Expanding the client base

Source: Manufacturing Digital

Date :26/09/2007 15:46:41

A trend for consolidation in central Europe is driving growth for the textile manufacturer, says the general manager of Fezko.

Written by James Hurley & Produced by Nick Hargrave

Fezko is a leading European manufacturer of textile interiors for the automotive industry, but its extensive and intriguing history stretches all the way back to 1812, when the company was established to manufacture the now legendary fezz hats.

The first significant step towards its modern incarnation didn’t arrive until 1899, when a Vienna-based group of factories manufacturing fezzes was created. 21 years later, a group of factories located in Strakonice in the Czech Republic, producing fezzes, woolen fabrics, blankets, knitwear, berets and caps was founded and the company’s movement beyond Fezzes began.

By 2001, and following foreign investment and company restructuring that created two separate divisions (textile interiors for vehicles and headwear), Fezko was newly positioned with a focus on the manufacturing of textile interiors for the automotive industry as its core business.

Aggressive marketing

While the Czech textile industry is experiencing a number of challenges, Fezko is continuing to grow. “We were perhaps lucky that our growth came when we reached a market where consolidation is really a must,” says Josef Blecha, Fezko’s General Manager.

“Unlike the US and even Asia, it’s a highly fragmented market. We had been facing twenty competitors in Europe, but the process is slowly diminishing that number. There are a lot of mergers and acquisitions going on and companies pulling out of the market.

"In that respect we’re financially strong. We have capitalised on the process in Europe that leads to consolidation to build our strength in this territory.”

Blecha, a graduate of the School of Economics in Prague, has enjoyed a career that has found him in senior roles in both the US and Canada. He joined the company in 2001. At the time, over 85 percent of the company’s turnover could be attributed to one sole customer, the Czech branch of the company Johnson Controls which produces Skoda car seats.

Now, Fezko can count a number of prestigious car manufacturers amongst its clients, including Daimler-Chrysler, Volkswagen, Ford, and Volvo, with around 50 percent of its turnover coming from its Skoda contract.

And at a time when Europe is being flooded by products from Asia, Fezko even exports to Malaysian car plants Perodua and Proton.

Asked how this has been achieved, Blecha is keen to stress the importance of good management and attention to detail in R&D. “We had very good support from our shareholders, who are hungry to reach the top with Fezko. Through both mergers and acquisitions and organic growth, we have been able to achieve their vision. But it’s also our own design and R&D that opens the door to OEMs.

“The marketing can only be as strong as your own designs. That is the odd aspect of our industry. It’s not the salesman but the designer who is making the deal upfront. It is very difficult for a salesman to walk through the OEM door and make a sale before a designer has presented an attractive design.

"We work very hard in conjunction with our R&D people to offer people things that no one else can offer. That makes a difference, along with the speed and reaction time that we can offer to the customers,” he explains.

If what Blecha calls “aggressive marketing” must take part of the credit for the company’s growth and success in winning new business, he says that the company’s independence and subsequent self reliance has also proved instrumental. Fezko is not part of a multinational concern and its management has to win its own contracts.

“Because we are not in the hands of any strategic partner or parent company, we were challenged with creating this aggressive marketing so we could look after ourselves. We don’t need to rely on anybody else’s help.”

The company’s relatively humble origins have also helped it to foster a climate that encourages superb customer service.

“I think we have proven in the past that we get close to the customers in the development stages. We rely on our own designs and have the ability to continuously present customers with new patterns and fully cooperate with manufacturers during the development of a new car.”

The new Detroit

To compliment its operations in the Czech Republic, in 2005 the company established Fezko Slovakia, based in Zilina, with the goal of bringing two completely independent manufacturing facilities online by the end of 2008.

“When we speak about the automotive industry, Bratislava has an action radius of 400 kilometres, and it will have produced 3.5 million cars produced by 2010. It’s a large market, and something of a new Detroit.

"Along with the OEMs that moved into the region, there will be some countries, like the Czech Republic that will have to face the rising cost of labour, but maybe Slovakia and Romania will be a little slower in that process,” he says, explaining the thinking behind the expansion.

Since 1990, the free market had been creeping up on the Eastern European countries, and it took a while for large numbers of people to take advantage of the situation. It’s different now of course because the market has matured, but I still believe there are a lot of discrepancies between the sophisticated market and the one that we have in central and Eastern Europe.”

As the market has matured, the low cost advantage has gradually started to fade as salaries increase and lower cost territories begin to attract investment.

“One of the challenges we will have to face is the increased cost of labour, and of course the actual availability of skilled and mature labour is another one. The market has become saturated with all of the companies moving in from the West, meaning availability of labour is a problem.”

The flipside of all of this is that the barriers to entry are high, leaving Fezko in an enviable position. “For many new companies - including textile companies looking to serve the automotive market - it will be very difficult to start from scratch if you wanted to move into this region, because they’d have a hard time matching the compensation levels that the other engineering companies may be able to do.

“Our advantage is that we’ve been here a number of years, we know the market, and with the exception of Abel in Austria, I don’t believe we have a natural competitor in the Central European region. We enjoy the long history and the geographical proximity that Fezko can offer to OEMs and the suppliers and customers that we deal with.

“In general, I’m not worried about the future. I may be worried about the availability of labour, but for that we can work on our own systems and look at compensation, company structure, motivation of the people, training, and constant improvements of the processes that we have in the factory.”

If Fezko needs to source high quality staff, it has no problem with reaching for highly skilled, well connected people from Western countries, reflecting the company’s ambitions and overall growth strategy.

“We have already spread our wings into different regions to be closer to the customer, and for that reason we have established three offices in Germany, one office in Spain and we’re going to look for a Fezko operation in Russia. We have also created a one off partnership with many countries around the world to provide a global service to our customers.”

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