Issue: Jan 2005


Magnesium shines



Magnesium is fast emerging as a metal of choice in the auto industry. APN chats to Jostein Eikeland, chairman of TMG.

by John Larkin

Magnesium shines

Automotive Purchasing News (APN): Please give us some background to TMG
Eikeland: I founded TMG in 2000. The company leverages the expertise and development experience of Tonsberg Presstoperi (TP), a well-known and 50-year Norwegian magnesium production company. TP has been re-structured as Tonsberg Magnesium and is a strategic production partner of TMG.
TMG draws its name from Norway’s oldest city, which has a 1000-year tradition of metal making. Through its relationship with TP/Tonsberg Magnesium, TMG has developed the most advanced and reliable hot chamber magnesium die casting techniques available in the world. This technology builds on TP’s history in hot chamber die casting machines (the company pioneered the approach in the 1970s).and is embedded in TMG’s Tonsberg System. TMG implements its technology and its comprehensive Tonsberg System throughout a network of production facilities that it has exclusive capacity rights to. TMG has plans to expand to 16 by the end of 2004.
The company uses next-generation die-casting machines, robotics, automation and centralized information management. The company has an exclusive agreement with Nowoczesne Technologie Produkcji s.c.(NTP) of Poland, which manufactures and finances the die casting machines that form the core of the Tonsberg System.
TMG has a seasoned management team located in strategic locations around the world. The company sells directly to automotive manufacturers and systems integrators and parts suppliers serving the automotive market. Tonsberg Magnesium Group (TMG) is setting a new standard in the production of magnesium-alloy die cast products. The company, headquartered in Oslo, Norway, combines a steep history and expertise in magnesium die-casting with an innovative business model and a technology-based infrastructure tuned to the needs of the 21st century.
APN: What is your vision and what is your mission?
Eikeland: We want to be the largest, most successful magnesium die casting supplier in the world in the next five years,. We feel we are bringing modern thinking to what has become something of a stale, slow moving industry. TMG’s strategy is based on three core advantages it brings to the magnesium die casting industry:
•Proprietary production techniques and systems that significantly reduce cycle time, improve quality and allow production of a wider spectrum of parts
•An aggregated network of capacity through foundries that utilize uniform production approaches, thus lowering costs and improving quality, reliability and scalability
•An extensive investment in information technology to manage the entire customer experience, from initial part design to final delivery logistics, resulting in superior service, dependability and cost effectiveness
APN: What is according to you the market of magnesium components?
Eikeland: Without a doubt, the automotive industry will drive magnesium consumption for all the obvious reasons - the need for lighter and safer parts and a new focus on recyclable products. We’ll also see growth opportunities in consumer electronics. Within the automotive market, the focus will be on safety parts, seat frames, crash-box systems, front beam and electronic boxes. Forecasts call for the market to grow from 2-3 kg per car to more than 50kg by 2010. This require a growth of more than 25% CAGP. Several factors will facilitate growth, including more accessible sources of prime supply, alloys that are more ductile and more castable, and more cost-effective production techniques that will lower the end cost for consumers.
APN: Please describe TMG’s range of products in more detail?
Eikeland: Our range of products includes steering wheel armatures, seat frame armatures, valve cover systems, and rack and pinion housings.
APN: What steps do you take to ensure your products meet the high quality requirements of the automotive industry?
Eikeland: Quality is a foundation principle for TMG and we believe it will set us apart in the industry. We have just passed an extensive quality audit, and are using the best practice model in our knowledge management system. We adhere to the toughest standards such as ISO 9001 and TS 16949 processes, and use quality-enhancing practices such as redundancy and proactive maintenance and quality assurance towards sensor driven production-line measures. The TMG management has a steep background in the automotive industry, and the President of our Poland operations has for the last 5 years been the CEO of Envinio, a German owned quality audit company specializing in the automotive sector
APN: How do you see business developing in the future?
Eikeland: I think the industry will see more and more active Venture Capital Management involved, and that will place a new mandate on performance increases. This is only possible through new technology and processes. We have done this, and the response from our initial customers is very encouraging. We are doing what theories are defeating, in real world in mass production. That’s what’s exciting about the business we are currently growing. As a private company we will not disclose our numbers, but we are seeking a public listing in the year of 2004.
A part of our growth strategy is to ‘go East’ but not necessarily in the way most people are talking about going east—as in China or other parts of Asia. We are going to Eastern Europe where we find lower cost but highly skilled production capabilities. We are already global competitive with 5-15% cost reduction for our customers, we will stay that way the next five years We do anticipate having some production in North America, and Europe by 2006. Another key element in our strategy is a fully automated part-commerce solution, that will be available by end of 2004 for all of our customers
APN: Is your capacity sufficient to meet your growth aspirations internationally?
Eikeland: Having a partner-driven manufacturing model enables us to grow the capacity exponentially, and we have a sourced 360 person team that build our plants and our production-lines as we go on. We have assigned from our European industrial investors and partners more than 140 Million Euro for capital investments in new plants going forward. This is all signed in letter of intent agreements, so our immediate and long-term capacity needs are secured from an investment point of view. Our second plant will operating by the end of this quarter, and our large super factory will operate by end of next year (2005). It will have about 40 fully automated production cells, and will be able to take on large part production parts up to 2.5 meters in diameter.
APN: What do you see as the biggest challenge for magnesium suppliers?
Eikeland: There are three types of suppliers that are in the supply chain and are under impact; they each have their challenges. A solid symbioses between these players and the technology providers are instrumental for a successful world. For the prime producers, they will have to deal with the whole issue of Chinese production and its impact on cost and quality, the environmental issues associated with magnesium harvesting and production, and the rising cost and use of energy throughout the process. For the alloy vendors, the main issue is the historical market volatility and how to address that to build a sustainable business model. In addition, they need to be looking at new types of alloys. The part producers themselves are on the receiving end of those two sets of issues for those two types of suppliers, plus they face the end market demands such as cost, availability and government mandates.

APN: Protection of the environment is a very important consideration for the industry and the suppliers. How are you helping to preserve the environment?
Eikeland: We have an extensive awareness on the topic. We do believe that by being environmentally friendly, we will actually gain better profit. For example for the past two years we have been the official coordinator of the EU-based recycling project REMACAF. We are also investing in R&D to test new efficient and biologically friendly lubricants. Our production consumes 40% less power than our competition. We run smaller machines with bigger parts, that require less equipment to set up our plant, and gives and overall net “environmental savings” of more than 50% towards the competition as we see it. We do expect the rest of the market has to adjust as well.
APN: How do you see magnesium influencing automotive manufacturing in the future?
Eikeland: Magnesium will be the key factor in reducing weight and lowering costs in automobile manufacturing. We see it as the primary factor is consolidating the number of parts, and also improving the overall environmental-friendliness of the industry.
APN: How are you making your business more customer-orientated?
Eikeland: Our industry has historically not been very customer-oriented and the TMG strategy is in direct contrast to that. Many of our senior managers have a background in the technology industry, which is a much more customer-oriented business. We are taking lessons from technology businesses, as well as applying technology itself, to be much more proactive in how we address customer needs. Some of it is basic - giving them access to more information, getting them involved earlier in the process, etc. And some of it relies on leading-edge technology so that we can operate more efficiently in tandem with our customers. Unlike the traditional ‘arms-length’ model, we prefer to have an intimate relationship with customers so we can anticipate their need, which makes us a more responsive partner.


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