Freudenberg committed to China

Freudenberg opened a new filtration factory in Chengdu in 2013.

Social causes high priority for century-old family firm

Hanno D. Wentzler, the Asia regional representative for the century-old Freudenberg Group, will continue the diverse family-owned company's principle to also make it a responsible corporate citizen in China.

As a fifth-generation member of the Freudenberg family, Wentzler is particularly committed to the group's values and principles.

He has participated in annual summer camps in Haijin primary school, Sichuan province and talked with local children to better understand their lives.

"We are a part of the society, so have a great responsibility to society overall, and more specifically, to the communities where we run our businesses," said Wentzler.

He said a good corporate citizen should go far beyond just being a part of the local economic landscape - it should be committed to taking on social responsibilities.

In China, Freudenberg's corporate social responsibilities programs focus on areas like education. They have supported a migrant school in Shanghai and completely rebuilt an earthquake-hit school in Sichuan province. Worldwide, Freudenberg is operating many CSR projects, mainly executed by single Freudenberg companies or subsidiaries.

By supporting CSR activities, Wentzler said Freudenberg's employees are proud to participate, which also enhances employee loyalty. In addition, the social activities to support education will be beneficial in the long run as it will provide quality labor force also available to the group, said Wentzler.

Though some companies use CSR as a tool to expand brand awareness, Wentzler emphasized that "responsible acting is not intended to be a marketing tool or a brand building exercise".

Development in China

Freudenberg's strong growth in China established a solid financial foundation for its CSR activities in the past decade.

"Our economic success provides the base for all our programs and initiatives in the wider CSR context," said Wentzler.

When it entered China in the early 1990s, Wentzler said it was sometimes "an adventure". That adventure established a solid foundation for Freudenberg. Last year its sales in China surged by 1.3 billion yuan ($212 million), or about 33 percent, to 5.41 billion yuan.

With diverse businesses ranging from chemicals to automobile components, Freudenberg runs 23 manufacturing sites in China. Its investment in the country totaled 2.3 billion yuan (about $374 million) over the last 10 years.

The figures from Freudenberg showed that revenues in 2013 grew six-fold over 2004 and represented roughly 10 percent of global sales.

Wentzler attributed the success to first-arrival advantages, efficient localization and successful talent strategies.

In the long term, Wentzler said Freudenberg will continue to strengthen the three key drivers to ensure the business continues to grow.

Wentzler said China is becoming increasingly important for the group and more Chinese talent take the leadership. Training courses and coaching programs ensure candidates can meet the position requirements in the future.

"If you compare the level of activities in China with other regions of the world you will see that we are engaged here far above average," said Wentzler.

He said that in the long run the management of Freudenberg in China should be laid completely in the hands of qualified Chinese employees.

For many international giants, China is a manufacturing base geared towards export. But Wentzler disagrees, saying the group would create value for local clients.

"This country is not the place where we want to benefit from lower wages or lower manufacturing costs. We are not interested in achieving short-term benefits," said Wentzler. "We create and utilize localized value chains for the Chinese market and for local customers."

Freudenberg has established research and development centers in China to better serve local clients. In July, it launched an R&D center for specialty lubricants and high-performance release agents in Qingpu district of Shanghai.

Growth objectives

Though China's economy has slowed in recent years, Wentzler remains optimistic. He said China is coming from a different base compared to almost all other economies in the world and the potential of the Chinese market has not been fully explored.

"Our growth objectives remain ambitious and I am confident that we can achieve them," said Wentzler.

But in the next few years, Freudenberg's investment in China will not be as big as it was in the past decade, said Wentzler.

"The big ramp-up investments, the major capital expenditures of the last five years are now in their consolidation phase. This means we now shift our focus toward increasing efficiency, productivity and intensifying local R&D efforts.

But Wentzler noted in the long term China remains one of the focus regions within the company's overall investment strategy.

As a diversified company with investments in different fields, Wentzler agreed that the management challenges are big. He said that also means more growth opportunities.

"Indeed it (diversification) requires much more attention and much more deep knowledge about many different markets, than a rather narrow, focused offering. But it is also a good opportunity to participate in markets that promise to be of growing importance in the future," said Wentzler.

Besides its established business areas like the automotive industry, Freudenberg has defined five key strategic growth areas that will attract a big part of the group's investments.

The five areas are chemical surface treatment, healthcare and medical technologies, oil and gas, industrial filtration solutions and vibration control technologies for industrial and railway applications.