Federal-Mogul has opened a new Asia-Pacific Technical Centre and headquarters in Pudong, Shanghai. The facility promises to play a significant role in the development of Federal-Mogul in the region and is integrated with the company’s global engineering network. just-auto spoke to Asia-Pacific vice-president Cornelius Fricke to discuss strategy and footprint planning.
How did you come to be in charge of Federal-Mogul’s Asia-Pacific operations?
Cornelius Fricke: My background is in mechanical engineering and my work with various automotive suppliers brought me to China more than a decade ago. During my time here I’ve managed joint-ventures with local Chinese manufacturers and worked with European companies building their presence in the region. I joined Federal-Mogul in 2008.
The company is in an interesting position here. It has been present in China for around 15 years, but its development only really began in earnest in 2005 when it appointed José-Maria Alapont as its global president and CEO.
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How has Federal-Mogul’s strategy for China changed?
Everybody at Federal-Mogul is now focused on being part of the growth in Asia-Pacific. China is clearly an engine for Asia-Pacific growth today and for the future. It has become the biggest car producer in the world and will build 15 million units this year. At present Federal-Mogul is averaging growth of 30% a year in China. We have 10 manufacturing locations that produce the company´s extensive portfolio and our target is to continue to grow much faster than the market.
Federal-Mogul has recognized that China is no longer an emerging market – its demands are increasingly sophisticated – but it is still developing fast. That calls for an approach that enables Federal-Mogul to grow in line with its customers global needs. Opening the Technical Center in Pudong is a milestone in our business’s development here that shows Federal-Mogul is committed to local engineering and development for the Chinese market.
How do the technologies Federal-Mogul produces for China differ from those for Europe? How quickly do you see the technology gap closing?
In Europe we are seeing tremendous sales growth in technologies that reduce engine friction and allow higher temperatures and loads without compromising reliability; Federal-Mogul has developed a strong portfolio of enabling technologies for engine downsizing.
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By GlobalDataIn China, demand for such technologies is not at the same level yet, but that’s chiefly because the regulatory requirements are different. But if you look at the industry targets that China is setting in terms of emissions and fuel economy over the coming decade, there’s a lot of convergence.
By 2015, China’s fleet average CO2 emissions should be around 154g/km, compared to Europe’s 130g/km. A recent government statement suggested that 95g/km of CO2 could be its target for 2020, the same as Europe’s stated aim. It’s possible that China might require that the technical solutions to arrive at that point are locally-developed. If so, Federal-Mogul is well-positioned to respond.
How much difference does a local tech centre really make?
The difference it is already making is enormous. We opened our doors to customers this summer and their response has been very positive. They came to inspect the facilities and brought orders with them: that shows the level of appreciation for local technical and development centre support.
Customers expect local engineering and the ability to deal with their issues without translation problems or loss of time. Anybody who has worked in China can tell you that Chinese customers expect fast development, but I’ve learned during my time in Asia that organizations also develop quickly here as well. Federal-Mogul’s R&D facility puts the state of the art equipment and people in place to satisfy the speed of development here.
How long before Federal-Mogul uses China for global development?
That will happen more and more as we increase our capabilities and technical teams. The next two years will be a learning phase with mainly application work before the facility also develops a product development role. We need to build experience, but in one or two years it will be at a similar level to Federal-Mogul’s other 17 technical centres.
The company will follow the same strategy in China as it does in other parts of the world. In Europe and North America we develop products in the region, for the region. China will be the same.
How concerned are you about intellectual property rights?
Some suppliers are anxious about bringing technology and know-how to China. We’re not unduly concerned about that. Federal-Mogul is working with others in the industry to protect our brands and technology so that customers get the value they expect from our brand.
How does Federal-Mogul plan to expand its R&D footprint in the region?
When we see an opportunity to grow, we take it. Our powertrain work is growing very fast. Chinese manufacturers’ efforts to improve fuel economy and emissions mean there is growing demand for Federal-Mogul’s pistons, piston rings, cylinder liners and bearings, where we can offer levels of expertise that our local competition cannot. This expertise is applicable to passenger cars and commercial vehicles. We have leadership in both market segments.
Champion is a massive global brand in spark and glow plugs, but, in China, Torch has 90 percent of the market. How can an automotive component manufacturer compete with lower cost local competition?
Federal-Mogul has world-class products that satisfy 100 percent of our customers’ needs. We have local manufacturing and can offer value for money to our customers. The Chinese vehicle market is going through transformation with millions of three- to five-year old vehicles about to enter the aftermarket and requiring customer repairs. The newer vehicles will want OE quality and we will deliver it with performance brands like Champion. The key is to compete on value, not price alone.
Our leading position in friction was established in this way. Our achievements in brake pad products came by introducing new technology and building capacity. The faster, the better in this area. In terms of development, that means having local dynamometers and vehicle testing capacity so that you can develop and validate friction formulations for customers’ individual applications, sooner.
How does Federal-Mogul plan its Asia-Pacific development footprint? What are the challenges in planning a development footprint in China?
Shanghai is an excellent central location to support the Asia Pacific region, including customers in Japan and Korea. We will expand further as demands increase.
Development capacity is determined by equipment and human resource capacity. Customers in China expect development cycles similar to other regional markets. When a contract is signed, capacity needs to be in place. It’s easy to have over-capacity, to invest without a confirmed order, so we have been careful to install flexibility to grow in line with our planned growth.
We also leverage our global network. In Europe the company is involved in a huge amount of basic engine testing work that Shanghai is helping to support. For friction products, Europe helps China by absorbing some of the peaks in demand for testing.
How will you integrate the new technical centre with the rest of your global network?
The Asia-Pacific Center is one of the company’s 18 globally-networked engineering and technical centres. R&D responsibility rests within each of our business units and is well coordinated to ensure that we achieve product leadership at a competitive cost.
We have global teams engaged in simultaneous engineering on projects with frequent data exchange. Focused around product and process competencies, they can work interdependently on any number of customer powertrain programs and vehicle platforms.
There are many very talented engineers in China and they have a drive that can achieve remarkable things. Being a truly global business able to support our customers anywhere in the world allows us to offer all our engineers opportunities to experience other locations. So I’m looking forward to developing both an international community of experienced people here in Shanghai and to offering our local engineers an opportunity to learn from other Federal-Mogul sites.
