There has arguably never been a more opportunist time for a Polish business to make a bold move than today. With much of Europe still suffering from the impact of the Ukraine crisis, Poland has become the last remaining island of economic success in an increasingly volatile region. Benefitting from a record-worthy 25-year growth spurt, savvy local businesses like Wielton are now able to invest heavily into R&D and expand production capacity while the rest of the EU is barely back in the black.
Located in the town of Wieluń, some 250km southwest of Warsaw, Wielton is hardly 20 years old but has to be considered the single most disruptive force in modern-day European trailer manufacturing since CIMC Silvergreen entered the scene in 2012. Benefitting from Poland’s remarkable success story – it is the only major European economy to avoid a recession during the financial crisis – the young company has devised a master plan that could see it grow into one of Europe’s top-three OEMs by the end of the decade.
Part of that plan became obvious in June 2014, when a news outlet reported that Wielton was looking at buying €100 million corporation Fruehauf. While the deal has not been completed yet, it could make for the most impactful event in the history of European trailer building since the widely publicised stumble of Kögel during the GFC.
Yet CEO Jarosław Szczepek is far too humble to stir up the market without reason. While he does confirm his company’s interest in the long-standing French OEM, he says there has been no definite agreement since the news leaked in June. “For now, we are at the consultation stage, but I am cautiously optimistic in this regard,” he says. “We currently don’t have the capacity to service all of Europe, so Fruehauf would make a good fit. It’s an interesting company with a long tradition and is in a great strategic position for someone like us.”
While Szczepek is careful to not reveal too much about the pending Fruehauf deal, he is more outspoken about the brand’s future growth strategy should the sale go ahead. “Should we be able to integrate Fruehauf in our business, and with it create real synergies, then yes, future expansion by acquisition would be an option,” he says – pointing out that challenging his competition in the west will not happen at the expense of neglecting Wielton’s home market, Central and Eastern Europe.
Here, Wielton itself is under attack by an armada of German OEMs who all hope to expand in the much talked-about boom region. “It’s nice contemplating our expansion in France and thinking of all the synergies we would create, but we cannot ignore that business at home has to continue as usual for it all to make sense,” he says.
“Luckily, we are benefitting from a certain lack of brand consciousness in the post-Soviet states that has levelled the playing field a little when competing with the likes of Schmitz Cargobull,” he adds. “There is less economic patriotism in the Eastern European trailer market than in the west. The key is getting the balance right between price and quality, and as a Polish company, we are in a preferred position to achieve just that.”
According to Szczepek, Germany used to be Europe’s manufacturing powerhouse, but that title has now shifted to Poland, where companies have access to a highly skilled workforce but also benefit from a low cost of living. “That mix certainly is one reason why we’re doing so well in Eastern Europe, but we can’t rest on our laurels in such a climate.”
Of all target markets in the region, crisis-plagued Russia is the one where Wielton is feeling the least pressure at the moment – mainly because the brand has a local factory in St Petersburg. According to Szczepek, more than half of the company’s exports currently go to Russia, with the brand’s reputation soaring since the Polish economy’s solid performance during the GFC.
“Polish goods have a good reputation in Russia. As a country, we provide them with everything from appliances to furniture,” he says. “But for us as a business, we can’t just rely on a temporary high. Wielton is a very international brand that uses equipment sourced in from across Europe, so people have to see us a global player, really.”
While the company’s dedication to designing reliable, application-focused equipment is said to be the main reason for Wielton’s success in Russia, Szczepek emphasises that producing in Russia with a Russian VIN number is a key advantage in the current political situation – so much so that production volumes keep going up despite the on-going Ukraine crisis and the fall of the rouble.
Szczepek says that having access to a fully functioning engineering and manufacturing outlet on Russian soil has reduced transport costs and taxes so significantly that even a stumbling rouble won’t be able to slow down the brand’s expansion.
“We just have to deal with changing exchange rates and try to not freak out too much. The value of what we store in our local warehouse may change by the day, but if you want to run a sound business, you have to take that into account and move on,” he says. “Luckily there’s almost no competition from Western Europe in the regions we operate in, so we sort of represent Europe there. That can be a real USP when contending with local brands like Kamaz, for example.”
What does worry the CEO, however, is that Wielton’s shareholders not always share his optimism about the company’s Russian investment. “All up, we probably make 20 per cent of our sales in Russia, so I think the concerns are widely unfounded,” he comments. “It’s not like we stake everything on the one card. Is the weak rouble worrying us? Yes. But have we managed to offset those losses by broadening our target market? Yes.”
In its home market of Poland, Wielton’s key selling point is customisation. While 70 per cent of domestic sales are derived from long haul transportation, the export situation is exactly the reverse. With 70 per cent of the company’s central and western European export volume generated in the construction sector, and only 30 per cent in road freight transportation, Szczepek says the local market is a special one. “We need to be more flexible and innovative here, which has helped us remain nimble and reactive as we grew the business. But the downside is a thinner profit margin.”
To offset that development, Wielton is now investing more in R&D than ever before. Where value can be added, says Szczepek, “money can be made.” A case in point is Wielton’s win of the 2014 Innovator Award for the most innovative Polish company. Wielton was awarded the prize in recognition of a new product developed for intermodal traffic: The ‘Huckepack” model is said to be the only Polish-made intermodal vehicle on the market and the country’s only response to the growing competition in the ‘road and rail’ field.
In the laudation, the company’s new aluminium tipper range was also mentioned. It was developed to provide the local construction industry with a lightweight alternative to the traditional steel tray equipment that is still widely used in Poland, and is already making for a solid 18 per cent of company sales a year after coming out.
According to CEO Jarosław Szczepek, the success of the aluminium tipper range is proof that Wielton’s future does in fact lie in the R&D department. “Growing the business by creating value is exactly where we should be, be it at home in Poland, in Germany, Russia or maybe even in France at some stage,” he says.
“We can’t rely on the soaring Polish economy alone to give us an edge, we need to invest more into creating it from within. Otherwise we won’t be able to withstand the pressure that’s coming from the leading German OEMs, for example. They continue to innovate, so we have to raise the stake too.”
Here’s where Szczepek’s latest passion project comes into play – a new, state-of-the-art R&D Centre that will enable Wielton to co-operate with Polish universities on the development of next-generation transport equipment. The project has just been awarded RDC status by Poland’s Ministry of the Economy, which means it is an officially recognised research facility that can access funds from the National Research and Development Centre, acting much like a university.
“Our new R&D Centre will be more than just a testing facility, it’ll be a knowledge hub where Poland’s most talented engineers and creative thinkers will be able to come together and push the envelope on modern vehicle design,” he says. “I am envisioning some sort of technology incubator where we get together with suppliers and academics alike to discuss where trailer design is headed. We are already in talks about co-operating with higher education organisations in Poland and abroad to kick-start new R&D projects and add new engineering staff to the team.”
Inspired by SAF-Holland, which has access to a similar facility in Germany, Szczepek says Wielton’s €18 million-project will help the brand boost product quality and rethink its product offering. “Having RDC status will give our company and its people a real boost. It’s a signal to the market that Wielton is determined to increase its competitiveness by finding new technological solutions that will provide our customers with the best product on the market.”
According to Szczepek, the acquisition of French company Fruehauf would make perfect sense in that context. “At the moment, doing business in Eastern Europe is our strong suit, but I believe we can also compete with Schmitz Cargobull, Kögel, Krone or Kässbohrer in the markets where they are strongest. It’s not unlike the rise of Poland as a manufacturing country, you know.”
He adds, “Fruehauf could be the perfect partner to overcome market entry barriers and level the playing field a little from a brand equity point of view, not to mention the cost savings in product development and sourcing that may be possible.
“Backed by our very own think tank based here in Poland, we could create real synergies that would help us widen the gap to the competition in Eastern Europe and Russia while closing it in the west. The potential is certainly there, and the best thing is that it’s not just a daydream but happening as we speak. In that sense, 2015 could easily become the most important year in the history of Wielton.”