Now part of the GST AutoLeather group, the Seton AutoLeather tannery in South Africa is making a positive impression on head office and on its customers for quality and efficiency.

Managing director, Shalen Sewnandan, is proud of these achievements, but says he knows that as far as automotive companies are concerned, leather production has to take place in lower-cost countries. This brings up questions of the commoditisation of leather, competition from lower-cost manufacturing locations, the use of more substitute or synthetic products, and the challenge to make leather match those substitute products. We shall address these issues later.

Global group

GST, the group that acquired Seton AutoLeather in January 2011, is a global group, with 12 facilities employing 5,200 people around the world. Just under 800 of these are based at the group’s South Africa facility. The focus is entirely on automotive leather, with Daimler, BMW, Toyota, Nissan, Ford, Mini and Land Rover all among the OEMs on the customer list. Seton AutoLeather SA produces all its finished leather from South African hides, with the leather types including light-embossed,    medium-embossed and deep-embossed leathers, available in full or corrected grain, chrome or chrome-free. There are also “cool leathers”, to protect drivers from seats becoming too hot, and a wide range of specialty finishing systems. 

There are currently seven OEM production facilities in South Africa making vehicles for local and export markets. Seton AutoLeather supplies leather to five of them, although this makes up only 15% of its total production. The remaining 85% of the leather production is exported to Europe, either directly in whole hide or cut-kit form, or via South African sewing plants in the form of sewn seat covers. Seton AutoLeather has the capacity to handle 4,000 hides a day, but current production levels are between 1,800 and 2,000 hides per day. From a total finished leather capacity of 15,200 square-metres, current output is over 7,000 square-metres per day.

Employee empowerment

Nigel, about 65 kilometres from Johannesburg, is a former centre for gold-mining; sadly, the majority of the mines are  no longer operational.

Now, the town’s biggest employer is Seton AutoLeather. In South Africa, all businesses have to comply with Broad Based Black Economic Empowerment (BBBEE) legislation, promulgated with the aim of redistributing wealth across a broad spectrum of South Africans, primarily focusing on previously disadvantaged ethnic groups.

Seton AutoLeather leads the way amongst its competitors with a BBBEE compliance rating of Level six but is working hard to achieve a lower (better) score. “GST and the management team in South Africa remain fully committed to this transformation process,” says Mr Sewnandan. “The company has a defined employment equity plan to develop black and female employees through the ranks of senior, middle and junior management. Our efforts in this regard are clearly visible in our management structure and shop-floor control. Training plans are centred on elementary skills development and the development of core business skills in the areas of general management, safety, health, environment and quality, leather technology and operations management. There is also a specialised team leader programme in place that is built on the 20 Keys continuous improvement system. In terms of enterprise development, the company has various initiatives that support and sustain newly developed black-owned businesses; we score  full points in this category. On the socioeconomic development front, we have broader, community-based projects in place and score full points in this category as well.”

Employee welfare

Just as South Africa began to emerge from the Apartheid era (the system of racial segregation enforced by the government between 1948 and 1994), it had to face a different problem, one that still casts a shadow. By the late 1990s, 35%-40% of the entire population was HIV-positive. In early 2000, Seton AutoLeather recognised the impact of HIV and AIDS on its operations and decided not to wait for government intervention but to fast track the roll-out among its workforce of antiretroviral medication.

“We had terminally ill employees who needed our support,” the managing director explains. “Also, we could not approach our employees about their state of health due to legislation that prohibits disclosure and discrimination. We had a death a week and we were really helpless.”

Seton AutoLeather launched a specialised HIV-AIDS programme at no cost to the employees and covered on-site employee monitoring on a weekly basis, pathology, medication and personalised and family counselling. “To maintain confidentially, we also provided the necessary medication off site,” Shalen Sewnandan says. “Currently, our programme remains in place and our efforts are directed at being more preventative in nature. Today we can say that we have managed to improve the quality of life for all our employees and their families.”

In addition to the HIV-AIDS programme, the company also provides on-site primary healthcare, patient management, occupational safety and health, and chronic disease management.

Further social challenges

In 2010, South Africa experienced a wave of industrial strike action and the automotive industry suffered as a result. In the ensuing months many OEMs took business away from South Africa to reduce their exposure to industrial action. “OEMs did move business away immediately following the 2010 strikes,” Shalen Sewnandan says, “but the leather industry has since been stable. The implementation of a multi-year wage agreement has played a key role in stabilising the leather industry. Since 2010, we have also made a concerted effort to do things better, to be transparent, share information, offer ongoing feedback and just be attentive.”

Today, as a result, the tannery has a stronger relationship with the workforce, stewards and union leadership, he says. He adds: “The key is for us all to be on the same page with regard to our customer needs and our competitiveness, and to have realisable operational performance targets in place.” His feeling is that the more all sides work together and share a common interest, the greater the wellbeing of the company and the safer everyone’s jobs will be. “Some of our customers have heard first hand from our union leadership their pledge not to strike, but to try and resolve matters while work continues,” he says.

“Decontenting” and challenges in the leather industry

Good relationships with  leather buyers notwithstanding, sales and marketing director, Detlef Wedekind, who is transferring to GST’s tannery in Mulheim in Germany at the start of 2013, uses the word “decontenting” to describe the approach some customers have taken in recent years towards leather upholstery. The addition of more vinyl and other synthetics is becoming more evident. “We are being requested much more frequently by OEMs to match the leather to vinyl products,” says Mr Wedekind. “We strongly believe that this should be the other way around and that vinyl and other synthetic products should be minimised or used exclusively in non-visual areas. We have seen many complaints in the field where customers complain about leather not being durable, or discolouring, and when we investigate such claims we find in majority of the cases it is the vinyl that does not perform. End customers truly think they are purchasing a full leather interior and leather gets a tarnished reputation through the non-disclosure of the content.”
He goes on to say that five years ago, “certain OEMs” had 20% more leather in their cars than they do today. His opinion is that the automotive interiors industry has become more competitive and many OEMs have developed new supply sources; manufacturing or model supply exclusivity has become a thing of the past, he says. “Overall automotive leather volume has grown but with so many new entrants in the marketplace, it is easy for buyers to chop and change,” he adds. “As leaders in our field we continuously look to create more value-add for our customers to discourage the use of synthetic products.” 

Until October 2012, Seton AutoLeather operated as South Africa’s only fully integrated automotive tannery. However, at least for the time being, it has stopped operating its own beamhouse and is bringing in all its raw material at present as wet blue. Shalen Sewnandan explains that this was far from an easy decision. 

The beamhouse at Nigel is a quality operation, well established before GST and indeed before Seton acquired the plant in 1997. This tannery was originally set up in the 1960s by an emigrant German tanning family called Hanni. Current research and development director, Richard Delfel, has been at the plant since the early 1980s and has lived through many of the changes. He made sure the company considered all angles before taking its decision on halting wet-end operations in Nigel, for example gently voicing the view that it’s at the wet end that tanners can best make their mark on a hide.

Mr Delfel helped the Hanni family design the wet blue plant in 1981, helped decide where the drainage would go, drove a forklift to carry materials required for the installation of the 16 drums, still there but silent now, except for two that are in use for wetting back some of the wet blue that comes in from external suppliers.

“Our interim decision to mothball our wet blue facility was driven by the ongoing low slaughter rate in the country. This impacts heavily on economies of scale and we will revisit our decision once the market improves,” says Mr Sewnandan.

Raw material choices

Seton AutoLeather has five approved wet blue suppliers, each with a working relationship that has lasted well over 10 years. Over these years, the company has seen its suppliers improve their facilities in terms of layout and technology. It says its suppliers are generally easy to work with and are open to recommendations and change. Wet blue in South Africa usually means chrome split production hides and average around 3.9 square-metres per hide. Hides are sold either on a table run basis, automotive selection, or printer selection, which is primarily used for stucco buffed-type applications. Unlike in most parts of the world, the majority of hides in South Africa are non-feedlot hides, and are a mix of breed, weight and gender.

The managing director says: “Although we prefer to produce from raw, we have worked with our supply base over the last few years in developing quality control standards. As part of our quality assurance system, we audit our suppliers regularly. Our incoming quality control is effective and the results per delivery are passed onto our suppliers enabling them to take corrective action, if required. We also benchmark their products against each other. With all of this, we can expect to receive the same quality level as we would if we run our own plant.” 

He explains that the availability of high-end automotive grade hides has declined over the last five years. Hides have more defects and these defects cannot be completely eliminated during downstream processes. In addition, some OEMs specify the width and length of open scars that can be stuccoed and buffed. If the hides are destined for full-grain manufacturing, these open areas will be marked out as non-cuttable areas. Automotive seating design has also changed considerably; the days of gathered seats are gone, with very tightly pulled seat covers that have a lot more body and shape replacing them. This results in natural marks being more visible in a pulled state and an increase in customer rejects. 

Secondary to the rise in open defect types is the prominence of veins that are clearly visible on the grain after finishing. In the past, if the veins did not look worse than a healed scar, the tannery could cut this in. Today, this is no longer possible as the majority of cut-to-pattern parts are laminated with either a foam or a scrim base and the lamination process itself accentuates the veins, making the cut part a reject. Likewise, process defects such as splitting damage, suck outs and shaving damage are accentuated when cut parts are laminated. 

International offering in chemicals

With the exception of locally sourced commodity products such as acids and salts, 90% of the chemicals that Seton AutoLeather uses are imported. The tannery’s managing director speaks very highly of the levels of customer service many of these international suppliers offer, as well as their technical competence in product development. Their representatives travel frequently to South Africa and take time to demonstrate and explain the benefits of new products. He likes the fact that there is strong competition among the various chemical houses and believes this keeps them  focused on the business. This, in turn, helps the leather industry to remain competitive and to keep substitute products out.

On the machinery side, he senses less urgency among suppliers to develop new technology that will make an immediate impact on the work of his and other tanneries. The current trend in the automotive leather segment presents a good example. Leather that is lighter in weight is in demand; car companies care deeply about weight because lighter cars are, generally, more fuel-efficient and place a lesser burden on the environment. And leather counts, because a 25% saving on the weight of a finished hide could mean a saving of up to three kilos on the whole seat-set in a vehicle. Mr Sewnandan says this is another example of leather showing it is up to the challenge of other automotive component suppliers for whom, he says, reducing weight is far less complex than it is for tanners.  

Chemical providers are coming up with newer retanning systems that promise lighter-bodied leather. The technologies employed are broadly based on making the leather thicker but not heavier.

Leather makes a difference

Despite the ever-changing challenges in the automotive industry, end-users still associate leather with prestige and luxury, Mr Sewnandan continues. “Leather is still unsurpassed in elegance; no synthetic substrate can match it,” he says. “Leather looks, feels and smells unique and these three qualities differentiate it from any competitor product out there. It becomes even more beautiful with age and it’s the ultimate recycled product.”

Competition against the best

As a group, GST takes internal benchmarking seriously. It has tanneries in China, Germany and Mexico, as well as South Africa, and cutting plants to turn the leather into seat-cover kits. “What is not measured is not managed,” says Mr Sewnandan. “We are privileged to be part of a multinational company. All GST facilities share their individual scorecards with each other, and this extends well beyond just manufacturing statistics, it covers best manufacturing practices and operational excellence and most importantly of all, lessons learned. 

“This gives the tannery a good feel as to where we are positioned in the world. Benchmarking within the GST group has definitely improved our operations in South Africa; we are not the same company we were two years ago.”

Career development

Restructuring the business in line with changing volumes and after the mothballing of the wet blue facility in September has led to a reduction in the number of people working at the tannery now. This is never a pleasant task, but the company seems to have gone about it in an interesting way. “Although we part ways with our employees, we ensure they have a soft landing and have a new skill-set to sustain themselves after they leave us,” says Mr Sewnandan. “To this end we either subsidise further training, in part or in full.”

Seton AutoLeather realised that the team it had making wet blue was made up of some of its most skilled and most senior people. Members of this team have now joined the retanning and finishing departments, while some of the less senior employees from those departments opted for voluntary “retrenchments” to further their studies, subsidised by the company. “And we’ll be following up on their results,” the managing director insists, “because we care. We think this gives them a good chance to grow, and to grow well beyond Seton.”

Even without the beamhouse, it’s a big operation, offering plenty of career development to those who work there. Mr Delfel explains that if a member of his technical team develops a new product, the practice is to see the product all the way through production and testing, staying with hides that form part of the trial until everyone, including his production management  colleagues, are happy that the concept will  work.  “This synergy between R&D and production has impressed some of the automotive supply chain experts,” Mr Delfel explains.

All Seton AutoLeather employees have an equal opportunity to grow, Shalen Sewnandan insists, as well as having responsibility for their own growth plans. Additional support from the company includes having an industrial psychologist on site once a week with the primary functions of developing leadership talent across all levels of management, career-modelling and tracking progress on agreed career development plans.

This approach is working, Mr Sewnandan believes. Current business practice is to consider all possible internal candidates for any vacancy before employing anyone from the outside. And one inspirational example he shares concerns a member of the R&D team, named Paul, who studied after  work  for eight  years, often  by  candlelight owing to energy restrictions. “He had the enthusiasm, the company recognised this and funded his studies,” the managing director says. “His R&D colleagues did a great job mentoring him and he has now qualified with a leather technologist degree. We have many other success stories like Paul. We know that if we give our employees half a chance, they will grasp it and make a success of it.”

He feels that something that sets Seton AutoLeather apart is its resilience. It has successfully navigated changes of ownership and profound changes in South African society. “Our employees have a natural hunger to learn and to grow,” Mr Shalen concludes. “This is not a company we all just work for, it is our company. And we have a passion for the product we make. This is a competitive environment and we have very reputable competitors. But my feeling is that we have changed our own mindset with all the investment we have made in our human capital. And as well as bringing us stability, security and viability in our business operations, this development has changed the way our customers perceive us. For the better.”

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