Nexteer, the former GM Saginaw steering division, has flourished under the ownership of China-based Pacific Century Motors its owner since 2011. Calum MacRae caught up with Nexteer’s president and COO Laurent Bresson at the recent NAIAS.
j-a: Nexteer has been very successful recently, 2013 revenues were up 10% H1 2014 were up 23%, what have been the drivers of that performance – is it more volume or value?
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LB: I would say several factors. One is volume – clearly a strong North America, some recovery in Europe and China relatively strong in 2014. Then there is new products and projects, with a significant backlog of new business that we have been awarded. The tipping point for us has been the change of ownership – in 2010 we were acquired by PCM – so we have stable owners and a long-term financial commitment. That has driven confidence into our customers that we are going to be here next year. Therefore, that confidence combined with an expansion of the product portfolio due to a 50% increase in R&D spending since the acquisition. In addition, of course there is the conversion of customers from hydraulic to electric power steering (EPS).
j-a: Do you see headwinds in the markets? There is a lot of talk about Europe again, the Russian situation, the Chinese market normalising etc.
LB: First, it is hard to know what is going to happen, as the world is really complex and volatile with geopolitics and the oil price. But I would say Europe we see being at its bottom about 18-24 months ago, it is a slow recovery but it is coming. It also depends on the customers and the products on which we are supplying. With China, I view it as moderate growth this year, clearly not double digit growth in the vehicle market, but for us we have the switch to EPS from hydraulic in that market and that’s our biggest challenge right now – meeting the demand for EPS in China, as there’s new fuel economy regulations and safety regulations that are all positively impacting demand. For North America we see it as very strong – oil prices right now are supporting the demand especially on trucks. Incidentally, 9 out of 10 trucks in North America are supplied with Nexteer’s EPS.
j-a: After the H1 2014 results were published, there was talk of Nexteer’s business growing by products that were customised for different markets, performance and price. Can you explain a little more about customising your products?
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By GlobalDataLB: Our business model is about achieving scale first of all. For us that means common building blocks for our steering products. Then we have specifics we have to tailor for different markets. Some regions will be more sensitive to NVH than others will. The big theme is around cost, especially in the emerging markets where we have to be even more cost competitive, which is why we have launched the brush motor EPS for entry level vehicles in 2014 on the SGM Wuling.
j-a: What is next in the steering technologies roadmap after EPS?
LB: There will continued development of different types of EPS. However, I would mention two main themes – one is mass savings, switching to lighter materials and using different joining and welding technologies. The other is around the safety of the products – cybersecurity is a major focus from the OEMs, self-driving cars, park assist, and lane keeping technologies. There are many opportunities with steering a major enabler of many ADAS solutions. Also, as a company we benefit in that we are very vertically integrated in terms of the design and the development of these new technologies – for example, we write all our own software, we design all the hardware; we have build-to-print design on the motors etc.
j-a: What percentage of your business is GM now?
LB: It is over 50%, but it will reduce with time. We want the GM business, but we also want to grow with other customers. And if you look at our order backlog, GM is a much smaller percentage than 50%.
j-a: How has it benefited your business in China being owned by a Chinese company?
LB: The benefit is indirect. The key has been the stability the company has given us. We combine the best of two worlds – HQ’d in Michigan, well known for over 100 years with western technology, but also knowing the Chinese market well. We used to lag behind the rest of the industry in market share. A couple of years ago China was 6% of revenue, now for the first 6 months of 2014 it was 13%, and the revenue increase was 49%.
Ultimately, the goal of the company is to have a balanced revenue footprint. So for example, China is expected to be around 25% of global production volume and our target is to match that share.
j-a: As well as steering, Nexteer counts driveline as a business unit. Is driveline a focus for the business too or is it a sideline? Is having just the two product lines enough to meet the company’s size aspirations?
LB: Well when you steer the car, the driveline links with all the steering components, so it fits as a business. As a business, our split is 82% steering and 18% driveline, and that is where we will generally remain, but driveline will grow with the business. For example, for halfshafts we have new global OEM customers
Having just the two businesses has advantages and challenges. Scale is critical – we have much bigger competitors, but as a differentiator all our DNA is steering and driveline where we have systems engineering expertise, and vertical integration from a design standpoint. We are smaller, but we can be quicker and more agile. But we are sensitive to this and we always look at ways and options to grow the company faster.
j-a: When you look at a competitor like ZF and their TRW acquisition, does that prompt a response at Nexteer in terms of growing an active safety presence?
For sure we are exploring the ADAS and self-driving car theme. Our strategy is not to be a ZF or Bosch sizewise; we need to be agile and responsive to customer needs. Quality end products are really the key.
j-a: In Europe, there is a movement to 48V electrical architectures so is EPAS ready to be part of the 48V circuit?
Well before there was 42V as the big thing, we talked about it ten years ago. But the key for us is you need expertise to get the highest torque output with 12V which enabled us to really supply all the segments – from Fiat 500 to full-size trucks – and Nexteer has pretty unique expertise in this. For us, if there is more power it actually makes it easier. In addition, of course there is a lot of discussion with OEMs everywhere and lots of R&D going into the new possibilities 48V could bring, like active chassis for example.
j-a: With EPS we see many times that the system is criticised in car reviews for not having enough feel, what is your response to those criticisms?
Really you can tune EPS anyway you like, steering feel is part of the vehicle brand’s DNA. Recently we have launched the Dodge Challenger and Charger, new Mini, BMW 1-Series all with our EPS system and they all provide lots of feel to the driver. In a blindfolded test these days you really cannot tell the difference between EPS and hydraulic power steering.
