Clear vision
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York Group boss Jim Davies has a knack for picking the right company at the right time, for the right price. Not content with attacking the European market, he turns to the US.
• "If the market shrinks and you have no "potential" to grow into, you'll suffer in direct proportion to any shrinkage. So our quest for growth is to protect the business we have."
When York Group boss Jim Davies started talking about the need for the UK trailer maker to break its heavy reliance on the British market back in February 1989 he may have had a clearer vision of today's market than most.
His aggressive European plan of attack looked somewhat optimistic, coming no more than six months after the management buyout of the group from Bunzl.
But the cracking pace set by the company for Continental growth — which has included the acquisition of Italian trailer maker Piacenza in 1988 and French builder Titan last year — has undoubtedly buffered York from one of the worst collapses in the UK trailer market since the slump of the early eighties.
"The UK trailer market is currently bumping along at around 6,000 units a year; down from 13,000," says Davies. "Critical replacement programmes are being stood off while people make more expeditious short-term arrangements, but we've managed to balance the decline here at home with the growth in our European business. We're employing more people now than we were six months ago as a group,"
While UK operators are carrying the burden of higher interest rates than their French counterparts, and the market on the other side of the Channel is still a good one. "In the UK and Benelux we're constrained by what we can sell . . in France and Italy, we're constrained by what we can make," says Davies.
Harmonised York has harmonised its main group product range. A platform trailer built by Titan at Le Creusot is virtually identical to one built by York at Northallerton, give or take individual national requirements in terms of lights and sideguards, and this ability to shift product back and forth between markets is paying off.
"We've programmed 500 Titans to be built at Northallerton this year — they'll be
badged and sold as Titans and delivered to the French point of sale," says Davies. "We spent a lot of money buying the Titan identity and we don't want to see it squandered."
His desire to protect the company's domestic market share through Continental growth is based on a realistic attitude to sales potential. "We've got a 30% share of the UK and less than 5% in France. We've got plenty of room to grow in the French new trailer market, which could run to 22,000 units this year."
According to Davies Titan's modest sales base places it in a better position to win business than the likes of French market leader Fruehauf, which has a much broader base to defend. York intends to spend heavily on the 16,0001W Titan plant, particularly in insulated trailers: "We're going to make a substantial investment in Le Creusot in terms of Thermostar to reduce our costs. Reefer building at York's Harelaw, County Durham plant will, however, be maintained in parallel. We'll still keep Harelaw for fridges," Davies adds. "If we didn't lose our degree of specialisation." York's recent success with the Thermostar is such that Davies now claims to be selling as many reefer trailers as Gray and Adams.
Agreements
Davies expects further growth in Europe through Spain and Italy as 1992 approaches, but recently the company has been looking beyond the EC to Eastern Europe as trade barriers come down.
It has already signed agreements with Poland and the USSR.
The Polish deal will involve Piacenza in a new licensing agreement with a transfer of technology, enabling a Polish trailer maker to set up shop.
Piacenza will then supply axles and suspensions for the Polish-built trailers and collect a royalty for each trailer sold. York's Italian group member is no stranger to Poland; it already sends 30% of its production there.
The Russian project is more ambitious, involving a joint venture to build insulated trailers at Tiraspol in Moldavia. York will provide management and technology know-how to set up a reefer production line which would also be supplied with running-gear components in the initial stages.
The first stage of the plan would be for 5,000 trailers a year, rising to 15,000 a year. Not only would the trailers be used by the Soviets, but York would also buy back a percentage of them for sale in Western markets in addition to collecting royalty fees.
The process of dealing with the USSR is likely to be a fairly lengthy one, although a Letter of Intent to proceed with the joint venture has already been signed. A feasibility study is due to be completed by the end of the year with manufacturing planned to start in 1992.
The rapid development of York outside of its traditional UK market will clearly make it a more attractive package in the run up to the company flotation which was originally intended to be "no later than March 1991". Because of the state of the economy, Davies has revised the target date: "Realistically I wouldn't expect it before November '91 . . . its more likely some time in 1992".
Davies is fully aware that the success of the flotation will hinge on future plans rather than existing triumphs: "We bought the company out for £60m in 1988. We've got to float for something that represents a quantum gain, and that needs to be driven by projections on the future. No investor is going to help you just to stand still."
The next phase of York's expansion plan is certainly ambitious. Bolstered by cash generated by a good flotation, York is planning to go shopping for an American trailer maker: "A successful flotation will take us to North America where we can set up the economies of scale, particularly on our components business. That would be financially very exciting," says Davies.
An attack on the US components market would see York up against the likes of Fruehauf, Dana and Rockwell. Exactly which US maker has been targeted by York is not known but given Davies' knack in picking up the right companies at the right time, for the right price, York's transatlantic foray may well pay dividends.
0 by Brian Weatherley