Businesses caught in the Eurozone debt crisis can either head for cover and try to ride it out or, like German trailer producer, Krone, they can harness cutting-edge technological skills and combine them with an unwavering family bond to keep moving ahead.
When even the economic giants, such as Germany, have begun to teeter under the weight of the domino effect rippling across Europe, finding the most effective business mechanisms to maintain momentum will challenge many a CEO.
Some will hold their corporate breath, waiting for solid signs that the 17-nation Euro zone will stand behind the currency. However, Germany’s second largest trailer manufacturer, Krone, is not about to let the momentum on its enviable R&D and intensive-engineering reputation slide. Instead, as dire predictions of a contracting production level for the coming European winter gain strength, Krone will in fact spend more to promote its leading-edge science and technology.
After all, Krone’s reputation pre-dates not only the current economic crisis, but the one before that as well, meaning the company is well established in the global market. With international confidence in the Euro zone shaken, this is a prime business example of strong company reputation overcoming geography.
Krone is stable enough to continue the rejuvenating cure that was begun in 2007 as the global financial crisis began to bite, when the 29-year-old Bernard Krone entered the family business. Having cut his corporate teeth in very tough times, the son of Dr Bernard Krone has just assumed the role of CEO of Fahrzeugwerk Bernard Krone GmbH (trailer plant) in Northern Germany, in addition to his role as Chairman of the Management Board of Maschinenfabrik Bernard Krone GmbH (agricultural machinery plant). With the chairmanship of both the machinery plant and the vehicle plant, the planned long-term process for the strategic takeover of overall responsibility in the family business continues. He has been active in the family business since gaining his economics degree four years ago.
The up-and-coming principal Bernard Krone, tells Global Trailer that this current crisis-driven environment is the best management school imaginable. “The transfer of the company's management is taking place in a particularly difficult phase of the economic and financial crisis, but it is also an extremely interesting time. My father has left big shoes to fill, but I am confident that I can lead the company into the future. The next few years will see us continue to work on a daily basis to maintain our position as an innovation leader and benchmark setter,” he says. Bernard Krone is not only unfazed by Europe’s struggle to prevent a bond market meltdown, he is actively seeking the positives in the situation.
“Europe’s trailer market is in a stable state and we have gained a great deal of experience managing the 2009/2010 crisis. As opposed to the post-GFC phase, we were able to increase our revenue by about 170 per cent to €804 million in 2010/2011. We are observing the Euro zone crisis closely, but we believe that Europe’s economic development is strong enough to maintain that level.”
And, even if the Euro zone does contract during the winter season, Krone will be prepared, he says. “We can draw back on an equity ratio of 50 per cent and have a stable financial backup to endure a second crisis. But, we trust in Europe’s ability to re-establish trust in the Euro. However, we see a need for structural changes in the finance sector to provide the capital for future investments in the commercial transport industry.”
Apart from the ubiquitous problem of maintaining cash flow, the probing question, now, is whether Krone will maintain the ability to translate innovation into growth. “Krone’s unique selling proposition is cutting-edge trailer design,” says 33-year-old Bernard Krone. “Operators around the world are crying out for a product that is both efficient and environmentally sound and only constant innovation and market research can meet the challenge.”
During the GFC, Krone, like most companies in the manufacturing industry, had to make drastic sacrifices and reduce staff numbers, but those cutbacks did not affect the R&D or purchasing department. “We reinforced these sections because we knew that a combination of innovative design and reduced cost would prepare the company for the future,” Krone says. “We have learned the lessons of the past and we were well placed if the GFC hits Germany.”
Apart from maintaining a technology edge, one such lesson was implementing a conservative approach to assessing target markets. “We have always been confident in our ability to predict market development, but we may have become more cautious in the last year or so,” says Krone. He challenges the predictions of UK-based consultants, CLEAR, who predict 48.2 per cent growth in heavy trailer demand in Eastern Europe in 2011, lead by Turkey, Russia and Poland.
“We see stable demand in Germany, Poland, Russia and even Italy,” he says. “But, the Eastern European market seems to stagnate due to tight credit availability. And, market development in Turkey is satisfying, but nowhere near CLEAR’s prediction.”
Turkey, in particular, is one market Krone is keeping a wary eye on. In 2007, Krone signed a joint venture contract with Turkish company Doğuş Otomotiv to manufacture up to 10,000 trailers a year in a new plant in the town of Tire near Izmir. But, the €35 million investment stalled when the GFC hit Europe’s economy and it has only just been revived.
“Building a production plant in Turkey was a strategically important and appropriate step, particularly as the forecasts of the European Union assume a 40 per cent increase in freight traffic until 2025,” says Krone, not denying that the GFC has been a stumbling block on the way to capture the Turkish market. “And, most of it will have to be transported on the roads within the continent, forecasts say.”
Another important factor, says Krone, is that Tire is located in close vicinity to promising future markets such as the Middle East and North Africa. “It is our goal to be able to serve the Turkish scene by the end of 2012 as it is the gateway to a whole new marketplace.”
Turkish corporation Doğuş has been selling Krone trailers in Turkey since 2004, making Krone the number one brand for imported trailers and the second overall on the Turkish market. “Apart from the straining GFC-period, our performance in Turkey has exceeded our expectations,” says Krone. “But, I think we can still improve on tapping the full potential.”
In Germany, Krone is already working on a strategy to refine the product range to meet customer demand. “We’re constantly working on innovative solutions such as the EasyTarp system, a new side curtain based on a pneumatic central locking system,” he says.
“Using EasyTarp, the driver can operate the curtain at the push of a button. This not only reduces loading/unloading times, but also minimises operational risks, as the driver can’t be injured by shifting cargo anymore.” According to Krone, the EasyTarp system, which has been developed in co-operation with Australian company MaxiTrans, will save a company about 20 minutes per loading process – equivalent to a century in the world of high-end logistics.
In addition, Krone’s hopes are set on the Cool Liner VIP series, a refrigerated semi-trailer based on a vacuum-insulated panel. “We managed to translate the principle design of a thermos flask into large-scale production,” Krone says.
Krone’s vacuum-insulated panels ensure an extremely high insulation value at minimum thickness. Based on a pressed powder core, the insulation plate’s key component is micro porous silicic acid. In a special procedure the powder core is wrapped in a high barrier plastic film, evacuated and sealed. “We’re the first brand to employ that method and we hope it will jump-start post-crisis sales in 2012,” Krone says. He presented the new technology in late 2010 at the IAA. A whole new model, however, “is not in store at this point.”
In fact, Krone’s R&D department is now focusing on reducing CO2 emissions. “I think sustainability is the next big thing,” Krone says. ”The entire transport sector has to become more efficient and green. And, efficiency also comprises a new dimension of time management. That’s where EasyTarp comes into play. Now we just have to spread the message.”
This ability to take a basic innovation, deliver it at scale, and then refine it with second and third-order innovations plays a critical role in driving growth, he adds. To do all this, a company must be at the centre of cutting-edge technologies, market demand, talent, and entrepreneurial spirit.
And, as the composition of global demand has changed dramatically over the past few decades – many next-generation engineered products are in high demand not by US or European customers, but by those in Asia, North Africa and the Middle East. Krone’s mindset changed along with the growing markets. “We realised that a global expansion was a logical step to maintain growth at an early stage,” says Krone.
“The foundation of our success in emerging economies has been laid long ago, when the industry was still a regional one. A lot of European trailer manufacturers that have been focusing on their home markets only have been overwhelmed by the GFC,” says Krone. “This, in turn, has lead to a consolidation phase that was dominated by two German companies which now control the European market – one of them is Krone. In the curtain sider market, we are now leading the market and we are the runner-up in the field of refrigerated vehicles and dry vans.”
While business in Germany and Turkey is growing, Krone is observing the North African market to continue its successful first-come-first-serve strategy. “We sense huge potential on the African continent, but we also acknowledge that most countries still need time to develop a sufficient infrastructure that would justify exporting. “But, we keep observing the market and continue talking to our local customers to always be up-to-date.”
Krone has recognised that only an on-going exchange of information will allow a company to be in the right place at the right time, especially in a world where breakthroughs travel easily. The family company has never lost its close touch with the transport industry. “In fact, personal communication is our lifeblood,” Krone says. “If you want to improve efficiency, resale value and ease of use, you have to talk to those who use the product every day.”
In addition, Krone encourages the design team to study new developments in the automotive sector – especially in regard to building materials and aerodynamics. “That’s how we got onto the subject of telematics, such as tyre pressure and brake wear monitoring, and geo tagging. Telematics ensure that you are informed 24/7/365 about the status of your asset and of the goods loaded on the trailer. You have constant access to the position, the temperature and the technical information – from wherever you are,” says Krone. “We are investing constantly in improving such technology.”
Experience has shown that the innovative edge can really make a difference in the sales process – but only at a second glance. “The two key factors influencing every purchasing decision are tare weight and price. By establishing the Ultra series we have successfully launched a lightweight range that can outperform the competition in terms of payload and we keep optimising production processes and purchasing to maintain a low price level as well.”
Not only in the contested trailer scene, entrepreneurship is the magic that binds all these elements. And, while uncertainty about public policy and regulation may have left the competition awestruck, the Krone family is powering on by putting its faith in the hands of 33-year-old, who publicly announced that he would make Krone the contact no European haulage company can avoid, by focusing on globalisation and on-going innovation. “We should expect – and desire – that as prosperity spreads, more places will contribute to the development of modern transport technology and help improve technological knowledge,” he says. “At Krone, we will be the first to translate such innovation into volume production and finally, growth.”