Groupe CAT, the France-based vehicle and cargo logistics provider, has revealed that it is tracking ahead of its expansion, diversification and asset purchase targets, and that it is also interested in acquiring other companies as it grows globally. Improvements in the company’s business model appear fortuitous particularly as it faces the end of an exclusive distribution contract in 2012 with its former owner, Renault.
Speaking to Automotive Logistics at the company’s headquarters in Paris, CAT’s head of vehicle logistics, Antoine Namand revealed that the company has made an important shift in strategy from operating vehicle logistics on a ‘non-asset’ or ‘asset-light’ basis to owning significantly more equipment in the supply chain. Namand said that the company changed its approach in part because of the high levels of volatility across individual markets, exemplified by surging rates in a recovering Russian market or stagnant rates in depressed markets like Spain. “We want to have more control over costs in the supply chain,” he said.
This shift to asset ownership has been evident in the company’s investments over the past year. In 2010, for example, CAT made a significant move into multi-modal transport by establishing a short-sea joint venture with Suardiaz Lines connecting Spain to Northern Europe. Namand said that the service is now operating two vessels.
The company also opened its first 100%-owned distribution centre at the end of 2010. Located near to a Renault factory in Batilly, France, the centre handles output from the plant as well as cars imported from Eastern Europe, including Hyundai’s Czech plant.
But the most significant capacity has been added for road transport. In the past 18 months, according to Namand, Groupe CAT has purchased around 250 car-carrying trucks, with a target of reaching an owned fleet of 1,000 on top of its 1,000 dedicated current sub-contracted fleet.
Frederick Vaglio, communications manager for Groupe CAT, added that while the company is looking at every opportunity to expand its fleet, it was nevertheless cautious about growing too large. “We are always looking at the best balance and flexibility in our fleet management. This is especially important when you see that some companies have suffered from having a large fleet off the road during the recession,” Vaglio said.
Namand said that CAT aims to control no more than 50% of the total fleet it manages, where possible.
“Our goal has been to ensure stability,” said Namand. “We want to find a balance between owning assets and subcontracting so that if a hot market suddenly drops we are not left facing a massive hole, but that if a market jumps we can also keep rates stable for our customers.”
He gave an example of the Russian market, where a truck shortage and a recovering sales market have led rates to double or treble. But according to Namand, Groupe CAT, which owns 47 trucks in the country, has not followed this trend.
A ‘low-margin’ strategy
CAT’s willingness to avoid surcharging in Russia is part of what Namand calls a deliberate “low margin strategy” that he said “is fairer for our customers”. While “low margin” still means profitable–the company made an undisclosed profit on revenue of more than €1 billion ($1.4 billion) in 2010, according to Vaglio–CAT is benefiting from several years of independent ownership and zero debt following the financial troubles of its previous owners.
This difficulty reaches it nadir in 2007 when GAL, the consortium that bought CAT from Renault in 2001, made up of Autologic, WWL and TNT, went into administration in France. CAT was taken over by a joint buyout of GAL between Wallenius Lines and Manuel Antelo.
Antelo, an Argentine investor and former president of Renault Argentina, became the sole shareholder of Groupe CAT on December 31st 2008. Since this period, besides securing new capacity, CAT has also been solidifying operations globally. “Our asset acquisition is a global strategy,” said Namand, pointing to investments in Lithuania, Romania, Turkey, Russia, South America and also in India, where last year Groupe CAT established a three-way joint venture with Sharaf Group and MSC. On the other hand, Groupe CAT has decided not to expand in China. “We cannot be everywhere,” said Namand.
Vaglio acknowledged that Groupe CAT was also looking to expand by acquisition. Last year, the company bought a French car haulier, Trial, and has nearly doubled its fleet to about 100, he said. “We are definitely looking for more M&A opportunities,” said Vaglio. “We have quite clear targets.”
Business beyond Renault
Groupe CAT’s expansion and transformation is coming at a critical moment, as the carmaker faces contract renewal next year for its Renault contract. While Renault has not said definitely what direction a new contract would take, it has indicated that it would continue to work with Groupe CAT but there there will be changes, potentially to the exclusivity and length of the contract.
But Namand expressed confidence over the renewal. "CAT has already faced such a situation in the past and has managed to get through it. Good and improving operational performances associated to a constant research of cost improvements will be our best assets to face this challenge," he said.
According to Namand, CAT is tracking ahead of its objectives for expansion and diversification. “We added €70m of net new contracts in 2009 and €100m in 2010, with good results so far in 2011,” he said.
Recent contracts have also helped CAT to lower the proportion of its business with Renault to less than 60% at a group level (for cargo logistics, which is about one third of CAT's business, Renault is around 40%). For example, CAT is now the releasing agents in the UK for Jaguar Land Rover and BMW, carries out distribution in France for Hyundai and Kia, and has increased business with the Volkswagen Group.
Namand also pointed to a strengthening in its relation with Renault and alliance partner Nissan, citing a recent best quality supplier award. “We are doing a lot of co-engineering to reduce costs and be competitive,” he said. “Our relationship with Renault has never been better, even if we still have a lot of work to do."
