Pollmann North America: Driving Business Forward with a Commitment to Automotive
by Dianna Brodine
Profile Summer 2011
Recent years have seen injection molders scrambling to diversify market offerings in order to mitigate the downturn in automotive production. At least one molder, however, evaluated its core strengths, took a hard look at the potential in the automotive market and shifted into overdrive with expanded marketing efforts and investments in equipment designed to strengthen its presence as an automotive supplier.
Following the Customer
Pollmann North America (or Pollmann NA), Romeoville, IL, is a subsidiary of Pollmann International, headquartered in Karlstein, Austria. Originally founded in 1888 by Franz Pollmann as a workshop for high-precision mechanical devices and watches; the company entered the automotive market in 1980 by supplying mechanical speedometers to Ford in Europe and the United States. The first international subsidiary was founded in the Czech Republic in 1991, with Pollmann North America established in 2001 and Pollmann China following in 2006.
Pollmanns core capability is injection molding, in particular the insert- and over-molding of metal components and leadframes for the automotive industry. In 1994, Pollmann started producing its first sunroof kinematics and today, Pollmann is the global market leader for these components. Other products manufactured for the automotive market by Pollmann facilities include door locking systems, transmission components, ECU housings, bobbins and several other molded components.
Our automotive customers drove the companys global expansion, stated Andreas Reger, president of Pollmann NA. There was a conscious decision that we wanted to be an automotive supplier. By default, we had to follow our customers as the industry become more and more global. The establishment of Pollmann North America is a good example. Our European customers grew in the U.S. market and were looking to localize their supply chain. So if we wanted to maintain and grow our business with our core customers, we had to manufacture in the U.S.
Pollmann opened its North American manufacturing facility in Romeoville, IL. At first, the company leased manufacturing space, but the strong growth of the business led the company to invest in its own 35,000 square foot manufacturing facility, which opened in 2006. With manufacturing capabilities geared toward high volume and high complexity components, the North American facility is highly automated, with robots assigned to each molding machine. Eleven machines range from 60 to 350 tons.
One of our biggest competitive advantages is the global footprint of our relatively small company, Reger said. There is a strong linkage between all of our branches, and we serve the same customers globally. Some projects might be acquired and developed in one location and then produced in another. We are small enough to have excellent communication between our branches, but large enough to leverage and benefit from the competitive advantage that our global manufacturing bases give us.
The Economy Slams on the Brakes
From its beginning, Pollmann North America had been managed by a team of Austrian expatriates. After seven years at the helm, the previous president returned to Pollmann Austria and the company decided to hire from the outside. In March 2008, it appointed Andreas Reger as its new president. Reger (a native of Germany) had been a business segment manager for the electro-mechanical product group at Siemens VDO (now Continental) in Troy, MI.
Pollmann hired Reger to take advantage of his business development background and the management experience that he had gained working for a large automotive Tier 1 supplier. That experience became critical as Pollmann NA channeled all of its efforts into what every other molder with an automotive focus was doing optimization of operations as the economy and the automotive industry began its decline.
With the economic downturn, Pollmann NAs European heritage became a liability. We were suffering more than most other suppliers from the strength of the Euro because we purchased 85 percent of our components and raw materials in Austria. The company, prior to 2008, had never gone back to a customer to renegotiate pricing. But in 2008, we had to, Reger explained. The increase in raw material prices and the increase in the Euro/USD exchange rate were just too dramatic. We were dying a slow death and had no other choice but to go to our customers and negotiate price adjustments. That was the very first thing, said Reger. Pollmann NAs customers, understanding that every supplier was experiencing the same crunch, were willing although not eager to reevaluate their contract pricing and agreed to share the pain.
Next, Pollmann NA implemented rigid cost controls, with inventory control at the top of the hit list. Pollmann NA reduced its on-site inventory by almost 40 percent, and implemented an inventory management process based on actual and historic customer requirements. Many of our components were coming from Europe, said Reger, and we were so concerned about our delivery performance that we would order enough supply to cover almost every eventuality. With inventory control making an impact on cash reserves, Pollmann NA also restructured its organizational processes to reduce complexity. We also approached the customer and said that in order to avoid the exchange rate risk, we would have to relocate some of our component purchases to the U.S. Before 2008, up to 85 percent of Pollmann NAs component purchases were from outside of the U.S. that number is now less than 30 percent, with the majority of components sourced locally.
The one thing Pollmann NA did not do was to cut salaries. We looked at this option very carefully but decided against it. The savings would have been modest compared to the potential negative effect this measure could have had on employee motivation, said Reger.
Making a Commitment to the Market
At the same time, Pollmann NA was exploring diversification outside of automotive, specifically into medical molding. With three automotive customers making up the majority of Pollmann NAs sales, the company needed to become more diverse. The medical market, however, was not the answer. What we learned after researching the market is that the needs and requirements of medical were not something that fit us well at that point in time, Reger said. We put the brakes on that very quickly.
Pollmann NAs facility is designed around its ability to perform highly automated, highly complex manufacturing. Many manufacturing cells within the facility are dedicated to a specific project, with very little changeability from cell to cell. The approach requires a significant upfront investment, but revenue per employee is high compared to most other molding operations. While researching other markets, Reger discovered that only a few markets outside of automotive would fit the companys operational model.
We had a limited amount of resources and we had to decide on the best way to allocate those resources, he explained. Our decision was very clear we allocated our resources into our core industry, which was automotive. Pollmann NA focused its diversification strategy on growing within the automotive market through both its existing customers and with new customers.
Despite the fact that the automotive market was in a decline in 2008 and 2009, Pollmann NA reinforced its marketing activities by bringing on three new sales agents at the end of 2008. We made that investment because we were confident that automotive was the place for us to be, Reger said.
We were convinced that there would always be cars built in this country and in others around the world, continued Reger. Our company is 123 years old and has survived two World Wars, the Great Depression and many other crises throughout its existence. This does not mean that we cannot fail, but it does mean that we look at things from a very long-term perspective.
Pollmann NA successfully worked to expand production within its existing customers, adding new parts to its product portfolio. In addition, Pollmann NA brought on four new automotive customers, lessening its exposure to market vagaries. As a result of new business acquisitions, the company purchased new Arburg and Engel injection molding equipment.
Accelerating into the Future
Today, Pollmann NA is a healthy organization on the rise. Reger pointed to the companys customer base and its willingness to commit to automotive as the reason for its survival. We took a long hard look at our capabilities, skills, resources and the markets that were available to us. This analysis led us to believe that in the short-term, customer diversification within automotive was more important for us than industry diversification. We also were fortunate in 2008 and 2009 that we had the right customers.
Having the right customers those that were strong, financially healthy and well-diversified within automotive has left Pollmann NA in its own position of strength, one that it now looks to capitalize on. With a robust balance sheet and growth opportunities with key customers, the company is beginning to look at strategic acquisitions. In the long term, we are looking to expand our manufacturing footprint into other industries. Reger explained. But, we need to be smart and careful not to overextend ourselves. When you diversify you add complexity, and complexity can create its own problems.
Reger also continues to monitor the economy. We are affected by the macro-economic environment just as anybody else is, and our only remedies are forward planning and material rate adjustment agreements with our customers. We also are still very concerned about the possibility of a double-dip recession or a prolonged weakness in the economic recovery. he said.
However, Pollmann NA is moving confidently forward, with a commitment to serve automotive markets both in the North American market and globally. The companys survival through a difficult economic downturn has left it in a better financial position, with a deeper understanding of its own manufacturing strengths and a customer base that is comprised of the right partners for the future.