German premium car parts manufacturer Dräxlmaier is ramping up production across Southeast Europe after issuing its debut €40mn hybrid bond to finance expansion in the region last year. This includes expanding at three locations in Romania, which has become an important country for the global producer, as well as investing in Moldova and Serbia.
In a corner of one of Dräxlmaier’s huge production cubes in Codlea, near the city of Brasov in central Romania, a team of workers are closely examining animal skins for minute imperfections. The skins, in a plethora of colours from pale cream to midnight blue, will be used to cover inner doors and dashboards for automakers such as Maserati and BMW.
Selection of materials is the first step taken by Dräxlmaier to ensure it meets the quality standards of its buyers, over 100 mainly premium carmakers. Much of the work at its plants is done by hand - another difference between supplying mass market and premium automakers.
According to Daniel Heymann, manager of the Codlea plant, 70%-80% of the product is handcrafted. “The most important thing is training by experienced trainers for products that are handcrafted. We train the trainer first, then we can multiply,” he tells bne IntelliNews.
The process is also highly automated. Heymann produces the left back door of a Maserati Quattroporte to demonstrate that there are no less than 1,200 variations for how the door can look, since buyers can make choices on factors from the colour of the leather to the type of stitching. Computer generated labels are issued for each stage of the process, to ensure the right option is selected for every part. This is another way of ensuring the same standards are adhered to across Draxlmeier’s global operations, which span 60 countries worldwide.
Around €50mn was invested into the greenfield Codlea plant. “Brasov is a very important plant for Dräxlmaier Group in terms of interiors,” explains Heymann. The plant currently has two huge production cubes in operation and a third is now under construction. The new building is due to be completed and put into operation by the end of this year. “Brasov is a very important plant for Dräxlmaier in terms of interiors. Customers like Dräxlmaier Brasov so much we have to keep expanding because of requests from them,” he adds.
Brasov is one of five locations in Romania where Dräxlmaier has operations, alongside Hunedoara, Pitesti, Satu Mare and Timisoara. It was one of the early investors in the country after the fall of communism, opening its first plant in Pitesti in 1993. Today, around 15,000 of its 55,000 employees are in Romania, making it one of the country’s largest employers.
Dräxlmaier is one of the largest of a number of international auto-components manufacturers attracted to Romania by the low costs and skilled workforce. Some supply the two domestic carmakers, Renault Dacia and Ford Craiova, while others - like Dräxlmaier - make products for export.
Transport infrastructure is an issue for many exporters in Romania, but Heymann says the plant’s location in central (rather than southern) Romania means it has decent road connections to the western border. Indeed, there are numerous big box plants scattered across the plain between Codlea and Brasov, where other manufacturers have also decided to set up production.
Another reason the region was attractive to Dräxlmaier is that it is in Transylvania, the part of Romania that was populated by Saxons back in the middle ages, and still has many German speakers. Proximity to Brasov university is another factor, since like most big employers in Romania one of Dräxlmaier’s main challenges is attracting and keeping good people.
“The advantages are clear. From my point of view there are a lot of really good people who are involved, they want to work. There are specialists from the university and good production people,” Heymann says. “The history is also important - you have the German connection.”
To ensure it continues to attract good people, Dräxlmaier (like other major employers) has reached out to universities and even schools. “Since 2012 we have been trying to build some specialists - we need electricians and mechanics,” he explains. In addition, the company has designed a masters programme linked to its needs and its “university caravan” presents Dräxlmaier at universities across the country.
Aside from its expansion in Codlea, the company is also ramping up its operations at two other locations in Romania. A new production hall - the third in two years - has been rented in Pitesti, while in Hunedoara the production area for electrical and electronic components is being expanded.
This follows the issue of the hybrid bond in 2016, which was subscribed to by the European Bank for Reconstruction and Development (EBRD). The bank said at the time that it would be used to build up production capacity in Macedonia, Romania, Serbia and Tunisia and to build a new plant in Romania.
“The international automotive industry is enjoying a period of steady growth. As one of the top suppliers in the premium segment, Draxlmaier Group will benefit from this and continues to expand its presence in Southeast Europe and other regions,” company spokeswoman Teodora Trandafir tells bne IntelliNews. “The orders we have already secured from our customers ensure current activity and are also the basis for future growth.”
As of early 2017, the company had started expanding its plant in Moldova, and taken on new people in Serbia. A small increase in numbers at its Serbian operations is expected towards the end of this year.