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Report from Pierburg

This automotive supplier has long been a significant factor in the German auto industry. Yet due to technology changes, it could have been relegated to minor status. Here's an examination of some of the things that the company has done to make what is most certainly an amazing comeback.

In which we meet a company that had once dominated carburetor production, found demand dropping like a stone, anticipated closing a major plant that was less than 20 years old, and has managed to come back in a big way . . .

In 1928, Pierburg AG (then of Berlin, now of Neuss, Germany) delivered its first carburetor: the company supplied Hanomag with a carb it built under license from a French concern, Solex. It may not sound like an auspicious beginning, but by 1960, every car built in Germany was fitted with a Pierburg carb. (To be sure, by that time the company had made its own developments.) That, to say the least, was good business. But then environmental concerns came to the fore, and the bottom fell out of carburetors.

In 1986, says Dr.-Ing. W. Hans Engelskirchen, executive vice president of Pierburg, a Pierburg plant in Nettetal, where carbs were manufactured, 1,844 employees were at work. The plant had been opened in 1972. In 1989, management decided that the plant would be closed. Speaking of the late 1980s, Georg Liebler, deputy chairman of the Executive Board of Pierburg, observes, "This period of Pierburg's history was critical; we were nearly a one-product company. More than 60% of our sales were carburetors."

Engelskirchen refers to what happened at Nettetal as "a phoenix story." And this rising from the ashes for what is now a 425,000 ft2 plant, with 320,000 ft2 of that dedicated to manufacturing, is indicative of what has happened to the whole company.

In 1991 the Nettetal plant received an order from Opel for throttle bodies and an order from Audi for intake manifolds. Engelskirchen explains a reason that the orders were obtained is, simply, "Our people know airflow." A carburetor company like Pierburg had to have deep knowledge of all aspects of mixing air and fuel. Dr. Joachim Schmidt, who heads up R&D-Electronics for Pierburg, says that when the company was producing carbs the R&D staff stood at about 450 people, many of whom were carb specialists. (The number is now at 335 people—a reflection not only of the passing of the carburetor, but also of a greater consciousness of personnel deployment in this increasingly competitive automotive marketplace.)

"Today," Georg Liebler says, "most of our products have something to do with the treatment of the air and gas flow to and from the combustion chamber. We can divide our product range into three different segments: air supply, emission control and fuel supply." Specifically, the company's range of products include intake manifolds, electronic throttle bodies, vacuum pumps, air mass flow meters, exhaust gas recirculation (EGR) valves, secondary air pumps, secondary air control valves, exhaust gas flaps, electrical fuel pumps, fuel sensors, and pressure regulators. Its competitors include Bosch, Siemens, Delphi, Magneti Marelli, Denso, and Hitachi, and VDO. Presently, about 60% of the firm's sales are in Germany and 75% of its production is also there. "We will grow our production capability only outside Germany," Liebler remarks. And they also aim to increase sales throughout other parts of the world. Pierburg, which is part of Rheinmetall AG (sales: 7 billion D-marks [DM]; 28,000 employees), is likely to be merged with Kolbenschmidt AG, a manufacturer of pistons, engine blocks, transmission parts, oil pumps, and water pumps. The consequent combination, which will probably be called Kolbenschmidt-Pierburg, would result in a firm that is the 15th biggest auto-motive supplier in the world. Pierburg itself has been doing well: its net sales in 1996 were 1.245 million DM (about $800 million) with profits of 31.6 million DM (approximately $20 million). It employs 3,650 people and has operations in Germany, Spain, France, and the U.S., as well as alliances and affiliations with firms in Asia.

At Nettetal today, 80% of the work performed is in the production of intake manifolds. There will be approximately 700,000 intake manifolds produced in Nettetal this year. Secondary air pumps are also produced. And although the area is generally sitting idle, there is still carburetor manufacturing: they make about 15,000 carburetors a year. They used to make that many in a shift. The number of employees in the plant is now at 740, less than half of what it had been during the heyday of carburetors. But the plant is open, and highly productive.

According to Engelskirchen, through "rationalization, automation and kaizen," they've attained a nearly 7% productivity increase each year since 1989 in the plant. In the past six years, Pierburg has invested 200 million DM in the plant. Within the foundry, no equipment is more than 3 years old.

They do complete manufacturing of manifolds at Nettetal, which are produced with either aluminum or magnesium. Following the diecasting, it is on to machining, then right through assembly. They try to make the die-castings as near-net shape as pos-sible in order to minimize the amount of machining that needs to be performed. The buffer of parts between casting and machining is held to no more than eight hours.

For a plant that was slated for closing, the level activity there today is remarkable.

 

II

"In the last years we needed all of our resources to manage the turnaround, the rapid growth and the consolidation of our company," says Georg Liebler, deputy chairman of the Executive Board, Pierburg AG. "Today we have conquered all these problems. Now we have the resources and we are willing to take the risk to invest in the U.S. market." And so they have set up shop in South Carolina . . .

Pierburg is a major supplier of fuel pumps to Mercedes-Benz, so when Mercedes decided that it would build a plant in Vance, Alabama, to produce its M-class sport utility vehicle, Ernst Kuhlen, executive vice president of Pierburg Inc., recalls, Mercedes suggested to its suppliers that they should have facilities in the U.S., as well. Which led to the establishment of a Pierburg plant near Greenville, South Carolina, in Fountain Inn, which was officially opened in October, 1996. The 50,000 ft2 facility, which also serves as the headquarters for Pierburg in the U.S., is on 17 acres.

Presently, the production operations are limited to assembling fuel pumps and fuel motors. Secondary air pumps, EGR valves, and throttle bodies are going to be added to the mix. The Fountain Inn customer base will be broadened from Mercedes and Volkswagen to include General Motors and BMW.

So far, some $12 million have been spent at the site, with from $10- to $15-million more on its way by the year 2000. Kuhlen, who anticipates adding machining capacity to the plant, reckons that even though they are implementing lean production methods and doing more local sourcing rather than shipping in inventory from Germany (not only is it advantageous from the point of view of the currency exchange rate, but it also provides benefits with regard to inventory levels: presently, the components coming from Germany are in transit for three weeks and a one-week stock is kept on-site), they will run out of room in the plant by 1999, which will undoubtedly result in more bricks and mortar.

The production in the plant is carried out in U-shaped cell arrangements. On the line for fuel pump manufacture, each of the workers is capable of performing three jobs which facilitates scheduling flexibility (such as providing the means by which line manning levels can be adjusted to meet customer demands). In order to establish the know-how necessary to produce parts, four people had been sent from South Carolina to Germany for four weeks of training prior to the launch of production. They, in turn, spent six weeks training plant personnel in assembly operations. This was supplemented by six weeks of instruction at a nearby technical school. This has been the basis of the multitasking capability of the employees.

According to Kuhlen, the biggest difference between the operations in Pierburg's German plants and the plant in Fountain Inn is that more automation is used in Germany. He explains that there are two important benefits to the approach being used in South Carolina: (1) it is easier to teach people how to perform the required tasks than to deal with complicated automation; (2) maintenance requirements are greatly simplified. This helps (1) lower the learning curve toward productive operations and (2) helps keep things up and running with minimal downtime.

 

III

Simultaneous engineering isn't something that just occurs in the U.S. or in Japan. It is a key part of the way they work at the Pierburg Neuss plant. And with an awareness of achieving flexibility with U-shaped cells and of the importance of quality, it becomes quite a productive performer . . .

The Pierburg Neuss plant, which is located in what is essentially a suburb of Dusseldorf, combines extensive R&D and engineering along with the production of an assortment of products, including electric fuel pumps and components; vacuum pumps; exhaust gas recirculation (EGR) valves; and various regulators, actuators and valves. The manufacturing floorspace is some 250,000 ft², and the employment stands at about 850 (510 workers; 190 skilled trades; 150 staff). Add in the administrative and engineering personnel who work in the buildings across the street from Werk Neuss, and the number of employees at the site goes to 1,500.

Dr.-Ing. Ludwig Dammer, who heads up manufacturing at Neuss (title: Leiter Hauptabteilung Fertigung) is extremely bullish on the proximity between the product engineers who devise and test the various products and the manufacturing engineers who are responsible for determining and building the ways and means to make many of these products. "We're doing simultaneous engineering, using cross-functional teams, which has greatly reduced the overall development time," he says.

One of the key areas of focus that Dammer and his colleagues have had during the past several years is changing the equipment floor plan at Neuss, going from traditional mass-production, straight-line assembly lines and machine tools organized by type to U-shaped cells. For the most part, Dammer says, the assembly equipment is produced internally or by an affiliated Rheinmetall firm. Should there be internal machine-build scheduling problems, they go to outside vendors. Dammer points out that not only does going to the outside permit meeting scheduling requirements, but it also allows Pierburg engineers to gain an understanding of how other companies produce assembly machines.

With regard to machining, there has been a concerted effort to switch from dedicated machine tools wherever possible to machining centers. However, this is not always possible, due to part configuration or volume requirements. For example, special machines are required for the five-sided machining of components that are used in the production of EGR valves; the Neuss plant is said to be the leading supplier of those valves in Europe. Consequently, high volumes are needed, which led to the selection of special machines.

Dammer notes that as there are more molded parts and greater part integration in the automotive components being developed now than there were in the past, the level of overall machining being performed at Neuss is declining. They have also undergone a rationalization program at the facility during which time they determined what components would be produced internally and which would be outsourced. Small parts—such as those made on screw machines—have been outsourced, for example. "There are companies that specialize in those operations," Dammer explains, "so they have better economies."

Add to this concern with economic, flexible production and cross-functional product and process development a detained concern with quality—there are signs posted in the plant that say "The quality of our products and services is the most important target of our company"—and you've got a manufacturing operation that is always on the move.

 

IV

When you visit what was once East Germany, some places retain the monochromatic nature of the previous state of affairs. But other sites have been rebuilt or refurbished and are as contemporary as analogous places anywhere else in the world. This fundamental rehabbing has happened and is happening at a Pierburg plant that was once a bankrupt state-run electric motor manufacturing facility . . .

Harta, a town about an hour east of Dresden, is the location of a Pierburg plant that specializes in the manufacture of small electric motors for various applications. Among the uses are in fuel pumps and for secondary air pumps. The Harta plant, which employs approximately 130 people (80 workers; 20 skilled trades; 30 engineers, technicians, physicists, managers), will manufacture about 1 million motors for fuel pumps and 60,000 for secondary air pumps. Additionally, the plant produces a newly developed recirculating water pump (for use, for example, in an engine cooling system); the patented pump was developed by Harta personnel. Throttle bodies are built at Harta. And plastic intake manifolds are assembled at the site from components shipped there from a plant in northern Italy.

All in all, the Harta site is a busy one. Those of you who are geopolitically inclined may have determined that the Harta plant is in the former East Germany (a.k.a., German Democratic Republic). The present plant site was established in 1922. In 1948 the then—existing business was nationalized and became part of the VEM-Elektrokleinmotoren-und Geratewerk. After the reunification of the country, Pierburg acquired the facility and began operations in the 18,500 m2 site (10,000 m2 of which are production and office areas) in January, 1992. Since then, the company has made an investment infusion of some 37 million DM to make what was a moribund facility a vital one.

According to Dr. Joachim Schmidt, head of R&D, Electronic & Electric, Pierburg, "There were skilled and well-educated engineers here in Harta. Their problem had been that if they needed a particular material—such as bronze for bearings—they couldn't get it." This state of affairs has been rectified by Pierburg, and now these people have the tools they need to do world-class work.

The plant is undergoing a rolling refurbishment. Crews are moving through, cleaning, painting, and relighting the workshops. New equipment is being installed. The electrical motor line for the secondary air pumps, for example, includes up-to-date flexible assembly systems built by Zihlmann, a Swiss firm, and Axis, an Italian company. The line produces two sizes—42 and 58 mm—with a third size (31 mm) coming. It has a capacity of 1.25 million assemblies per year; it operates in a random, or mixed, mode.

The Axis nonsynchronous line for fuel pump rotor assembly is fully automatic. If it was running for three shifts (it currently operates for two), it would produce some 2.4 million assemblies per year.

The intake manifold assembly line is a semiautomatic array built by Rettinger-Prazisions-Anglen, a Munich-based company. Its three-shift capacity is 270,000 units per year.

Given that the customers for the Harta plant includes Audi, BMW, Opel, and Mercedes, it is clear that the people in the former GDR are extremely capable of competing with anyone given the right infrastructure.