Suppliers must be innovative to succeed, says ElringKlinger CEO

By Klaus-Dieter Flörecke, Automotive News Europe

Dettingen, Germany - ElringKlinger CEO Stefan Wolf says future issues facing suppliers include cutting emissions and fuel consumption, as well as alternative powertrains and vehicle safety. The German company is the world's leading supplier of cylinder head gaskets for diesel engines. Last year, the company had revenues of €528.4 million.

Wolf spoke with Klaus-Dieter Flörecke, a reporter with European Rubber Journal's sister publication Automobilwoche.

What big challenges do suppliers face?

They are the same issues affecting the automakers. In the end, they are our customers. We suppliers are expected not only to be development partners, but also to work out new, innovative solutions ourselves.

What solutions do you plan?

They involve products ... that contribute to reductions in emissions and fuel consumption as well as the application of alternative forms of energy and powertrain assemblies. Active and passive safety measures for vehicle occupants and pedestrians represent an important issue.

I am convinced that suppliers that go into these fields and offer technically demanding solutions will continue to be able to operate profitably in the future.

What role should suppliers play?

I see the task of a supplier as not only producing and delivering parts, but also offering customer services and development work. That means not only continually improving parts, but also offering new solutions that the supplier itself devises.

But suppliers can only do that if their operations are efficient and profitable enough.

Do automakers appreciate this?

The great majority of vehicle manufacturers put great value on cooperating as partners. They prize business stability ... in their suppliers.

Do you ever turn down contracts?

We have certain minimum returns that we have to reach. Our investments are about 10 percent of our sales revenue. As a publicly traded company, we have a responsibility to our shareholders to earn a sufficient yield on invested capital.

How badly have the huge increases in raw-materials prices hit you?

The rise in raw-materials prices in the past 14 to 16 months has been immense. In early 2006, for example, a ton of nickel cost $16,000 (about €11,600). In early June 2007, the cost had risen to $53,000.

What are the criteria you use to select the factory where a product will be manufactured?

China and Brazil continue to become more attractive as locations. We have been there a long time. India, where we are now building a factory, is attractive as well. Nonetheless, we are a champion of German industry. We employ nearly two-thirds of our 3,300 workers in Germany.

From Automotive News Europe (A Crain publication)