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11F CONFIDEITLY POISED OR EUROPE

BC p Can we start with Europe? Your company has made quite an inroad intai Belgium; could you say a little abOut the sort of tactics ERF may follow on the Continent? For example, whether you are going to concentrate on one country or intend to regard this as a base for broader spread and, if so, what particular strengths ERF has got in selling in Europe.

PF: First you've got to design a product for Europe. No British manufacturer at the moment has got a vehicle that is ideally suitable for the European market. Over the past two or three years at ERF we have developed a vehicle for Europe with higher horsepower engine, multispeed transmission, sleeper cab, more driver comfort and so on. But even now we have some way to go to make it comparable with some of our European competitors.

So first of all you have simply got to have the right product. Once you have the product then you have to start thinking about the distribution and service. Fortunately we have decided to go ahead with fitting as standard, at least for the moment, the Cummins engine which has quite a lot of service• availability throughout Europe. So the engine is fairly well covered. For the other components — transmission, electrics and so on — we have some tentative arrangements with various people in Europe.

But we started in Belgium, in Brussels, and now we have just appointed Dutch distributors — who are also Curnmins distributors. We are having discussions with one or two French companies and we hope that, before the end of 1972 certainly, we shall have made a French appointment. And we are making investigations in Germany, mainly from a service point of view. By 1973 we should have both sales and service covered in the main centres of Europe. We are not talking of Italy yet or Spain, but this can be developed.

BC: So you really are making an effort to move gradually into these other countries as well? You have sold about 40 vehicles in Belgium, I believe, which is very good for a first year. These were assembled over there, I think?

PF: They are sent over CKD and assembled in Brussels.

BC: How do retail prices compare over there with Continental trucks — is it possible for British makers to be competitive, even with the EEC tariff'?

PF: Every Continental or Scandinavian manufacturer has different price lists for different countries! We are finding that we have to overcome quite a big tariff barrier — on a complete vehicle it is 20 per cent. On a CKD vehicle it is 14 per cent, but by the time you build it up you have got quite a big cost problem.. What we and our distributor have to do is to keep our margins to the absolute minimum — we are keeping our prices as low as possible to compete, to be in the same sort of price bracket as our competitors — Scania, Volvo, Mercedes, Fiat.

BC: So you are very eager to see the EEC tariff barrier swept away — it is coming down progressively.

PF: It's coming down 20 per cent per annum over five years.

BC: How soon, then, in that five-year span are you going to be on a much

more nearly competitive price basis with the Continentals, do you think? When does it really become a profitable business for you?

PF: You must remember that among the biggest competitors in Europe are

the Scandinavians who, of course, are in EFTA and have the same problem as we have in overcoming a tariff barrier. Scania and Volvo are selling very well in Europe and have a very big percentage of the market and, of course, are competing against Mercedes, Fiat, etc, who have no tariff problems in those markets. • I think the Continental operator is prepared to pay more than the British operator for the right product.

BC: Is this a tradition — that they will pay more for their trucks?

PF: If you want 300-plus horsepower and everything that goes with it you are talking of a more expensive specification all round. Whatever price-cutting or saving you could achieve, it must still basically be a more expensive truck. Most cabs on long-distance trunk jobs are sleeper cabs and on the 'Continent they

higher standard comfort than we are offering in tit country because of the difference i conditions — so it is more expensivi The drivers in Europe have got t drive. much longer distances and, i spite of the Common Market, the have still got a lot of frontiers to crof and there is a lot of paperwor required, involving hanging about. BC: In Britain ERF has bee showing a 12-15 per cent increase i sales and production over recei years — in 1970 it was a 24 per cei increase in both profits an production; you built 2300 truck Looking at what you know of ti second half of 1971 and the way ti orders are doming in, do you think is going to take a long time to g demand a much back on to that 15 per cent per annum trend line?

PF: To say that we will quickly get back to that rate of growth would be foolhardy. but it's not impossible. Certainly I think the market is not growing at the same rate as it has Dyer the past 10 years. I think the switch from light and medium vehicles to heavies has gone a long way and probably the heavy end is getting rather saturated. At the same :ime we are getting much more zompetition; two manufacturers from Scandinavia have taken quite a slice nf the British market — between :hem, Scania and Volvo have got lbout two per cent of the market over 5 tons, which totals 70,000 vehicles 3er annum. And they have about 10 .o 15 per cent of the top end of the narket.

C: I know that ERF has :onsiderable pride in its sales and listribution network, particularly if ooked at in comparison with other nanufacturers of comparable size. Is ales and distribution a thing about vhich you have made a particularly :onscious effort for a long time, as ving particularly important to the mailer, independent manufacturer? 3F: About 10 years ago our policy m this was determined — we came lawn firmly •on using outside listributors to market our trucks in he UK. We have never had wholly iwned depots. We feel that we are ;ood at making trucks, but we at ;andbach cannot possibly know all he operators throughout Britain as ntimately as our distributors. So we lave established a network of 20 nain distributors throughout the ountry and under the distributors are

■ robably as many dealers — about

40 outlets altogether. We have gone deliberately for local knowledge, people who know the local operator. BC: Have you any non-exclusive distributorships?

PF: Our object is to ask, our distributor to be solely ERF so far as heavy trucks are concerned. We can't expect him not to have other franchises at the lower end. We have one or two who are selling Seddon mediums, but none, I think, with competing heavies.

BC: Although you have been making very good profits, the new Middlewich service and spares venture was obviously a very big step to take as a sizeable investment. Apart from providing a service centre, is the spares supply directed principally at the distributors? I don't think you encourage direct dealing with operators on spares?

PF: We try to encourage our distributors to sell spares to the operator. We don't want to sell spares direct to the operator — if we find we are selling spares to an operator it indicates that he is not getting a good service from his local distributor — unless, of course, the operator is just down the road from our service centre. But obviously if any operator in, say, London was having to come to Cheshire for his spares something would be wrong.

BC: Putting up a facility like this, very modern and with computerized ordering, isn't there a risk that your distributors are going to be more reluctant to carry spares stocks themselves?

PF: The computer system we have put in is basically to maintain adequate stocks. We expect our distributors to carry a reasonable stock, as obviously they can give a more immediate service. We encourage our distributors, on a very favourable discount system, to buy by monthly stock order from us, and they pay for the spares as and when they have them.

BC: People tend to overlook the specialized side of ERE — how are the fire appliances and Snorkels doing? Is this proving the growth market that you expected?

PF: We have only recently gone into the fire appliance business in what I would call a proper way. We have made fire appliance chassis for the past four 'years. and have supplied them to the fire appliance specialist . . we have basically been a sub-contractor. However, now we are changing our policy and have incorporated what was the Jennings body company into ERF, integrating it completely and calling it the ERF Body Division -though still retaining the Jennings name on certain products. We are looking at the fire appliance business very seriously and we are going to produce a rationalized body which will not only fit ERF chassis but other chassis. Of course we would prefer to put fire appliances on ERF chassis but there is also a big demand for other than ERF chassis in this field. partly because of municipal vehicle standardization policies.

BC: Inflation has been a problem for everyone in the past three or four years and particularly in the past 18 months or so. Do you see this as a continuing threat to the British truck business, especially from the point of view of being export competitive?

PF: The last chassis price increase we had was in April 1971. We are anticiinating another increase in April 1972. Obviously, since we buy in the majority of our components we are subject to increases that our suppliers pass on to us, but we have got a very good buying department who are capable of fighting off what we would term unreasonable demands. For some items we have more than one supplier, but inflation is pretty general throughout not only the UK but the world at the moment and our Continental and Scandinavian competitors are having the same problems.

BC: Has the drop in volume in the past year had an effect on pricing? PF: It's not had an effect on prices but on profits. When you reduce your output considerably you can expect your profits to come down.

BC: The Corporation Tax cut has helped a bit in the sense of retaining profits in companies — has this helped significantly towards your capital investment plans?

PF: Any , reduction in tax will obviously help, but the cut in Corporation Tax has only gone a very small way to meeting our capital expenditure programme. But we are basically a design-assembly-marketing operation and do not require a lot of expensive machine tools and equipment. We need office accommodation and buildings and we have increased our office accommodation and production capacity recently, also gaining more space with the move of the service centre to Middlewich. We now have a potential in our present factory of increasing our current capacity by at least 50 per cent — well over 3000 vehicles. With our present operation we could probably produce 4000 vehicles a year if we had the materials and orders. BC: If the new weights and axle spacings bring an increased demand for eight-wheelers, does this bring a problem in getting output volume? PF: We have two tracks in our assembly shop, one mainly producing tractors and the other producing longer multi-wheeler units. The difference in labour content in a tractor and an eight-wheeler is surprisingly small — for example the brake equipment on a tractor is somewhat more sophisticated than on

an eight-wheeler. There is a space problem in building eight-wheelers instead of tractors but you can turn up the wick, as it were, and they go down the track a bit quicker.

BC: Have you yet any ideas of the trends among customers in response to these new regulations; are they looking at 28-30-ton eight wheelers? PF: Certainly, we have orders already for them, but until the regulations are finally approved — which they are not as we talk at this moment — and we have some dates, then we cannot expect a rush of orders. But operators are trying to work out what the changes mean to them— is an eight wheeler a better bet than a tractor unit? But most of the heavy vehicle operators have quite a lot of money tied up in trailer equipment, so any movement is going to be gradual. The two areas where I think the 28-30-ton eight-wheelers are going to come in . are probably bn bulk tankers and tippers, but I wouldn't think that on trunking work there is going to be a very big demand.

BC: Is it possible for you to bank on a few good production "bets" in advance, or are you really having to wait to see which configurations operators are going to make up their minds to buy?

PF: In the past we had plenty of orders and no problem in deciding what we were going to make. Now we have got to decide which way the orders will go, so we are having to be ready for much more rapid switching of the product mix. There will, we feel, be a swing towards 28-30-ton rigids and also 24-ton six-wheelers. Where in the past our output has been about 65 per cent tractor units and the rest a mixture of two-axle long-wheelbase models, six-wheelers, eight-wheelers and specials, we believe now that the product mix is probably going to be 50 per cent tractors, 25 per cent eight-wheelers and perhaps 25 per cent a mixture of what's left.

BC: You are just about getting into production with the A series?

PF: Any manufacturer with a new model always seems to be late in bringing it out, and I'm afraid we are no exception. We anticipated being in full production in January but for various reasons we will not be on full stream until May. The bulk of our tractor units will then be A series. We haven't yet brought the multiwheelers into the series, though we have done prototypes. But obviously, from a rationalization point of view, as soon as possible the whole of the production will be the A series basic design.

BC: You have produced an A series four-wheeler for drawbar use; has that roused any particular interest? PF: Quite a lot of interest and some orders. Operators are a bit reluctant in this country, I think, to go back to the old drawbar trailer days. And, as I said earlier, people have still got a lot of investment in semi-trailers.

BC: Business is now slowly picking up as the revised regulations begin to sink in, but is it still a general complaint that manufacturers are hamstrung by not knowing what tomorrow's regulations are going to be?

PF: The main problem is that, while we do often know 'what regulations are likely to be — we are on SMMT technical committees and there are joint meetings with the Ministry discussing future regulations — we seldom know the introduction dates. This is the real problem. We can meet regulations, but it is a matter of. timing.

BC: Is the Motor Panels cab on the ERF Europe model, which presumably will be standard on your export trucks to the Continent, likely to be offered on the home market as an option to the LV cab?

PF: In the past we haven't offered it on the home market, or only on very rare instance, because there hasn't been a demand for a sleeper cab, and it is much heavier and more expensive. At present we only make it as a sleeper but we are bringing it in as a non-sleeper later in the year. We feel, looking perhaps two or three years ahead, that we may have to reconsider our cab programme in relation to our competitors on the Continent, and bring in a cab which meets the European cab comfort requirements, tilting for easy maintenance and the cab impact test which is going to be brought in. Our cab programme at the moment is under consideration. We shall soon have a much better idea of our future plans regarding cabs.

BC: It seems to us, from our experience, that the problem is not that British cabs are badly laid out or the fittings not of good quality but simply that one is committed to a large engine protrusion in so many of them — the noise is very difficult to suppress however well the engine is insulated. It is the noise level difference which is most noticeable. The Swedes often have almost as much engine protrusion, but perhaps a basically quieter engine:

PF: There. are two main reasons. They are using a turbocharged engine, which is quieter than a normally aspirated engine, and they have a tilt cab which is literally a sealed unit and in which, to get at the engine, you don't have to lift the bonnet sides. The tilt cab, properly designed and manufactured, is one of the best ways of keeping engine and other noise out of the cab.

BC: Do you see an expanding future for ERF in the new European situation — not forgetting your traditional Commonwealth export markets?

PF: I feel there is a real opening for a vehicle of high quality to meet future requirements. I think we are more flexible than many of our bigger competitors. We need to spend more on research and development. OUT policy is to buy most of our components but our suppliers will have to work very closely with us in developing the products to meet the environmental problems — especially on horsepower and noise. It's going to be a combined R and E programme with our suppliers anc between us I think we shall be able tt put enough steam behind the projeci to compete very favourably with the big four.

Because we have joined thi Common Market our exportini programme has changed, but we stil need other markets, from a purel! volume point of view. We are stronl in many of these markets and have Tic reason to pull out of them jus because we are going into Europe, it fact. A lot of them will have clos trading links with the Commoi Market.