How Krone is running its own race

Until recently, the consensus view among economists was that Donald Trump’s economic stimulus package would help the US outstrip the rest of the developed world in 2017 – regardless of his controversial social media antics. But the ‘Trump bump’ has so far proved surprisingly feeble. Instead, the economic story of the year has been the slow and steady revival of the Eurozone.

According to Peter Praet, Chief Economist at the European Central Bank, economic growth in the single currency area was more than twice as fast in the first quarter of 2017 than in the US and has “shown a remarkable resilience” to external shocks – prompting experts to raise the continent’s growth forecast from 1.4 per cent last summer to more than 1.7 per cent in June.

Regardless of whether the recovery is just a pleasant blip, as the Financial Times cautioned, or more deeply rooted and self-sustaining, one company that has seemingly anticipated the signs of the time is German OEM, KRONE Commercial Vehicle SE.

Unfazed by political turf wars in the UK and neighbouring France – and with a refreshingly indifferent attitude towards the competition – the company has set its own pace for much of 2016-17 and is now benefitting from a finely balanced product portfolio, future-proof processes and a strong project pipeline.

Leading the business is 39-year-old Bernard Krone, who took the reins from his father, also named Bernard, in 2010 when he was only 33 years of age. Inspired by the hands-on family motto – while many wait for the times to change, Krone takes action – he set a complex corporate evolution process in motion that not only ensured Krone’s survival in the aftermath of the GFC, but also helped the company’s ailing trailer manufacturing division bounce back in record time.

As such, finding Krone in a strong position while many businesses are still trying to predict just where European manufacturing is headed doesn’t come as a big surprise, he told Global Trailer magazine.

Q: Trailer sales in Europe have been solid for the past year or two, even though the market has been repeatedly labelled ‘difficult’ – especially with view to Russia and Turkey, and more recently, the UK. Now more and more key indicators are pointing to an actual recovery. Does that mean sales are going to take off?

A: I don’t think so. There is still ample production capacity in the market that has been created prior to the GFC, so it will remain hard for any OEM to operate profitably. There may be enough volume, and thus enough revenue, but the price pressure is still incredibly high, margins are low, and drivers are getting increasingly hard to come by. The market is still very much under pressure.

Q: So the European economy’s success story as described by Peter Praet of the European Central Bank recently isn’t as exciting as some economists make it out to be?

A: Europe has been surprisingly stable for a while, which is why trailer sales have been so healthy. Many in the industry, not just Krone, have done a good job picking themselves up after the Eurozone crisis. Events like Brexit and the media’s strong focus on Russia, and more recently Trump, have probably distorted that image in the public domain, which is why the numbers have taken some time to catch up.

Q: And yet business sentiment is still widely subdued. Is it fair to say that caution is still warranted in European trailer building? Even VDA President, Matthias Wissmann, seemed reserved when announcing a 25-year-high in commercial vehicle sales at the start of the year.

A: That’s a good way of putting it. The market has been stable, but there’s still a lot of uncertainty, and therefore people are holding back a little.

Q: Not so much with the Krone organisation, though. You seem to have read the signs of the times exceptionally well, being able to ramp up production in line with returning demand while still remaining attentive to the political landscape – especially with a federal election coming up in Germany.

A: We’re not unhappy with where we are right now, and that’s partly because we haven’t been paralysed by external factors – as classic German Mittelständler, we tend to focus on ourselves and roll up our sleeves when we think the time is right. You can’t trust in politics to get the job done for you. That’s why we invested heavily in our European service network last year, as well as a new paint shop, a new warehouse and of course our new validation centre, which is a huge project. Many of these decisions have been made with the future in mind, and some are paying off now.

Q: The CEP (Courier, Express and Parcel) Shuttle you launched in 2016 was one such decision.

A: Correct, we’ve done a good job coming out early with such a product. It’s an interesting field for us and we’re seeing more competitors following our lead now. Naturally we will keep observing the space, especially with view to electro mobility.

Q: Does that mean you’re working on a powered vehicle?

A: We’re specialising in the transport solution on the back, so we’d need to partner with a drivetrain expert to make such a thing happen. But it’s certainly an option. We have a lot of solutions in the pipeline people might not expect from us.

Q: What role will telematics and big data play in that context?

A: Telematics is an important business tool and will become even more crucial down the track – which is why we’re very active in that field, too. Just think about the 3D load space measuring tool we presented at the 2016 IAA Commercial Vehicle Show. Whatever progress we make, though, has to be supported by the market – and that’s where we still have work to do as an industry. The automotive industry’s recent scandals have diminished the market’s trust in numbers, and the whole big data debate can quickly sound threatening, too. But that’s just my view.

Q: Have you always seen yourself as somewhat detached from the pack?

A: Good question. I think 10 years ago, I was a lot more affected by what the competition is doing. Back then, I would have probably said our goal was to be the number one, full stop. Today, I’m a lot more relaxed about all that. We want to be our customers’ preferred business partner these days, and not just measure our success in volume. We want our customers to associate Krone with quality equipment, good people and a positive buying experience.

Q: Is that the reason why you created a whole product family around the Krone brand, ranging from tyres through to telematics and, most recently, a proprietary axle?

A: In part, yes. There’s a Krone alternative for almost every part now, because many customers appreciate having a single point of contact for everything related to the trailer so they can focus on their business. But we’re no Krone missionaries – they can spec whatever they like, of course. That being said, our Krone Trailer Axle, produced by Gigant, is a great product that is performing exceptionally well.

Q: Naturally a strong parts offering opens up new opportunities in the aftermarket too.

A: Exactly. It will be close-to impossible to solely compete with the standard trailer portfolio only in the future. There is no alternative to investing in digital technologies and value-added services if you want to grow both sustainably and profitably in a low-margin market such as trailer manufacturing. Krone established a unique webshop system for parts accessible with VIN number to speed up the parts supply chain to the workshops and customers. Krone’s aftermarket performance is a key piece of that puzzle. With this offering, we improve customers’ TCO (Total Cost of Ownership, ed.).

Q: With that in mind, do you feel like you’re moving too far away from your core product?
A: I don’t think so – our success in the market shows that we’re on the right track. Suppliers to the transport industry have to be solutions providers to survive these days.

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