SOUTHFIELD, MI – José Maria Alapont has been president, CEO and a director of Federal-Mogul Corp. since March 2005.
The supplier of original-equipment and aftermarket powertrain, brake and electrical components spent six years in bankruptcy court, a victim of asbestos litigation, before exiting in 2007. He responded to questions via email. The interview was edited for length.
Ward’s: You’ve had almost six years at Federal-Mogul: three years in bankruptcy and three years out. What is it like to go through bankruptcy? What advice would you give for successfully restructuring and emerging from bankruptcy?
Alapont: Bankruptcy is a very challenging and tough process, and companies should always do their best to avoid it. When I joined Federal-Mogul, the company was already more than four years into bankruptcy, but with the new strategy we managed to exit successfully within the following two years.
The fundamental thing to succeed in bankruptcy is to separate the court process from the company business. Federal-Mogul dealt efficiently with the issues of bankruptcy while staying intensely focused on running day-to-day operations as a successful business.
We delivered on commitments and emerged with an even larger customer base and solid product portfolio in place. This enabled Federal-Mogul to keep developing and executing our strategy for sustainable global profitable growth.
Another important point is to maintain, throughout the process, a strong focus on future customer and market requirements by investing in leading technology and innovation. Federal-Mogul invested more than $2 billion in engineering and capital investment since 2005 to keep our technology pipeline flowing and modernize our facilities to deliver world-class technology, innovation and quality.
Ward’s: Federal-Mogul grew rapidly through the 1990s, then closed 27 facilities since 2004 as part of restructuring driven by bankruptcy and overall market downturn. How do you size up your current manufacturing footprint globally? Do you still have more capacity than you need?
Alapont: Federal-Mogul has implemented an extensive restructuring to shift our footprint to be in line with the global markets. Our best-cost manufacturing capacity has grown in the last five years from about 10% of total capacity to more than 30% today.
That means that while we were closing uncompetitive sites, we also opened greenfield sites in China, India, Brazil, Russia, Eastern Europe and other global markets where it was a strategic necessity to establish a local manufacturing and engineering capability to support market and customer growth.
Today, we have a very strong global footprint including 11 sites in China, with a new state-of-the-art technical center, seven sites in India, six sites in South America and two in Russia. Our Asia-Pacific Technical Center in Shanghai is one of 18 around the world. This well-equipped engineering hub, with a facility of around 100,000 sq.-ft. (9,290 sq.-m), provides technology development and customer application support for our entire portfolio to serve domestic Chinese and other global auto makers located in the Asia/Pacific region. Our investment is paying off.
Ward’s: There was a time when Federal-Mogul wanted to be a mega-supplier, serving broad portions of both the aftermarket and OE segments. Is the era of the mega-supplier over? Is it unwise for a supplier to attempt to be all things to all customers?
Alapont: One of Federal-Mogul’s strengths is our customer, market and product portfolio diversification. Federal-Mogul products are present in more than 250 vehicle platforms and 700 powertrains and no customer represents more than 5% of total sales.
We believe serving OE and aftermarket customers is a key advantage for the company, as we can leverage our product- development investment originally in the OE market to support both the original equipment service channel and the independent aftermarket sales channel.
We have leading market positions in our OE product lines, like pistons and rings, sealing, bearings, systems protection and friction material, as well as more than 20 leading brands in product categories like engine, chassis, friction, lighting, wipers and service products.
Ward’s: From your perspective, is the recession over and has the recovery begun, or do you see the possibility of a “double-dip” recession on the horizon?
Alapont: We have seen a global recovery of the economy in general and the automotive industry in particular. All indications point to steady market strengthening, although at lower levels in mature markets and continued strong growth in China, India, Brazil, Russia and other high growth markets.
Federal-Mogul, in the meantime, is showing very strong sales growth across all markets on a year-to-date basis: North America is up 52%, Europe up 26%, China revenue is up 78%, Brazil is up 22% and Russia is up over 200%.
Ward’s: Every company needs great technology to survive bad times. What technologies are you most confident will be game changers?
Alapont: We are continuously launching new technology and products that help improve fuel economy, manage higher combustion pressures, reduce emissions and increase overall powertrain and vehicle efficiency.
We recently launched DuraBowl pistons, featuring a special re-melting process that hardens the crown of the piston to ensure high combustion temperature and pressure does not impact the durability of high performance, boosted, downsized engines.
For commercial vehicles we just introduced the Magnum Monosteel piston, a new design for off-highway and commercial-vehicle engines that reduces piston friction by up to 17% and reciprocating mass by 7%.
Our IROX engine bearings are a great example of Federal-Mogul’s ability to solve new technology challenges with specially engineered solutions. IROX is a polymer coated engine bearing that is highly suited to the poor lubrication conditions present in stop/start engines used in today’s hybrids or to recharge EVs.
The customer reaction has been very positive and we are launching IROX on new powertrain applications beginning in the first quarter of 2011.
We also have several new NAO brake formulations and are developing low copper formulations designed to help customers attain future regulatory requirements for brake pads.
Ward’s: How would you describe the current state of your supply base? Are your suppliers financially healthier than they were a year ago? How many suppliers remain on your “watch list?”
Alapont: The number of suppliers that are closely monitored has decreased since the low point of the market downturn, and we do not foresee any risks since we have over the last few years developed a strong dual-source strategy for the majority of our purchased products and materials.
We have been working on supplier development especially in the growing markets like China, India, Brazil and Eastern Europe, to establish reliable sources of supply for materials and components. We are making good progress in developing the necessary localized supplier network to meet our needs and thereby to have a world-class competitive localized supplier base.
Ward’s: If you couldn't work in the auto industry what would you be doing?
Alapont: I have been enjoying this challenging industry during the last 36 years, 18 with global vehicle manufacturers and another 18 with suppliers – and definitely I would do it all over again. Other than this, I could be interested in global financial investments.
Ward’s: What is the one sign you are waiting for before you declare the U.S. market ready to rock again?
Alapont: The U.S. market has already started to rock again, and we expect it to keep rocking even harder in 2011.
Ward’s: What’s the most interesting/challenging part of your job?
Alapont: Developing a world-class diversified and leading Federal-Mogul with a best-in-class team capable to satisfy customers, shareholders and employees by generating sustainable global profitable growth based on technology, innovation and quality excellence in products and services, at a competitive cost.
Ward’s: What are you looking forward to driving in 2011?
Alapont: Together with my wife, we have recently driven Cadillac,, Mercedes and Lincoln models. We recently had a new Jeep Grand Cherokee and Chevrolet Volt for a test drive at our headquarters, and both were very good.
There are so many great vehicles coming to market, it is hard to choose. But I always enjoy getting behind the wheel of new vehicles that feature Federal-Mogul products, including the latest from Ferrari, Porsche and Corvette.