Going global may be relatively new for most suppliers, but it's old hat for Lucas Industries plc, the big British-based supplier of automotive braking components, diesel and electrical systems: Lucas has been spreading its wings worldwide since the early 1960s.
Lucas also manufactures aftermarket and non-automotive electronics products, but nearly 75% of its global revenues, which totaled $4 billion last year, are derived from automotive operations.
A key element in its international strategy was to organize Lucas Automotive Inc. in 1977, basing the U.S. subsidiary in Troy, MI, a half-hour's drive north of Detroit and close to its North American customers. Lucas U.S. sales alone hit $1.84 billion in 1994.
Lucas U.S., as it's commonly called, is headed by Derek Savage, a graduate engineer who has spent most of his 30-year Lucas career in sales and marketing positions. He was elevated to president of Lucas Automotive in 1988, his first North American assignment, and recently was named director of sales and marketing of Lucas Braking Systems in the U.K. Mr. Savage currently splits his time between both jobs until a U.S. successor is named.
"If you're going to be a long-term player, you've got to participate in the growth areas," he tells WAW. "Our mission is to position ourselves in the (automotive component) infrastructure of various countries. It's really a dog fight and everybody is doing it, but it's very exciting. I call it the 'supplier Olympics,' because at the same time the pace of technology is quickening."
Lucas's early forays -- it first ventured into China during the 1960s -- focused on licensing its technology, chiefly in braking, to local manufacturers. "The OEMs (automakers) are going global and they expect their major suppliers to follow them," he says. "They are basically saying, 'We're going to operate in this country -- how are you going to support us?'" It helps to have established a beachhead. Lucas tied in with Brazil's Varga Ltda. some 25 years ago. Now Ford do Brasil is ramping up to make its European Fiestas there. Lucas supplies Fiesta components in Europe and, via Varga, will do the same in Brazil.
Although it still has licensees throughout the world, Lucas in recent years has relied increasingly on joint ventures (JVs) and occasional acquisitions to meet demand from its automotive customers -- a list that includes most major automakers, with Ford Motor Co. the largest.
Lucas "frowned on JVs in the past, but with the cost of technology going up you can't live on licensing alone," he explains. "You've got to participate in the manufacturing value. There's faster growth in the emerging markets, so we've got to be there. Then the question becomes, how, when and where? And you've got to do it and meet local content laws."
Setting up JVs, unlike licensing, calls for "cash up front, but if you're going to be a global player you've got to pay the price," Mr. Savage observes. "You don't have to own 100% of anything, but you can't go into these countries and say, 'Here's what we're going to do.' Those days are gone forever. They've got expectations just like anyone else," he says.
In 1994 alone, Lucas formed three JVs in China and one in Taiwan, all to produce braking components, with Volkswagen AG the primary customer. It also has partners or licensees in Thailand and Malaysia (both established in 1968) and Indonesia (1974).
Lucas has relationships with six Japanese suppliers, the first (with Tokico) dating to 1964. Among its major links is a 50/50 brake-components JV in the U.S. with Sumitomo Electric Industries Ltd., called Lucas Sumitomo Inc., based in Lebanon, OH, near Cincinnati. The two companies have been doing business together since the late '60s and formed the U.S. operation in 1987 with a $45 million investment. Disc-brake manufacturing began in 1991 and has been expanded three times since then. Total investment in U.S. disc brakes is now $50 million.
Lucas Sumitomo is the sole supplier of front disc brake calipers for six Ford-U.S. cars and the Windstar minivan; pickups built by New United Motor Manufacturing Inc.; and the VW Golf and Jetta.
Terms of the Sumitomo JV are updated yearly to determine forward strategies for each company. Sumitomo covers Japan-based automakers, where the engineering takes place, and Lucas concentrates on U.S. and European automakers. "There are some strains," Mr. Savage allows, "but you have to work through those."
Lucas Sumitomo announced five years ago it would produce antilock braking systems (ABS) in the U.S., but that plan was aborted in the face of tough competition. Now it's investing $35 million for phase one of an ABS manufacturing scheme to produce 300,000 ABS sets in Lebanon starting in March 1996, with four customers lined up -- two in the U.S., two abroad, and one that also includes traction control.
Mr. Savage won't say who these customers are, and rationalizes Lucas Sumitomo's late entry this way: "The fact that we're so late indicates we've got something they want. In this case we're using the best technology of both companies. By coming in late we've adopted the world's best practices," he says. "We've continuously benchmarked everyone."