That smooth, supple leather that connotes luxury and a sense of wellbeing in the most exclusive cars in the world has organic beginnings and endings. Beef producers harvest their animals for food, then sell the hides to leather makers in varied industries.

Leather makers such as the Michigan-headquartered Eagle Ottawa (EO) take it from there, adding their own imprint. EO, which began in 1865 producing goods for the horse and buggy trade, has grown into the world’s largest leather producer. It has a 20% share of global leather markets. The company began supplying upholstery to the automotive sector in 1910 and the business now comprises almost 95% of its portfolio. GM, Ford, Toyota, Honda, BMW and Mercedes-Benz are among the 30 auto-makers and 100 brands served.

Advertisement

EO creates customised grains, textures and high-durability performance leather for customers. It manufactures finished hides, leather parts and interior leather solutions using a complex 24-step process. To serve customers globally, the company operates in South Korea, China, Japan, Europe and South America. It also has three key supplier partners in South America and Mexico, so it can run leaner in higher cost regions.

In the worst global economic crisis in 80 years, the company faces challenges as it expands into new markets. “We’re trying to get positioned for the next two to three years of a global downmarket and at the same time to become as efficient as we can,” says Jerry Sumpter, EO’s CEO and president. “We want to hit competitive price points in order to win business, but make a nice piece of leather that’s distinguishable from imitations.”

That means maintaining stringent quality, reliability and dependability (QRD) standards that set automakers’ interiors apart from their competitors. “You can cut back on QRD processes but in the long term it works against you,” says Mr Sumpter. “We have to make ourselves cost-efficient but maintain the embodiment of fine leather.”

Tightening up

However, reality is a stern teacher. Total EO revenues were $500m last year, falling 15% compared to 2007. Despite the deep loss, the company continues to protect its R&D edge and its leadership in leather expertise by combining old world craftsmanship and new world technology.

To keep a competitive edge, the company invests about 4% of its global revenues in R&D, and that figure will not drop in 2009, says Mr Sumpter. “The advantage to our global operating footprint is the access to raw materials that enables us to produce a wide range of products – from luxury to economical leather – to meet our global customer needs,” he says.

Juarez, Mexico, is EO’s North American production centre. The company, last winter, closed its Waterloo, Iowa, plant in the US to cut costs in response to the economic meltdown.

In 2007, EO supplied about 1 million non-chrome hides for more than 600,000 production vehicles, across 100 different models. In 2008 that figure was 800,000, despite the faltering economy.

The economic slump hit hard last November but Craig Tonti, EO president for the Americas, says that customers are not cutting back on leather interior investments. “Since November, we’ve had very few calls from customers to take penetrations down. They know they put leather in a car to sell vehicles. If you de-content and take leather out of luxury cars you’re going to change the vehicle’s image,” he says.

Tim Brennan, vice-president for innovation and marketing, adds: “We’re actually seeing more opportunities because of the current economic situation. Manufacturers prefer to stay with companies with a strong balance sheet that are more established.”

COMPANY PROFILE

EAGLE OTTOWA

Headquarters

Auburn Hills, Michigan, USFounded

Began as Eagle Tanning Works in 1865; merged with Ottawa Leather Co in 1916Employees

Approximately 4000, across 40 global locationsR&D facilities

Testing facilities in Rochester Hills, MichiganPlant facilities

Cascavel, Brazil; Buenos Aires, Argentina; Juarez, Mexico; Szolnok, Hungary; Shanghai, China; and Rochester Hills, US