Case context: Trelleborg AB

This section presents Trelleborg AB, the target of empirical effort and common denominator for the four cases. The basis for the information presented here is mostly official documents, such as annual reports and the corporate website, complemented by the general interviews described in Chapter 5 and informal discussions with Trelleborg AB employees.

7.1.1 History and future

In 2005 Trelleborg AB celebrated its 100^th anniversary. Trelleborgs Gummifabriks AB was registered as a Swedish corporation on October 30, 1905. The operation concentrated on the manufacture of industrial rubber and tires. From having 100 employees and sales of approximately SEK 0.5 M in 1905, the company expanded and by 1935 had some 1,000 employees and sales of SEK 10 M. By 1955, the number of employees had grown to 3,000 and sales reached SEK 125 M. Still all business was national, but in 1962 the Trelleborg Rubber Fabriek was officially opened in the Netherlands, becoming the company’s first manufacturing unit outside Sweden. Trelleborg was listed on the Stockholm Stock Exchange in 1964. As revenues weaned, measures were introduced to restructure the company through the sale and closure of unprofitable operations in 1983. When profitability had been restored, an extensive program of acquisitions was implemented.

At the beginning of the 1990’s, the Trelleborg Group’s operations included mining and metals, mineral processing, the distribution of products for the building sector, and the pulp and paper industry.

During the latter part of the 1990’s, the corporation was again restructured. Divestment of operations considered non-core created a strong financial position. In April 1999, the decision was made to follow a new strategic direction and to reposition the Trelleborg Group.

The strategy adopted was termed “concentration and expansion” where

“expansion” meant that the Group would utilize substantial amounts of its financial resources for external growth. This has meant undertaking acquisitions, such as those of Invensys AVS and LAC, which have strengthened Trelleborg’s market position in antivibration components for the automotive industry. In autumn 2003, Trelleborg acquired Smith’s operations in polymer-based precision seals which became Trelleborg Polymer Sealing Solutions. A complete list of later acquisitions and divestments are provided in Appendix B.

Trelleborg AB is today a global industry group with 22,000 employees in about 30 countries. Annual sales are of approximately SEK 22.5 billion. The head office is still located in the small Swedish city of Trelleborg, in the very south of Sweden. In 2003 the net profit was SEK 702 million, an increment of 71 %. Major markets are the European and North American markets, with Asia and the Pacific region becoming more and more important. The corporation is now focused towards processed polymer materials:

The Trelleborg Group offers technological solutions that meet three primary customer needs: to seal, damp and protect to secure investments, processes and people in demanding industrial environments. […] Based on polymer technology and in-depth applications know-how, Trelleborg develops products and solutions designed to meet specific needs, often in close collaboration with customers. (Trelleborg, 2007, p. 8)

Most of Trelleborg’s growth in recent years has been achieved through M&As. The growth objective is 8-10% yearly over an economic cycle.

For 2006 the business growth was 13%, where 6% was organic growth and 7% was through purchase of additional operations (Trelleborg, 2007). After a period of strong M&A-driven growth, priority has now shifted to complementary acquisitions with the ambition to create synergies. Organic growth is also more emphasized than before. 6%

organic growth was, according to CEO Fredrik Arp, a very satisfying result (Trelleborg, 2007).

7.1.2 Structure and business areas

Trelleborg AB consists of a central group management function and five distinct Business Areas (Figure 7.1). Each business area has its own profit center and may from some perspective be regarded as individual organizations. Each business area has its distinct corporate culture, its way of doing business, its unique costumers and its own IS. Comparing the five business areas, Trelleborg Automotive (TA) is the largest, both in terms of employees and net sales (Figure 7.2). They follow hereafter in named order: Trelleborg Engineered Systems (TES), Trelleborg Wheel Systems (TWS), Trelleborg Building Systems (TBS), and finally Trelleborg Sealing Solutions (TSS).

Previous and expected growth is not equally divided between the business areas. TES and TSS are the two areas that have been considered as having greatest potential for the future and, logically, the fields in which growth has been concentrated. It is also from these business areas that the four cases are presented in the following chapters; naturally, this presentation will tilt substantially towards these areas. However, to understand the implications of the cases on the group as a whole, it is also necessary to introduce the other business areas, their activities, and their use of IS.

Figure 7.1 Structure of Trelleborg AB

Trelleborg Automotive

Trelleborg Wheel Systems Trelleborg Sealing

Solutions Trelleborg Building

Systems

Trelleborg Engineered

Systems

7.1.3 Trelleborg Engineered Systems

TES is a global supplier of industrial fluid systems and engineered solutions that focus on the protection and safety of investments, processes and individuals in demanding environments. The business area comprises two business segments: Industrial Fluid Systems and Engineered Solutions. Industrial Fluid Systems develops manufactures markets, and distributes industrial fluid systems, such as hose systems and elastomer laminates in polymer materials for advanced applications.

Engineered Solutions, with operations that are project-oriented and focused primarily on infrastructure and offshore oil and gas applications, provides engineered solutions in polymer materials.

Examples include marine fender systems, support bearings and expansion joints for bridges, tunnel seals and niche products for the offshore, oil/gas extraction sector. The head office is located in Trelleborg, Sweden. Major production units are located in Sweden, Norway, the UK, Germany, the Netherlands, France, Spain, the US, Canada, Singapore and Australia.

TES is a highly decentralized and heterogeneous business area. It consists of a set of mainly self-managed business units that form individual companies. The business units are specialized in their areas, and generally have few customs or suppliers in common. The TES management considers the units themselves to be best equipped to understand the needs of their costumers and how they should be met

Figure 7.2 Division of net sales per BA (Trelleborg, 2003)

efficiently. Despite the relative freedom of the business units within TES, major decisions such as larger investments or changes in offering must be approved by TES management. This includes M&As, which sometimes are initiated and entirely managed by the individual business unit. M&As can also be initiated by TES on a business area level and then managed by a project group set up at business area level.

7.1.4 Trelleborg Sealing Solutions

Most of Smith’s operations in polymer-based precision seals took place after the purchase integrated into Trelleborg AB as a new business area and named Trelleborg Polymer Sealing Solutions, which later was altered to Trelleborg Sealing Solutions (TSS). TSS is a global supplier of precision seals for the industrial, automotive and aerospace markets.

For the industry, this business area offers sealing solutions in specialty materials for a range of applications. For the automotive industry, TSS produces security-critical seals for application areas such as steering, fuel control, air conditioning, air induction and driveline systems. TSS also produces aircraft seals that are used by aircraft manufacturer in engines, flight controls and actuators, landing gear, airframes, wheels and brakes.

Most of the products are marketed under the Busak+Shamban label.

The head office is located in Stuttgart, Germany. Production units are located in Brazil, Canada, Denmark, France, India, Italy, Japan, Malta, Mexico, Poland, Sweden, the UK and the US. Geographically, TSS is organized into three regions: Europe, which is still the main market with a 70% share of total revenue, as well as the Americas and the Asia Pacific which together make up for 30%. The organization is divided into three distinct business units for marketing, logistics and sales.

TSS is marketing driven and aims to compete with a value-added offer of quality and high technology, rather than cost. Industry trends point to where customers demand holistic solutions and aims at reducing the number of suppliers (Trelleborg annual report, 2005); the business model of TSS is solutions oriented. This means that TSS salesmen and application engineers meet up with customers, discuss and analyze their specific sealing needs and then come up with a solution that caters to this. This business model is supported by an organizational structure that distinguishes between Marketing, Supply-chain (or Logistics) and Manufacturing activities, which can be seen in Figure 7.3. The solutions proposed by the marketing units may involve

in-house manufacturing, but products may also be procured from third party suppliers, or even competitors; the number of goods purchased through this channel is said to be as high as 30-35%.

Figure 7.3. TSS Business Activities

According to Windahl et al. (2004), the modern solutions-oriented company should seek to re-evaluate their internal competence and move core competencies from production and technical applications, such as production, to marketing, consulting and integration competencies. In practice, this means that solutions-oriented businesses place less emphasis on their production and more on consulting and the ability to integrate vertically with customers and suppliers. Windahl et al. (2004) also confirm the need to develop systems integration competence within the solutions-based company.

7.1.5 Trelleborg Automotive

Trelleborg Automotive (TA) manufactures polymer based components and systems used for noise and vibration damping for passenger car, light truck, heavy truck, rail, marine and industrial applications. With net sales of SEK 8,721 million, TA is the largest of Trelleborg’s business areas. It is also the largest business in terms of employees, that is, 8,487 employees. TA comprises two business segments:

Antivibration Systems and Fluid & Acoustic Solutions. The first segment produces noise and vibration solutions to the automotive industry. The latter segment supplies the car and truck industry with engine cooling, air supply and acoustic management systems. TA’s head office is located in South Haven, Michigan. Major production units are

Manufacturing Marketing

Logistics

Site 1 Site 2 Site 3 Site 4

located in Brazil, China, the Czech Republic, France, Germany, India, Italy, Mexico, Poland, Slovakia, South Korea, Spain, Sweden, Turkey, the UK and the US.

7.1.6 Trelleborg Wheel Systems

Trelleborg Wheel System (TWS) is the second largest business area of Trelleborg, with its SEK 2,704 million in net sales and 2,118 employees. The two business segments Agricultural & Forest Tires and Industrial Tires manufactures and distributes tires and wheel systems for tractors, farm machines, forest machines, transport vehicles and other utility vehicles. The head office of TWS is located in Rome, Italy.

Production units are found in Denmark, Italy, Sri Lanka, Sweden and the U.S.

7.1.7 Trelleborg Building Systems

Trelleborg Building Systems (TBS) is a supplier of polymer- and bitumen-based building products for sealing and waterproofing applications in the industrial and consumer markets. TBS comprises three business segments: Sealing Profiles who develops, produces and markets sealing products for the construction sector and other industries, and sealing strips for the consumer market; Waterproofing Systems who supplies bitumen- and rubber-based products for waterproofing and protection applications in the construction and civil engineering sectors; and finally Pipe Seals who produces sealing systems for concrete and plastic pipes. The head office is located in Trelleborg, Sweden. Production units are located in Sweden, Denmark, Poland, Germany, the UK, Finland and Spain.

7.1.8 IS at Trelleborg AB

Trelleborg AB has on a group level a central function addressed to IT, called Group IT. This function is lead by the CIO who reports to the CFO. Group IT tasks are mostly related to alignment of IT issues, such as security, central negations on hardware and software purchase, and strategic IT development projects concern group level, for example Intranet, Extranet, B2B integration and systems integration. Together with IT managers from the five BAs, Group IT forms the IT-forum

with quarterly meetings to exchange experiences, information and knowledge.

When describing the flora of IT-systems, CIO, Peter Andersson, expresses it as “You name it, we got it” (PA, 050120). Regarding IT, this is very true for Trelleborg, being a decentralized organization. Each business area is practically in charge of its own IT architecture, ERP-system strategy and IS. TA, TBS and TSS have implemented the same ERP system in all business units, while TES, TBS, and TWS may have a distinct ERP system down to the factory level. For example, TBS has implemented the ERP system, Movex, in all its business units. TES is the less homogenous business area at Trelleborg. According to CIO, Jan T. Pettersson, they do not consider there be any enhancements with one single ERP system, as its business units to a high degree have distinctive costumers and separate work processes. Costumers do not demand the business area to provide one single face, but rather have highly specialized ways of doing business.

Decisions on IT architecture are made on the group level.

Trelleborg has chosen IP-based networks and CIO, Peter Anderson, wants to deploy Microsoft Active Directory, a desire that has met resistance as some BA want to keep their functional Novell solutions.

Lotus software portfolio is used for communication and Microsoft Sharepoint Portal tends to be given a more and more important role as a portal solution. The portal project is one of the major IS projects on the group level. Other projects on the group level are related to systems integration and the leverage of synergies following the acquisitions.

During the time of the four cases presented in this chapter, there was a shift in IS management on the group level. In 2004, current CEO, Fredrik Arp, hired Peter Andersson as the CIO, reporting to CFO, Bo Jacobsson. Peter Andersson was not a part of Trelleborg Group Management. Fredrik Arp resigned in 2006 and was replaced by Peter Nilsson, who in 2006 had already created the position of Senior Vice President with responsibility for IT. It was the first time that Trelleborg included responsibility of IT in the group management.

Peter Svenburg, previous CIO at Scancem/Heidelberg Cement, was hired for the job. Although this strengthening of the role of IT at Trelleborg is likely to have impact in the future, the change did not have any impact on the cases presented in this thesis. First, at the time that Peter Nilsson and Peter Svenburg had settled into their offices all four cases had progressed far into their integration projects. In addition,

the four M&As were, as will be shown in this chapter, foremost the concern of the individual business areas. The Trelleborg group level had almost nothing to do directly with the four M&As, even though general group-wide policies had a limited impact, as will be explained later.

More information on Trelleborg AB is available at:

www.trelleborg.com