Kongsberg Business Report FY2008
Business Highlights
Financial overview
Factors
1)
Automotive Systems
-Even in a very tough business environment, Automotive Systems managed to secure new business within all product areas, including gearshift systems, seat comfort systems, head restraints and arm rests, which is expected to add additional volumes from late 2009 onwards.
2)
Commercial Vehicle Systems
-Throughout 2008 Commercial Vehicle Systems continued to win important new orders, and thus increased market share for its main product areas; clutch actuation, gear shift systems, fluid transfer systems, air couplings and chassis and cabin stabilizers, which partly compensated for the downturn in the manufacturing volumes of vehicles at the end of the year.
3)
Power Products Systems
-Sales softened in North America early in the year and later in Europe as the year progressed. The economic slowdowns in these regions were offset by the significant market penetration this business unit experienced in China and Russia for several key products and sectors. Sales in China had a record year with Heavy Duty leading the growth having a 20 % sales increase over prior year. Sales efforts within India also began showing great potential throughout the year.
Contracts
-A major US truck and engine manufacturer has chosen the Company to supply additional hose and tube components for 6 and 9 liter diesel engine platforms. For the 6 liter, the Company will supply a turbo oil supply line to complement existing turbo parts currently supplied. For the 9 liter platform engine, The Company will supply a high tech fuel line capable of performing at very high pressures. These two lines total over $18 million in new business through 2010 and design is underway to supply through 2013. They will be manufactured in the Company's Pickens South Carolina and Suffield Connecticut plants. (From a press release on Mar. 5, 2008)
-A major producer of heavy trucks has chosen the Company to supply a safety product related to the rear axle suspension of their trucks. The contract term is 4.5 years, and deliveries are expected to start in early 2009. The main part of the production will take place at Rollag, Norway. The order value is estimated to be NOK 370 millions. The contract marks the conclusion of 3 years with development and testing. The customer is one of the largest producers of heavy trucks in the world, and with this agreement, the Company has laid the foundation for sustained growth in the commercial vehicle market for many years to come. (From a press release on Mar. 14, 2008)
-Three major producers of automobile interior seat and door systems have chosen the Company to supply products into future vehicles in the North American market. The total order value is estimated to be 17M Euro, with potential options for an additional 4.9M Euro at a later date. The contract terms vary from 3 to 6 years, and initial deliveries are expected to start in late 2008. Production will be in its facilities in Mexico and will provide products for the Cables & Actuation, Seat Support and Headrest market segments. (From a press release on May 2, 2008)
-A global producer of heavy trucks has chosen the Company Automotive as the developer and supplier of their next generation of Gear Lever Units. The contract term is 5 years, and deliveries are expected to start in 2011. The order value is estimated to be NOK 200 millions. (From a press release on May 9)
-The Company's Actuation Systems has won further business with a leading truck manufacturer in North America through 2008 till 2012 with a mixture of power train & fuel hose assemblies. The value of the contract is estimated to about Euro 10 million over the period. (From a press release on May 15, 2008)
-The Company has won a contract with a major European heavy-duty truck producer. The new business, which includes delivery of cabin stabilizers, has a contract term of three years with production start early 2009. The order value is estimated to be NOK 120 millions (Euro 15 mill), and it is expected that the products will have a life-cycle beyond the set contract time. (From a press release on Jun. 11, 2008)
-The Company’s Driveline business group has won a new business which includes delivery of manual gear shifters, with its patent for cables abutment. The program name for this contract is X83 Renault Trafic, which is a joint project between GM and Renault. The new model, with the shifter from the Company, is going to be launched early 2010. The order value is estimated to be EUR 36 million. (From a press release on Aug. 14, 2008)
-The Company’s Interior business group has been awarded a contract for seat massage systems by one of the leading manufacturers of luxury and sports cars. The new contract is based on its patented Body FitTM Modular Seating System. The order value is estimated to be approx. MNOK 50 / EUR 6M, and production will be in its facility in Burton, UK. Initial deliveries are expected to start in 2011. (From a press release on Sep. 16, 2008)
-The Company has booked an order valued at 5.9 million Euro from Faurecia. The new business includes delivery of arm rests to the US market. The contract term is 5 years with production start in 2009. The arm rests will be manufactured at its plant in Reynosa, Mexico. (From a press release on Sep. 23, 2008)
-The Company has booked an order valued at approx. MEUR 18 (approx. MNOK 151) from a German manufacturer of passenger cars. The new business includes delivery of Seat Heat to the European market. The contract term is 7 years with production start in 2010. The seat heaters will be manufactured at its plant in Pruszkow, Poland. (From a press release on Oct. 14, 2008)
-The Company has been awarded a new contract from a South American truck manufacturer. The contract includes delivery of gearshift system. The new business has an estimated value of MNOK 137 (17 M Euro). Production starts in 2010 and will take place at its production facility in Jundiaﾃｭ, Brazil. (From a press release on Oct. 20, 2008)
-The Company's Automotive Systems Division has been awarded with 3 new business contracts from Chinese and Japanese customers. The business wins are with one Chinese customer for seating products. The further two contracts are with two Japanese customers, one for door module systems and the other for vehicle sunroof systems. Contract value is approximately 5m Euro/46 MNOK. Production for all products will be in its facilities in China. (From a press release on Oct. 28, 2008)
-The Company has booked an order valued at MEUR 4.3 (40 MNOK). The new business includes delivery of Seat Heat to the Russian market, where a German automaker is preparing the launch of a small sized car. This contract is the first ever with this carmaker. (From a press release on Dec. 8, 2008)
-Fluid Systems, a business unit of Actuation Systems of the Company, announced that a contract of hose & tube assembly worth over MEUR 35 (326 MNOK) with a leading truck manufacturer has been secured for supply over the next four years. The package centers around the fuel and ancillary systems within the engine environment. Production start for many parts will be from 1st quarter 2009 with further products coming on stream during 2010. (From a press release on Dec. 9, 2008)
-The Company has won new gearshift business with a leading truck manufacturer in South America, valued at MEUR 7.5/MNOK 70. Contract term is 5 years, starting with initial deliveries from its Jundiai facility in Brazil in 2009. (From a press release on Dec. 15, 2008)
Acquisition
-In January 2008, the Company completed the acquisition of Teleflex (TFX) automotive activities plus other vehicle related businesses for $560 million on a cash and debt free basis. The acquired activity, named Global Motion Systems (GMS), has a world leading position in developing, producing and marketing systems for gear shift, seat comfort, fluid systems and other industrial vehicle control systems. GMS has a global presence with about 8,000 employees working in 16 production facilities in North and South America, 13 factories in Europe and 5 factories in Asia. In 2006 GMS had annual revenues of $855 million. GMS is a long term supplier to blue chip customers like Mercedes Benz, Toyota, Ford, Chrysler, GM, Renault, Nissan, VW, BMW, Peugeot, Lear Corporation, Caterpillar and Scania. The merged Kongsberg Automotive will have revenues of approximately Euro 1 billion, with more than 50 facilities, in 20 countries, on all continents, and over 11,000 employees.
Restructuring
In Automotive Systems
-The Company reacted quickly to the market situation by implementing major restructuring efforts in 2008, consolidating several manufacturing operations. To reduce overhead cost and create additional synergies the two divisions Driveline and Interior Systems, both selling to automotive customers, were merged during October 2008. Relocation to low cost countries continued in an effort to reduce variable costs. Most of the initial restructuring plan was completed in 2008, but additional actions have since been announced to meet new market challenges. These actions were initiated in 4th quarter 2008 and will be completed during 2009. Both the European and North American operations made major progress in implementing the Lean principles to minimize waste and optimize the value streams. A Lean Champion network was instrumental in securing significant improvements in several plants and even more efforts will be made in this field going forward. To compensate for some of the reduced volumes, an initiative was started in 2008 to insource parts to fill up internal capacity. This will continue through 2009.
In Power Products Systems
-Throughout 2008 various systems were put into place while certain facilities and personnel transferred to other divisions. As part of the integration this business unit completed the separation from Teleflex in the Limerick, Pennsylvania and Hagerstown, Maryland operations. Additional restructuring activities included the closure of two facilities, one in North America and one in Europe.
-The Company announced that they are restructuring their Interior Systems operations in North America. Production at their Westland, Michigan facility, which produces lumbar support assemblies for the automotive market, will be transferred to its facility in Reynosa, Mexico. The Westland facility is expected to close in the autumn of 2008. Another restructuring project is to transfer the current production of Interior Systems parts from Willis Texas to the plant in Matamoros Mexico. This is also scheduled to be completed during 2008. The Willis plant will however continue manufacturing of other products within the portfolio. (From a press release on Apr. 18, 2008)
-Kongsberg Power Products Systems AS, a subsidiary of Kongsberg Automotive Holding ASA, has declared it is considering proposals regarding closing the factory in Mﾃ､rsta, Sweden. The factory in Marsta has 54 employees. The facility produces heavy duty cables, pedals, hand controls, hydraulic valves and electrical components to the Commercial Vehicle and off-highway vehicle market. The potential closure of the factory may lead to a transfer of production in Mﾃ､rsta to its existing locations within Europe. (From a press release on Apr. 23, 2008)
-The production in Itajuba (Brazil) will be transferred to an existing plant in Jundiai. The Itajuba plant produces gear shifters to the South American automotive market. The Itajuba plant currently employs 35 people. The transfer is expected to be completed by December 2008. (From a press release on July 1, 2008)
-The Company is restructuring its production operations in North America, being driven by the global automotive market collapse. Production at the Van Wert, Ohio facility will be transferred to the Nuevo Laredo, Mexico facility. Also, production at the Haysville, Kansas facility will be transferred to the Matamoros, Mexico facility. Both US facilities are expected to close in the summer of 2009. (From a press release on Dec. 13, 2008)
| (in million Euros) | FY2008 | FY2007 | Rate of Change(%) | Factors |
| Overall | ||||
| Sales | 905.9 | 398.8 | 127.2 | - |
| Operating (loss)/profit | (1.1) | 26.4 | - | |
| Operating revenues by business segment | ||||
| Automotive Systems | 528.8 | 179.9 | 193.9 | See (1) below |
| Commercial Vehicle Systems | 267.7 | 218.5 | 22.5 | See (2) below |
| Power Products Systems | 145.7 | 0.0 | - | See (3) below |
Factors
1)
Automotive Systems
-Even in a very tough business environment, Automotive Systems managed to secure new business within all product areas, including gearshift systems, seat comfort systems, head restraints and arm rests, which is expected to add additional volumes from late 2009 onwards.
2)
Commercial Vehicle Systems
-Throughout 2008 Commercial Vehicle Systems continued to win important new orders, and thus increased market share for its main product areas; clutch actuation, gear shift systems, fluid transfer systems, air couplings and chassis and cabin stabilizers, which partly compensated for the downturn in the manufacturing volumes of vehicles at the end of the year.
3)
Power Products Systems
-Sales softened in North America early in the year and later in Europe as the year progressed. The economic slowdowns in these regions were offset by the significant market penetration this business unit experienced in China and Russia for several key products and sectors. Sales in China had a record year with Heavy Duty leading the growth having a 20 % sales increase over prior year. Sales efforts within India also began showing great potential throughout the year.
Contracts
-A major US truck and engine manufacturer has chosen the Company to supply additional hose and tube components for 6 and 9 liter diesel engine platforms. For the 6 liter, the Company will supply a turbo oil supply line to complement existing turbo parts currently supplied. For the 9 liter platform engine, The Company will supply a high tech fuel line capable of performing at very high pressures. These two lines total over $18 million in new business through 2010 and design is underway to supply through 2013. They will be manufactured in the Company's Pickens South Carolina and Suffield Connecticut plants. (From a press release on Mar. 5, 2008)
-A major producer of heavy trucks has chosen the Company to supply a safety product related to the rear axle suspension of their trucks. The contract term is 4.5 years, and deliveries are expected to start in early 2009. The main part of the production will take place at Rollag, Norway. The order value is estimated to be NOK 370 millions. The contract marks the conclusion of 3 years with development and testing. The customer is one of the largest producers of heavy trucks in the world, and with this agreement, the Company has laid the foundation for sustained growth in the commercial vehicle market for many years to come. (From a press release on Mar. 14, 2008)
-Three major producers of automobile interior seat and door systems have chosen the Company to supply products into future vehicles in the North American market. The total order value is estimated to be 17M Euro, with potential options for an additional 4.9M Euro at a later date. The contract terms vary from 3 to 6 years, and initial deliveries are expected to start in late 2008. Production will be in its facilities in Mexico and will provide products for the Cables & Actuation, Seat Support and Headrest market segments. (From a press release on May 2, 2008)
-A global producer of heavy trucks has chosen the Company Automotive as the developer and supplier of their next generation of Gear Lever Units. The contract term is 5 years, and deliveries are expected to start in 2011. The order value is estimated to be NOK 200 millions. (From a press release on May 9)
-The Company's Actuation Systems has won further business with a leading truck manufacturer in North America through 2008 till 2012 with a mixture of power train & fuel hose assemblies. The value of the contract is estimated to about Euro 10 million over the period. (From a press release on May 15, 2008)
-The Company has won a contract with a major European heavy-duty truck producer. The new business, which includes delivery of cabin stabilizers, has a contract term of three years with production start early 2009. The order value is estimated to be NOK 120 millions (Euro 15 mill), and it is expected that the products will have a life-cycle beyond the set contract time. (From a press release on Jun. 11, 2008)
-The Company’s Driveline business group has won a new business which includes delivery of manual gear shifters, with its patent for cables abutment. The program name for this contract is X83 Renault Trafic, which is a joint project between GM and Renault. The new model, with the shifter from the Company, is going to be launched early 2010. The order value is estimated to be EUR 36 million. (From a press release on Aug. 14, 2008)
-The Company’s Interior business group has been awarded a contract for seat massage systems by one of the leading manufacturers of luxury and sports cars. The new contract is based on its patented Body FitTM Modular Seating System. The order value is estimated to be approx. MNOK 50 / EUR 6M, and production will be in its facility in Burton, UK. Initial deliveries are expected to start in 2011. (From a press release on Sep. 16, 2008)
-The Company has booked an order valued at 5.9 million Euro from Faurecia. The new business includes delivery of arm rests to the US market. The contract term is 5 years with production start in 2009. The arm rests will be manufactured at its plant in Reynosa, Mexico. (From a press release on Sep. 23, 2008)
-The Company has booked an order valued at approx. MEUR 18 (approx. MNOK 151) from a German manufacturer of passenger cars. The new business includes delivery of Seat Heat to the European market. The contract term is 7 years with production start in 2010. The seat heaters will be manufactured at its plant in Pruszkow, Poland. (From a press release on Oct. 14, 2008)
-The Company has been awarded a new contract from a South American truck manufacturer. The contract includes delivery of gearshift system. The new business has an estimated value of MNOK 137 (17 M Euro). Production starts in 2010 and will take place at its production facility in Jundiaﾃｭ, Brazil. (From a press release on Oct. 20, 2008)
-The Company's Automotive Systems Division has been awarded with 3 new business contracts from Chinese and Japanese customers. The business wins are with one Chinese customer for seating products. The further two contracts are with two Japanese customers, one for door module systems and the other for vehicle sunroof systems. Contract value is approximately 5m Euro/46 MNOK. Production for all products will be in its facilities in China. (From a press release on Oct. 28, 2008)
-The Company has booked an order valued at MEUR 4.3 (40 MNOK). The new business includes delivery of Seat Heat to the Russian market, where a German automaker is preparing the launch of a small sized car. This contract is the first ever with this carmaker. (From a press release on Dec. 8, 2008)
-Fluid Systems, a business unit of Actuation Systems of the Company, announced that a contract of hose & tube assembly worth over MEUR 35 (326 MNOK) with a leading truck manufacturer has been secured for supply over the next four years. The package centers around the fuel and ancillary systems within the engine environment. Production start for many parts will be from 1st quarter 2009 with further products coming on stream during 2010. (From a press release on Dec. 9, 2008)
-The Company has won new gearshift business with a leading truck manufacturer in South America, valued at MEUR 7.5/MNOK 70. Contract term is 5 years, starting with initial deliveries from its Jundiai facility in Brazil in 2009. (From a press release on Dec. 15, 2008)
Acquisition
-In January 2008, the Company completed the acquisition of Teleflex (TFX) automotive activities plus other vehicle related businesses for $560 million on a cash and debt free basis. The acquired activity, named Global Motion Systems (GMS), has a world leading position in developing, producing and marketing systems for gear shift, seat comfort, fluid systems and other industrial vehicle control systems. GMS has a global presence with about 8,000 employees working in 16 production facilities in North and South America, 13 factories in Europe and 5 factories in Asia. In 2006 GMS had annual revenues of $855 million. GMS is a long term supplier to blue chip customers like Mercedes Benz, Toyota, Ford, Chrysler, GM, Renault, Nissan, VW, BMW, Peugeot, Lear Corporation, Caterpillar and Scania. The merged Kongsberg Automotive will have revenues of approximately Euro 1 billion, with more than 50 facilities, in 20 countries, on all continents, and over 11,000 employees.
Restructuring
In Automotive Systems
-The Company reacted quickly to the market situation by implementing major restructuring efforts in 2008, consolidating several manufacturing operations. To reduce overhead cost and create additional synergies the two divisions Driveline and Interior Systems, both selling to automotive customers, were merged during October 2008. Relocation to low cost countries continued in an effort to reduce variable costs. Most of the initial restructuring plan was completed in 2008, but additional actions have since been announced to meet new market challenges. These actions were initiated in 4th quarter 2008 and will be completed during 2009. Both the European and North American operations made major progress in implementing the Lean principles to minimize waste and optimize the value streams. A Lean Champion network was instrumental in securing significant improvements in several plants and even more efforts will be made in this field going forward. To compensate for some of the reduced volumes, an initiative was started in 2008 to insource parts to fill up internal capacity. This will continue through 2009.
In Power Products Systems
-Throughout 2008 various systems were put into place while certain facilities and personnel transferred to other divisions. As part of the integration this business unit completed the separation from Teleflex in the Limerick, Pennsylvania and Hagerstown, Maryland operations. Additional restructuring activities included the closure of two facilities, one in North America and one in Europe.
-The Company announced that they are restructuring their Interior Systems operations in North America. Production at their Westland, Michigan facility, which produces lumbar support assemblies for the automotive market, will be transferred to its facility in Reynosa, Mexico. The Westland facility is expected to close in the autumn of 2008. Another restructuring project is to transfer the current production of Interior Systems parts from Willis Texas to the plant in Matamoros Mexico. This is also scheduled to be completed during 2008. The Willis plant will however continue manufacturing of other products within the portfolio. (From a press release on Apr. 18, 2008)
-Kongsberg Power Products Systems AS, a subsidiary of Kongsberg Automotive Holding ASA, has declared it is considering proposals regarding closing the factory in Mﾃ､rsta, Sweden. The factory in Marsta has 54 employees. The facility produces heavy duty cables, pedals, hand controls, hydraulic valves and electrical components to the Commercial Vehicle and off-highway vehicle market. The potential closure of the factory may lead to a transfer of production in Mﾃ､rsta to its existing locations within Europe. (From a press release on Apr. 23, 2008)
-The production in Itajuba (Brazil) will be transferred to an existing plant in Jundiai. The Itajuba plant produces gear shifters to the South American automotive market. The Itajuba plant currently employs 35 people. The transfer is expected to be completed by December 2008. (From a press release on July 1, 2008)
-The Company is restructuring its production operations in North America, being driven by the global automotive market collapse. Production at the Van Wert, Ohio facility will be transferred to the Nuevo Laredo, Mexico facility. Also, production at the Haysville, Kansas facility will be transferred to the Matamoros, Mexico facility. Both US facilities are expected to close in the summer of 2009. (From a press release on Dec. 13, 2008)
R&D
R&D Structure
-R&D facility is located in Kongsberg, Norway.
R&D Activities
Automotive Systems
-In 2008, this business unit started several projects to develop and manufacture systems that will be significantly lighter and require less space than comparable systems today, hence have positive influence on fuel consumption, and thereby its carbon dioxide emissions. Weight reductions in the range of 20 to 80 % has been achieved in product areas such as seat heating systems, head restraints and systems for lumbar support. The development towards alternative power sources, with hybrids and advanced battery technology, represents new and interesting opportunities for the Company. Within its global R&D network of more than 200 engineers, the division is working on new programs on hybrid platforms, including new shift-by-wire solutions and innovative comfort features for thin profile seats.
Commercial Vehicle Systems
-The R&D departments are investing a large percentage of its research and development resources in developing lighter and more environmental friendly solutions. During 2008, the Company continued the ongoing development of composite materials. The next generation of composite air couplings was introduced to several new markets. A weight reduction close to 50 % has been achieved as a result of shifting from brass to composite material. In the Driveline and Chassis area, the Company has accomplished further environmental achievements. Most important, lighter and stronger suspensions products and a new electronic driveline product that leads to more effective engine consume and hence less fuel consumption and CO2 emissions.
Power Products Systems
-The market research and R& D efforts are committed to working closely with customers to implement new electronic throttle control systems for gasoline and diesel engines as well as electric vehicles. Additional work is underway in support of customers' engine control units, and the issues regarding alternative fuels. Several key new product development efforts related to these areas launched in 2008 and others are preparing for launch in 2009.
-R&D facility is located in Kongsberg, Norway.
R&D Activities
Automotive Systems
-In 2008, this business unit started several projects to develop and manufacture systems that will be significantly lighter and require less space than comparable systems today, hence have positive influence on fuel consumption, and thereby its carbon dioxide emissions. Weight reductions in the range of 20 to 80 % has been achieved in product areas such as seat heating systems, head restraints and systems for lumbar support. The development towards alternative power sources, with hybrids and advanced battery technology, represents new and interesting opportunities for the Company. Within its global R&D network of more than 200 engineers, the division is working on new programs on hybrid platforms, including new shift-by-wire solutions and innovative comfort features for thin profile seats.
Commercial Vehicle Systems
-The R&D departments are investing a large percentage of its research and development resources in developing lighter and more environmental friendly solutions. During 2008, the Company continued the ongoing development of composite materials. The next generation of composite air couplings was introduced to several new markets. A weight reduction close to 50 % has been achieved as a result of shifting from brass to composite material. In the Driveline and Chassis area, the Company has accomplished further environmental achievements. Most important, lighter and stronger suspensions products and a new electronic driveline product that leads to more effective engine consume and hence less fuel consumption and CO2 emissions.
Power Products Systems
-The market research and R& D efforts are committed to working closely with customers to implement new electronic throttle control systems for gasoline and diesel engines as well as electric vehicles. Additional work is underway in support of customers' engine control units, and the issues regarding alternative fuels. Several key new product development efforts related to these areas launched in 2008 and others are preparing for launch in 2009.
Investment Activities
Capital Expenditures
| (in million Euros) | FY2008 | FY2007 |
| Automotive Systems | 18.7 | 8.0 |
| Commercial Vehicle Systems | 14.7 | 18.2 |
| Power Products Systems | 3.8 | 0.0 |
| Eliminations | 0.9 | 0.6 |
| Total | 38.1 | 26.8 |