March 1, 2012: Rolf Breidenbach, CEO of Hella

The CEO of Hella discusses with Eliot Lobo the role of his company’s Indian operations in its transformation from a multinational into a truly global corporation.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 29 Feb 2012 Views icon6668 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
March 1, 2012: Rolf Breidenbach, CEO of Hella

To begin with, could you give me a picture of where Hella is at?
Hella is currently growing at between 10 and 15 percent worldwide on average. Of course we would like to continue on this growth path, and the Indian market will play a very important role. We will now continuously invest in India in both, our production capacity and our D&D (design and development) capacity. We now have more than 150 engineers in electronics D&D in Pune and more than 80 in Chennai for lighting — our target is to increase this number by 20 percent per year.

To a certain maximum, or is it open-ended?
Currently it’s open-ended. That’s because, on the one hand, we would like to use these people to develop local products for the Indian market, but on the other hand our D&D centres in India also play a very important role in our global development network. Our Indian colleagues work very intensively together with their colleagues in China, Germany, and NAFTA.

Are your technical resources in India growing more than in the other locations?
India and China are growing at the same high level. The others are growing as well, but not at this huge rate. As concerns technology, of course we are interested in implementing the best knowhow here in India. So India is not a kind of workbench but step by step we are building up here premium technology knowhow for both, lighting and electronics. And it’s already there. Our lighting people are able to develop premium headlamps and tail-lamps on their own, and the same is true for electronics, both the parts & components business (pedal sensors, vacuum pumps, etc) and the body electronics (body controllers, keys, and so on).

Is India a market for all Hella products?
No, of course we have to follow a step-by-step approach. Most immediately, we think energy consumption will be a very strong issue in the Indian market, so we want to offer a system solution with well-established products like our intelligent battery sensor, DC-DC converters, body control modules, and fuel control module. When we offer these components in combination, this will be a real benefit for customers in India. The same is true for body control systems with the body controller plus the keys, keyless entry systems, and so on.

Hella is best recognised for high-performance lighting; how long have you had electronics?
For at least 10 years. We have a clear strategy for both lighting and electronics — we would like to be among the top three worldwide in our markets, and we have more or less reached this position for all our products. And of course, we would like to increase our business in the Indian market with these state-of-the-art products, with which we really have a global footprint.

An important topic in the commercial vehicle industry in Europe, as in the passenger car industry for some years now, is the electrification of auxiliaries — air compressors or steering pumps, for example. Are these areas in which Hella can deliver, or is delivering, value?
We are already in the business of electronic steering, producing electronic steering control modules. Whenever you talk about electronics, Hella is there —when there is a business case that can put us among the top three worldwide. So of course with all this increase in electronics in the vehicle, be it passenger cars or trucks, we are there if it makes sense for us.We also have engine oil pressure sensors that continuously measure the pressure in the oil. If you have a mechanical pump it’s running all the time, even when you don’t need it, but an electrical pump can deliver pressure on demand, and we are working on such systems for commercial vehicles as well. If we have 12V devices, and we see a market demand or individual customer request for a commercial vehicle, once we have this designed on 12V, we can easily adapt it to 24V. And we have a couple of examples where we did it in the past, and we are going to do it in the future too.

Where you had a product for a car that you scaled up for a commercial vehicle?
Sure. Like our intelligent battery sensor. It is coming from the passenger cars, but it is going to be introduced in the big trucks as well to control the quiescent current consumption because the drivers sleep in their trucks in Europe. They may even leave the light on to read or something, and then they cannot crank in the morning. And if they do not deliver on time, the consequences are catastrophic. This component would not ensure an adequate level of charge in the battery, but also optimise the power consumption by individual loads and, indeed, the charging of the battery itself.

What does your commercial vehicle business look like, and how important is it as a part of your overall business?
The truck business is an important area for us, but not as important as the passenger car business. I would say 15 percent of our OE business is truck and commercial vehicle.

Your LED tail-lamp cluster for trucks is high technology, but appropriate for the market. Has Hella had to re-engineer its products for India in a drastic way, or do you have a DNA that makes it easier to create value propositions for a market like India without having to go through an upheaval like some other German technology companies sometimes have to go through?
I think we have to do both. The guiding principle is, we have to fit the market requirements. And when you look at the Indian market, on the one hand there are these very functional products which have to be low-cost. But we are very well-established in this segment, not only in India but also in China and other fast-developing countries. On the other hand we see that this market will also demand high technology.You mentioned LEDs — perhaps not a full LED headlamp at first, but when you look at single-function activities then LED functionalities become more and more important from the perspective of fuel-efficiency and safety. We don’t only offer highly sophisticated LEDs; we also have technologies developed for emerging markets that not only deliver added value in terms of safety requirements and lighting distribution, but are as well affordable for those markets. We’ve had some years of experience with these products in China already, and there is close communication between our design centres in China and India, so it’s not difficult to fit those technologies to the demands of Indian OEMs.A bright light on the street not only looks good; it’s very important for safety. Very often it’s the [poor performance of the] lighting function that’s the reason for accidents at night — worldwide. And of course, we see safety lighting as a big opportunity for us in the Indian market.

What was your experience in China? When did you begin with this technology, and what products did you start with?
In China we started with LED technology for tail-lamps five years ago, and at that time it was a certain overlook-able take rate. But look at the China take rates for LED tail-lamps today — we are above 50 percent in all segments! Two years ago we introduced LED technology in partial functions for headlamps – daytime running lights or signal functions, – and now we are already developing the first full LED headlamps for Chinese local brands for vehicles that will go into production in 2013.

Are you aware of anyone else who is developing LED technologies in India?
No. This is the difference, and this is a unique selling point for Hella. We have the full capability to develop LED solutions here in India. Currently we use this capability even in our global development network for lighting, but we can use it immediately for applications in the Indian market. The knowhow is in place, the engineers are in place, and as I said, we are increasing this at a rate of 20 percent…

When you talk of functional requirements, how different are they in China for an LED tail-lamp than they are anywhere else?
In the developed markets we must always offer 110 percent of the functional requirements for lighting performance. But in China we figured out that the customer is pretty satisfied with 90 percent of the European functionality. And we are developing solutions that fulfil the requirements of our customers. This gives us an added advantage as well, as it makes the technology affordable.

To take the figures that you mentioned, bringing down the functionality from 110 percent to 90 percent — does that really make a big difference in commercial terms?
Yes, because it could be then a different concept. And this is already a pretty attractive commercial benefit.

I imagine Indian OEMs would primarily be interested in LED technology for cars they want to export. But do you really see this as a driver, or is it the domestic demand?
We see both as driving forces. On the one hand, of course, our Indian customers would like to have an increasing market share in India, and therefore there are cars developed specifically for the Indian market, and here the technology used, the material used, the functionality that is required, are sometimes different from the global platforms. And therefore we have to offer both. On the one hand these more market-specific products, which our Indian colleagues, of course, are very familiar with; on the other hand these global platforms, where there will be no difference between India, China, North and South America, or Europe. We have to offer both, because the demand exists.The way we see it, our utmost priority is to ensure safety, so from that perspective there is absolutely no difference between what we offer in India and in Europe. However, when it comes to comfort, European expectations of features that OEMs offer in cars they sell in those markets are far higher. Indian OEMs can quickly emulate the same features with a reduced functional performance for the domestic market — with a big commercial advantage.

In the example you gave above, what function or performance are you referring to that is 90 percent instead of 110 percent?
In China, for instance, it’s the same requirement in terms of light distribution and safety as in Europe — there’s no difference. But in Europe we have a lot of additional features and highly sophisticated LED applications, like integrated automatic curve lights. These are not in demand in China or in India. In these markets cars are mostly driven within cities, so why should they have additional features like motorway lights or spotlights?Another example I can cite is our intelligent battery sensor (IBS), which we developed for the European market first of all when the stop-start function was introduced. This was basically driven by legislative requirements that were to come. As European carmakers have a number of ECUs in their cars, they really have to be very careful of the state of charge. But now we also see the need for a battery sensor in India, not because of legal requirements but as a means to lower the total cost of ownership. There is a big fuel efficiency benefit we can give customers here, and that would anyway not have to deal with so many ECUs and such high power consumption. What we’re doing in this case is basically carrying over the technology, the functions, but using different materials to give our customers a more competitive price. It’s not that it is lower-performing, but rather that it is better-fitting.

Could you give me any more examples of products that are “better fitting” for India?
Headlamps again: like I said, the regulatory requirements are exactly the same as in Europe, so we cannot compromise on those. But they don’t say that you have to have an integrated headlamp. So you will see trucks that have separate lamps for high beam, low beam, and turn signalling. The moment you put them all into one envelope the cost increases. Modularising them, as we have done, is just smart cost management, nothing else. You do not compromise on quality, but what’s really important is to understand the customer’s requirement and give him the most cost-effective product.A more specific example of this: we now have what we call an optimised foglamp. Hella Slovenia, which is expert in this, designed a common reflector that we use across many platforms. So the only tooling we require is for the fascia, that is the lens and for the wedges, not for the reflector. And when you have millions of reflectors coming off the same tool, the cost comes down. So it’s a smart way of managing the cost.

Do you develop your products in a way that allows you to offer different feature levels without having to put in significant development effort into a separate product for China, or for Germany?
Modularity and flexibility are very important especially when the demand is continuously evolving. Sometimes customers do not know what they will want tomorrow, and to be able to offer a quick solution you have to have a scalable technology which is also flexible. That allows you to synthesise a solution that is not only based on existing building blocks that are proven in the market, but also flexible enough to be upgraded. For customer needs that are changing, it would take a lot of time and effort to develop products from scratch to a level of maturity each time. But if you have a modular solution that is also upgradable, you can deliver more and more features on a single platform.Another interesting example of modularity is our accelerator pedal sensor. Here we have created a modular solution called a black box, and packaged all the electronics inside in such a way that it can be reused by multiple customers in multiple environments. The core electronics, developed in the lead location Lippstadt, are standard. The benefit here is not only that you save on costs; you also have a more mature design — prove it one time and reuse it in various places. We change the pedal lever arm and the mountings, but the core, the heart, still beats the same way across the world. So it’s the Hella heart that’s sitting in the centre, continuously beating with the same pulse.

Not everybody develops their products to the level of modularity you describe. How much is modular thinking really a part of the way you do things?
Modularising means investing upfront, because you need to think ahead. You have to ensure that what you’re developing can be reused in the future. So reusability and upgradability need to be considered upfront. You have to invest a little more, think more, and adopt a more structured approach to design building blocks that you can upgrade. This is the way we are doing it with our body control modules in India, which is the lead development location for this product. Down the road maybe we will take this back to the more developed economies.Tell me more about this.With the body control module we are developing, we have put down a global platform for emerging market needs. In markets like India, China, and Brazil, the needs are not yet frozen and the market is continuously evolving. So we need to create a platform that is scalable and flexible.

When do the first products from this platform get seen, and do they get seen in India first?
We hope to see it first in India. We have almost acquired our first project, but we cannot reveal who the client is because we’ve not yet won the business. But the idea is also, let’s say, if we win that project or not, we will roll that development out into international OEMs, in Germany, in the US.

Taking technologies like this back to Europe — Bosch is doing something like this with its diesel systems. Is there really interest in Europe for the same things you are developing in India?
Yes, this is the concept we have all over really. Basically, as we are a German company, we have built up many competences in our plants in Germany for sure, but we have also other products, for example the global body controller competence, which is now here, and the global CAPE (Car Access Passive Entry) keyless entry system competence, which is in China, from where we will support developments in this area all over the world. We have fuel control modules, for which the centre of competence is the US, from where we support Germany, South America, and India and China as well. So this is basically how we share competences, and also the needs of the regions, but bring all of them into a modular global Hella network.

Do you see prospects for other centres of competence in India?
Yes, but because it’s future thinking we have yet to take the decisions. We started with the lead development for body control modules, and there will be others in the future for India.

When did this thinking emerge, to have centres of competence all over the world?
We decided five years ago that we really had to take the next step, developing from an international to a real global company. Of course ideas like platform concepts, and so on, were already there, but spreading the responsibility for fundamental development worldwide, I would say, we started five years ago. And now we have to further develop it, step by step. Only with spread responsibilities can you really become a global company.

What has your experience so far been? Has it been seamless throughout?
Nothing in the automotive supplier world is smooth and seamless. But the one important learning is that you really have to do it in a team-oriented way. All the different competence centres, all the different people in the global development network, have to work together. Because developing a standard is one thing, using the standard worldwide is the other. This needs a kind of acceptance. It’s about different cultures working together as one global team. And finding the right approach to do this needs experience and time. But I think we are now on a good way. The key word is respect — you respect the thinking, the needs, the specific cultures of all the centres, all the different people worldwide. In the end we are one Hella. Bringing this mindset into the whole organisation was a significant experience for us over the last five years. But now our Chinese managers and Indian managers work together as one as we develop into a global company.

One thing’s certain — your people are passionate about what they do. I could be forgiven for thinking that Hella is a completely Indian company!
(Laughs.) These guys, they are pushing us now! And so it should be.

Letting go, letting the local entity formulate strategic decisions — was that easy to do?
As I said, nothing is easy. We took the decision and of course we learnt a lot, but in the end, as a global company, you have to live in the matrix. And one important dimension of the matrix is the regional responsibility. So [Hella India Electronics managing director] Naveen Gautam, [Chennai design centre director] Venkatesan Radhakrishnan, and [Hella India Lighting MD] Ramashankar Pandey are responsible for the development of the Hella business in India. Of course there are others responsible worldwide for the component business but in the end, when we talk about the development of the Indian market, these three gentlemen are responsible for business here. And when the functional directors and the regional directors respect each other, when they really work together in the matrix, there is no problem. We established this system step by step over the last five years, and now it’s clearly paying off. And it’s good for me to hear from you as an external observer that the passion of these gentlemen is at the right level. I have the same opinion.

Mr Gautam is not only the head of your Pune tech centre, but is also responsible for the electronics business. Isn’t this unusual?
I don’t think so. I think managers should have some kind of technical or business background. It’s good that managers have some functional responsibilities too, not just managing from a 1,000m perspective but also having a good and very close relationship with the shopfloor, to the tech centres. That’s why we follow this principle.

Do you do it all over?
Not 100 percent, but we prefer this kind of organisation. Don’t you think this is a good approach? That the person who is developing the product is able to take care to sell it. If you’re passionate about it, if it’s your baby, you really take care of it. You want to see it grow.

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