The years 2008 and 2009 were not kind to the car industry. As businesses around the world struggled to survive the downturn, almost one-third of tier-one car suppliers in the US were facing bankruptcy, according to global consultancy AT Kearney. Massive job losses followed, as the industry sought to reduce outgoings. 

Car sales plummeted to near-record lows and austerity reigned after the collapse of US carmakers. Suppliers dramatically slashed costs and capacity as a result, mirroring their the behaviour of customers.

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Three tier-one US suppliers who survived the economic crisis say they recovered after adopting strict cost control measures and realigning internal practices. These rebounding supplier groups are now investing in their business units, primarily in the Americas and the Asia-Pacific regions.

Bosch's technology focus

Automotive engineering company Robert Bosch felt the brunt of the downturn, but came back stronger. Headquartered in Gerlingen, Germany, the firm is the world’s largest supplier of automotive components and industrial technology, with facilities in 60 countries. When the downturn hit, global sales revenues in its automotive technology sector fell 18% in 2009 to €21.7bn from the year before. But as the recovery took hold, revenues rose 29% to €28.1bn in 2010.

Dr Werner Struth, chairman of Robert Bosch’s US subsidiary and management board member of Gerlingen-based Bosch, believes past lessons must be kept in mind as another period of global economic uncertainty looms, especially in Europe.

“Clearly, the recession the industry experienced in 2008 to 2009 was the worst we have seen in the past 60 years,” says Mr Struth. “The storm clouds are brewing once again with the escalating financial crisis in Europe. It is a sobering situation that we are watching intently. The learnings from the past and uncertainty that lies ahead demonstrate its urgency and relevance. This [situation] is also affecting Germany, even if we still anticipate that the German economy will grow by 1% this year." 

Key to the 126-year-old company’s comeback was investing in new technology critical to carmakers. In 2011, privately owned Bosch invested €4.2bn in R&D, representing 8.1% of sales. About €3.3bn of this went into technology alone. “R&D investment helped us prepare to move into the economic recovery in the strongest position possible,” says Mr Struth.

As a result, Bosch had a record-setting year in 2011, posting global total sales revenues of €51.5bn. Its North American headquarters in Farmington Hills, Michigan, reported its highest regional sales in a decade of $9.8bn, up 11% from the previous year.

Car technology comprises Bosch’s largest sector, 60% globally. Its car sales revenue exceeded €30bn in 2011; a record. This year, its sales revenue per vehicle worldwide will reach nearly €400, according to Bosch's projections.

“Bosch’s product focus is on internal combustion engines. In the long term, we see all powertrain paths converging toward a full electric vehicle,” says Mike Mansuetti, president of Robert Bosch’s US subsidiary. “We are working to improve fuel economy of gas engines by up to 30%... and clean diesel also is seeing growth.”

To react quickly to market fluctuations, Bosch adheres to recession-tested internal measures. These include examining expenditures to ensure they meet certain criteria, such as being vital to the company’s long-term growth and true to its core values, such as sustainability and staff retention. Other measures include reducing capacity and staff only when needed. Mr Mansuetti says Bosch reduced its headcount worldwide by about 11,000, or 4%, to 271,000.

Bosch leaders believe the crisis lessons apply to any business. “As we have acquired or partnered with various companies over the years, we have had the opportunity to look inside [many] operations, some of which were managed exceedingly well. What we found is this strategic approach is scalable and can be adopted in virtually any size of company to maximise momentum and deliver results,” says Mr Struth.

Hella’s aggressive investments

Hella, a leading supplier of electronic lighting products for the automotive industry, was able to handle fiscal setbacks earlier than most. The company secured long-term global financing and issued a bond offering in late 2009. Stabilising its automotive sector, the company is shifting gears to further develop business in the Americas.

“We see tremendous potential for growth in the Americas for both electronics and lighting during the next three to four years,” says Dr Martin Fischer, CEO of Hella Corporate Centre in Plymouth, Michigan. Hella's parent company is based in Lippstadt, Germany.

At the end of May this year, Hella reported record earnings of €4.8bn for the year to date, 9% higher than the equivalent period in 2011. Hella’s preliminary earnings before interest and taxes for this period grew to €613m, from €565m in 2011.

Mr Fischer projects that Hella will sustain 5% to 10% growth in the next few years. The company has more than 2500 employees in the Americas, but that number is expected to grow by 30% or more by the end of 2014. Global employees number about 25,000 in 70 locations.

Hella is making aggressive investments in Brazil and Mexico, according to Roger Ventosa, the lighting director at the company's Mexico and South America operations. In Brazil, Hella is partnering with São Paulo-based Emicol, a major producer of electronic and electromechanical components, to produce body-control modules for one global automotive manufacturer. Production is expected to start by next year at an Emicol facility in São Paulo.

And in Mexico, Hella is expanding manufacturing, with the investment of $97m in a 20,000-square-metre facility in Irapuato to produce headlamps and rear-lighting systems. This is expected to open in mid-2013. The company is also adding 5100 square metres to its San José Iturbide electronics plant near Mexico City, and opening an R&D centre for lighting technology in Guadalajara.

Behr America’s CEO shuffle

Meanwhile, Behr America, another supplier hard hit by the economic meltdown, staged its recovery by replacing its CEO. Behr America is a supplier of air-conditioning and engine cooling systems based in Troy, Michigan. Its parent company is based in Stuttgart and employs some 17,400 staff at 36 production centres worldwide.

“With the onset of the crisis, our sales volumes dropped dramatically and losses were climbing. Behr put its turnaround plan in motion, accelerating its cost optimisation project,” says Wilm Uhlenbecker, Behr America president and CEO since October 2011. He had served as vice-president of operations after joining the company in 2007 as vice-president of cost reduction.

“Cuts were made in all our locations. In manufacturing, we are largely performing higher than in pre-crisis levels. In engineering and other supporting functions, we had significant cuts and are now on the path of recovery,” says Mr Uhlenbecker.

Now expansion and investments are on the executive’s mind. “We are realigning our activities in Brazil and South Korea. Some of our European plants also will be repositioned to shape them up for new business,” says Mr Uhlenbecker.

Two new locations started production in 2012: one in China to capture domestic market growth, and one in the Czech Republic to create competitive cost structures for components and modules.

In North America, Behr houses plants in Ramos Arizpe (Mexico), which saw recent expansion; Dayton, Ohio; Fort Worth, Texas (service and distribution locations); and Charleston, South Carolina. Dayton’s restructuring included facility upgrades and cutting production to one plant instead of two. Revamping Charleston brought new technology (exhaust gas recirculation), equipment and layout changes to optimise material flow.

“Rapid volume recovery and new launches are in focus. Acquiring new talent is also one of our stated challenges,” Mr Uhlenbecker says. Behr America’s sales climbed 35% from $554m in 2009 to $749m in 2010. Sales in 2011 rose 19%, year on year, to $894m. 

The global economic crisis has bitten hard for carmakers, forcing businesses to shake up their business practices. While spending cuts have been universal across the car industry, firms have been investing strategically. Bosch has focused spending on new technology, while Hella has channelled investment into expanding its manufacturing base in the Americas. Behr America has also seen cuts, under the guidance of a new CEO, but is now returning to prosperity.