Dräxlmaier Group

Landshuter Strasse 100
Vilsbiburg, D-84137
Germany Telephone: (49) 8741 47-0
Fax: (49) 8741 47-1940
Web site: http://www.draexlmaier.de

Private Company
Incorporated: 1958 as Fritz Dräxlmaier, Geisenhausen
Employees: 35,000
Sales: EUR 1.4 billion ($1.76 billion) (2006 est.)
NAIC: 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing; 336360 Motor Vehicle Seating and Interior Trim Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing

Dräxlmaier Group is a supplier of electronic systems and components as well as premium interior parts, modules, and systems for upscale passenger cars and luxury sports cars. The company markets its products to some of the world's leading automakers, including BMW, Daimler-Benz, Audi, Volkswagen, Porsche, and Toyota Lexus. Headquartered in Vilsbiburg, Bavaria, the group operates 52 subsidiaries in 20 different countries in Europe, North America, Asia, and Africa. Roughly two-thirds of the company's total workforce are employed at the group's five production plants in Romania. The group's two main divisions, vehicle electrical systems and interiors, each accounted for about 50 percent of revenues, according to Automobilwoche in 2005. The company is privately owned by the German Dräxlmaier family.

GETTING STARTED WITH THE GOGGOMOBIL

In 1958, with the postwar economic boom in Germany in full swing, a sizable number of firms, from motorcycle manufacturers to machine tool producers, entered the promising market for automobiles. One of them was Hans Glas GmbH, a Bavarian company that had produced sewing machines before World War II. After the war the company ventured into motor scooters and went on to manufacture the Goggomobil, an early model of a small passenger car for the masses. To build the so-called microcar, Hans Glas, the owner of the company, lined up a number of contractors to deliver the necessary components. One of them was the merchant Fritz Dräxlmaier, a close friend of the family, who founded his own company, Fritz Dräxlmaier, Geisenhausen, in 1958 to supply Hans Glas with such components.

In May 1958 Dräxlmaier received his first order from Hans Glas to provide a total of 50,000 wire harnesses for three different models of the Goggomobil (a sedan, a coupe, and a limousine) within one year. Right from the first order it became clear that being a supplier for automobile manufacturers was a demanding business. The first 100 wire harnesses were to be delivered about one month after the order was placed. Thereafter, a predetermined number of wire harnesses had to be provided daily, according to the daily output of cars. Soon after the first order, Dräxlmaier received the second one. He was also contracted to provide interior components for the Goggomobil, including door trim panels, dashboard trim panels, rear window shelves, and upholstery.

In the beginning, a team of three men oversaw production in Vilsbiburg, Bavaria, while several women assembled the cables in a cellar. Meanwhile, Fritz Dräxlmaier drummed up new business, and very successfully so. To keep up with orders for interiors, new production equipment was installed, including high-frequency welding equipment and vacuum molding machines for thermoplastics, the raw material for seat covers. After six years the company moved into a new 2,400-square-meter production building. In the same year the company began manufacturing parts made from polyurethane foam. In 1968 Dräxlmaier's own tool and die workshop supplemented the existing facilities.

ESTABLISHING AN INTERNATIONAL NETWORK

Due to the fierce competition, Hans Glas sold his company to Bayerische Motoren Werke (BMW) in 1966, and Dräxlmaier became one of BMW's suppliers. Only one year later, automaker Audi placed its first order with Dräxlmaier. In 1971 the company won a contract with Volkswagen, one of Germany's leading manufacturers of passenger cars. As the company's growing list of large customers resulted in large orders, production facilities were expanded in the late 1960s and early 1970s. By the time the company's new administrative building was completed in 1972, Dräxlmaier had established itself as a trusted supplier for Germany's top carmakers.

As early as in 1974, long before the term globalization was used to describe the massive move toward a world-spanning division of labor, Dräxlmaier set up a production site abroad, in Tunisia. Two years later the company established a foothold in the United States. In 1978, EKB Braunau, a new production subsidiary for wiring harnesses and electrical components with about 100 employees, was opened in Austria. Four years later, EKB Braunau moved to a much larger site. By 1983 Dräxlmaier had evolved to a group of six companies with a combined workforce of 1,300. Two years later, two limited liability companies were established to replace the former sole proprietorship: Lisa Dräxlmaier GmbH and Eldra Kunststofftechnik GmbH. Also in 1985, four additional affiliates abroad extended Dräxlmaier's international network even further. However, the company's main growth took place in Germany. There, the demand for parts had grown so fast that the whole division had to be moved to a site seven times the size of the old production space in Geisenhausen in 1976.

ADJUSTING LOGISTICS TO AUTOMAKER'S DEMANDS

In the late 1980s, with economic globalization well under way, the demands of Germany's top automobile manufacturers on their suppliers became a greater challenge to meet. In general, their business relationships became intertwined more closely. In particular, with shortening product cycles, development processes had to be synchronized in time periods that were becoming shorter and shorter. Consequently, suppliers had to deliver not only parts, but more complex components to reduce the number of contractors automakers had to do business with. The same was true for production processes. With increasing global competition, suppliers were more and more integrated into the automakers' supply chains in order to keep costs low. That meant that a chosen supplier had to adjust his own production and logistics processes to the rhythm of the automakers' assembly line. This in turn was possible only if suppliers were present wherever their automotive customers had built a factory.

COMPANY PERSPECTIVES

In a market that is now dominated by mega-suppliers, Dräxlmaier is one of the few remaining family enterprises. At the same time, the Dräxlmaier Group is one of the very few automotive suppliers possessing expertise in auto electric, interiors, trim, electrical components, tool making and logistics. Vision is not possible without an awareness of one's past. That is why we would like to take a look back and show you how Dräxlmaier has become what it is today namely, a dependable, innovative system partner working to shape the future of the automotive industry.

The Dräxlmaier Group aggressively pursued the goal of becoming such a preferred supplier for its major German clients, including Mercedes Benz, BMW, and Audi. A very important first step in that direction was the construction of a high rack warehouse in 1987, which was completely automated. This innovation constituted the basis of a cost-efficient and flexible handling and flow of raw materials, and semifinished and finished parts within the company's production, assembling, and logistics processes. The structure was enlarged several times and ultimately became the heart of just-in-time supply chains. A second major innovation followed in 1990 when Dräxlmaier introduced the concept of customer-specific wire harnesses.

Customer-specific wire harnesses were assembled from a great variety of predefined wire set modules that could be used in different combinations. They were combined precisely to customer specifications. There were several hundred variations of modular wire sets to choose from for any new car model, which were used for vehicular electrical systems, entertainment systems, and engine management. The different modules were assembled and delivered just-in-time to the carmaker's assembly line. The necessary data were constantly transmitted and processed by Dräxlmaier's proprietary supply chain management software system. As a result, the cable harnesses that left a Dräxlmaier plant contained no unnecessary cables as was previously the case. For Dräxlmaier, the new system cut down material cost. Customers benefited because the weight of the cars was reduced.

GOING GLOBAL AS A SYSTEMS SUPPLIER AFTER 1990

The opening of Eastern Europe in the early 1990s presented Dräxlmaier with new opportunities. In 1990, the company set up a production facility for wiring harnesses for Volkswagen, in Crossen, Eastern Germany. Three years later the company established its own production subsidiaries in Hungary, the Czech Republic, and Romania. The second half of the 1990s saw Dräxlmaier establish new subsidiaries in the United States and Mexico. In 1996 DAA Draexlmaier Automotive of America was founded in Duncan-Spartanburg, South Carolina. In the same year, DAM Draexlmaier Automotive de Mexico was set up south of the Texas border in Reynosa, Mexico. The next major step, the move to China, followed seven years later when a new production subsidiary, Draexlmaier Automotive Components Co., Ltd., was established in Shenyang. In addition, Dräxlmaier opened subsidiaries in Thailand, Malaysia, Spain, Poland, Slovakia, and South Africa.

Two years after the death of Fritz Dräxlmaier, Sr., in 1995, the company was renamed Dräxlmaier Group. In the mid-1990s, Dräxlmaier made the transition from component to systems supplier. A first major success, Dräxlmaier won a concept competition by Mercedes-Benz for the entire cockpit of the company's CLK/C208 model in 1994. The solution presented by Eldra Kunststofftechnik won out over the proposals of globally active competitors much larger than Dräxlmaier. Three years later Dräxlmaier won another major concept competition contracted out by BMW for a complete door module for the BMW 7, which was subsequently developed as a so-called functionally integrated system (FIS), manufactured and delivered to BMW's assembly line just-in-time for the first time. In 1998, the company's research and development (R&D) engineers moved into Dräxlmaier's new technology center at Vilsbiburg headquarters, that united the design, modeling, and prototyping as well as the tool and die departments under one roof. All in all, sales soared in the 1990s with two-digit growth rates the average.

KEY DATES

1958:

Fritz Dräxlmaier establishes a business to supply wire harnesses and the interior for the Goggomobil.

1966:

German auto manufacturer BMW is won as a customer.

1969:

The first order from German carmaker Audi is received.

1971:

Dräxlmaier is awarded a contract from Volkswagen.

1974:

The company's first foreign production subsidiary is set up in Tunisia.

1976:

A factory is built in the United States.

1985:

Lisa Dräxlmaier GmbH and Eldra Kunststofftechnik GmbH are founded.

1993:

Dräxlmaier sets up its first subsidiary in Romania.

1996:

New subsidiaries are set up in the United States and Mexico.

1998:

Dräxlmaier takes over interiors manufacturer HIB Holzindustrie Bruchsal GmbH.

2000:

The company designs and manufactures the complete Interior for the BMW Z8.

2003:

Dräxlmaier opens a subsidiary in China.

EXPANDING FURTHER WITH INTERIORS

Besides cable harness modules, interiors played an increasing role for Dräxlmaier. Shortly after BMW's order for BMW 7 door modules, the automaker also ordered center consoles for the same car models, which were designed as an FIS as well. In 1999, Dräxlmaier began manufacturing a full leather interior for the Mercedes-Benz CL Coupe. Two years later the company started producing interiors for the Mercedes-Benz SL Roadster. In order to be able to deliver the components just-in-time to Mercedes-Benz' assembly line in Bremen, Dräxlmaier set up a new production plant in Achim near Bremen in northern Germany in 2001. In addition, the company received new orders for interiors from BMW. For the BMW Z8, Dräxlmaier was awarded a contract to design and manufacture the entire interior of the car. In 2002 Dräxlmaier received an order to provide the whole interior, the electrical system, and the fine wood trim for DaimlerChrysler's luxury Maybach sedan.

In order to advance even further in the area of interiors, Dräxlmaier acquired a majority stake in HIB Holzindustrie Bruchsal GmbH in 1998, a former subsidiary of Daimler-Benz. The interior maker processed fine woods and manufactured high-quality trim made from wood, chrome, and even from stone, which was laser-cut into very thin sheets, for upscale car models. The demand for wood trim increased steadily for several reasons. First, the market share of the premium segment in passenger cars was going up. Second, to satisfy consumers' desire for personalization, car companies offered wood trim (from birch or bamboo to oak or walnut) as an option even for smaller and less luxurious vehicles. Third, new technologies made it possible to use wood in a much larger number of applications than in the past. For example, in the early 2000s several automakers exhibited concept cars with wood instrument panels, or even with wood floors. In 2001, Dräxlmaier won an order for wood trim for the Lexus RX 300 model of Japanese auto manufacturer Toyota, the first from a customer outside of Germany. Orders from other automakers followed later in the decade, for Bugatti's Veyron, Ford's GT, Jaguar's XK, and Porsche's Panamera.

MOVING TO LOW-COST LOCATIONS AND PREMIUM MARKETS

In the early 2000s Dräxlmaier continued to move jobs to low-cost countries in Eastern Europe. The production in Crossen, Eastern Germany, was moved to Jelenia Gora, Poland, in 2001, which was supplemented by a new development center for vehicle electric systems in 2003. According to the Romanian newswire Rompres and the German newspaper Stuttgarter Zeitung, an estimated 950 jobs had already been moved from production sites in Germany, Austria, and Hungary to Romania, since the 1990s. Altogether, Dräxlmaier invested about EUR 210 million in its five production plants in Romania, which became Dräxlmaier's most important production location. Romanian employees even played a major role in training staff at new sites in Mexico, China, and Egypt.

The move to realize cost efficiencies in other countries was not without controversy. In 2006 Dräxlmaier's subsidiary HIB received public attention when, without any announcement, it closed down its production site and logistics center in Böblingen after all the equipment had been moved to Buchsal headquarters during a holiday in June. The company management vacated the Böblingen site, which had become unprofitable, after a lengthy dispute with HIB's labor council. Part of the staff later agreed to be transferred to Bruchsal. In July 2007, Dräxlmaier made headlines again when the company paid an estimated SKK 9 million (about $3.7 million) to the southern Slovakian city of Rimavska Sobota in an out-of-court-settlement, after it had changed its mind about setting up a new factory there. The expected additional business was to be handled by existing factories in Romania instead.

While many automotive companies were moving further East, primarily into China, at the midpoint of the first decade of the 2000s, Dräxlmaier looked West, simply because at the time the potential market for expensive vehicles looked more promising in the regions governed by the North American Free Trade Agreement (NAFTA) than in Asia. In 2005 the company built a new production plant for vehicle electrical systems and interior components in San Luis Potosí in central Mexico. Beginning in 2006, some 1,800 newly trained Mexican workers began manufacturing electrical systems for the BMW models Z4 and X5, which were delivered just-in-sequence to BMW's assembly line in Spartanburg, South Carolina. The unusually complex wire harnesses for the BMW X5 contained about 900 different cables consisting of up to 100 modules, and weighing up to 100 pounds. The factory also delivered electrical systems for the Bora Variant to Volkswagen's assembly line in Puebla, Mexico, and interior components to Dräxlmaier's new customer General Motors for their Cadillac STS.

With such newly won customers as Toyota, Jaguar, Bugatti, and Cadillac, Dräxlmaier seemed to be well on the way to further growth. However, to keep up with increasingly fierce competition in the global automotive industry, resulting in mounting cost pressures, Dräxlmaier was striving to optimize the group's international structures and to encourage closer cooperation across divisions and locations by introducing so-called Synergy Boards. Looking ahead, the Dräxlmaier Group anticipated additional growth in the premium interiors segment and expected a significant increase in business from longtime customer Audi. Other promising markets for Dräxlmaier were Japan, where the company opened a customer service center in Toyota City in April 2007, and the United States. The company also had a number of new products in the pipeline. By 2010 upscale passenger cars may well be equipped with electrically adjustable arm rests or automatic sun shades in the front doors, made by Dräxlmaier.

Evelyn Hauser

PRINCIPAL SUBSIDIARIES

DVS Dräxlmaier Verdrahtungssysteme GmbH (Germany); DFE Dräxlmaier Fahrzeugelektrik GmbH (Germany); ELDRA Kunststofftechnik GmbH (Germany); DSV Dräxlmaier Systemverkabelungen GmbH (Germany); HIB Holzindustrie Bruchsal GmbH (Germany); DAU Dräxlmaier Automotive UK Ltd (United Kingdom); EKB Elektround Kunststofftechnik GmbH (Austria); DAA Dräxlmaier Automotive of America LLC (United States); DAM Dräxlmaier Automotive de Mexico; DCM Draexlmaier Components Automotive de Mexico; Draexlmaier (Shenyang) Automotive Components Co., Ltd. (China); DTS Draexlmaier Automotive Systems (Thailand) Co.; D&A Electrical Systems Sdn. Bhd. (Malaysia); Ltd. SC Lisa Dräxlmaier Autopart Romania SRL; DRM Sisteme Electrice SRL (Romania); S.C. ROLEM S.R.L. (Romania); DLR Lisa Dräxlmaier Autopart Rumänien S.R.L. (Romania); Dräxlmaier Group SOKORO/Tét (Hungary); MEE Elektrotecnikai Bt. Turul utca10 (Hungary); DFS Dräxlmaier Fahrzeugsysteme GmbH (Spain); DSE Dräxlmaier Systemy Elektryczne Sp. z o.o. (Poland); Skoda Auto a.s. DRE Draexlmaier Elektrotek s.r.o. (Czech Republic); Schütt GmbH (Slovakia); Dräxlmaier Group METS 2 (Tunisia); EGES Egyptian German Electric Systems Company S.A.E.; D&B Wiring Limited (South Africa); D&B Interiors (Pty) Ltd. (South Africa).

PRINCIPAL COMPETITORS

Leoni AG; Johnson Controls Inc.; Faurecia S.A.; Siemens VDO Automotive AG; Delphi Corporation; Visteon Corporation; Valeo AG; Yazaki Corporation; Grammar AG; Lear Corporation; Erwin Behr Automotive GmbH; Novem Car Interior Design GmbH.

FURTHER READING

Diem, William, "Going with the Grain," Ward's Auto World, August 2004, ABI/INFORM Global, p. 2.

"Draexlmaier to Pay Town Sk9m for Cancelled Investment," CTK Business News, July 7, 2006.

Flörecke, Klaus-Dieter, "Dräxlmaier profitiert vom Premiumtrend," Automobilwoche, November 6, 2006, p. 23.

——, "Mehr Farbtupfer im Innenraum," Automobilwoche, June 26, 2006, p. 46.

——, "Neue Bordnetze aus Mexico," Automobilwoche, September 12, 2005, p. 77.

"German Auto Parts Producer Draexlmaier, the Largest Employer in Romania in this Field," Rompres, June 22, 2007.

Steinmaier, Volker, "Daimler-Lieferant räumt über Nacht Böblinger Standort leer," Stuttgarter Nachrichten, June 17, 2006, p. 13.

——, "Druck auf Dräxlmaier wächst," Stuttgarter Nachrichten, June 29, 2006, p. 13.