Traverse City, Mich. — For French automotive supplier Faurecia SA, navigating an evolving industry means planning ahead while maintaining enough flexibility to make a sharp turn in the other direction. It's about safely maneuvering around new challenges — some of which you're prepared for and others that shake up your business model.
But Faurecia isn't driving down this road alone. It is picking up passengers along the way that give the global firm a competitive edge.
A major part of Faurecia's strategy includes forming synergetic relationships with startups and scooping up companies, big and small, through acquisition.
Last year, Faurecia acquired French supplier Parrot Automotive, now Parrot Faurecia Automotive SAS, to accelerate the development of vehicle infotainment products. The company is part of Faurecia's Clarion Electronics unit, which was launched in April to focus on cockpit electronics and low-speed advanced driver assistance systems (ADAS).
The electronics division was formed as the result of another acquisition by Faurecia: Clarion Co. Ltd., a Japanese manufacturer of car audio, navigation systems and other products. Both acquisitions were driven by Faurecia's "Cockpit of the Future" strategy, which leverages advanced technology and electronics to create customized, predictive and connected experiences inside a vehicle.
More recently, in July, Faurecia announced a collaboration with tech company Microsoft Corp. to develop connected and personalized technologies using Microsoft's expertise in artificial intelligence, edge-computing and cloud-based services.
These strategies are evidence of a shifting supply chain in automotive, too, as more manufacturers — automakers included — tap into the high-tech realm where plenty of startups are waiting for investors.
But it's "easy to fall in love with the tech," said Todd Fletemier, Faurecia's vice president of Midwest technology platform. Companies have to make sure the technology is viable, with a strong leadership team in place.
"Each of those megatrends, if you will, impacts our business in a different way," he said. "It's making sure that we understand how they're going to impact it to allow us to maintain the core business."
Plastics News met up with Fletemier at the 2019 CAR Management Briefing Seminars, held Aug. 6-8, to talk about Faurecia's startup strategy and big-picture outlook as an automotive supplier.
Q: The automotive industry is changing. There's no question about that. As a big, global automotive supplier, what are some of Faurecia's top priorities here?
Fletemier: What we're focusing on is understanding how these changes are going to affect our business, maybe not in three to five years, but within that five- to 15-year window. As these evolve, in the automotive cycle, things are pretty well set for what's going to happen in the next five years, but as the mobility as a service, for example, as that changes and evolves, how will that impact our business? Will it open up new customers? Will our customers want different products? We're trying to understand some of those long-term trends to position the business in the right away.
Q: Do you have "penciled-in" answers to those questions right now, where you can adjust them and react accordingly?
Fletemier: Yeah, for some of them, but a lot of it is still early enough that we have ideas, but one of the things that we're trying to do is to validate them. From a business model perspective, one of the things I spoke about yesterday was a path to commercialization. It's one thing to say we're solving a problem. Is it a big enough problem that there can be some level of a business there? And then, what does that look like? And then, like you said, keeping flexible because as things are changing so much, so fast, you've got to be able to pivot, whether you're a $20 billion company or a $2 billion company.
Q: You're responsible for the advanced development and scouting of new technologies, strategy and innovation development. What are you seeing in the technology startup ecosystem? And what does Faurecia look for in a partner?
Fletemier: We divide our ecosystem into three pieces. We have our corporate partners like Microsoft, Hella and ZF. We have our acquisitions, those companies, like the recent acquisition of Clarion on the large scale and Parrot on the smaller scale, and then the startup pieces.
First, it's where in the ecosystem do they fit? You can put the university partners in there as well — where do they fit in there? But the startups are obviously very key. I could spend all of my time just going through startups. But what we've done is said, first, can I have a vision — for me and my team members, whoever is looking at it? Is there some relevance to one of these problems we're trying to solve or one of those strategic pillars? If the answer is yes, then we have that exploratory conversation. And you have to be very careful. It's easy to fall in love with the tech. You can go to any one of these startups — and yeah, that's really cool — but is it really viable, and is the leadership team the right people to take that through to the end? And that's what we're finding to be really key because there's a lot of great idea people. There's a lot of great business people. How do you put them together to make sure they have the leadership to see it through?
Q: How do you determine whether a startup or a specific technology is worth investing in? There's a lot of risk there, right?
Fletemier: There's always risk. Ninety percent of startups fail. Anybody, any venture capitalist out there, will report that number pretty hard. Our objective is to beat that number. So, make sure we're making those right investments, but then it's being that engaged partner in their success. Don't just throw money and hope because that's not going to work. Where can we help that startup be successful where they wouldn't be without us? What can we accomplish with that startup that we couldn't accomplish otherwise? Once we have that symbiotic relationship, now you have a pretty good shot at beating 90 percent.
Q: Automakers are also forming partnerships and investing in startups. How is this shifting the supply chain?
Fletemier: We call it mobility as a service. So, inside mobility as a service, there's a number of different subsets, but we're studying very closely and watching this because we believe, one, that that's going to change what the automakers want. If we use the analogy of the automakers selling base model vehicles into a rental fleet, will they have a level of vehicle that they sell into a mobility-as-a-service fleet and what will that content be for that different use case?
We're trying to build with the Cockpit of the Future project — that's one element of it — to scope those products for that market. And then we start to break it down even further with things like nonemergency medical transport. The problem is there are 3 million missed [medical] appointments annually at the cost of $1.2 billion, and it's just the U.S. now. And so as the population ages, it's going to get to be an even bigger number, so what can we do inside of mobility as a service, again, with unique products to solve that? And then, what's the business model to make money at it? Those are the types of things that we're trying to solve.
Q: What are the big trends or the big topics that you're hearing this year at the CAR Management Briefing Seminars?
Fletemier: We're hearing a little bit more focus on aging, which was good. I heard [Center for Automotive Research President and CEO] Carla Bailo call it "the silver wave," and every day 10,000 seniors turn age 65. By 2050, 27 percent of the population in the developed world will be over age 65. How do we get mobility? Because we age — we can't stop that — that's not going to change. So, the reasons why people stopped driving are still there. As we get this large population of elderly, what are their unique needs that we can position ourselves for?
It's good to hear people start to talk about that, and we want to build more of that conversation because we think it's a really, really critical thing. And we talked about CASE (Connected, Autonomous, Shared, Electric), there's demographics, and that is going to impact it. With all respect, we talk "millennial, millennial, millennial," and there's that other segment of aging people with huge buying power that we need to focus on.