Georg Graf, Freudenberg Group’s Regional Representative for India has 35 years of experience in Germany and Asia managing operational businesses and working in diverse corporate functions. He joined the Freudenberg Group in 1992 and relocated to India in 2008. He has served as the President of the Indo-German Chamber of Commerce in India, and has in-depth expertise in finance, accounting and projects.
In CY20, Freudenberg India witnessed a drop that is double that of global sales, which itself fell by 7.6%. Why?
The economic environment globally and in India for the business groups of automotive, textile and mechanical engineering sectors were extremely challenging at the beginning of the year. In addition to the pandemic, the transformation in mobility, which is our key industry, has led to seven of our 10 business groups having to incur losses.
In contrast, three business groups have experienced a positive impact on their business. Freudenberg Home and Cleaning Solutions (FHCS) is benefiting from more stringent hygiene measures, Freudenberg Filtration Technologies (FFT) from the launch of mask production and Freudenberg Medical (FM) from buoyant demand for new products.
In contrast, for Freudenberg Group globally, there was considerable demand for products, including FHCS, from the beginning of the crisis, which were ready for supply only in some parts of the globe. For the first time, this business group reported sales of more than €1 billion. FFT also benefited from new product and service solutions such as special system checks for COVID-19 and hygiene audits. Demand at Freudenberg Medical (FM) also grew.
How do you see this year pan out for Freudenberg India with the second wave hitting badly?
Following a significant downturn in the world economy in 2020, economic growth is expected to recover in 2021. Against this backdrop, we plan cautiously for the year ahead and expect a slight recovery of business in the markets relevant for the group. We will continue to invest in long-term projects.
What are the key drivers for growth?
It is Freudenberg’s goal to offer customers in the passenger car and commercial vehicle industry, mechanical and plant engineering, textile and apparel, construction, mining and heavy industry, energy, chemical, oil and gas industry, medical technology, civil aviation and rail vehicles sectors with technological and innovative products as well as services. Innovation strength, strong customer orientation and close collaboration, and diversity and team spirit are the group’s cornerstones.
What are the solutions for the mobility segment?
Three key areas in the year under review were mobility, digitalisation, and sustainability. In CY20, Freudenberg conducted R&D activities to the amount of €446.3 million (previous year: €480.9 million). This represents 5% of sales.
For example, the corporate function provides materials, process and simulation expertise, surface technology methods and an exchange platform for cross-sectional technologies such as tribology and electrochemistry.
Vibracoustic’s first proprietary electronic control unit plus software for an air spring system reached series production maturity in 2020. The air spring system providing comfort and dynamic performance features innovative switchable three-chamber air springs with actively controlled shock absorbers, the electronic control unit including software, and the system components’ integration into the full vehicle system. It has already gone into production at a European premium car brand.
A growing number of customers are switching to an innovative release agent from Chem-Trend (part of Freudenberg Chemical Specialities) for die casting parts used in the automotive industry. Based on a proprietary silicone polymer, this release agent achieves productivity gains, reduces downtimes and improves the surface quality of the parts.
Freudenberg Sealing Technologies (FST) has developed a new material that combines seemingly contradictory properties. It conducts heat well but is also electrically insulating. The company is already testing initial applications for charging sockets, control units and batteries in EVs.
It has also developed an advanced testing procedure and simulation methodology that offers performance improvements and better longevity in offshore wind energy component applications. The simulation process helps identify optimal materials and designs for wind applications over the lifetime of a turbine.
SurTec, also part of Freudenberg Chemical Specialities, began developing an innovative, decorative coating for products manufactured by one of the world’s leading electronics and technology groups in the period under review. The material based on chromium (III) processes achieves the required deep black colour and metallic haptic and complies with the customer’s extremely high environmental and health standards.
The “micronAir proTect line” cabin air filters from FFT reduce aerosols’ concentration and thus protect against viruses. It is achieved by a unique multi-layer design that filters noxious environmental gases and inorganic and biological particles and aerosols.
Where do you see potential to expand your business further in India?
In India, the business felt the effects of the government’s decision to lockdown large sections of the economy for a considerable part of the year. Even in an extremely challenging market environment, the diversified portfolio in industrial, automotive and consumer was agile in responding to new market requirements.
In light of dynamic developments in the spread of coronavirus in spring, the business group swiftly decided to invest in its mouth-nose mask production capacities in Germany, thus making an essential contribution to meeting high demand.
The group developed numerous other innovations to the market-ready stage in 2020, notably anti-virus filters for passenger cars, buses and mobile air purifiers, and membrane-based cabin air filters with high-efficiency mechanical filtration properties. As a result, demand for products from Freudenberg Home and Cleaning Solutions continued high in 2020. The main driver was increased demand for floor cleaning products, gloves and clothes.
Taking into consideration the above trend, we see more opportunities for expansion in these areas. Moreover, once the pandemic situation settles, the automobile industry would pick up some pace, and we would like to bring forth our new mobility solutions.
How is the importance of India operations gaining momentum for Freudenberg?
Freudenberg has held business ties with companies in India for more than 90 years. The group has 15 production sites around India and employs around 3,000 people at 50 locations.
Despite the challenges of working in India, Freudenberg is still very convinced of the long-term Indian opportunity, with its young, well-educated and connected population and its evolution as an IT and R&D powerhouse for global players. India is the youngest connect-democracy in the world and is increasingly being considered a preferred partner in manufacturing across industries.
Companies realise that India, more than a consumption market, is also a manufacturing and R&D hub allowing foreign companies to create and export products to other markets in this region.
While ease of doing business, transparency and e-governance has shown considerable improvement, skills development and technical training need further investment. However, it will probably take a few years to reach the pre-crisis level. The geopolitical and economic uncertainties faced in 2021 are especially severe.
One major uncertainty is the further development of the COVID-19 pandemic and its effects on the global economy and the Freudenberg Group markets, especially in the automotive industry. Our India operations, for sure, is gaining importance for the group.
What is India’s contribution in term of R&D and application engineering?
We have made good progress with our strategic focus topics of e-mobility, digitalisation and sustainability. Furthermore, we have continued a high level of R&D activities as an innovative technology group globally and in India.
For example, Klüber Lubrication in India is a German-based multinational, but our manufacturing kettles are based and designed on the standardised model across every Klüber facility. So globally, there is no difference in the kettles/ manufacturing set-up.
We have a Global Manufacturing Process (GMP); these kettles are PCS-7 software deployed and connected to our Germany headquarters. We have a centralised manufacturing process, where each batch produced can be viewed by our global manufacturing team, where they can access the production details and the process used.
As a speciality lubricant manufacturer, our expertise lies in two key factors – product recipe and process. In terms of products, we curate solutions that address every problem faced by our customers.
Yet another example is the steel industry that faces a significant challenge with the hardening effect of the lubricants on their rollers due to usage of high temperatures. Klüber in India has developed an innovative product specifically for these applications, which has been globalised. This product helps the steel mills run with high efficiency and in a sustainable process.
Technological solutions for the steel industry developed in India have been presented at the Global Steel Conference, which became the latest technology in the market. Another revolutionary product developed in India is for the cement industry for the open gear application. These are few products which we have developed in India, and these are getting globalised.
Can you share some details about exports from your India operations?
Business groups in Freudenberg India mainly fall under the Asia Pacific region, excluding China. Most of our business units do quite a lot of exports to Malaysia, Singapore, the Philippines, Vietnam and Thailand, and many new projects under the trials will hopefully increase our export capacity within our region. Freudenberg India businesses are also split into various vertical expertise, other than auto products; hence we export to our customers from multiple industries basis the need of these regions.