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Timothy Conlon, President and COO of Viasystems Group, Inc. (Nov 1999)
November 8, 1999 |Estimated reading time: 12 minutes
Pistes & Pastilles magazine n°23, Nov. 1999 Timothy ConlonA conversation with Timothy Conlon, President and COO of Viasystems Group Inc.
"I Believe You Think We Are Not the Way We Really Are!"
Number one world-wide only three years after start-up, Viasystems denies wanting to play Monopoly in the printed circuit market. According to Timothy Conlon, in an exclusive interview with Pistes & Pastilles, the American group’s numerous acquisitions do not suggest predatory behaviour at the expense of its competitors, but a global customer service culture for its clients.
Why has Viasystems become the world’s leading manufacturer of printed circuits boards? What is your marketing strategy?
Viasystems was born out of our customers’ needs. We started thinking about this in May 1994, during negotiations with a large OEM. At that time, we were in the process of starting up Berg Electronics, an electronic connector business, sold by the DuPont group; then we acquired two other connector companies from OEMs, then six other companies. Between starting up Berg, and selling it to Framatome Connectors International (FCI), we almost doubled its turnover. Therefore, these companies which out-sourced their connector businesses suggested to us that we also take on their printed circuit board production divisions. They asked us to set up a global organisation, that’s to say, one with world-wide facilities, which would make the whole range of technical services available to them and which would deal with them as customers instead of sister divisions. We did not create Viasystems because we wanted to take over the printed circuit market, but rather because that is what our customers requested. It has never been our objective to become the world’s number one, but to provide global solutions in a sector where our customers believe they are not competitive. In terms of their printed circuits, they may require low prices, hence our acquisition of Kalex; they may want production facilities near their own sites, and we can meet all the western market’s needs thanks to our European and American plants. If necessary, we can also offer local production facilities in China. Several of Viasystems’ production sites use leading-edge technology and can meet any orders in this area. So our acquisition strategy is based on technology, logistics possibilities, production capacity, and expertise. Our objective has never been to be the biggest organisation in the market, but to be our customers’ best supplier.
Last June, you stated that you needed to open up in Asia, and in August, you acquired Kalex. Will you announce today that you still need to do something more? How far do you see yourselves growing?
Ten years ago, the ten main printed circuit manufacturers provided 18% of the industry’s global capacity. Now it is 30%, and within five years, this Top Ten will have grown to 50%. The big get bigger. Viasystems will not be alone; there will be several of us ahead of other manufacturers. It is a repeating pattern in economics. A new market is fragmented because all the players are working out the best production systems. When the market starts to mature, a set of large organisations separates off. The rest continue as specialist or local suppliers, whether for specialist markets or customers. In most areas of activity, it is the five or ten largest companies that dominate the market. This is already the case for semiconductors, connectors, and so on. The printed circuit industry has reached this stage. Viasystems is not the cause, but rather the effect the effect. To be more precise, it is one effect, and not THE effect. Our competitors are doing the same as we are, sometimes the same way, sometimes differently, on a smaller scale at present; but they are following the same plan as our customers suggested to us, and to them. Today we may well be the leader in some areas of production, but we will not be the only one. We are not unique, nor are we totally different. That is not our intention.
What modesty for a Number One! Is this Viasystems philosophy, its organisational culture?
We still have to create Viasystems’ culture. We have acquired the best units in terms of their geographic location, technology, or particular expertise. Each one already had its own culture, and it would not be useful to turn everything upside-down, and risk wrecking the business. We have already been through a similar experience – in a different sector, but people are people. You need about three years to assimilate a change of culture. Therefore, if we consider the Kalex acquisition, it will take at least another two years to define the Viasystems culture. We cannot just impose it; it is created by the 17,100 employees. Each of them is a unique individual; each of them contributes to the company’s culture. We need them all. Moreover, this is the only way to develop this group culture. What is more, we are all changing and growing, myself included. Management has to adapt to the organisation. My role, more than anything else, is to act as a facilitator, someone who helps each unit to become part of the integrated whole, and play an equal part in the success of Viasystems and of our customers. As far as the word modesty is concerned, that is not really accurate. It is just that I know how hard it can be to assimilate an acquisition. It never goes the way you thought it would at the start. Sometimes you do not get everything you expected, on the other hand, sometimes you get a nice surprise. For example, the factory at Hecht, in the Netherlands, has exceeded all our expectations; and its order book now outstrips its capacity. This is because there was a melding of its underlying culture with Viasystems’ philosophy. In addition, to succeed in assimilating, you have to be really flexible. If you impose rigid ideas, you end up with something you did not want. That is not what we want. I would rather be a leader than a dictator. I think you think we are not the way we really are!
In France, American organisations do not have a very good image...
It would be very difficult to describe Viasystems as an American organisation. Of our 17,100 employees, only 2,500 are in the States, and the rest are spread throughout the world. Although our headquarters is in America, it is the employees that make the business work, not the capital.
Will the Kalex acquisition mean you increase price-cuts?
The Kalex acquisition was a part of our original strategy, which was to create a global supplier for the category of customer which makes up a core market – telecommunications (which makes up a third of our core activity), instrumentation and automotive. Nevertheless, our current production capacity is not infinite. Kalex allowed us to enter additional segments of our customers’ market sectors. When they were looking for low-cost production units in a particular sector, we offered them an alternative. They could call on us as a local supplier, or negotiate tighter prices with local businesses. It is not our intention to get into a fight with already existing parts of the local market, but to adapt to our customers’ needs. If they need printed circuits to European quality standards, we are at their disposal, because we are the leading European manufacturer. However, our prices will include European labour costs. If they want rock-bottom prices, they will find them anyway. What we hope is that they will come to us if we are their ideal partner. Our priority is our relationship with our customers. We can adapt ourselves to individual needs. P rinted circuits are a high technology industry. We need an adequate return on investment to stay at the optimum level and to continue to invest. This applies to Viasystems as well as others. Therefore, we have to maintain an acceptable level of ROI.
The number of manufacturers is declining. Many organisations are considering their position and their future. What would you say to small manufacturers of printed circuits?
Above all, that I admire them: in developing their businesses, they have created something out of nothing. I have never done anything like that in my life. Over the past few years, the market has changed considerably. Small manufacturers of printed circuits have to take notice of this change, and chose the best development options in terms of their customers’ strategies and requirements as they see them evolving. It will be different for each of them. Some will be able to move towards an industry sector which is not concerned with global supply and service, but solely in the local market, and where the best local suppliers service the local market. This can be an excellent strategy. They could also offer specific benefits, for example one-offs and small batches, since most of the larger manufacturers are not geared up to anything other than large volumes.
Viasystems’ powerful position is not well tolerated by some of your competitors. Do you have a problem with their attitude?
I did not start in the printed circuit industry, but I have worked in several sectors within electronics. When I think about the electronics industry as a whole, and I see the size and performance of certain groups, I do not think Viasystems is so big. Last June, at the EPC conference, we discussed the Viasystems effect on some of this industry, and that what we are really concerned with is not the printed circuit market, but our customers’ satisfaction, and all we are doing is carrying out a plan that meets their needs. Therefore, Viasystems’ position as Number One in its field does not really impress me. It is not our intention to criticise or damage anyone. We do not sit and ask ourselves, "How can we harm Company X?" That type of attitude does not help anyone. We are not after any popularity prize, but hatred goes against our beliefs. It is only business!
Are you going to move your European production to Asia to bring down costs?
Not necessarily. We locate our production to meet our customers’ needs; for Asian high-tech businesses, we produce printed circuits in our European and US plants, and ship them to Asia when local sites cannot meet their requirements. For customers who want the lowest prices, they get circuits that have been manufactured in the lowest-cost countries.
Do you have a minimum order?
It depends on the factories. I have just been talking about our major orientations, low cost and high technology, but we’re also working in a niche market for short runs, or using special materials, or for unusual circuits that can be difficult to manufacture without, however, demanding very advanced technology. For this market, we accept orders for short runs. One of our factories in the United Kingdom even produces circuits by the unit, whereas the manufacturing processes of our Asian factories demand a minimum volume of around 5,000 circuits. Therefore, although we can produce small runs, we are not trying to capture that part of the market. We are not looking to monopolise every order and every customer. We are focused on a segment of the customer base and we hope to capture half of this market, or even 70% in some specialised sectors. Let us face it: we are not going to win them all.
What is the your ideal contract length with customers?
We have three or five-year contracts with some clients but that is fairly unusual. Moreover, in most cases the term contract is not appropriate. It would be better to talk about a pricing agreement. A contract implies a reciprocal commitment: Viasystems makes a commitment on production capacity and price, the customer on the volume of work. However, with a pricing agreement, the customer gives an indication of the potential work volume without committing himself, while we, on the other hand, quote a firm and final price for that deal. This sort of agreement is mostly valid for a year, sometimes only 90 days, or for one year with re-negotiation every 90 days.
What gave you most pleasure in your professional life?
For sure, I know exactly what it was! A long time ago, I was running a factory with 600 people in a small town. After four years, I changed companies and continued my career. However, that factory went downhill, was sold twice and finally closed. Fifteen years later when I was in a senior position, we decided to build a factory in the United States as we wanted to have factories world wide. We went back to that same small town and built a new factory. My most precious memory was the day we opened the site with 300 workers. It now has 800 employees. I still get letters and telephone calls from people who live there. When we built the factory, there was 17% unemployment compared with 8% today. That state awarded us with an honorary plaque as the leading job creator in one of the areas worst affected by unemployment. Creating long term jobs, stable employment for as many people as possible: when I die and have to answer for how I used the talents I was given, I hope I will have something to say.
And the worst memory of your career?
Every time I changed jobs, and that has happened often in my career. I have always found it very hard to say goodbye to everyone I had worked with professionally for all those years. It is tough, really tough.
Interview by Olivier Cadic and René-Martin Simonnet
Self portrait
"I am forty eight years old and have worked in the electronics industry for more than twenty years. I have worked in both electronic components and equipment assembly. Twenty-six years ago, shortly after graduating with an engineering degree from Gannon University, I met Robert Mills (the first president of Viasystems), and our paths continued to cross throughout the early years of our careers. In 1992, I was working for Amphenol, a large cable/connector manufacturer when Robert Mills contacted me and suggested I join Mills & Partners, Inc. a corporate management firm. Combined with their partners, Hicks Muse, Tate and Furst, the Mills & Partners organisation was looking for a team to manage their recent acquisitions. For six months, I held the position of president of Thermadyne Industries, Inc. (welding and cutting) before being appointed chief operating officer (COO) of Berg Electronics. Five years later, I became president of Berg, a position I held for two years before Berg was acquired by FCI. I am not important in the Viasystems’ genesis. It could have been anyone in my place. My years of experience in electronics have linked and introduced me to the many customer segments in this industry. When Berg was sold, it was logical for me to assume the position of president of Viasystems. This industry excites me and keeps me on my toes, and during business hours, I give Viasystems my complete attention. In private, I devote my time to my family and enjoy life to the fullest."
Timothy Conlon to Olivier Cadic :"I believe you think we are not the way we really are!"