Suppliers to the automotive industry were some of the companies to be worst affected by the economic downturn. Tim Brown discusses with members of one of the largest independent UK stamping companies, Covpress Holdings, the impact of the recession and the need for strategic diversification.
Covpress Holdings is comprised of two companies on the same site — Covpress Ltd and NCJ. Covpress acquired Stratford based NCJ in 2004 and relocated the company to the Covpress site in 2005. At present, Covpress Ltd is 100% automotive and generally performs high-volume automated presswork and assembly using transfer and progression presses supported by robotic welding and assembly cells. NCJ generally produces niche products for automotive and non-automotive industries using manual tandem press lines with robotic assembly.
“We can offer our customers the capabilities of either company on the same site,” says managing director, Mike Gillett. “A low volume customer might utilise NCJ whereas a higher volume customer requiring robotic welding or transfer or progression presses will use Covpress Ltd. We have certain customers such as Perkins and UYT that deal with both because there will be some low volume and high volume parts.”
Within the automotive market, NCJ has traditionally been a tier two supplier whereas Covpress Ltd is predominantly a tier one supplier. The company produces automotive engine parts for Caterpillar and Perkins and is a tier two supplier to Honda and a direct supplier for air reservoirs to Land Rover.
NCJ is also heavily involved with the gas industry, producing gas meter case work assemblies. One of the most notable Covpress projects is the Body-in-White (car body sheet metal) work for General Motors on the X83 model van. The Vauxhall Vivaro, Renault Trafic and Nissan Primastar share the common infrastructure of the X83 model.
“Over the last several years, we have tended to concentrate on high-strength materials with up to 1180 mega-pascal strength steel. You can significantly reduce the weight of steel but maintain the same strength. This is what the automotive OEMs are looking for. We have the equipment and are proficient in this material and therefore it is one of our biggest opportunities.
“One of the issues with high-strength materials is that it is not easy to form as it has spring back problems, splitting problems and can be very hard on tooling. A number of companies have struggled either with their equipment because they don’t have high enough tonnage or enough technical knowledge of how to cope with high-strength materials and that has given us an opportunity in the market place as we have a several large bed, high tonnage presses including a 2500 tonne transfer press that is able to easily manipulate most high strength materials.”
Impact of the recession
As with most companies, 2009 was very difficult and Covpress Holdings experienced a reduction in turnover of 38% to £34m when compared to total sales of £55m in 2008. According to the company, during some periods last year, there was up to a 60% reduction in automotive production. The company is now starting to show an increase in 2010 of 18% and is this year forecasting turnover in excess of £40m.
Gillett and his team admit that the diversity offered by NCJ customers provided a “cushion” as the company’s non-automotive work, comprising about 15% of the company operation, remained quite steady during the period. “That fact made us start thinking a little bit about our future strategy,” says Gillett.
“We realised we were too dependent on the automotive industry. So we have actively, over the last 12 months, pursued more non automotive work than we have ever done before. We are diversifying in to new markets such as satellite dish sets and are trying to specialise more and more into the gas metering supply chain. With the introduction of smart metering in the UK and Europe, following legislation changes, there is substantial growth in that market place and we see that as very strategic for this business. Our primary customer has just signed a contract with the UK’s largest energy supplier to support commercial smart meter deployment.” As a result of diversifying product offerings, the company is particularly interested in further developing the Covpress Ltd client book.
The ability to adapt tooling from manual presses to their automated transfer presses has allowed this to become a reality. “If you can put tooling from a manual press into a transfer press, you can save up to 70% of your labour costs. What we’ve been doing with a number of our customers is initiatives over the last few years to adapt the tools to go in to our transfer presses and then share some of the cost savings with the customers.” With the increase in demand for the gas meter case work, much of the work has been transferred from the manual press lines to automated presses.
Downturn not down tools
In addition to strategic developments, the company undertook a considerable leaning process and managed to find huge excess, cutting overheads by £2m in areas Gillett says the company never thought were possible. “We looked at rates, rent, security and every small detail to see if we could reduce the costs. We utilise the Toyota Production System (TPS) and were already very lean but the recession showed that we weren’t as lean as we thought. We didn’t like the recession but it made us look at things differently and we feel stronger and leaner for the future.” Gillett says that the company has always employed TPS through every facet of its operation as well as having commenced six sigma programs. The company has also put a total of 42 people through the NVQ qualification for business improvement techniques.
“During the recession, whilst we had to make some cutbacks, we also put some investment in to our people,” he says. “We are an investorin- people company and we were open and honest during this recession even though there were redundancies. We had a decrease in production of 50% and had about 25% redundancies. We have recently taken on about 40 people, including some of those that were made redundant.” When demand, particularly the van market, became very intermittent, the company was confident that the market would bounce back. During that time the company offered staff a guaranteed three day pay week which, once work returned to normal, any owed time would be paid back. “At the end of summer last year, most of our people were back on fulltime work and by Christmas 99% of people were back to normal,” says Gillett. “That gesture was well received on the shop floor. We are proud that during difficult times we’ve still kept a good relationship with the work force. The staff also took voluntary pay cuts during that period which wasn’t something we forced on people but they quite willingly volunteered to have reductions until we saw better times. We are very pleased at how our people have reacted to an immediate cutback.” Gillet says that “during a recession, it is really about working together to get through.” Covpress Holdings appears to have done just that and is now looking ahead with infrastructure investments and acquisitions both on the company’s radar. While remaining cautiously optimistic about the immediate future, Gillett says the mood is very positive and he is confident of a strong emergence from the downturn.