A year ago, Freudenberg-NOK General Partnership lost an automotive sealing contract — temporarily. The company had quoted a job for an engine subsystem, but cost concerns prevailed and the German-Japanese supplier lost the contract to a lower-priced competitor.
Some months later, it seems the competitor wasn't up to the task, and the customer came back to Freudenberg-NOK and asked if it could take over the job. The purchasing department wanted Freudenberg-NOK to do it at the competitor's lower price, even though the customer's engineers weren't looking for the cheapest solution. The engineers understood the meaning of, “you get what you pay for.”
Richard Allen, the new chief executive of Freudenberg-NOK's Sealing Products Sector, loves to tell this story. In the end, his company stood its ground and ultimately got the initial price it quoted. Freudenberg-NOK should have played hardball and said the price had gone up 10%. But management wasn't feeling that cocky.
This anecdote gives Mr. Allen a certain buoyancy about his company's prospects. Carrying on an earlier message from company Chairman Joe Day, Mr. Allen espouses the theory that a new breed of technology-driven suppliers is emerging — the so-called “Tier 1.5s.”
These are suppliers with something unique to offer — exacting expertise worth more than most purchasing folks generally want to pay. “You have to be prepared to walk away from business,” he says, matter of factly, in an uncharacteristic show of supplier gumption.
Mr. Allen has taken to the airwaves in Detroit with two radio commercials for Freudenberg-NOK's sealing capabilities.
“We are so focused on the engineering, manufacturing and support of automotive sealing that vehicles with our seals simply don't leak,” he says in the script with his British accent.
“At Freudenberg-NOK, we do everything — everything but leak!” he says in the second commercial. “We leave that task to the competition.”
Pretty bold stuff. This type of bragging often comes back to haunt, but Mr. Allen says he has no reason to dial back his exuberance.
Of the company's 22 North American plants producing seals, half of them have PPM rates (defective parts per million produced) of less than 10, and several of them report PPM rates of zero over the past three years, he proclaims. He says the benchmark for quality in the sector is a PPM rate of about 50.
He also says his company is “proud to eliminate a large chunk of warranty costs” for OEM customers. About two-thirds of warranty claims are related to leaks, noise and vibration.
Although faulty seals are less common today, Mr. Allen says the problem hasn't gone away, thanks to his competition. “It's there. Trust me.” A faulty dust boot, for instance, can lead to premature wear on the driveshaft, yet leave no sign on the pavement.
It all gets back to Mr. Allen's primary message: “We won't dilute our expertise by trying to be too many things for too many people.”
He joined Freudenberg-NOK in 1999, when the company acquired gasket maker Farnam-Meillor. He had been chief executive at Farnam-Meillor. Previously, he was president of Varity Kelsey-Hayes' foundation brake business and managing director of Perkins Diesel Engines.
An accountant by trade, he grew up in Coventry in “Britain's automotive Midlands” and actually lived between two plants — one that produced Jaguar cars and the other Triumph motorcycles. His memory of a steady parade of classic cars and motorbikes is vivid, but he no doubt also remembers a tragic flaw of both companies that almost ruined them: oil stains on the pavement.