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14 “Managing the short term effectively without sacrificing the long term “ The crisis affecting the entire economy, and particularly the automobile sector, has forced us to manage our operations extremely tightly in the short term, while continuing to respond to our customers’ needs. But we refuse to allow the short term to dominate the long term and remain firmly convinced that lasting results are crucial. In 2010, our continued investment in research, development and marketing will enable us to: • Market a new range of highly innovative products in various market segments. • Launch a new communication campaign aimed at promoting the unsurpassed performance of MICHELIN tyres, which Effects of the crisis & How Schaeffler AAM can emerge from it The Automotive Aftermarket has not escaped the effects of the worldwide economic and financial crisis. The first signs were observed in the fourth quarter of 2008, when many Automotive Aftermarket customers were compelled, due to the financial problems of their dealer and workshop customers, to implement even more restrictive cash management measures. This involved cutting back internal inventory-to-sales ratios, tighter receivables management and changes to the customer structure. A great deal of effort and hard work (e.g. restrictive cash management, constructive discussions and action plans with our plants) have enabled www.ad-europe.com combine high adherence, reduced fuel consumption and outstanding durability. This makes purchasing MICHELIN tyres, whether during a crisis or any other period, the best possible investment for any car owner. After 2010, innovations unveiled at the last Frankfurt Fair, which will be included in future generations of hybrid and electric cars, also indicate that Michelin is set to play a major part in the development of sustainable mobility over the next few decades. Though it may seem surprising in the current economic climate, many consumers are looking for quality products with highly competitive running costs. This is why the Michelin brand held up remarkably well in 2009. Professional IAMs have an important role to play and amazing opportunities within this context. It would be over-simplistic to say that the current challenges are due solely to low prices. AD has many assets, which us to maintain our delivery capacity, service commitment and the reliability that our partners have come to expect. This was also confirmed when we were named “Supplier of the Year” by AD International. At Schaeffler Automotive Aftermarket, we see current developments in Michael Söding, Vice President Sales & Marketing Jean-Claude Pats - Marketing & Commercial Director Europe will enable it to respond to the changed needs of its end consumers. Jean-Claude Pats - Marketing & Commercial Director Europe the Automotive Aftermarket as a period of consolidation rather than a crisis, which will continue, in our estimation, beyond 2010. We now need our customers to show a certain amount of understanding and support us by avoiding disproportionate orders, which may otherwise lead to supply shortages. It would be more productive in this situation to achieve the best possible delivery service for all concerned, by means of longer lead times and coordinated order management. The workshops, dealers and industry as a whole will only be able to emerge successfully from this period of consolidation, if flows can be managed as flexibly as possible in terms of workshop requirements and the availability of parts manufactured. Michael Söding, Vice President Sales & Marketing
Russia and the Crisis, as seen by AD Russia. Although the crisis hit Russia later than the western economies, it is now one of the countries worst affected. The fact that its GDP fell by over 8% in 2009 indicates that times are difficult. Many companies, and especially manufacturers, have ceased trading or experienced a major downturn, leading to increased redundancies. It is easy to predict how this will affect consumption, as Russia has fewer or none of the “social shock absorbers” that exist in the economies of Western Europe. Losing your job pretty well means losing your income. Social security benefits paid by the government are lower and private insurance schemes are still either in their infancy or non-existent. This situation has forced many households to focus on the basics, in other words: housing, food, health and education. New vehicle sales fell by 60% and motorists tend to leave their cars in the garage. This is not a time to be spending money on maintaining vehicles that are hardly used. The crisis followed a complete transformation of the car population, which began in 2002 and turned historical IAM data for Russia upside down. During a period of major prosperity lasting 8 years, the vehicle population increased considerably to the advantage of foreign brands (VAZ and GAZ experienced a different fate). Unfortunately, what might initially have appeared to and ultimately will benefit the IAM, at first had negative consequences for our business. The population, except for VAZ and GAZ, was rejuvenated and its average age of 5.3 years now makes it the youngest population in Europe. Real potential exists but demand for replacement parts will only increase at a later stage. Moreover, it should be noted that Asian, Korean and Japanese manufacturers stand to gain the most from this extraordinary wave of growth. Eight of the ten most common vehicles (excluding VAZ and GAZ) in today’s Russia are not European. Whereas « AD Avanta » in Chelyabinsk demand for IAM used to focus mainly on imported used German vehicles, the market is now developing in response to demand for parts for Asian vehicles, which are newer and will therefore “consume less” in the short term. The IAM environment in Russia is therefore in a state of flux, for structural as well as economic reasons. So how does AD Russia fit into this picture? It is doing very well. Our proactive policy has enabled us to develop our stock in order to keep abreast of new demands from the market. At the same time, our policy aimed at protecting margins may have lost us a little volume but it has protected the profitability of our partners/affiliates. Due to investment in fields such as Fabrice Rosi, AD Russia Coordinator product management and marketing, together with the many opportunities offered to us by AD International through its “supplier portfolio” and management/ sales programmes, and the support and solidarity of our many partner suppliers, AD Russia is riding the storm without suffering any damage. Of course, our sales volume has fallen slightly but within manageable proportions and it continues to “exceed” the general trend. Within this turmoil, AD Russia has again earned its stripes through resilience and is still recognised as the “leading” organisation in the sector. Its recent acquisition of two new partners/affiliates, the Avanta and Mikado companies, which joined AD Russia when the crisis was at its peak in March and October 2009, respectively, serves as further evidence of this strength. Our suppliers understand the necessity of doubling their efforts to expand their ranges to include components for Asian cars and will help us continuously develop our stock. It is also likely that we will acquire further partners/affiliates and that the crisis will have to end before too long. The car population in Russia is still young yet one of the largest in Europe. All of these factors serve to reassure us that the Russian IAM, and particularly AD Russia, represent one of the best growth areas within our sector. Fabrice Rosi AD Russia Coordinator Board Member www.ad-europe.com 15
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