We are one of the few complete braking system suppliers in the world. As far as discs are concerned, we have mainly local competitors. Nobody operates worldwide as we do. In calipers, we face all global players. They are a very important resource for us because they do not let us rest on our laurels while they are at our customers’ doors. Some of these competitors, such as Continental and TRW, do not only offer brakes. Sometimes they target our customers as a marketing prize, and they are ready to offer brakes at very low prices to gain access to other kinds of business. We then have to show the customer we really offer something different.
Brembo is a hyperspecialized company often fighting, as you said, against multidivisional giants. Do you feel at a disadvantage?
We have to grow. Globally, we are small. We would have to double our sales to 5 billion euros per year.
We have a structured three-year plan that projects results up to five years. Beyond five years, we have guidelines. But it’s difficult to get into too much detail, not least because our customers have a hard time forecasting their business over that time frame.
Europe still accounts for more than half of your revenue. Is it too much?
That is because most premium carmakers we supply are in Europe. There is no need to rebalance. If we look at the end markets for the cars we supply, sales are quite evenly split between America, Europe and Asia.
How much does your biggest customer account for?
We have a policy not to let any customer generate more than 10 percent of our revenue. We have a number of customers around that percentage, but nobody at 40 percent. That is key to keeping our independence and to avoid being tied to big car platforms. If you lose one of those big platforms, you risk a big drop in revenue. We are ready to leave something on the table to have fewer long-term worries and to be able to be more aggressive toward customers, if necessary.
Would it make sense for Brembo to diversify its product portfolio?
We bought [seat belt maker) Sabelt 10 years ago, but the [global financial] crisis canceled most of the growth possibilities, so we decided to focus on our core business. [Brembo sold Sabelt in 2015.] We also evaluated the aerospace world, but, given the kind of technological breakthroughs that are possible now, we must stay focused to avoid the risk of missing opportunities in our core business.
One of the biggest disruptors to the industry will be the electrification of the car. How will Brembo handle this difficult transition?
The brake is a key element of the passengers’ comfort. If the car is electrified, it will need an electric brake instead of the current hydraulic one. We will have to understand which cars will be electrified and up to which point the cars will be electrified. Generally speaking, cars will be heavier and need better-performing brakes. Imagine stopping in an emergency in a 3-ton SUV.
Is the current trend toward SUVs a boon for Brembo because bigger vehicles require bigger discs?
The heavier the car, the better for us, for two reasons: First, as you said, a heavier vehicle needs a stronger and more advanced brake. Second, carmakers look to ways to reduce weight, and we can help them do this.
The Jaguar I-Pace has a one-pedal braking system that during normal conditions slows the car by activating an electric motor as soon as the accelerator pedal is released. But in an emergency, the brake pedal activates the four disc brakes. Does that mean we will still need four disc brakes?
Of course. And mildly electrified cars [with 48-volt systems] do not have enough braking power to stop the car in an emergency.
How is Brembo working on regenerative braking?
We already produce some parts, and we are developing an integrated system. The end solution will be a box [a sort of central processing unit] with integrated brake management.
Are there any vehicles on the road with such systems made by Brembo?
Not in production yet. We are talking about brake-by-wire to various customers. When you touch a product that affects safety, you have to be careful. Nobody wants to make mistakes, but once someone starts, all others will follow.
What are the main advantages?
Less fuel consumption because you don’t have a hydraulic circuit that needs to maintain pressure and there is no exhaust oil to get rid of.
Will the search for integrated solutions have you move down into the mass market?
No. We are not cost leaders, so we have to be price leaders. The lower part of the market would not pay for our kind of engineering content.
Because Brembo serves the premium market, does this mean in China you are limited to boosting business with European automakers’ local joint ventures?
That’s our current position. But we did, however, open an r&d center dedicated to China to be closer to Chinese customers whose cars are aesthetically pleasing but still lack technological content. The more you help them develop future products for export to Europe and the U.S., the easier it will be to supply those vehicles.
What is your business forecast for 2019 in Europe, the U.S. and China?
I expect we will be able to grow our global business in 2019 despite an overall flat car market. I foresee a slight decrease in the U.S., a slight improvement in Asia, which will be significant in absolute volume terms, and a flat Europe. Our premium positioning makes us less sensitive to volume contractions. Therefore, we stay in positive territory in the U.S., where we benefit from the technological upgrading of some sports cars from cast-iron brakes to aluminum or ceramic ones. We follow the growth of the Asian market, and in Europe we operate in the very high range, so there is nothing to worry about.
Brembo had a record 360.7 million euros ($413 million) in investments in 2017. Will it continue at this level?
We had a high investment cycle, as we are opening three plants in Poland, Mexico and China. I expect 2018 to have a lower level and a slight decrease in the coming years.
Do you have any joint ventures that help reduce the costs of r&d?
So far we keep everything in-house. You have to know how everything works before you can delegate some parts of the work.
How would a tariff war effect your business?
On paper it shouldn’t be a problem, as we keep production and sales geographically aligned, even for brake calipers. In the real world, our customers will be affected; so we will, too. If the U.S. imposes a 25 percent tariff on a Porsche made in Germany, which we supply, the eventual drop in sales volume will affect us.
Brembo supplies BMW’s U.S. plant. Let’s suppose BMW moves half of its production to Europe to avoid European tariffs on U.S.-made products. How do you replace the lost business in the U.S.?
Our U.S. salespeople will have to wake up every morning with an idea about finding new customers. Actually, we could manage these kinds of figures with our plant flexibility; bigger numbers would be a problem.
Have you been hit by steel tariffs?
So far, so good – touch wood. We haven’t because we produce in the U.S. [and buy steel there].
How about your carbo-ceramic brakes business? How many do you produce per year?
Business is going well, within an important phase of tech development. We are close to opening the new carbon factory in Curno, [Italy, which is close to Brembo’s headquarters in Stezzano]. Customers who buy cars with carbo-ceramic brakes as an option choose that option more often. Porsche, for example, has it as a standard only on the very high end of its range, but customers ask for it when it’s an option.
Did you solve the industrialization problems to also offer carbon pads with carbon discs?
We now have carbon pads, which are needed only for extreme uses – basically on the racetrack and only for true racecar drivers. Besides, they are still extremely expensive.
What is the ratio between the cost of a carbo-ceramic disc and a steel one?
The industrial cost is about 1,000 euros versus 150 euros for a traditional one. The manufacturing process is still very complex and expensive, and the volumes are very low: 250,000 discs per year versus millions of traditional discs.
In your world, you own all the relevant intellectual property, the products and the tooling. Can any of your customers get the rights to a specific design?
A brake caliper is not like a tire; it is specific to a car. I cannot take a caliper made for a Mercedes and put it on a BMW or vice versa; it is physically impossible. Each caliper is tailor-made, and we always have here at least 70 cars to test for development of the brakes, together with the customer. That is true for discs, too. Our aftermarket department has several thousand product codes and each year has to develop all the ones for newly launched cars.
In the past, Brembo used to supply complete suspension modules to Porsche. Is it still the case?