For this week’s AMN Executive Interview, we sit down with Tim Corcoran, managing director of the North American region for ZF Services. In this exclusive interview, Corcoran talks with us about a variety of new and upcoming initiatives for ZF Services, including the recent opening of the 2.5MW test bench at its Vernon Hills, Ill., Wind Service Center, which will be able to test more than 200 gearboxes annually.
You’ve been with ZF for quite some time and have served in your current role since 2006. Bring us up to speed on what has been accomplished in that span of time with you leading the North American region.
We’ve really gone through a set of continuous improvement cycles. We started back in 2007/2008 to merge some internal aftermarket divisions so we now have one aftermarket organization. That merge brought about the need to add on to this building and to move/relocate. We had some people who didn’t come with us from Ohio, so we had to hire and train and re-staff our organization. It was a significant effort.
During that time, we’ve done some new product launches. We re-launched our clutch program for passenger cars. We started the wind energy business, where we repair wind turbine gear boxes now, we started a rail remanufacturing program for both ZF and non-ZF products, we created a regional organization for service in North America, to include Canada, the U.S., Mexico, Central America and the Caribbean. That allowed us to combine the strengths of each of those organizations into one very strong organization for North America. And, as we speak today, we’re launching a new passenger car shock program in the U.S. and Canada. We’re piggybacking on the industry-leading majority market share aftermarket shock program we have in Mexico to create the same synergies for the U.S. and Canada. We’re very excited about it.
On May 8, the company held an open house to unveil a new 2.5MW test bench at the Illinois Wind Service Center. Tell us about this project and what new opportunities it opens up for ZF and your customers in the wind energy sector.
Together, with the state of Illinois, which gave us a sizeable grant to help us get into the wind business, in the past three years we have added cranes, testing, washing, painting and inspection capabilities into the building here in Vernon Hill, Ill. For ZF, this was a natural market progression that really makes sense. We’re a company that offers motion and mobility solutions. So as a gearbox expert, to go from marine gearboxes and move up to wind turbines was only natural. We looked at the market and saw that there are 48,000 wind turbines in service today, all of which are going to need serviced. So, we made the investment while they [wind turbines] were still in their infancy, and now, as they move into maturity, we’ll be ready to help service them and keep them spinning.
What are your expectations for this alternative energy source and the market share you will capture as a result?
Since this is an energy source without a carbon footprint, it really fits with ZF’s global strategy of being within the renewable energy business. We expect that with time, we will continue to grow and gather market share in the gearbox repair market. Since it’s a relatively new market. it’s tough to determine market share at the moment. ZF though as a company, about a year ago, purchased Hansen Gearbox from Belgium, and they are the No. 2, by market penetration, gearbox manufacturer. So we have both an aftermarket strategy and an OE/new gearbox strategy. So, between the two, it’s a very integrated, holistic approach to the gearbox market for wind turbines.
New this year, ZF’s SACHS brand began offering a fully assembled premium strut and spring assembly program for the aftermarket. What can you tell us about the launch and the reception it has had in the marketplace thus far?
That’s part of the launch of our aftermarket shock program for the U.S. and Canada.
Probably not as well known in the marketplace, as a brand name, SACHS is either the No. 1 or No. 2 global producer of shocks for passenger cars and commercial vehicles. What we have seen is that the aftermarket is making a clear move back to the OE quality and ride characteristics. That is our strength. By either providing quick-fit solutions, or shock absorbers or struts, we’re really getting to the sweet spot of what the installer wants. They want the part to fit right the first time, they want the OE quality and they don’t want any comebacks. That’s really the most economic way to repair a car. We really see that and think that our line does that for them.
As a supplier to both the OE and the aftermarket, what are your thoughts on the passenger car transmissions market for the next few years. Do you expect to see growth in this category?
That’s an interesting category because you have different technology solutions for the same purpose. You go all the way from the typical gasoline engine with a regular automatic or manual transmission, then you have mild hybrid solutions and then you have full hybrid or electric vehicles. The market seems to be moving in multiple directions at the same time. Automatic transmissions, whether they are part of a hybrid solution or part of a typical gasoline diesel engine solution, will be the majority of the market for the next decade or more. It’s a very cost-effective solution. The technology that ZF offers, by either building an 8-speed rear-wheel-drive, or 9-speed front-wheel-drive, offers superior driving quality and fuel economy. I don’t see any sign of this changing any time soon. In fact, ZF sees this trend in such a way that we built a 1 million-square-foot plant in South Carolina to make automatic transmissions here for U.S. customers.
You mentioned hybrid and diesel. There’s a lot of speculation on the growth of the hybrid market, the electric vehicle market and the diesel market. Do you have any thoughts on which will actually be the front-runner?
Let’s start with electric. Electric is a really interesting solution that allows you to plug in a car overnight when the electrical grid is theoretically at its lowest level. The challenge the U.S. has is do we have the infrastructure to support a fleet of electric vehicles. When you go to a parking lot, can you plug your vehicle in? That infrastructure is only now coming into play, so it may be an interesting solution but it’s not practical for the mainstream at the moment. Hybrids are coming along, but they seem to have topped out at a certain market share. There are certain people who like it and use it. It’s a very robust solution, it works with taxis and other fleets, but it’s not mainstream or commercially accepted. The major influence here, obviously will be the cost of fuel as gasoline or diesel goes up its going to drive people to more creative solutions.
Let’s migrate to the heavy-duty segment for a moment. What hurdles and corresponding opportunities does ZF see in the heavy-duty clutch and shock aftermarket?
SACHS, again, is a market-leader in commercial vehicle shocks. We have a significant market share of Class 8 trucks – brand-new trucks – with our shocks built into them. For the most part, the market doesn’t know that. It’s the best-selling trucks that have our shocks and have the better ride and long life. We need to take that story to the aftermarket and really tell them, “Look, there’s a reason why the best trucks in the U.S. pay extra to have the SACHS shock on there and we think you should also consider SACHS for your fleet.” We’re bringing that message to the market.
As far as clutches are concerned, we have industry-leading technology solutions: light pedal effort, long-life, low maintenance costs and we’re bringing those clutches to the aftermarket also. The acceptance has been very good. I expect to see continued strength and growth of market share in both our shock absorbers and clutches for commercial vehicles.
With the recent upturn in the construction industry, what opportunities does your Off Highway group see in the future?
The off-highway market has changed considerable of the past 10 or 15 years. In the past, there were a lot of individual owners of construction equipment, whether they be backhoes or front-end loaders or other kinds of equipment. The penetration in that time of the rental fleet has changed the dynamic. There’s a lot more rental fleets out there. What we saw when the market started to turn down a few years ago, as far as new housing starts, a number of those vehicles that ended up needing repair or maintenance were pushed to the back of the parking lot and now as the construction market is picking up steam quickly, those vehicles are getting fixed and they are also buying new ones. So, our construction business, whether it’s spare part sales or selling remanufactured gearboxes, has been increasing year-over-year at a pretty steady rate. We’re pretty excited by the rebound we see in the construction industry.