State of the Industry 2011: An Interview with José Maria Alapont, President and CEO, Federal-Mogul Corp.

What is your primary industry of focus? What are the top off-road industries you are investing in for 2012, and why?

Federal-Mogul is a leading global supplier of powertrain and safety solutions to the world’s foremost original equipment manufacturers of automotive, commercial, aerospace, marine, rail and off-road vehicles; industrial, agricultural and power generation equipment; as well as the worldwide aftermarket. 

The diversity of our business – in terms of the industries we supply, the products that we offer and the locations where we operate – has been a cornerstone of the company’s success. Federal-Mogul products are on more than 300 vehicle platforms and 700 powertrains, with no single customer representing more than five% of total sales.

The commercial vehicle and off-road industry is an important market segment for us, and it represented $1.2B or 18% of our global revenue in the last 12 months.  The commercial vehicle and off-road global markets are forecast to grow 23% and more than 4%, respectively, in the next five years and are a key part of Federal-Mogul’s strategy for sustainable global profitable growth.

Which would you consider to be your strongest market? Is that also your largest for supply? Do you plan to grow your presence in that market, or is the demand not there?

Federal-Mogul’s sustainable global profitable growth strategy is based on customer, region, market and product diversification.  Considering our global business, OE sales represents about 65% of the company’s sales and aftermarket sales, about 35%.  Approximately 70% of our business is in light vehicles, 20% in commercial vehicles and 10% in the aerospace, rail, alternative energy, power generation and industrial sectors.

From a regional standpoint, sales in Europe represent about 43% of our total sales, the U.S. and Canada represents about 39%, with 18% being sales primarily in the BRIC markets. 

Federal-Mogul’s total sales are growing rapidly in the BRIC markets, and the company’s growth has been consistently stronger than these markets. Comparing the first half of 2011 to the first half of 2010, our combined CV and LV OE sales in China are up 22% while the China market has grown 5%, sales in India are up 30% while the Indian market has grown 16%, sales in Russia are up 149% while the Russian market has grown 51%, and sales in Brazil are up 8% while the Brazilian market has grown 7%. The BRIC markets offer much opportunity for suppliers, and as these developing markets continue to grow, there is great opportunity for Federal-Mogul. 

Federal-Mogul’s growth is driven by customer demand for our leading technology and innovation in core vehicle and powertrain technologies. Products that we supply to the CV and off-road markets include pistons, piston rings, cylinder liners, ignition components, bearings, sealing systems, fuel pumps, friction, lighting and systems protection products. 

We are seeing similar demands for our products in the BRIC and other fast-growth developing markets, as we are experiencing in the mature markets, due to increased regulatory requirements and overall market expansion. We are well-positioned to deliver our leading technologies that improve fuel efficiency, reduce emissions and enhance vehicle safety in these developing, high-growth markets through our regional operations or through strategic joint ventures.

Where have you expanded internationally? Which emerging markets are you keeping your eye on for future growth potential?

Federal-Mogul already is a global leader in all main markets, and we plan to keep strengthening our position in each. We have a solid growth plan, diversified business model, leading technology innovations, and a competitive global manufacturing base. We are growing organically as we differentiate ourselves through our advanced technology, superior brands, and manufacturing and distribution excellence.  We also are evaluating potential acquisitions to increase our portfolio diversification and to increase our technology in alternative energies and electrification by acquiring new innovations or technologies that can be developed across our global product lines.