Tuesday 2023-08-22

The following interview on the overall outcome of the recent strategic planning process is the first in a series of intranet articles – and videos – that also take a closer look at the strategy process of the three Business Groups Lighting, Electronics and Lifecycle Solutions.

Michel Favre, HELLA has just put its corporate strategy through its paces. Together with Johannes Müller, you were responsible for the process. Where does HELLA stand, are we on course?

Michel Favre: Overall, we are very well positioned to continue growing in a dynamic market and competitive environment: We have innovative new technologies. We have highly motivated teams. And we can work even more closely together under the FORVIA umbrella – with the chance of new business opportunities and synergies. But we also have room for improvement, because the current figures show that although we are growing, our growth is not yet quite as profitable as we would like it to be.

What consequences do you draw from this?

Michel Favre: Growth is one side of the coin, profitability the other. We need profitable growth to be able to live up to our claim as innovation and technology leader in the future. To achieve this, we have to be much more selective than before. For example, with our customers: Here, we need to focus on profitable partners and pay even more attention to profitability, especially with new orders. In addition, profitability aspects should be weighted even more strongly in decisions, for example regarding product developments or investments. Another important factor is the processes in the areas of development and production, where we can still achieve a lot in terms of standardisation, for example.

Johannes Müller: In addition, we have to become faster in our processes in order to keep up with the growing pace, especially in the Asian market: Where can we work even more agile, where can we become leaner and what does the customer really ask for? These are important questions that need to be addressed.

In which products and in which markets do you see the greatest potential for profitable growth?

Michel Favre: Electromobility and automated driving are the global megatrends of the automotive industry and therefore also important growth areas for us. We are focusing on these with innovations such as our SSL | HD headlights, Front Phygital Shields, Smart Lighting, Digital FlatLights, battery systems or radar components, to name just a few. Both electromobility and automated driving are currently being driven from Asia in particular. Chinese OEMs are developing attractive and affordable vehicle models at an enormous pace. As a supplier, we have to adapt to this. Because the relationships we are now building in China will not only help us there, but in the medium term also in Europe, where Chinese OEMs are already increase their capacity. Of course, we will remain a reliable partner for customers in our core markets especially in Europe they are the foundation of our growth strategy.

Johannes Müller: But not only Europe and Asia are important markets for us, North America also plays a decisive role – especially with the electric vehicle manufacturers based there. In addition to e-mobility and automated driving, there is another market development that is relevant for us.

Which is?

Johannes Müller: I am talking about the vehicle architecture, which will change significantly. The trend is towards the centralisation of control units. Let's take seat control as an example. In the past, this ran via a decentralised control unit, just like many other controls. In three to five years, the entire electronic architecture will probably be handled centrally by a high-performance computer, supplemented by a few decentralised units (so-called zonal modules). For us, this is also an opportunity: we can convince customers of our strong technology in zonal modules and our software competence.

Mr Müller, as Head of Strategy, you work closely with Michel Favre and the Executive Board on strategic planning. What does the process look like, how does strategic planning work in practice at HELLA?

Johannes Müller: Strategic planning has two levels: planning for HELLA as a whole and planning for the business groups and product centres. In this way, we ensure that all those responsible are involved and support the results. In terms of content, the aim is to shed light on market developments and competitive activities. From this, we filter for the topics that are relevant for us, see what they mean for our strategic orientation and make adjustments if necessary. To do this, we take a long-term view and then define the strategic roadmap for the coming years in concrete terms – this year until 2028. Of course, we work very closely with the management on the strategy side.

Michel Favre: This year, for the first time, we also carried out the strategic planning process simultaneously with our colleagues from Faurecia in order to be coordinated in the best possible way (e.g. looking at market analysis).

An important characteristic of a strategy is its long-term design. Why do we still need annual strategy updates?

Johannes Müller: Of course, a strategy is fundamentally designed for the long term; but there are always short-term influencing variables that we have to take into account and that are not always predictable. Just think of the financial crisis of 2008, Corona and the associated supply bottlenecks, or the war in Ukraine with rising energy costs and inflation throughout Europe and beyond. Against this background, it is existentially important to regularly check how such developments affect our business and where price adjustments may be necessary.

Michel Favre: In addition, we have to win and plan tomorrow's business today. Because orders we receive today will go into series production just in two, three, four years. So, we have to plan corresponding budgets, resources, capacities, investments, so that we can also achieve in the near future what we are planning today.

How do you inform yourself about strategically relevant developments for HELLA, which sources do you use?

Johannes Müller: Our first source is the manufacturers' volume plans. There have been major fluctuations here in recent years. In 2018, for example, around 95 million vehicles were produced worldwide, then came the corona-related slump to 75 million vehicles. And only in 2030 will we possibly reach the 2018 level again, according to our estimates. Of course, this development has a significant impact on our growth planning. A second important source are market studies, for example from universities or consultancies. In addition, we of course include the assessments of our internal experts, who are often able to best assess what is relevant for our business, and thus calibrate the findings obtained from external sources.

How important are the business groups for achieving the growth targets?

Michel Favre: Lighting and Electronics are our growth drivers. Both areas have high-tech innovations in their portfolios, which are in line with the megatrends of electromobility and automated driving and offer our customers real added value. In Lifecycle Solutions, we are very successful and profitable with a good, customer-oriented portfolio. The focus here is currently strongly on Europe, which is why we want to strengthen the North American business in particular. Growth opportunities are offered, for example, by new digital diagnostic and maintenance solutions or the expansion of the truck business.

In summary, HELLA is ...

Michel Favre: ... very well positioned for current market trends and future developments in the coming years. We can all be proud to work for this company.

Thank you very much for the interview.