Acquisition brings market diversification

15th March 2013

By: Chantelle Kotze

  

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The acquisition of automo- tive electronic components manufacturer Pi Shurlok has enabled Durban-based designer and manufacturer of aftermarket electronic vehicle systems PFK Electronics to diversify its core business to include the manufacture of vehicle components for local and international original-equipment manufacturers (OEMs).

The acquisition of Pi Shurlok, which was completed in November 2012, was prompted by significant growth within PFK Electronics over the last five years and the resultant need to increase its production capacity, says PFK Electronics group sales and marketing director Colin Snyman.

He adds that the acquisition was a good opportunity for PFK Electronics to diversify into the OEM arena of contract manufacturing – also known as build-to-print – instrument clusters and plastic injection moulding, as Pi Shurlok has established a reputation as an ISO/TS-16949-, Ford Q1- and VDA-6 OEM-certified first-tier supplier.

Before the acquisition, PFK Electronics’ fully automated surface-mount device (SMD) placement capacity was 70 000 components an hour using screen printers, robotic pick-and-place SMDs, reflow ovens and optical inspection. This has subsequently increased to 150 000 components an hour since the acquisition, notes Snyman.

Meanwhile, PFK Electronics also acquired production and test equipment, including flying probe, in-circuit testers and selective soldering, as well as access to Pi Shurlok’s combination meter instrument cluster, convenience module and exhaust emission-control technology.

PFK Electronics’ sales and marketing and engineering design team will remain at the existing head office facility at Umbilo road, in Durban, while the production facility is being relocated to Pietermaritzburg to merge with Pi Shurlok.

Since the acquisition, the new combined staff complement is 550, with a combined office and manufacturing facility floor space of 8 500 m2, which makes PFK Electronics one of the biggest electronic products manufacturers in South Africa, says Snyman.

“PFK Electronics has been growing as a company by about 30% each year for the past six years, unlike Pi Shurlok, which was facing difficulties. We plan to turn this around and grow our OEM business by about 35% from 2014 onwards.”

PFK Electronics has doubled in size since the acquisition; however, the 2013 performance results will merely reflect consolidation, with real growth starting from 2014. This is when the business contracts that are currently being secured and being worked on come to fruition, he notes.

Snyman explains that the contracts secured by PFK Electronics this year will only reflect growth between 2014 and 2015 and will require an increased staff complement in line with the expected increase in production.

OEM Growth Segment
PFK Electronics instrument clusters will be a significant future growth segment in the OEM arena.

The company successfully entered this arena by negotiating contracts with three OEMs to localise their vehicle-component manufacturing.

Snyman notes that the technology agreements are being signed and the technology transfer will take place this year; however, production is only expected to begin in 2014 or 2015.

PFK Electronics is also localising the manufacture of body-control modules, CANBus communication technology and convenience modules, some of which are its own designs and some designed through a technology agreement with international first-tier suppliers.

The company is also expanding its exports to include products such as exhaust emission control systems, developed by Pi Shurlok.

By competing against inter- national automotive component manufacturers for the localisation of component manufacturing in South Africa, PFK Electronics will prove that it is a solid company and, in turn, make local manufacturing more attractive to OEMs, says Snyman.

“It is difficult to become a first-tier supplier to local OEMs, as procurement is decided on in the country where the vehicle is designed; but the acquisition of Pi Shurlok has enabled us to become a first-tier supplier through Pi Shurlok’s previous technology agreements.”

Using this as a springboard, PFK Electronics aims to showcase its technology and capabilities as a first-tier supplier to global OEMs.

Aftermarket Growth Segment
PFK Electronics plans to grow its alcohol breathalyser immobiliser systems, the Ignition Interlock, and the telematics and fleet management products, under the Autowatch brand, over the next three years, as the company believes these aftermarket products will in future become an OEM installations instead of aftermarket installations.

The company’s insurance telematics driver behaviour and profiling system, the Autowatch Profiler, is being rolled out as an aftermarket installation, but the company envisages that, with time, driver profiling will also become part of an integrated telematics module fitted at OEM level.

The Autowatch Profiler system is being launched through three local insurance companies in April, says Snyman.

The long-term aim of PFK Electronics is to obtain more design and development contracts for instrument clusters and body control modules to augment its current built-to-print business.

In the next five years, PFK Electronics also hopes to secure design and development contracts for integrated telematics systems to be fitted at OEM level, which include global positioning systems, vehicle tracking and fleet management, as well as driver profiling.

PFK Electronics’ video fleet management system with real-time video monitoring will be launched onto the market in September.

In the long term, PFK Electronics aims to increase the number of Ignition Interlocks supplied to the local automotive sector to reduce the amount of alcohol-related road deaths and public transport accidents.

The company is developing video-imaging verification technology for the Ignition Interlock, which will be launched in June.

PFK Electronics is lobbying for government to have the Ignition Interlock legislated as a mandatory fitment to all public transport vehicles and advocating for an offender programme where drivers who have been found guilty of driving while under the influence of alcohol are compelled to have an Ignition Interlock fitted or face having their driver’s licence suspended.

In the commercial sector, PFK Electronics recommends the use of the Ignition Interlock by fleet and freight companies to prevent drivers from starting or driving their vehicles while under the influence and thus protect their assets.

Snyman says Ignition Interlocks are already legislated in Canada, the US, Australia and most European countries, but to legislate the use of the product in South Africa requires lobbying government, talking to fleet companies directly and educating the market on the advantages of the technology.

The acquisition of Pi Shurlok is a complementary fit for PFK Electronics in terms of combining Pi Shurlok’s OEM capabilities and PFK Electronics’ design and development capabilities, notes Snyman.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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