Chapter 3: Going for Growth
At the beginning of the 1980s, DENSO’s European operations lagged behind other regions within the wider group. There were a number of factors that contributed to this situation, including the difficulty of gaining a foothold due to the market structure of small and medium-sized OEMs in each country, as well as the restrictions imposed by the licensing agreement with Robert Bosch GmbH, a technology partner. However, when the contract expired in the late 1980s, DENSO decided to aggressively expand its business and become a key player in the European market. With lower production volumes compared to other regions, it was difficult to secure business feasibility through independent production. Thus, for the first time, DENSO Europe started considering a basic policy of collaborations and alliances with other companies in the same industry.
While exploring potential partners for each product, DENSO decided to collaborate with French company Valeo in the ignition coil business, resulting in a 50-50 joint venture. DENSO Barcelona (DNBA) was established on the outskirts of Barcelona, Spain, and became DENSO's first manufacturing facility in Europe. However, it was not all smooth sailing. After the DNBA office building had been completed and just as the production line was being installed, Valeo decided to withdraw from the ignition coil business and offered to dissolve the joint venture agreement. While continuing to prepare for ignition coil production to fulfill its commitment to customers, DENSO decided to install a production line for electronic products, thereby taking the first step on its journey as a multi-business production center. This is the cornerstone of DNBA’s exceptional monozukuri capabilities.
Another industrial collaboration and alliance that yielded significant results was the one with Italian company Magneti Marelli (MM) in the thermal business. After a year of thorough discussions and negotiations, DENSO and MM arrived at a common vision and signed a collaboration agreement aimed at becoming Europe's number one supplier of thermal components. Under the agreement, DENSO took a 25% stake in MMCL, acquired DENSO Marston (DNMN) in Shipley, United Kingdom, and established Nippondenso Manufacturing, now known as DENSO Manufacturing UK (DMUK), in Telford, also in the United Kingdom.
This partnership grew stronger over time, expanding from the design of key components to cooperation in production. Toward the end of the 10-year collaboration agreement with MM, the two companies held exhaustive discussions that led to DENSO’s acquisition of MMCL and the establishment of DENSO Thermal Systems (DNTS) in 2001.
From 2000, sales across DENSO’s European thermal business continued to expand to serve existing and new European customers. Accordingly, the company established production bases in the Czech Republic, Turkey, Spain, Poland, Portugal, and Morocco, contributing significantly to sales growth in Europe.
Another major factor that supported DENSO Europe's growth in the early stages was the establishment of sales and technical bases near customers in each country, which was done to better understand customer needs in order to continue providing proposals that would exceed customer expectations. Following the opening of an office in Germany in 1984, customer-oriented offices were established in the UK (1984), France (1985), Italy (1986), Sweden (1998), and Belgium (2000). The same period saw the establishment of a number of technical and engineering facilities, including: an engineering center in Coventry, UK (1993), as a base for advancing technological development as a partner to our customers, primarily for EMS testing and local technical support; an engineering center in Eching near Munich, Germany (2003), equipped with climatic chambers, acoustic chambers for components and vehicles, component test benches and a state of the art wind-tunnel, which are essential for the development of thermal products; and an engineering center in Aachen, Germany (2005), as a design and testing base for diesel engine-related products. These now play an important role in further enhancing DENSO's technical capabilities.
In addition to DNBA’s electronic products and the Thermal Group’s heat-related products, the powertrain business and rotary machinery business also contributed to the expansion of DENSO’s European business through its diesel products, alternators, and starters.
With regard to rotary machinery products, DENSO’s considerations centered on the acquisition of MM, with whom DENSO had achieved success through collaboration in the thermal business. In 1999, DENSO acquired the MM manufacturing plant in San Salvo, Italy, and established DENSO Manufacturing Italy (DMIT). This plant had the advantage of expertise in rotary machinery production and was expected to become a production base for electrification-related products in the future.
Following extensive analysis, DENSO decided to establish a production facility in Hungary (1997) to supply diesel injection components to the European market. This brought about a drastic improvement in quality, which transformed DENSO’s fortunes within the burgeoning Central European market, laying the foundations for long-term future success. Above all, this example illustrates the value of moving into new geographies and how DENSO values of quality, collaboration and commitment to long-term results yield great outcomes. The construction of the new plant in Hungary within a timeframe of one year, the fastest project of its kind in DENSO’s history, was symbolic of its success. Despite some initial challenges, there was a widespread commitment to continuous improvement, a journey that was accelerated by collaboration within the team in Hungary, but also with colleagues throughout DENSO and even with external political stakeholders, whose support was key in the initial stages of the venture.
Seeking new opportunities to accelerate growth in Europe, DENSO also focused on the aftermarket segment, with a focus on a newer and broader customer base, specifically in supplies. Customers included distributors, wholesalers, garages, and OE car dealers. In the industrial solutions segment, DENSO expanded into Fleets, Life & Energy, and Industrial Robots – three key markets that have grown significantly. To further expand commercial operations in Europe, DENSO also acquired CTR, a commercial product supplier with operations in Italy, France and Spain.