'The German way' finds a happy home in Australia
April 2012
Why Fuchs Lubricants, one of the world’s leading niche manufacturers, is upgrading its infrastructure in Australia
Most people would never describe grease as “high performance”. But it is a sophisticated, technologically-advanced and vital substance that helps to make the world go around – literally. Without grease, oil and other lubricants, the global economy would grind to a halt. Ask any engineer.
In this seemingly unglamorous business Fuchs Lubricants is the world’s largest independent manufacturer and supplier. It produces oils for engines, gears, sprockets and chains; lubricants for compressors, motors and pumps; and hydraulic fluids for all types of critical equipment.
The company has generated solid growth in Australia over the last 10 years. It has about 10 per cent market share and the Australian operation is the fourth largest in the Fuchs group, making it strategically important for future growth.
Fuchs continues to show faith in Australia, and Australian manufacturing, with two recent multi-million dollar investments in Melbourne – a new grease plant in 2010 to expand capabilities, and a new world-class regional lubricant laboratory and technical centre opened in April 2011.
Due to recent growth and expansion plans, Fuchs has just announced another $A5.5m investment program to build a new warehouse and increase the manufacturing capacity of its Melbourne plant in 2012/2013.
The Mittelstand approach
Founded as a German family company in 1931, Fuchs Lubricants is a fine example of German Mittelstand specialisation – long-term oriented, highly-engineered and innovative mid-sized firms that have become dominant global players in crucial niches focused on B2B products and services. Mittelstand firms represent over 80 per cent of German companies. Many are family owned, and have secured international success by investing heavily in R&D and delivering high quality and highly specialised products and services.
With about 3,700 employees in 50 countries, Fuchs manufactures about 10,000 products for more than 100,000 customers around the world in aerospace, agriculture, automotive, engineering, manufacturing, mining, marine, pharmaceuticals, and transport. In 2011, sales revenues were €1.7 billion.
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| Image courtesy of Fuchs Lubricants |
While there is strong competition in lubricants, Fuchs operates only in this field and sells mainly to business. This differentiates Fuchs from its major competitors, who are energy goliaths where lubricants is only a small part of their business.
Almost 10 per cent of Fuchs’ staff – more than 300 chemists, engineers and other experts – work in R&D around the globe to ensure technical leadership in many critical products.
The wholly-owned Australian subsidiary, Fuchs Lubricants Australasia, has 12 distribution sites throughout Australia and New Zealand. Over 95 per cent of the company’s products are manufactured locally at premises in Melbourne and Newcastle, all with ISO9001 certification, R&D and quality control capabilities.
Over the last 12 months Fuchs’ Australasian operations have grown by 20 per cent. The increase has been especially strong in mining, construction and agriculture, where Fuchs prepares tailor-made blends of lubricants and greases for specialised equipment.
Australia’s business environment contributes to Fuchs’ success
Fuchs Petrolub AG of Mannheim, Germany, has been investing in Australia since 1980. The original move was part of Fuch’s global expansion. Today, Australia is one of the top 15 lubricant markets in the world, so Fuchs views Australia as a great opportunity.
“Australia has a stable government, a strong economy, a skilled workforce, and excellent research capability,” says Wayne Hoiles, Managing Director, Fuchs Lubricants Australasia.
“Local infrastructure, such as the banking system, regulatory environment and telecommunications, makes it easy to do business here. People are talented and hardworking. These are all good reasons to invest in Australia.
“Australia is also a sophisticated market for lubricants, with some high technology requirements. If you have a specialised business like ours and the market is a reasonable size, then you can invest, generate good returns, and grow your business. This is why Australia has been so rewarding for Fuchs over the long term.”
Why Fuchs is succeeding in Australia
Hoiles says Fuchs has a laser focus on lubrication – and nothing else.
“Throughout the world, from our chairman Stefan Fuchs down to our production workers, all we do is lubrication,” Hoiles says.
“We have the most comprehensive range in the world and we offer a total solution to customers. By that I mean a combination of product, service, application knowledge, logistics, and technical support. This is how we are unique.”
Fuchs has six operating divisions in Australia – three in the mining sector and three to cover automotive, manufacturing, steel making, agriculture, transport, and light engineering.
“We are strong in mining, but only in certain parts where we have the technical knowledge and capability to lead,” says Hoiles.
“We are investing in this area to provide better products and services so we can increase our market in Australia.”
Confidence in Australia attracts Fuchs’ investment
Hoiles says Fuchs Lubricants Australasia has grown 300 per cent in the last 10 years with sales now exceeding A$160 million.
Using Australia’s position as a leading lubricant industry development hub for the Asia Pacific, the new A$2.5 million lab and technical centre in Melbourne means more R&D for Fuchs Australasia and new national standards for lubricants development in Australia.
“Fuchs manufactures in Australia so we can develop and customise products for the local market,” says Hoiles. “The new lab will ensure we continue to create new products and provide an increased level of technical support to our customers.
“Our Australasian business is important to the Fuchs Group because the new lab is part of our global program to invest in the future. It will provide technical support to other Fuchs’ companies in the Asia Pacific region, and form part of our global R&D and technical support programs.
“German companies take a longer term view of business. They think way beyond the next quarter and invest only where they see the capability to help build the local industry for sustainable returns.
“Combine this perspective with our plans to leverage our global knowledge for local and regional innovation and you can understand why we have such confidence in Australia, and in Australian manufacturing.”
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