ZF’s Knack for the Niches
Volume sales can spring from filling needs in niches. ZF thinks big by concentrating on every small step.
“I prefer small steps,” Julio Caspari, president ZF of North America, told us on a recent tour of several NAFTA production facilities and the vastly expanding ZF Technical Center in Northville, Mich. The preference simply goes to core competency.
|ZF has had a long relationship with Mercedes Benz in Tuscaloosa supplying differentials and axle assemblies for the M-Class.|
The letter “Z” in ZF stands for Zahnradfabrik and it means “tooth on wheel maker,” or gear maker. It takes a lot of small teeth to make a gear, each one having to be perfectly formed. Gears are precision mechanisms only if quality is consistent from tooth to tooth. That ideology sits at the base of this $10 billion plus components and system supplier which turns a venerable ninety years old in 2005.
“Superior performance with a niche component often leads to volume sales and that can happen in several ways. The niche component can grow in popularity, become more mainstream, resulting in greater volumes. That’s one way.
“By performing successfully in one product niche there may also come the opportunities to leverage relationships toward other components or better components, then perhaps there’s the chance to produce subsystems, systems and then modules. When programs are quality driven, that is a particular help to us. The whole idea of continuous improvement gets back to making progress in small steps,” noted Caspari.
|ZF’s CVT technology has a big role in the Freestyle as the standard transmission. |
Making small steps, of course, does not rule out the possibility of making lots of them. With 119 production locations in 25 countries, small steps have put the ZF footprint everywhere. The product portfolio is vast and also very current and today it fully embraces well known entities including driveline, chassis and suspension specialists Lemforder and Sachs Automotive as well as a 50/50 steering system joint venture with Robert Bosch known as ZF Lenksysteme GmbH.
Many specialties have been assembled together under the ZF umbrella. Years ago the strength of the company was more oriented to heavy duty commercial vehicles and marine, but today it is more than 60 percent light duty vehicle by sales volume, Caspari pointed out. In 2003, Western Europe accounted for 72 percent of sales; the NAFTA market was second in volume for ZF accounting for some 17 percent of sales, but growing faster than Western Europe. It has more than 20 production locations in Asia, with half of them in China. It is well positioned in Asia and although sales in 2003 amounted to only 6 percent of ZF’s total, explosive growth is occurring.
But it all comes together niche by niche. At ZF’s plant in Gainesville, Ga., the company produces 5- and 6-speed manual transmissions for Ford and GM light trucks, axle drives for DaimlerChrysler vehicles, but also power shift transmissions and multi track rear axles for construction machinery. A lot of separate programs and components fill the Gainesville plant, which produced $86 million in finished product in 2003.
That is in contrast to ZF Lemforder in Tuscaloosa, Ala., which at this point is dedicated to the Mercedes-Benz M-Class SUV, for which it produces front and rear axles systems and differential assemblies. Actually, there are a number of front and rear axle variants, so the plant carefully sequences approximately 14 truck loads of axle systems per day for the MClass. Tuscaloosa will also produce complete axle systems for the new M-B Sport Tourer when it goes into production in Vance, Ala. In this plant a single program accounts for more than $230 million in sales, which translates to approximately 100,000 axle systems per year.
Other units of ZF deliver axle systems in Austria, China, Thailand and South Africa. BMW is a customer at all of those locations. ZF is now also aboard Ford s new Five Hundred and Freestyle programs at the new Manufacturing Campus in Chicago with complete front and rear axle modules.
|A ZF worker checks measurements on a rear-end module that will be sequenced into Ford’s Chicago Assembly plant and bolted to the new Ford Freestyle. ZF is leasing space in Ford’s supplier park adjacent to the plant. |
What's very interesting with ZF is that you can be with them in Gainesville where they extol the efficacies of the manual transmission as applied to light trucks, and the next day you are in the Saltillo, Mexico, plant that produces only torque converters, for automatic transmissions of course, many of them for light trucks. Hey, when the man wants a blue suit, turn on the blue light.
Saltillo produces heavy duty as well as light duty torque converters and its customers include GM, DCX and Ford on the light vehicle side and Caterpillar, Dana, Carraro, JCB, Allison and other ZF divisions. Much of this business grew out of an acquisition from Borg-Warner. The well equipped stamping plant was virtually moved from Sterling Heights. Saltillo, which is completely integrated from stamping through testing will produce more than 700,000 torque converters this year in several sizes. GM is by far the biggest customer.
Taking on components by the hundreds, thousands and tens of thousands, ZF also is very much at home with millions of components as well. At its Guadalajara, Mexico, strut and shock absorber plant, ZF Sachs produced upwards of 7 million units in 2003, at the rate of 50,000 per day. Some 49 percent of production is devoted to OE light vehicle customers, some 39 percent to the aftermarket and the balance to heavy trucks and recreational vehicles such as snowmobiles and ATVs.
Automotive customers for this plant include the Big 3, plus Nissan and VW, but also suppliers such as Delphi and TRW Automotive. There are 25 customers total, and countless models. It supplies many new high profile models including the Ford Freestyle and Five Hundred, the Chrysler 300 and Magnum, Nissan Altima and Maxima. Caspari explained to me that ZF has been making investments at somewhat heavier than normal levels and the company has numerous developments afoot that should start to bear fruit.
mission, which is produced by Ford first for the Focus C-Max for Europe only, and available as an option on the Ford Freestyle and Five Hundred. Kind of a niche market at the moment, but with plenty of upside potential for sure. Then there s also the new generation S 6-53 manual, which is also available in an automated version.
ZF tickled the market with a prototype 7- speed automatic at the Frankfurt Auto Show last fall. Instead of a conventional torque converter, it uses a unique wet startup clutch with a dual mass flywheel. Higher performance and efficiencies are claimed. At any rate, ZF has a full stable of automatics, manuals and even the CVTs to serve nearly any niche.
It also has a new transfer case for all wheel drive vehicles that uses an electromechanically- controlled multi-disc clutch to distribute power to the front and rear axle. It can function in either a passive or active way to enhance performance.
On the suspension system side of the business, the new ZF Sachs Continuous Damping Control (CDC) system is proving very successful in the European market, most notably on the Opel Astra, and it is being prototyped on several high profile U.S. models.
Name the niche in driveline, suspension or chassis components and systems, and the chances are ZF is squarely in that space, and typically with more than one bet. ZF s Caspari says it all about small steps but nothing is stopping the company from taking many small steps all at once.