Freudenberg & Co.

views updated

Freudenberg & Co.

D-69465 Weinheim
Germany
Telephone: +49 6201-805808
Fax: +49 6201-883430
Web site: http://www.freudenberg.com

Private Company
Incorporated: 1849 as Carl Freudenberg, Weinheim
Employees: 29,667
Sales: DM 7.08 billion ($3.5 billion)(1999)
NAIC: 316999 All Other Leather Good Manufacturing; 332999 All Other Miscellaneous Fabricated Metal Product Manufacturing; 3363 Motor Vehicle Parts Manufacturing

Weinheim, Germany’s Freudenberg & Co. is a private partnership owned by the nearly 300 members of the founding Freudenberg family and acting as a holding company for a vast and diversified manufacturing and engineering company with global operations ranging from high-quality leather to nonwoven textiles to seals for the automotive and other industries. Freudenberg oversees a network of nearly 200 German and international companies, many of which are operated as joint ventures, including long-standing partnerships such as Freudenberg-NOK and its United States branch Freudenberg NOK GP, in partnership with Japan’s NOK Corporation (in which Freudenberg holds a significant minority share as well). Another longtime partnership is the Freudenberg & Vilene Nonwovens joint venture with Japan Vilene Company Ltd. Freudenberg’s operations are grouped under several business groups: Seals and Vibration Control Technology Europe and Seals and Vibration Control Technology North America; Nonwovens; Freudenberg Politex Nonwovens; Specialty Lubricants, notably through Klüber Lubrication; Building Systems; Household Products, including Vileda, Enka, and Wettex-branded products; and Technical Distributors. Business groups handle global responsibility for their operations. In addition, Freudenberg operates a number of divisions, which report directly to the parent company: Flexible PCBs, through Freudenberg Mektec; Soft-Running Rolls; Industrial Procurement; Leather, the company’s founding activity; and Jela children’s shoes. The company sold its Elefant children’s shoes business to Clarks Shoes of England in 2001. The Seals and Vibration Control business groups combine to provide more than DM 3.4 billion of the company’s DM 7.08 billion in sales in 1999. The next-largest business sector is Nonwovens, which added DM 1.44 billion. Europe, including primary market Germany, accounts for some 61 percent of sales, with North America adding nearly 31 percent of sales. The company’s operations are guided by “spokesman” Peter Bettermann.

Leather Innovator in the 19th Century

Carl Johann Freudenberg joined with Heinrich Christian Heintze to take over a tannery in Weinheim, Germany. Freudenberg gave the company his name in 1849 and led the company in the development of a variety of leather products, especially patent and satin leathers. Freudenberg’s son Hermann Ernst Freudenberg joined the family business and, at the turn of the century, began experimenting with a newly discovered tanning process, using chrome liquor instead of traditional plant-based dyes. The chrome tanning process offered much greater speed in what had been a long and tedious business, and Freudenberg became the first company in Europe to introduce the new technology.

The company quickly became the leading tanner in Europe, with exports to other countries topping two-thirds of the company’s total production. Yet the outbreak of World War I and the subsequent economic upheavals not only eliminated the company’s export markets but forced a near-collapse of the leather industry. By then led by the third generation, Freudenberg determined to branch out into a new direction, wagering on a new product line while waiting for the leather market to return to health.

The company focused on its readily available supply of scrap leather and other by-products, seeking new uses for these materials. The development of industrial machinery and the internal combustion and other engine types, and their need for sealing systems, gave Freudenberg a new market in the 1920s.

Until then, most seals found in Europe came from the United States and made use of leather skirts to form the packing for the seal. Freudenberg began producing its own version of the seal. Freudenberg, with Walter Simmer as head of this project, also worked on perfecting the design of the seal. By packing the leather bushing inside a metal housing, adding a spring to maintain tension, the company had created a mechanical breakthrough.

The company debuted its patented Simmerring radial shaft ring in 1929, setting an industry standard. The original leather used proved too fragile for the intense demands placed on the seal and in 1936 the company developed a synthetic rubber replacement. The new version of the Simmerring became an indispensable component used across a wide range of industries and products. During this time, the company incorporated as a family-owned partnership to accommodate the growing number of Freudenberg family members. The Simmerring and the company’s leather products once again brought Freudenberg to the international market, and the company opened production facilities in Switzerland, France, Austria, and Great Britain. Much of the company’s foreign operations were to be shut down by the outbreak of World War II, however.

Freudenberg’s successful diversification encouraged the company to extend its operations into other new directions. One of the company’s biggest successes came when its engineers, including Ludwig Nottebohm, developed the so-called staple-fiber nonwovens, a new method of creating high-resistant fabrics and materials without using traditional weaving techniques. The nonwovens proved useful for such applications as clothing, handbag, and luggage linings and interlinings; industrial applications such as filters and insulation; protective coverings for plants; and medical uses, such as bandages, and personal hygiene—most famously, disposable diapers. Freudenberg introduced its first staple-fiber nonwovens in 1948, marketing the Vileda Window Cloth and other household products using the Vileda brand name and interlinings under the Vlieseline brand name.

The company’s growing expertise in a wide range of materials was extended again in 1949 when the company turned its production of rubber used in its Simmerring operations to a new sector, that of floor-coverings. This activity, later placed under Freudenberg’s Building Systems business group, targeted especially the industrial market, with such products as high-resistance pastille-type floor-coverings.

International Activities in the 1950s

Freudenberg returned to the international scene in the 1950s. The company came to the United States in 1951, forming a partnership to produce nonwovens in that country. Freudenberg also opened production facilities in a number of markets, including the United Kingdom, France, Spain, Italy, and The Netherlands. The European countries soon came to represent more than a third of the company’s total sales. Toward the end of the 1950s, the company extended its sealing systems production to include the related vibration controls systems, a market the company entered in 1957.

Freudenberg found a new international market and new and lasting international partnerships in 1960. In that year, the company and Japan Reichold Chemical formed a joint venture company, Japan Vilene Company Ltd., to manufacture nonwovens for that and other Asian markets. That same year saw the debut of a still more important joint venture for Freudenberg, the formation of Freudenberg NOK with Nippon Oil Seal Company. The joint venture agreement also gave Freudenberg a 25 percent share of its Japanese counterpart.

In 1965, Freudenberg developed a new nonwovens production process, called Spunbonded, allowing the continuous production of nonwoven materials, binding threads formed from a molten plastic solution. The highly resistant and flexible material represented a new textiles industry breakthrough and formed the backbone of the new Freudenberg Spunbonded subsidiary.

In 1966, Freudenberg’s acquisition of Klüber Lubrication, based in Munich, gave it a position in the specialty lubricants market. Founded in 1929, Klüber Lubrication produced special purpose lubricants such as extreme temperature lubricants and ultra-pure lubricants for ultra-small ball bearings.

Company Perspectives:

1. The Freudenberg Group must remain broadly diversified; it is this structure which lends it its valuable stability. In belonging to the group as a whole, the various business operations gain a special, shared identity and a support permitting them to gear their strategy to long-term planning.

2. The Freudenberg Group must remain a 100 percent family enterprise. This means a high equity capitalization of at least 40 percent is essential. This in turn necessitates not only adequate profitability, but also a proper balance between capital investments and cash flow. 3. The group is open to joint ventures with other companies, if these will usefully complement or further strengthen our business operations. Relationships with our associates in these ventures must be based on fairness and personal trust. 4. The Freudenberg Group has its headquarters at the original Weinheim location, which forms part of its identity, and where substantial resources of knowledge, tradition and infrastructure are gathered in one place. Weinheim is to remain a significant production location in the future as well. This requires that the Weinheim-based facilities, like all the others at home and abroad, hold their own against their competitors in terms of performance and costs.

During the 1970s, Freudenberg concentrated on expanding its production and distribution networks. The company opened facilities throughout North, Central, and South America. Australia, South Africa, and Central Asia were also part of the company’s international growth. Much of its international expansion came through its increasingly close NOK partnership. In 1976, the two companies founded NOK Klüber Co. Ltd. to produce specialty lubricants for the Japanese markets. That same year saw the founding of another joint venture with NOK, that of Simrax GmbH, for the production of axial face seals in Weinheim. NOK’s acquisition of Rubrasil S.A of Brazil opened the way for the later Freudenberg NOK Componentes Brasil Ltda. Freudenberg also bought a share of NOK’s Singapore Oil Seal Co. Ltd. at the end of the decade.

The partners joined together at the beginning of the 1980s to launch an entirely new operation. In 1981 the companies, together with Mekton, of Japan, inaugurated Simflex, in Weinheim, for the production of flexible printed circuit boards. These components were to become an essential element in the development of a variety of technologies and industries, found in products ranging from calculator and mobile telephones to the companies’ car seals and vibration control systems. Simflex became known as Freudenberg Mektec GmbH & Co. KG in 1996.

Freudenberg’s Japanese partners not only became part of the company’s organization growth, they formed a primary influence on its industrial operations. Adopting elements of the Japanese kaizen corporate culture, Freudenberg began introducing a variety of quality and process improvement programs, culminating in what the company called its GROWTTH (”Get Rid of Waste Through Team Harmony”) program.

The end of the 1980s saw the formation of what was to become Freudenberg’s single largest operation. In 1989, NOK and Freudenberg combined their U.S. seals and vibration controls operations into a single body, Freudenberg NOK General Partners. Over the next decade, the company built up a strong market, especially among Japanese car makers producing in North America. By the end of the 1990s, the partnership also was attracting important orders from the Big Three U.S. automakers, such as a $1 billion order from Ford to supply engine sealing packages.

New Organization for a New Century

Freudenberg continued to seek new product categories. A new market was found in 1991 when the company began producing and marketing MicronAir filters, using the company’s nonwoven materials, for automotive air intake systems. The reunification of Germany, meanwhile, enabled the company to expand its park of production facilities, when it acquired two plants in the former East Germany.

By 1995, Freudenberg had developed a large and complex network of business operations and subsidiaries. In that year, the company restructured its organization, splitting off its primary business units into fully independent limited partnership companies granted global responsibilities for their operations—and giving these units the ability to respond more quickly to changes in their specific industries. At the same time, Carl Freudenberg, Weinheim was transformed into the smaller Freudenberg & Co. holding company. The partnership agreement that had kept the Freudenberg company solidly under the family’s control remained relatively unchanged.

Freudenberg and partners NOK and Vilene took the leap into the Chinese market, forming joint venture production and distribution companies for both seal and nonwovens in 1996. A year later, Freudenberg found a new partner in longtime Italian rival Politex, when that company agreed to merge its spunbond nonwoven operations into the Freudenberg Politex Nonwovens joint venture. The company also acquired Marelli & Berta SpA, a manufacturer of nonwoven linings based in Italy; Meillor SA, a France-based manufacturer of flat gaskets; and Xerex Corp, a producer of fleece based in South Korea, in 1999. Meanwhile, Freudenberg was preparing to introduce its Vileda brand to the United States, through the acquisition of that country’s MB Walton. Freudenberg also hoped to extend the Vileda brand throughout Eastern Europe, South America, and China.

Although its industrial operations were proceeding smoothly, the labor costs and other issues forced the company to reexamine its position in the leather market. In 1996, Freudenberg decided to concentrate its leather production on the high-end sector, producing for such luxury products company as Hermès, Gucci, Cartier, and others. The company’s footwear subsidiary, Freudenberg Schuh KG, was preparing to cut back on its range of shoe brands. After building its Elefant brand into one of Western Europe’s leading children shoe makers, the company sold that subsidiary to Clarks Shoes, based in Somerset, England, in 2001. Freudenberg retained its Jela, Freewalk, and Nora brands and its Tack chain of retail footwear stores.

Freudenberg celebrated not only its 150th anniversary at the turn of the century but also its 40th anniversary in close partnership with NOK Corporation. Freudenberg remained a representative of a rare breed of company at the beginning of the 21st century: highly diversified, family-owned—and highly successful.

Key Dates:

1849:: Carl Freudenberg takes over tannery.
1900:: Freudenberg introduces chrome tanning process in Europe.
1929:: The company begins seal manufacturing.
1936:: The company introduces synthetic rubber-based seals.
1948:: The company launches first nonwoven products.
1949:: The company begins manufacturing rubber floor-coverings.
1951:: The company enters the U.S. market.
1956:: The company begins production of vibration control systems.
1960:: The company forms joint ventures with NOK and Vilene.
1965:: Spunbonded nonwovens are introduced.
1966:: The company acquires Klüber Lubrication.
1976:: NOK Klüber Co. Ltd joint venture is founded.
1981:: The company founds Freudenberg Mektec GmbH & Co. KG.
1989:: Freudenberg NOK GP (U.S.A.) is created.
1995:: The company is reorganized as Freudenberg & Co.
1997:: Freudenberg Politex Nonwovens joint venture is formed.
1999:: The company acquires Meillor SA (France) and Xerex Corp. (Korea).
2001:: Elefant shoe subsidiary is sold.

Principal Subsidiaries

Freudenberg Haushaltsproduktie KG; Freudenberg Mektec GmbH & Co. KG (50%); Freudenberg-NOK (50%); Freudenberg NOK Componentes Brasil Ltda (50%); Freudenberg-NOK General Partnership (U.S.A.; 50%); Freudenberg Politex nonwovens SA (50%); Freudenberg Schuh KG; Klüber Lubrication München KG.

Principal Competitors

Amcast Industrial Corporation; BBA Group pic; Edelbrock Corporation; E.I. du Pont de Nemours and Company; GKN pic; Intertape Polymer Group Inc.; Kolbenschmidt Pierburg AG; Nippon Piston Ring Co., Ltd; Rheinmetall AG; Robert Bosch GmbH; Valeo S.A; ZF Friedrichshafen AG.