KP Upbeat After Massive Restructuring

German supplier Kolbenschmidt Pierburg Group staged a financial recovery in North America last year, says Gerd Kleinert, chairman of the company's board of management.

North American sales for the powertrain component supplier have grown steadily over the past four years, from $240 million in 2001 to $314 million in 2004, he says. Total global sales were $2.4 billion last year for the supplier, up 3% from 2003.

Some 14% of the supplier's total 2004 sales were in North America, third behind Europe (44%) and Germany (34%).

An extensive restructuring for Kolbenschmidt Pierburg has been successful, boosting net income from $55 million in 2003 to $102 million in 2004. The stock price on the European exchange got a healthy kick, as did research-and-development spending.

With a positive outlook, Kleinert says Kolbenschmidt Pierburg is mildly considering acquisitions and partnerships. “I don't want to buy a company, then have to restructure it later,” he says. “We don't want to dilute what we have.”

Kleinert says the supplier has been talking to “a lot of people” regarding partnerships that would not have been feasible due to poor financial performance three years ago.

The restructuring reduced headcount in North America by about 300 employees, from 2,006 in 2001 to 1,736 last year, mostly due to cutbacks at its Fort Wayne, IN, Karl Schmidt Unisia plant, which supplies pistons for Ford Motor Co. and General Motors Corp. The supplier has invested $40 million since 2002 to upgrade its three Karl Schmidt Unisia North American plants in Fort Wayne; Marinette, WI; and Leamington, Ont., Canada.

At one point the Fort Wayne plant employed 1,100 people. Today it employs 230. “That plant is now profitable,” Kleinert tells journalists. The plant was losing money at an alarming rate a little over a year ago, he says.

“Our Fort Wayne piston plant will be the most productive piston plant that Kolbenschmidt has throughout the world,” says Karl Schmidt Unisia President Frank Pohlmann.

The Fort Wayne plant once was part of Zollner Pistons LLC, which Kolbenschmidt Pierburg acquired in March 1999. Company founder Fred Zollner established what is now known as the National Basketball Assn.'s Detroit Pistons in Fort Wayne. The team moved to Detroit in 1957.

“Our state-of-the-art engineering and test facility in Fort Wayne already has paid dividends, allowing us to offer complete development and test capabilities for our North American customers,” Pohlmann says. Fort Wayne has taken the lead in developing new heavy-duty diesel engine pistons, for example.

Karl Schmidt Unisia, headquartered in Marinette, increased piston deliveries 11% last year, from 24.3 million units in 2003 to 27 million in 2004.

The supplier's Pierburg Inc. unit, which produces water and oil pumps, electronic throttle controls, secondary air pumps and exhaust control valves, booked more than $50 million of new business for 2004, the highest rate of new business since the U.S. unit was established nine years ago.

For Pierburg and bearings unit KS Bearings Inc., officials are forecasting a 50%, or $500 million, increase in sales by 2008. North American restructuring programs at the two business units are complete and are providing growth opportunities.

The supplier says it plans a “substantial investment” in Pierburg by 2010.

KS Bearings of Fountain Inn, SC, which supplies bearings for automotive and heavy-duty applications, is looking to increase automotive business in North America and expand its product lineup of engine bearings and metallic transmission bushings and washers.

KS Bearings President David Mosier says the company's Permaglide product, which contains a DuPont Teflon-like coating that cuts down on friction, is “finding its way into areas that previously were unsuitable — for example, inside an internal combustion engine.”

Mosier says the product currently is being used on the rocker arms and camshaft of a high-performance V-8 engine.

Meanwhile, the transfer of bearings production from Greensburg, IN, to Fountain Inn has been completed, despite initial quality glitches, Kleinert says. But overall, Kolbenschmidt Pierburg reports a 50% reduction in defective parts per million and quality issues in one year's time.