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OEM alliances offer growth; with a promise of increased productivity, alliances between paint makers and their OEM and industrial customers continue to expand.

Partnerships with customers may offer big opportunities for expansion for coatings companies. But they could also mean that the paint manufacturers will have to extend the scope of their businesses.

The sort of alliances being formed by coatings producers supplying the automotive or OEM market are demonstrating a necessity to think well beyond the mere supply of paints. They are teaching paint manufacturers how to look after not only the requirements of the OEM companies with the supply of coatings, but also how to help them run and raise the efficiency of their paintshops.

In Europe all the major providers of OEM paints--such as BASF, DuPont and PPG Industries--are involved in partnerships with their customers centered on the joint operations of parts of their paintshops.

They are alliances which have proved themselves to be efficient and cost effective over the last few years. Now they are at a point where the OEMs may be in a position to be given an even bigger role.

BASF is now operating around 30 coatings partnerships or lead supply systems (LSS) with OEM manufactures, most of them in Europe. With Renault and its affiliate Nissan of Japan, it has 11, more than half of them in Europe, two are in Japan and one is in China.

In fact for BASF, these paint shop cooperation arrangements with OEMs are providing the big impetus behind the group's policy on partnerships. The coatings business, half of whose sales are accounted for by OEMs, is showing the way forward on alliances for the rest of the company, which is the world's biggest chemicals producer.

BASF has recently embarked on a strategy of working more closely with its customers in areas like new product development, but more significantly it is aiming to become even more directly involved in their manufacturing processes as well. So far virtually all of its experience in what it calls "value-chain integration" has been in paintshop partnerships with automotive OEMs.

"We don't just want to offer more for a higher price and less for a lower price," Jacques Delmoitiez, BASF's group vice-president and project leader for strategic guidelines, said at a press conference at Novo Mesto, Slovenia, where the company is a paintshop partner at a local Renault plant.

"We need to walk in our customers' shoes," he explained. This can mean participation in "highly integrated interaction models in which we assume responsibility for part of the customer's production process."

At Novo Mesto, at which Renault last year made 130,000 of its Clio models, BASF has a 30-strong team of its own employees with multifunctional tasks which stretch well beyond the supply of paint.

Under its agreement with Renault at Novo Mesto, BASF is responsible for process materials and their management, external and internal logistics, incoming goods inspection and testing and the operation of the paint mixing room. Its staff, which is equivalent to approximately 10% of the paintshop's workforce, also runs the laboratory and looks after quality control and color and solvent management.

The BASF team at Novo Mesto looks after the supply and purchase of 70 chemical products, storage of chemicals and their transfer to the production line and preparation of materials for pre-treatment, topcoat and other applications. It also has to monitor the painting processes, through analysis of results and tests and it has to prepare action plans for improvement.

Within the partnership, BASF has its own alliance with Chemetall GmbH, a supplier of pre-treatment metals and chemicals. Henkel also has a small partnership team on site for the supply of waxes mainly at the pre-treatment stage.

PRODUCTIVITY IMPROVEMENTS

Since the start of the LSS scheme at Novo Mesto more than five years ago, there have been considerable productivity improvements at the paintshop. In fact the incentive for BASF is to cut costs since the company is paid on the basis of cost-per-unit (CPU) or for each vehicle coated without any defect. The CPU is set by Renault within the framework of an annual budget for the shop.

"Each year usage reduction will be achieved by continuous optimization of the painting activities," explained Thierry Herning, BASF's global account manager for Renault. "Depending on their respective optimization in a given improvement, Renault and BASF will share the benefit of the saving achieved."

BASF has helped reduce paint material costs per car by 20% at the plant, increased the first-run-OK rate to 95% and cut per car waste disposal by over 60% and solvents consumption by 63%.

It has also introduced improvements to the paint process such as the introduction of a faster and cheaper spot repair system and the switch to a less expensive solvent. It has participated as well in the development of ways to increase capacities at the shop.

"Under the LSS concept the process of painting a car is first broken down into all its elementary activities, to build a well defined activity module," said Mr Herning. "The management and responsibility of each module is then assigned to the most appropriate partner."

"The idea here is to reduce the complexity, to use best the respective core competencies of each partner, to avoid double work and eliminate wastes," he continued. "Mutual trust is at the basis of a successful partnership."

This view is echoed by Renault which sees the arrangement as helping it to focus on raising its efficiency as an auto manufacturer. "The carmaker is a specialist in the automotive production process (while) the partner is a specialist in best material solutions," said Albin Kuznik, Renault's production manager at Novo Mesto.

The French-based car company's latest new venture in Europe is a 230 [euro] million ($290 million) assembly plant in Moscow which was inaugurated in April and has an initial production capacity of 60,000 vehicles per year, rising to 100,000 units in 2008.

BASF has already been appointed the partner for the LSS scheme in the Russian plant's paint shop. But it could be given a role with broader responsibilities for the provision and purchase of chemicals than that at Novo Mesto. This could give BASF an important function in Renault's plans for the close involvement of local suppliers in the operation of the plant.

SEAN MILMO

EUROPEAN CORRESPONDENT

MILMOCW@RODPUB.COM
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Title Annotation:International Coatings Scene: EUROPE
Author:Milmo, Sean
Publication:Coatings World
Geographic Code:1USA
Date:Jun 1, 2005
Words:1035
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