Hayes Lemmerz International Inc is a major global supplier of automotive and commercial highway wheels, brakes and powertrain components. Over the last decade, the company has expanded geographically, broadened its product range and branched out to supply heavy truck makers. Continuing just-auto’s series of Q&As with automotive component manufacturers, Matthew Beecham talked to Fred Bentley, Chief Operating Officer, President of the Global Wheel Group, Hayes Lemmerz International Inc.
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just-auto: Could you talk us through the rationale for the merger of Hayes Lemmerz’ North American Wheel and International Wheel Groups into the Global Wheel Group?
Fred Bentley: “The main driver behind the merger is that most of our customers today look at sourcing strategy as a global decision. They would like us to have one voice, whether it is in Asia, Europe, South America or North America. It made sense for us to have alignment in our global business, to have our technical development going the same way and most importantly, to respond to what the customer is asking us to do.”
just-auto: We’re seeing a number of wheel manufacturers hit hard times lately. Since Hayes Lemmerz has emerged from Chapter 11, what shape is the Company in today?
Fred Bentley: “If you look at the first quarter of 2007, we were off to a good start. We had year-over-year earnings improvement. Our first quarter was strong. We have given guidance for the full year that looks like we are going to have a pretty good year. The most important thing is that a lot of action that we have taken over the past six years has put us in a much stronger position today. For example, we closed most of our North American aluminum wheel capacity over the last several years. We have divested some of our lower performing businesses and invested in some of the lower cost regions. The result of these actions are beginning to show-up in our financial result. This year we have spent a lot of time on re-financing the Company and working on our balance sheet to improve the health of our company going forward. In Europe, the aluminum wheel market is currently in a tough market, but we have been ahead of this so far, although realize that there is still a lot of work to do.”
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By GlobalDatajust-auto: What are your business targets for the Global Wheel Group?
Fred Bentley: “The three things that we focus on are making sure that we are a low cost manufacturer, that we are close to our customers, and that we have great people doing that. If you look at some of our results in the Global Wheel Group business, we have had better than industry growth over the past few years. I would expect to continue along those lines.”
just-auto: In terms of your Global Wheel Group’s overall investment fund, where is it being mainly spent at the moment?
Fred Bentley: “In 2007, investments are in Turkey, India, Thailand and the Czech Republic. In 2006, we had two plants in Turkey and we opened a third one. Most of the upfront investment in Turkey was last year, and this was finalizing the facility to bring it up to its 1 million wheels a year capacity. The investment this year in Turkey is taking the plant to its next level of capacity. One of the things that is nice about our Turkey operations is that it is capable of serving both Asia and Europe.
“Turkey itself has over 1 million cars produced every year and so it is a strong growing economy. This allows us to support the local market, but also export. It is important to understand our strategy. If you look at where we build our plants, we are in locations that have strong local markets. Most of our locations are to support local markets, but we will also export a little bit.”
just-auto: What about China?
Fred Bentley: “We have steered away from China because the dynamics are different than in most markets in the sense that in wheels, specifically aluminum, there is over-capacity, and most of what the Chinese alloy wheel manufacturers are doing is focussed on exports. For Hayes, we believe that, first, from an investment standpoint, it will not return the cost of capital that we have in our business, and secondly, it is an over-capacitized market that is extremely price sensitive. Although it is a very large market, we do not believe that it is a very profitable [wheels] market.”
just-auto: As we understand it, Hayes Lemmerz has plans to expand in the Russian steel wheels market, too, through its license agreement with TZSK. How is that progressing?
Fred Bentley: “It is still early. We have a technical agreement with our partner right now. And we are working toward growing that relationship over the course of the next few months.”
just-auto: What are the other challenges facing the wheels industry?
Fred Bentley: “The challenge for us is to stay ahead on technology and to be at the forefront so that products are fresh and that we are able to meet the changes in the market. If you want to play on just price and being just a low cost manufacturer then it is hard to compete.”
just-auto: Is there much room for further consolidation in the wheel industry?
Fred Bentley: “I think that depends on market, and by product. For example, in Europe, today there are basically three steel wheel manufacturers and there are about 18 manufacturers of aluminum wheels. So the answer on steel is, probably not much on consolidation, and on aluminum, probably a lot which has driven a number of the recent results where a number of our competitors have been bought and some consolidation has started.”
just-auto: Could Hayes Lemmerz take on some of these alloy wheel makers?
Fred Bentley: “Our target over the past few years has been to grow organically through expansion, and then, to divest some of our non core assets. We have worked hard to improve the balance sheet as well. The reason that we did all of this was, to be positioned so that if the right opportunity came along, we could take a good hard look at it. We are working on the: “what do we do next?” So it is too early to answer your question specifically, but it is something that is on our plate to answer over the next several months.”
