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EuroAuto: Mahle’s Approach to the Global Market

This comparatively quiet company has been making various acquisitions of late, all apparently aimed at bolstering its considerable strength in powertrain.

Mahle Group (www.mahle.com; Stuttgart) may be among the top 30 automotive suppliers with more than 40,000 employees, 110 production plants, and seven research and development centers, but it has got on with its business without attracting too much attention. To many, it is seen as a motorsport supplier, having its name prominently displayed on the Le Mans winning Audi’s nose, as well as on the Formula One Ferrari, but that it just the tip of a very large iceberg. While motorsport plays an important role, it is very much a minor one in the grand scheme of things. Pistons have always been the core business for this German company that was formed by the Mahle brothers in 1920. At a time when the heavy gray cast iron piston held sway, they focused their attention on developing light alloy pistons, achieving success in 1921 with the series production of the first light alloy piston in Europe. This was followed 10 years later by the world’s first aluminum piston for diesel engines. These were to prove to be the foundation for the company’s success over the next
80 years.

In the intervening period, there have been a number of milestones but in tune with the times, over the last dozen or so years the company has evolved from being a components supplier to a systems provider. This year alone, for example, it has purchased the Argentinean company Edival, that produces mainly valves, valve guides and valve seat inserts, and acquired the air intake module and air filtration business division from Siemens VDO Automotive. However, the really big news came in March when it completed the acquisition – at a knockdown price – of Dana’s engine hard parts business, the main products of which are piston rings, engine bearings, cylinder liners, and camshafts manufactured and sold under the Perfect Circle, Clevite, and Glacier Vandervell brands. It also brought into the Mahle fold another 5,000 employees in 39 locations in 10 countries.

“I think the Dana engine business complements our worldwide market position, particularly in the areas of piston rings and engine bearings, as well as in the aftermarket for engine parts,” says Prof. Dr. Heinz K. Junker, Chairman of Mahle Group Management Board and CEO. “This acquisition is a strategic step to fill our product portfolio and to strengthen and balance our global presence. It is lifting our piston ring business to number-two worldwide and we are also now number-one in air intake systems. The Dana acquisition has also been a very good fit for us as their business was primarily focused on North America while we were strong in Europe and Asia. We are now working to integrate the locations into the existing Mahle production network by appropriate restructuring measures, in order to facilitate all necessary synergy effects for the future.”

Buying companies is one thing, integrating them is another, but Prof. Junker does not foresee any major problems. “With all three acquisitions it has not been difficult to have the backing of the existing management because they have been looking for a safe home for along time. For example, nobody really knew what was going on at the Dana Corporation, and it was difficult for them to plan their future when in Chapter 11. What the engines division was lacking was the systems approach, but now they know that they belong to a company that is totally focused on the engine. They know that we understand what we are talking about, which was not the case with the previous company.” He says that it is a similar situation with the air module business of Siemens VDO, which was not core to the direction that Siemens VDO was taking.

While these acquisitions would seem to indicate that Mahle is concentrating on Europe and the Americas, the Chinese market plays an important part in the company’s plans. In January this year it opened its eighth production plant in the country in a joint venture with Hubei Tri-Ring to produce engine valves for car and truck engines. “With this new plant in China, we are going to close a strategic gap in supplies in our engine valve product portfolio, because our global customers expect not only deliveries in Europe, but also in all other important worldwide regions,” says Prof. Junker. Further investment in China has included a development center that not only acts as the headquarters for the eight plants in the country but also has an important role in design, calculation, component testing, engine testing, as well as electronics and chemical laboratories and metallography.

“Initially we thought we could serve all of Asia out of Tokyo, but it didn’t work because the Japanese market is quite different to the Chinese,” says Prof. Junker. However, Japan still plays an important part in the company’s strategy. In June it announced a Memorandum of Understanding with the Riken Corp., a Japanese company supplying automobile and industrial machinery parts and other industrial products. In addition to the expansion of the already existing Allied Ring Corp., a 50-50 joint venture manufacturer of piston rings based in North America, both companies have agreed to collaborate on the development and manufacture of piston rings, engine components and systems, camshafts and other products.

Two days later the company announced that it had acquired Promec and its subsidiaries in Mexico, a producer of cylinder liners and piston rings for passenger car and heavy duty applications for the OE and aftermarket businesses. The agreement included among others the acquisition of the aftermarket brand Carpro. As can be seen, the company is not standing still and has been on an active acquisitions trail which shows no sign of abating. When asked about the future, though, Prof. Junker talks about the need for greater engine efficiency. “A rapid and effective improvement in fuel economy in the coming years can only be achieved with diesel technology. We therefore expect an improved market share for diesel engine passenger cars in the North American and Asian markets in the coming years.” 

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