Wollsdorf Leather sells 70% of its leather to high-end automotive firms, working hard to meet all their requirements for quality and reliability.

Wollsdorf Leather, a full-service tannery based in a small town near the Austrian city of Graz, has a history that will seem familiar to students of the European leather industry’s most recent 100 years of history.

A family called Schmidt, still included in the full formal name of the business (Wollsdorf Leder Schmidt & Co Ges.m.b.H), founded a tannery in Weiz in the 1920s and ran it for 60 years. They moved production to a new site at Wollsdorf, 15 kilometres away, in 1978, keeping the old site as a storage facility. The company is still 100% owned by the Schmidt family but has been run by external management teams since the 1980s, with Andreas Kindermann as the managing director since 2007. Over the decades, the focus of its production has moved from footwear and belts for local consumption in the early days to new, global markets such as specialist automotive leather applications, high-end furniture and aviation. To help add value to the company’s automotive leather, the old site in Weiz now operates as a cutting plant, producing finished leather pieces to cover steering-wheels, airbags and other car components.

Sales revenues are currently at a little under E130 million per year and there are 870 employees, 570 at the Wollsdorf tannery and 300 at the cutting plant. The tannery is processing 2,300 hides a day at the moment. Around 95% of its output goes for export. Emphasising the international nature of its business, Wollsdorf Leather has a sales office in High Point, North Carolina, to help it serve the US furniture sector, another in Melbourne, Australia, and a recently set-up joint-venture operation in Fuzhou to provide car-seat upholstery for the Chinese aftermarket (but with all the leather produced in Austria).

Demanding customers

“Quality starts in the abattoir,” Mr Kindermann says. “We are working with our suppliers to increase knowledge of the best trimming practice and to make sure we can stick to the breeds and the origins that we know will give us the grain quality and the yield we need.” Bull hides from Alpine breeds such as the fleckvieh dominate the selection, but raw material from other origins can be part of the mix too. With the price of raw material so high, head of purchasing, Josef Wolfbauer, has been working for about 18 months to identify additional sources of material, with quality and availability the key questions.

Reach for the sky

Aviation clients are also very demanding, but Wollsdorf Leather has noticed an important difference between these customers and those in automotive. In most cases, aviation companies put leather into an aircraft that they will run and maintain themselves. This means arguments about the economic merits of choosing leather upholstery ahead of synthetic substitutes resonate loudly.

Airlines including Qantas, Lufthansa, Austrian Airlines and Singapore Airlines have shown a keen interest in running a lighter leather that Wollsdorf has produced. It still meets all of the aviation industry’s technical requirements regarding flame-retardancy, but, at less than 600 grammes per square-metre, offers a weight-saving of 40% compared to standard aviation leather. Each aeroplane seat uses up 1.5 square-metres of leather; multiply that by the number of seats in an aircraft and by the number of flights that aircraft will complete in a year and the weight-saving converts impressively into a fuel-saving (lighter aircraft use up less fuel) of £30,000 per plane per year, reducing operating costs and the airline’s carbon emissions. Sales director, Gottfried Tandl, explains that the key to saving weight is to reduce the thickness of Wollsdorf’s aviation leather, from around 1 millimetre to 0.7 millimetres, and still meet all the performance specifications of customers.

He explains that the leather will usually last at least six years on a typical seat on an aircraft, compared to half that amount of time for textile-based upholstery. Leather is easier to clean, which makes it faster for airlines to turn leather-upholstered planes around and get them flying again, which is what counts, at least on short-haul routes. After a couple of years, he adds, textile-based upholstery has to come out altogether for thorough cleaning and afterwards undergo flame-retardancy treatment all over again. For these reasons, there is a strong feeling at Wollsdorf Leather that many of its aviation customers would like to use more leather in their aircraft interiors, especially in first- and business-class cabins to emphasise luxury and quality. An obvious example would be to use leather in the partitions between seats. A barrier to this has, traditionally, been the difficulty of meeting the aviation industry’s rigorous requirements for cabin materials to have low heat release. If fire breaks out, airlines want the materials in the cabin to release as little heat as possible for as long as possible so as not to make the fire worse, and to increase the amount of time passengers and crew have to escape. Wollsdorf Leather believes it is on the verge of being able to present to the aviation industry a leather that can be used in seat surrounds and still pass the required test for heat release. “There is still a lot of work to do before we are able to put this idea into serious production,” Andreas Kindermann says, “but the important point is we are working hard to find ways to add value to aircraft leather."

River restored

Soon after Andreas Kindermann took over, Wollsdorf Leather found itself implicated in a cross-border dispute. The tannery’s location is near the local river, the Raab, as is often the case with manufacturing plants that require good access to water. The Raab is narrow here, although fast-flowing at the time of our visit, the beginning of winter. If you follow its course for 70 kilometres or so, you come to the border with Hungary, where the authorities launched a complaint in 2007 over pollution in the river, known there as the Raba. Campaign groups were quick to become involved and quick, too, to blame the leather industry for the poor quality of the water. A second tanner, even closer to the border, and Wollsdorf had to face enquiries from the authorities, protests from the campaigners and negative publicity for a short time, but when Mr Kindermann asked for time to choose the best way to reduce the effects on the river of his company’s leather production, he received it. “I was open-minded about finding the best solution,” he says now, “so I consulted externally. I gave the campaign groups my word that if they gave me enough time to make good decisions, I would first tell them what we planned to do and I would bring the plan to fruition, but I said they would make things even more difficult if there were negative stories in the newspaper every week. And they agreed."

After a number of improvement projects in and around the onsite wastewater treatment plant (see technical section), all of these relationships are cordial again. Separately, a recent audit carried out by well known German consultant Jutta Knoedler showed Wollsdorf Leather’s carbon emissions to be 50% below an average she has worked out for tanneries in Europe. Around 10% of its fleshings (the total is 10,000 tonnes per year) is clean enough to go into biodiesel and the company is paying a premium to its energy supplier to make sure all the electricity it uses comes from hydro-powered sources. It has even asked Vallero, the Italian manufacturer of tanning machinery, to carry out an audit and give Wollsdorf a guarantee that the wood in the tanning drums it has bought has come from sustainable growth. “They told us we were the first tannery to ask them that question,” Mr Kindermann says.

In 2012, the local authorities gave the tannery a water management award. In November 2013, Wollsdorf Leather was named as the winner in the industrial category of the annual Export Award of the state of Styria. These important achievements appear to have attracted considerably less publicity than the Raab dispute of 2007, but they are a sign that the relationship with the authorities is now on the soundest possible footing.

Team for today

Andreas Kindermann places a high level of trust in his management team, saying that he regards it as his responsibility to concentrate on the future of the business and leave most of the day-to-day running of the tannery to them, or, as he puts it, “think about tomorrow while they look after today”. Production director, Herwig Grabner, worked his way up from the shop floor. He describes himself as a tanner, but is deeply grateful for the help he has received from the company to resume his studies in recent years, completing an undergraduate degree in engineering in Mittweida and then a Master’s in Vienna. He jokes that this has enabled him to become “a translator” between production and management because he is now able to speak “both languages”. But the serious side of this is that the business cases he presents now for new machinery or new projects now make it much clearer to the company’s management team how quick the pay-back will be. There are currently 52 improvement projects on the go or under consideration and, clearly, this is an environment in which new ideas are welcome.

As a result, production time, from raw material to cutting, has come down substantially in the last four years. Raw material is expensive, Mr Grabner says, and if a tannery is going to continue to operate in a wealthy country like Austria (it had the tenth highest standard of living in the world in 2012, according to the World Bank), everything has to run as smoothly as possible.

The day-to-day work to improve the tannery’s environmental performance is in the hands of Siegfried Figoutz, who joined the company from the automotive industry in 2009. He says it was a bit of a shock to start at Wollsdorf Leather when the dispute over the water quality in the Raab was still running, but he is still enthusiastic about addressing the challenges all tanneries face in reducing their impact on the environment. He is still trying hard to make improvements. Mr Figoutz says it probably took a full year before the changes he brought in began to make a difference to measurable things such as the water-quality readings from samples from the river, but he is confident now of a wider recognition of changes for the better, reflected in the awards for water quality and export performance from the regional authorities. “And I can tell you what has made the difference,” he adds. “There has been a change in the philosophy here and waste management is now integrated into the way the tannery works."

As well as taking responsibility for raw materials sourcing, head of purchasing, Josef Wolfbauer, leads much of Wollsdorf Leather’s dialogue with its chemicals and machinery suppliers. He and his colleagues carefully record the performance of suppliers in terms of price, product quality, delivery performance and so on. On the machinery side, he points out that reliability is the key factor. Wollsdorf Leather wants the machines it buys to run well with “just normal maintenance” from in-house technicians. However, if external help is required, it wants spare parts and technicians to arrive quickly and to provide the necessary support. “We want companies who do what they say they will do,” he says.

In terms of the people who work at the tannery, Wollsdorf Leather is a much more diverse place now than it was two decades ago, reflecting wider changes in this part of Austria and, more widely, this part of Europe. Among the 870 employees, 40 different nationalities are represented.

Human resources director, Petra Gauster, regards the rich diversity of the workforce as something tremendously positive, but it also means the company has to take several special steps to look after its people. Examples of extra lengths the company has gone to include a careful dialogue with a Graz couple of African origin. The husband had worked at the tannery for some time and had consistently put forward his wife as a candidate every time Wollsdorf Leather carried out a recruitment exercise. The company expressed concern for the couple’s six young children and turned the request down on a number of occasions. However, the requests continued and the company eventually agreed to allow the husband and wife to work mirror shifts so that, with a little overlap help from a neighbour to cover travel time, both could work with one of them always free to look after the children.

On another occasion, the company lobbied hard to secure work and residence permits for the daughter and son-in-law of a Romanian employee who had been diagnosed with terminal cancer. He hoped to have his family as close to him as possible, but permits for people from Romania had, at that time, become restricted. The company appealed and persevered and eventually succeeded in securing permission for the man’s family to come to Austria. They are still there and still work for the company, although the man succumbed to his illness some time ago.

A development programme, called the Wollsdorf Academy, has taken root and is allowing people right across the company to advance, to learn, to enjoy their work more and to earn more money. Ms Gauster has developed detailed learning modules that workers can complete at their own pace. New levels have come into the company structure to allow more people to gain promotion. She has seen positive results, such as a reduction in staff turnover from between 8% and 10% five years ago to around 2% today. To emphasise the importance of this, she says: “This is still a relatively low-wage industry and there are plenty of other factories in this area where people can earn more. We have found that the best way to recruit people is through word of mouth. People working here already have told their friends and family that if they are willing to work hard they can stay here for a long, long time and make progress. If people are willing to work hard, they can achieve a lot."

Value for money

There can be no doubt that Austria is an interesting place to produce leather, but far from cheap. Josef Wolfbauer, like practically everyone in a purchasing role for tanneries, spent much of 2013 thinking about ways to cope with the record high raw material prices, including, as mentioned above, attempting to find additional sources of material of the right quality. In addition, he explains that Wollsdorf Leather keeps having a go at producing leather that meets all of its quality requirements from alternative hides. “But we generally need tighter grain than you can get from those hides,” he says. Mr Wolfbauer’s parents ran a tannery of their own in a different part of Austria until they retired, so he feels he has grown up with the sector and been able to accumulate a lot of industry knowledge. He insists, for example, that lower volumes of raw material and higher prices are all part of a cycle and that the numbers will, once again, eventually become more manageable for tanners. There is demand from customers. The figures he has for 2013 suggest automotive companies around the globe together produced 71 million new cars and that their target for 2014 is 73 million. Some of these will have little or no leather in their interiors, but Wollsdorf Leather’s most important customers clearly do want to offer consumers leather upholstery and leather-covered steering-wheels, which should be good news for them, for the consumer and for the tannery.

This is positive. But he wonders about too many user organisations regarding leather as a commodity these days, and about the contribution the tanning industry itself has made to that situation. He blames “too much short-term thinking” and says the whole industry should work together to talk to consumers about how leather is made and where it comes from. If consumers developed a clearer understanding of the naturalness of leather, for example, marks on the skin might cease to be regarded as faults, he suggests. And this would make life easier for tanners because they would be able to process and sell more of the raw material they invest in.

The key for managing director, Andreas Kindermann, is adding value to customers’ own products: car interiors, furniture, the experience on board an aircraft or whatever. “We know we are not the cheapest,” he says again, “but we believe we offer good value for money. Each of our consignments is of the same high quality, meets all of customers’ technical requirements, and is on time. We are never late. The price of steering-wheel leather per square-metre is attractive, but the demands are very high and difficult to meet consistently. You have to have a lot of flexibility."

Flexibility, here (and unusually for any aspect of the automotive supply chain), means keeping a high stock of crust to be able to cope with customers asking for extra sets of leather at relatively short notice. Mr Kindermann, from an automotive background himself, found this a little difficult at first. He recalls: “I used to think ‘no inventory’, because I had always believed that, as well as costing money, inventory disguises problems. But our customers change their orders, often without giving us much notice, and to be able to cope we have to keep a high stock of crust, material of the right quality that will give us the right yield. Keeping stock costs, but if it helps us achieve the right level of consistent quality, it’s worth it."

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