SAF-Holland’s battle call

Since Rudi Ludwig has chosen to step down as CEO of SAF-Holland Group GmbH on 30 June, Detlef Borghardt (48) is leading the multi-national corporation. The aspiring engineer loves fast decisions and considers speed an important element of modern-day management. Therefore it is no surprise that Borghardt did not hesitate to call out an ambitious agenda.

Despite his young age, Detlef Borghardt is no typical careerist. In fact, his career in the automotive industry began on the base level as a car mechanic. After studying vehicle design in Hamburg, Germany, he started off at Alusuisse-Lonza, learning the ropes in the product development and sales division before becoming a member of the management team. In 2000, he came to SAF-Holland and ended up working in the global sales, marketing and customer service department. He then joined the management board in 2007 and was made deputy CEO at the start of 2011. Global Trailer met Detlef Borghardt at the SAF-Holland head office in Germany. 

Q: Do you think that starting out as a mechanic has helped you in pursuing a management career?
A: Yes, very much so. To be successful, you have to speak the same language as the client. It doesn’t matter whether it’s the aftermarket or OEM sector – if you have a technical background and know how to change a brake pad or how much grease to use, you meet the client at eye-level.

Q: Starting off as a car mechanic, you have become CEO of a multinational corporation. How would you describe your work philosophy?
A: You have to be open-minded, honest and avoid taking detours. Therefore I always encourage people to be straightforward. There is no need for hesitation or strategic considerations – just tell the truth. I believe that honesty is very important in today’s business world, and it is one of my key principles. Don’t try to cheat people.

Q: Did the industry’s character change since you started your career?
A: I think the commercial transport industry is more globalised today. As opposed to the truck industry, which has begun operating on an international level long ago, the trailer sector has always been a very regional one and is still developing on a global scale. Companies have started to cross borders and think internationally. It’s not uncommon to travel to China to establish a business partnership or source material in India or Russia. In addition, people have become more flexible – and I believe that they love working for a corporation that is able to overcome national boundaries.

Q: SAF-Holland just founded a subsidiary in Turkey, SAF-Holland Otomotiv. How important are Turkey and the Middle East for SAF’s portfolio?
A: We believe that Turkey is becoming more and more important. We started off at the Bosporus almost 13 years ago through an agent, but since the country has grown to become a major market in terms of trailer sales, we decided to open our own subsidiary. The main reason is that the Turkish trailer manufacturing industry is changing – local companies do not only occupy a niche anymore. It’s an export-oriented business now. In fact, the pure volume of trailers produced in Turkey and the Middle East is so big that we simply cannot ignore the market. Looking into the future, we believe that the market will keep growing. The GDP in Turkey grew about nine per cent last year, the population is young, and there is a lot of investment in infrastructure. Hence there is a demand for transportation. In addition, the Near- and Middle-East is growing as well. That’s why the Turkish branch and our new subsidiary in Dubai which we opened in August are the perfect bases to serve the region.

Q: Do you think you’re at the forefront of a new trend?
A: There is probably one more company that is able to keep up with our current pace, but I think most of the competition is behind. In the long term, we might even start a production base in Turkey. The main reason is the huge sales volume we expect, so we need to be more flexible to serve the Middle East and the area south of the former Soviet Union in a cost effective way. And since companies like some big trailer-OEM’s in this region are gearing up as well, we definitely see the need to act.

Q: SAF-Holland has just begun to centralize the spare parts supply in Germany and North America. Which signal do you intend to send to the market?
A: The main reason to centralise the aftermarket business is to improve the supply. We want our clientele to have one contact, one invoice and one shipment. In the end, we will be more flexible, more cost effective, and we are able to guarantee increased availability. So we are not cutting down on resources, we are increasing effectiveness.

Q: Is the philosophy of centralisation and stream-lined processing a global one?
A: No, the world is too different. In Australia, for instance, one central warehouse would be a bad idea because of the cast country. In that case, de-centralisation is the way to go.

Q: How is SAF-Holland dealing with the current market situation – an optimistic German economy, a palpable slowdown in the US and a nervous stock market?
A: It may be surprising, but we do not see a slowdown in North America at all. In fact, we experience increasing demand in both Europe and the US, and we didn’t hear anything about a decreasing utilisation so far.  I believe the anxiety in the stock market is driven by speculation, and there will not be a new recession as order intake has remained on a high level.

Q: History has shown that rapid growth after a downturn can cause a supply shortage…
A: Yes, there is a bottleneck in the casting industry, for instance. Most suppliers decreased capacity in the recession, and now it is hard to catch up. But we have at least two suppliers for each and every component, and so far, we have always been able to serve our clientele.

Q: You mentioned before that the current build rate is ramping up in both Europe and North America. Where is the global market heading?
A: We undertook an independent market study in early 2011 as a basis for a major capital increase. It is based on a vast number of in-depth interviews with industry experts around the globe who predict a double digit growth in trailer production in Europe and the USA every year until 2015. China and South America  will grow about five per cent a year,  India and Russia about ten per cent. Overall, the global market will grow about seven per cent per annum until 2015.  And the truck market will grow about 5 per cent as well. If we don’t experience an unforeseen crisis, I am very confident.

Q: So the market is ready to go full steam ahead?
A: I don’t know, maybe it would be smart to hesitate at this stage. On the other hand, the capacity is already there since 2007, at least in Europe and the US, so there is no real need to make an investment to keep up with growing demand. China and India, though, will have to catch up. For us, the motto could definitely be ‘full steam ahead’, though. Fortunately, we increased our capacity to serve the European market in 2007-08. Therefore, there is no real need to make huge investments to keep up with growing demand for our product range in Europe and fifth wheels for the US truck market. But I am sure we will invest in line with our strategy planning until 2015 to further grow our axle business in North America.

Q: Many international companies edge into the Brazilian and Indian market at the moment. Do you feel any pressure?
A: These days, we focus on our core market, North America and Europe. That’s where we earn money and make profit, and where we know what to do. We also observe China, Brazil, and Russia, of course. In fact, we have already invested in Brazil and China to satisfy the demand in the BRIC countries. India is also on our to-do-list.

Q: What will SAF-Holland be able to maintain or even gain market share?
A: We have a very good feeling about what we’re doing today. To maintain our position and maybe even grow, we invest a lot in R&D as we believe in an advanced product range that can provide a real benefit for the client.
But we also keep in touch with the end users who, eventually, create the demand. That’s why we centralised our aftermarket business, for instance. We want to solve problems, not create new ones. Therefore we empower our people all around the world to stay in touch with fleets and solve problems as soon as they occur. Therefore, you need to have a certain size and invest a certain amount of money.

Q: We have seen a big circle in the type of bearing used in hubs. From the original two-tapered roller with a nut to the modern cartridge now back to two high tolerance bearings and a sophisticated nut. What is your current philosophy here?
A: In Europe, SAF invented the cartridge bearing in 1996, offering a one-million-kilometre warranty on the hub unit. Today, the cartridge bearing is standard in Europe., and we still believe in the system as it is both cost-effective and innovative. In North America, though, the industry is sceptical about the technology. Therefore we continue to offer the cartridge bearing in North America. But we’re not missioners. If the market does not want a cartridge bearing, we will be prepared and offer an alternative system. Nonetheless, we would like fleets to test the cartridge bearing since we believe it is the most sophisticated solution. But we won’t say we’re the kings of cartridge bearings. If you want something else, we have an alternative on offer.

Q: How does such scepticism affect the conversion from drum to disc brake?
A: The conversion from drum to disc will depend on the truck industry. We can see the change, and if it continues, the trailer market must follow. It’s a must if you don’t want to destroy the truck braking system. We have made that experience in Europe. Therefore we see the disc brake percentage grow. Today, ten to 15 per cent of our US production is disc already, and we expect the trend to continue. I don’t know how fast the US market will change, though. China might embrace the disc brake earlier than North America.

Q: You always say that you believe in an integrated system only. Why?
A: We don’t believe in tightening bolts. Such technology is antique; you should not touch the connection between axle and suspension.  I don’t say competing systems don’t work, but an integrated system is the state-of-the-art-solution. Our system is cost-effective, lightweight, and easy to maintain. That’s the key advantage.

Q: The majority of the global trailer market is still using mechanical suspension. How do you serve it?
A: To be honest, the mechanical side has been neglected since air suspension entered the market, although it will remain the suspension of choice in China, South America and India. That’s why we changed our mind in 2008 and began to invest in the mechanical suspension again. At the moment, we are developing new mechanical suspensions to suit various markets around the world. We do not have a global one-size-fits-all approach, though. Each market, freight, and client is different. That’s why we keep testing different, weight-optimised systems that we believe will be the benchmark when we launch them.

Q: Based on this information, which product will you bank on the future?
A: We have a different approach for every market. In March, we launched a new air suspension family in North America, named Fusion Beam. It’s a combination a cast beam and a fabricated end. It’s nothing new, but we were able to combine two well-established technologies to create the ultimate solution. The casted beam has proven itself in America, and the fabricated one is successful in Europe. The new product can offer the best of both worlds – it is weight optimised and easy to handle.

Q: Why?
A: Because they combine well-proven design and innovative ideas. Most of all, we focused on weight reduction and increased simplicity to ensure easy maintenance. And due to the fact that most systems around the world are outdated, we believe it is the right time to offer a new product, especially in combination with our true and tested axle technology. We are very optimistic about our approach. In Brazil, we will launch a new mechanical suspension system at the Fenatrans exhibition in October, and South Africa will follow very soon.

Q: You have revealed an ambitious agenda, but there is no prognosis for the future without examining the status quo. Which market position do you occupy at the moment?
A: I know that we are one of the top three in North America – I daresay we are runner-up after Hendrickson, who have been in lead since the beginning of the air suspension. But the clientele has begun asking for an alternative. We have been an alternative in the past as well, but on a small scale since our product range was limited. Yet the new range is more versatile, and we have achieved at least the same weight or even less. As result, we can now offer a complete system including our own axle. I think such a holistic approach will make us gain market share.

Q: An outright battle call?
A: I would say so. North America is one our most important markets. The next year or so will see 220,000 plus or probably up to 300,000 trailers being built, and we would like to have a fair share of that.

Q: Meritor just left the European market. Does that move play into your hands?
A: I don’t know yet.  We have to wait and see what will happen in America, but I think it’s good for us.

Q: In how far will it affect your global market share? Where do you see yourself today?
A: It’s always difficult to talk about market share, because the question is whether you talk about production volume or actual sales. If you talk about mere volume, Fuwa is the sole number one. But if you talk about sales, it is different, especially because we sell an integrated system. In 2010, SAF-Holland generated a sales volume of €630 million, this year we will achieve up to 25 per cent more. Some of opposition cannot present such a figure. I think in that respect, we are globally among the top three in trailer axles and suspensions; and among the top two in landing gear, king pins and fifth wheels as well.

Q: Talking about numbers, can you estimate what percentage of the market uses air suspension?
A: According to an independent study, about 65 per cent of the North American market used air suspension in 2010, and that percentage will grow to 70+ per cent until 2015.  In Europe, almost 90 per cent used air ride in 2010, and the percentage will not change in the near future. In 2010, about 10 per cent of all Brazilian trailers were equipped with air suspension, and the cut will grow to 18 per cent in 2015. We also know that China and India are on a comparable level. For us, such information is gold, as we now know that the majority of the global trailer market will still use mechanical suspension in 2015. And if you would like to be a global player, that’s one of the battlefields.

Q: Will you be able to meet the demand if the build rate is ramping up on a global scale?
A: Yes. In the US, we are almost sold out on trailer axles for 2011, but we are prepared. That’s why we invested into the operation to double our capacity in 2012.

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