In January 2013, German powerhouse Krone took over family-owned axle manufacturer Gigant in a move to in-source product expertise and create new synergies in the field of purchasing, manufacturing and aftersales service. But what first seemed to be a common takeover soon turned out to be the start of something much more innovative.
To understand just how shrewd the new alliance is, it’s important to acknowledge the industry’s rediscovery of vertical integration in the wake of the Eurozone crisis – be it to gain more control over raw material and parts supply or to boost strategic differentiation. Most often, a corporate Goliath would take a rather forthright approach to tie down a supplier for the long term – for example by playing them off against the competition or bringing them into the fold through acquisition. But the Krone/Gigant deal showed us there is a less hostile option – collaboration.
According to Markus Gehle, second-generation Managing Director of Gigant, the Davids and Goliaths are more than capable of leveraging each other’s strengths and perspectives to ensure everybody wins – even in a time of increasing economic pressure. Rather than swallowing Gigant whole, Krone not only preserved the brand’s innovative DNA, but actively disseminated it across the Group.
Q: Mr Gehle, Gigant just completed the first full business year as part of the Krone Group. Are you happy?
A: Yes, very much so. We have reached our target for the first full business year after merging with Krone and we still see growth potential for the time to come, so we’re very satisfied with our current situation.
Q: Obviously much has changed since Gigant joined the Krone family. How did you experience the transition period?
A: The first task was integrating the Gigant brand into the more complex Krone structure, which went really well as our entire team was very supportive. The Krone management was extremely helpful throughout the transition period too – so much so that we now consider Gigant part of Krone. For me personally, not much has changed. Yes, there are a lot more meetings than before as we re-set our goals in line with Krone’s overall strategy, but my job is still the same and very enjoyable.
Q: Krone may appear to be somewhat of Goliath compared to David-like Gigant, yet there are more parallels than one may think. For instance, both businesses are family-run.
A: Correct. The fact that both businesses were family-owned did help during the acquisition phase; as did the fact that we are both from the same region in Germany, which means we share the same attitude towards business, family and community. I am convinced the integration process would have been a lot more difficult if we had come from a different regional background.
Q: Please elaborate…
A: Both Krone and Gigant are fully aware of the responsibility they have for the local community and take that role very seriously. Bernhard Krone, for instance, attended all staff meetings personally and thereby won our team’s trust and respect fairly quickly. The fact that Mr Krone always delivered on what he promised throughout that process helped immensely, of course. It’s been a great experience.
Q: It’s not a classic takeover as we know it though. What’s different?
A: Obviously there is a certain perception in the market if a large-scale company like Krone is taking over a mid-sized family business like Gigant, but Krone motivated us to retain Gigant as a standalone brand. As a result, we didn’t really change our product portfolio at all; in fact, we will expand it to provide even more value to our clientele. The Gigant brand will remain as strong as it was.
Q: But there must be some sort of interaction behind the scenes?
A: Naturally being part of the Krone Group is a plus from a business perspective as there are new synergies in sourcing, procurement and so on. Plus, each company brought news expertise into the partnership that we all benefit from. For example, Krone is very strong in assembly and coating, which is know-how we look forward to utilise. That’s also why we’re having a lot of joint meetings recently where the Gigant management is actively involved in decision making processes that go beyond the actual Gigant brand, so Krone can benefit from our expertise and vice versa; which is exactly what we tried to achieve when we first considered joining the Group.
Q: Speaking of collaboration – one product that has everyone talking is the Krone axle. When will we see the first Krone-branded Gigant axle?
A: I think it’s no secret anymore that there will be a Krone-branded axle on show at the IAA trade show in Hanover – it’s just a logical development. Despite retaining our independence as a brand, we actively want to help Krone develop its own portfolio, of course. To ensure we manage that balancing act, the Krone axle will only be made for Krone and won’t be featured on our separate Gigant stand.
Q: Which doesn’t mean there can’t be a volume model on the Gigant stand too…
A: Indeed, but I think that’s probably a post-IAA project given how busy we were with the Krone product. But we will certainly use the lessons we learnt when developing the Krone axle to improve our own Euro model.
Q: Which direction will the Gigant brand take under the Krone umbrella? Can the Krone-inspired Euro axle help it expand globally?
A: Yes, why not. The next generation of the Euro axle will certainly help us expand globally, especially if we look at the possible synergies we could create through joint sourcing and economies of scale. At the moment, Gigant is still a very central European brand, but the global market is slowly becoming more interesting for us; there sure are a lot of exciting opportunities out there.
Q: Where do you see those opportunities? Are there any underlying trends you would place a bet on?
A: I believe the current focus on environmental friendliness in the truck market will also affect the trailer segment – that’s why we will continue to look at energy recovery technologies going forward. The second main trend is weight reduction. The axle definitely is a big cost and weight factor in the overall scheme of things, so there is enough work left to do – be it through moving to 19.5’’ brakes or developing a more efficient scheme to match axle and application.
Q: In line with that encouraging future outlook, do you think the Eurozone crisis has changed the market in the long haul?
A: Potentially, yes. I think the market, at least in Germany, is stable at the moment. Everyone seems to be fairly optimistic about the medium-term future. The one thing that has changed drastically is lead-time management. In the past we were able to pre-plan months ahead; these days we’re happy if we have a handle on the next four weeks. I think that’s just the new business reality we all have to come to terms with. Everybody has to become more flexible and reduce delivery times as much as they can – including ourselves. We’re all under pressure and trying to reduce costs; and keeping stock definitely doesn’t help here.