity for Grammer. The first tiers have in-house capacity they want to utilise.
“There is a very high level of interest,” says Geyer. “There is an awakening going on at the moment. If we continue to just focus on price,” says Geyer, “it will have its effect on quality.”
