In this exclusive AMN Executive Interview, we sit down with Fras-le President and CEO Daniel Randon, and Rodrigo Meirelles, who joined the company in June as Fras-le's first vice president and general manager for its North American, European and Asian operations. The two executives share with aftermarketNews updates on the significant growth the business has experienced in North America this past year.
Last January, Fras-le announced an $11 million investment at its Prattville, Ala., which is adding 100 jobs and marked the beginning of heavy-duty brake lining production for the company in the U.S. In addition, Fras-le purchased a new, $1.5 million brake NVH dynamometer from Link Engineering Co. in July. And, this past November at AAPEX, the company introduced its new Work Truck and Fleet disc brake pad program, wrapping up a significant year for the business in North America.
Rodrigo, you are relatively new to Fras-le. Tell us about your background and why you accepted the role as vice president and general manager of Fras-le’s North American, European and Asian operations?
RM: Things are going very well. Fras-le is a great company to work for and is exceeding the expectations I had when I started. I came to Fras-le with 17 years of experience with Eaton Corp., where I held positions in Brazil, The Netherlands, the United States and Italy. It was a good company to work for, and I had a good career there. I had the opportunity to work in a very diverse and global environment with a lot of exposure to the international business scenario. I spent a lot of time in China, India any place they make trucks but I got the offer to come to Fras-le and it was a very attractive offer in terms of the responsibilities I could have, and the job I could do to develop new capabilities. At Eaton, I was seen as an expert in the commercial vehicle market, in transmission technology and its application in the marketplace. However, I really wanted to develop more of the general manager type of capabilities in my career. So, that's why the offer Fras-le was really enticing.
Earlier this year Fras-le announced a major new initiative into the work truck and fleet market. Why are you bringing this opportunity to the market at this time?
RM: I think it's important to mention that Fras-le has a very broad portfolio of friction materials. We have a large presence in North America, especially on the heavy-duty side, through the partnership/supplier agreement we have with Meritor. That allows us to know the commercial vehicle market very well, both globally and in North America. We decided to focus on bringing to market a comprehensive line of pads for Class 1c-8 trucks. We have product that is proven in the industry to be extremely capable and we wanted to distribute it in North America. The Work Truck and Fleet disc brake pad program allows us to do that. For the core of the program medium-duty trucks - we are the OE friction provider on about 50 percent of those trucks in the United States and it's all made at our factory in Alabama. That provides a very good foundation for us to bring the product that we have engineered, manufactured and proven, to meet the aftermarket’s needs.
What are you thoughts on the trucking industry today? Does it seem to be rebounding from your perspective?
RM: If you look throughout the industry, I think there is a high uncertainty in the marketplace today. 2012 started off rather aggressively but later in the year there were some uncertainties about the economy even about the U.S. economy, but particularly about the global economy. We are finishing the year in good but not great shape.
Is it rebounding completely? No. Is it terrible? No, it is not, but surely it could be better. The initial forecast for Class 8 was 280,000-300,000 units. We may end the year at 285 - the low end of the initial forecast.
The medium-duty market appears to continue to be resilient and the market forecasts indicate slight growth in 2013 vs. 2012. However, due to multiple uncertainties in the global economic environment, we need to be careful. We remain cautiously optimistic about a positive medium-duty market for 2013.
In terms of how it relates to our program, we feel that this medium-duty market is under-served, and we see this program as an opportunity for both light and heavy-duty parts distributors, traditional WDs and retailers to increase their sales in the medium-duty segment where we are seeing slight growth.
Daniel, Fras-le has made a number of investments in the North American market, both in Detroit and at your manufacturing plant in Alabama. Tell us more about these investments and why they are important to Fras-le and the Randon Companies?
DR: We invested approximately $14 million into our manufacturing facility in Alabama, which was used to increase our R&D capacity with a new dynamometer, and to begin producing heavy-duty brake linings in January of 2013. We also invested in increasing our capacity for our off-highway products, and moving their manufacturing to the United States. In 2011, we invested in a new sales and engineering office located in Northville, Mich.
These investments demonstrate Fras-le's commitment to the North American market and the company's continued efforts to be a global company. The North American market is a very important market for Fras-le.
Detroit is sort of the birthplace of the transportation industry in the U.S., however Alabama and Tennessee are starting to make names for themselves as strongholds in the auto industry as well. What was the appeal in investing in Alabama?
DR: We bought the manufacturing facility from a competitor, in Alabama, in 2008. It is very well-located and also the labor market there is very good, which helps us to be more efficient. Also, state and local partners gave us some incentives to continue to invest in Alabama.
What are the key challenges to being a leader in such a competitive category as friction and how is Fras-le addressing these challenges?
DR: Fras-le, as a company, is 58 years old. It's a company that has always invested a lot of money in development of new products and friction formulations. We're always trying to be first-to-market with new applications. It's very important, if you want to be a leader, to always be developing new products.
In terms of product innovation, as I said, we just invested in a new dyno in the United States, but also in Brazil we have our own proving ground. It is 10 miles long with 18 different tracks. At this proving ground we are able to test our products. In addition to the proving ground, we have a lab in Brazil where we have 10 dynos and other equipment. The total investment was approximately $20 million. At Fras-le, we keep investing approximately 3 to 4 percent of our net revenue in R&D.
Global synergy is also important for Fras-le. Not only in the U.S. and Brazil, but we also have another manufacturing facility in Asia so we can support our customers globally.
If I were to sum up our top challenges as a leader in the friction category, they would be:
1. developing new, innovative products
2. being first to market
3. providing a unique product offering
4. maintaining global synergy
Let's talk about motorsports, which as we all know is incredibly popular here in the U.S. with NASCAR and NHRA. Can you tell us about Fras-le's involvement with the Formula Truck series in Brazil?
DR: Fras-le has been a sponsor of the Formula Truck series in Brazil for 10 years. It's a race of Class 8 trucks, and it's a very important race in Brazil and Argentina. Each racing event is three days long: warm-ups, qualifications and race day. We provide friction material for the trucks that lasts for all three days of the race, whereas in the past, the trucks had to change their brake pads every day. This is important to note, because we bring that same level of quality and innovation to our products in the North American market.