A new joint venture has redrawn the map in one of the industry’s fastest-growing and more fiercely competitive sectors – front-end modules.
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The partnering of Hella-Behr and Plastic Omnium, the French bumper manufacturer, poses serious strategic questions for several suppliers. Among them is Valeo, Plastic Omnium’s partner in a joint venture that makes 800,000 front-end modules a year for the new Renault Megane platform.
Bumper suppliers such as Peguform and Dynamit Nobel, which are currently looking for new owners, also face a more uncertain future.
The new joint venture will be a powerful force in the industry. It will account for 1.25 million of the 3.5 to 4 million outsourced front-end modules assembled worldwide. Combined sales will total €350 million in 2004. The partners will bring together eight plants in Germany, the Czech Republic, Slovakia, Spain, Mexico and Korea.
Lippstadt, Germany-based Hella is a lighting and electronics specialist. Stuttgart-based Behr is a heat exchanger specialist. The two Mittelstand companies formed Hella-Behr Fahrzeugsysteme GmbH in 1999 to offer front-end modules to OEMs.
Within two years HBPO expects to deliver two million front-end a year to OE customers.
“The front-end module is on the verge of huge growth,” said Thomas Hedenborg, former CEO of Hella-Behr Fahrzeugsysteme and the chief of the new joint venture.
“There is a huge amount of new programs, new OEMs who are going down this road,” says Hedenborg. “We estimate that in five to seven years’ time about 30% of the cars will be equipped with a front end module.”
He says the potential market is around 15 million units.
Hedenborg says adding Plastic Omnium extends the philosophy that led to the creation of the Hella-Behr joint venture in the first place.
Changing regulations means OEs and front-end suppliers “have a number of new technical issues that need to be resolved – the major one being pedestrian protection” he says.
Active pedestrian protection will be required by 2010.
Marc Szulewicz, President of Plastic Omnium’s Automotive Division, says carmakers will need in-house competence in pedestrian protection.
Just assembling a front-end module as an outsourcing operation can offer a carmaker some economies, says Szulewicz.
But “we felt that if we could put all of what we know really together, not hiding anything, then we would be able to… succeed in optimising the interfaces between headlamps, engine cooling, bumpers, beams, and all the elements for pedestrian shock protection.”
The problem with project-by-project alliances, Szulewicz says, “is that when you collaborate with a company, you don’t put everything on the table.”
“You know this company is going to collaborate with one of your competitors next time,” he says.
Together, the three partners will contribute between 60% and 85% of the content of a front-end — which can range in price from €200 to €800. Plastic Omnium will contribute between 10 and 30% depending on the complexity of the pedestrian impact protection system and whether the bumper fascia is included in the front-end.
Plastic Omnium and Hella-Behr say they began looking for a partner or partners at the same time. They bid together on two projects before deciding to go ahead with the joint venture.
Both parties see similar advantages in the co-operation. Hella-Behr looks for a stronger presence with PSA and Renault-Nissan and Plastic Omnium looks for growth with German carmakers.
Both companies are happy with the cultural fit – Hella (sales of €3.0 billion) and Behr (€2.8 billion) are both larger than Plastic Omnium (€1.6 billion).
“But let’s say we are playing in the same league,” says Szulewicz.
And “the three companies are all family owned companies,” he says, though Plastic Omnium is also quoted on the Paris Bourse.
Szulewicz says: “this is important in terms of long term strategy and long term commitment.”
SupplierBusiness.com
