Interview with Ulrich Hetzel, Founder / Managing Director
Company / Brand: Hetzel FZTH
Industry: automotive transmission repair and spare parts supply
Headquartered: the commune of Ubstadt-Weiher, Germany
Established: 1993
Number of employees: ~40
Website: fzth.de

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Q: How did you arrive to the idea of starting your own company? Was it a tough decision?

Edi (note: Uli's elder brother, co-founder at Hetzel FZTH) was a workshop manager at that-time’s largest rebuilder in Germany, which was more than 28 years ago. He worked there for 5 years, the first half of this company was sold to America and then it was fully sold out to the USA’s Fred Jones Company. Edi brought me in there, while I was a student of business and computer science. I implemented the software system and network on the company, I had an overview and the idea, and Edi had the technical knowledge. They had applied for a big contract but they lost it. That was for OE’s: Chrysler, Subaru, and Toyota. As the contract was lost, the USA heads wrought off the company by firing all people. Edi then decided to open his own company, he asked me if I would join in . I was a student at that time but I agreed. And so we founded the company, it was 1993.

Edi worked there full-time, I worked half a day, my wife – also half a day. Therefore, it was the beginning to start with. I decided to check if everything goes well, and after my diploma, I was going to join fully or continue with business and computer science.

Uli Hetzel

Q: So starting your own company was a forced measure and not own voluntary decision?

Edi had a plan from long before. We had our company before; our father had a car dealership company so Edi had a gene of being self-employed. That was sure to go. The time just fitted well, it was the right impulse. We started as partners, 50:50. And it is the same up to this day.

Q: Why did you decide to base your company in Ubstadt-Weiher?

Our home is not far away. The reason is that my wife lived in Ubstadt-Weiher. I moved there and in the back yard there was a small workshop that was used for building stones in former days. We started off on that room and just after 2,5 years everything was so filled up that we had to move out. We didn’t have any space left, we used even the attic and basement. We had an opportunity to move around the corner, there was a military base there. We could rent it in the beginning and then after a few years we found out that in the neighbor village they were selling a similar building to a private person. So we thought that if they could buy it, we could buy it as well. Therefore, we asked the local government and they were happy, as it could bring in money into the budget. We took a loan and we made this purchase.

Hetzel headquarters in Ubstadt-Weiher (drone view)

Q: What are the major sides of Hetzel business? You do almost all about transmissions. What is the biggest division of the company in terms of production volumes / financial output?

It is a little difficult to say. The variety makes the difference. It is also depending on the market situation, on the competition. We had to find our own profile. There are companies older than us on the market (I mean European market), so that had maybe 20-25 years more in business. They had accumulated profit and experience. It was very difficult to compete with them. Some concentrated on the parts business but didn’t do it. We were doing both: parts business and transmission repair business.

In the beginning, the plan was that we are an interface between the rebuilder and the private customer. Our idea was to be a sales hub but the quality of those products was not sufficient so we had problems all over. Edi had to resolve those problems. The customers at that time told him that it is either him doing transmissions or he won’t be getting any new orders, no work. We came back to what we thought we wouldn’t do: we started to rebuild automatic transmissions of our own, Edi did that. Since then, everything worked well. That was the basis, and today it is still the basis. The Technology, having all knowledge in our own hands, ability to resolve the problems of our own – this is the foundation for our business. We work with OE parts, we work with a lot of technical equipment, we want to produce the highest quality, and this is our major goal. We are in that network of people who rebuild transmissions worldwide, we have good relationships, and we are recognized as a company with everything: solutions to technical problems, supplies, test equipment distribution, etc. We have a lot of experience with that. We had to invest what we earned, into a safe harbor – technology and know-how.

With sales, one day you are making good money and then next day you get a competition who found out how to supply it cheaper – and you are out of the business. We had to think over, how can we invest the money that we earned to avoid the rough sea. What we did is invest in technology, training, know-how, equipment, building – all of that.

Coming back to the initial question, the major business for us is OE business. We have achieved contracts with OE partners – like BMW, ZF, Subaru, and Cadillac Europe. Then Torque Converter rebuilding is important as we do high volumes.

Q: Can you mention any numbers? How many converters per month, maybe?

By year, we do around 5000 converters, and the quantities are growing very much.

We have very important test equipment, we sell and we train. That means, it fits into our plan to represent ourselves as a technical hub. We do not simply sell but we also train other companies how rebuild transmissions, repair torque converters, valve bodies, and so on.

Q: May companies in the world in fact need a company who can both supply quality equipment and train how to work with it, along with the basics of transmission repair operations.

This is something important among what we do; we are open for it. On one hand, people ask us why we do it. Because thus you create competition for yourself. This is not really true for us because it enables us to develop a long time cooperation with them. They may start with filters, oil pans, oil; next step – they will buy some parts and complete transmissions. Then when they start to repair some of the transmissions, they may continue to buy other transmissions from us. When they do all transmissions, we will supply transmission parts.

We feel very open, we like sharing the experience. Sharing can make you richer – this is what we do. For example, Edi said to me 100% of his own business is less than 50% of his business with me, as a partnership.

Q: This is synergy. 1+1 equals 3.

Exactly. We have the same relationship with Alan (Smith, MD at Cottingham Engineering LTD). We help Alan but he helps us as well.

Q: You’ve been on the market for over 25 years, you are in a strong position now. You probably can create allies and not competition, do you?

Very true but it was a long way.

From left to right: Uli Hetzel, Nick Raad (future director of sales and production), Edi Hetzel

Q: As you mentioned Hydra-Test, I’d like to know what other testing equipment you have in your business apart from this brand?

We are also distributors for Hot Flush in Europe, we have made the CE certification for it. It is not officially allowed to use the American version of this equipment in Europe because it doesn’t fulfill European security requirements. We have worked this out. The machine is expensive, really; but it is worth it. Especially for warranty cases. Having this machine for a big rebuilder, it pays off within a year, or even half a year. To be sure that you have no debris and metal pieces coming from the oil cooler back into the transmission and destroying your rebuilt transmission again. That’s very important.

Then we have Tim Eckart flushing machine, it does exclusive oil change. There are other machines, many of them, they all work the same way: you pump oil from one side and you let the engine run, at the other side the old oil comes out. The disadvantage of this method is that while making this oil change, the old oil mixes up with the new oil all the time. And to make the quality of this process reasonable, you need additional 5-7 liters of the fluid. However, when you do it with the machine that we use (which is very simple, by the way), it allows for the idea to drain the complete transmission off the old oil, with the Torque Converter, taking out the filter – you take out all the dirt. At that, you work with a cleaner. Remaining 0.5-1 l of old oil is then slushed out with the new oil. Possibility of mixing old and new oil is eliminated. You simply need extra 0.5-1 liter of new oil, so you save quite a lot of fluid. This Eckart machine is a German product.

Then we also work, still, with Kinergo, PowerTest that bought Superflow. Recently we’ve sold a PowerTest dyno. Then we represent Autel, similar to Launch diagnostic tools. Then also tools to reprogram ECU’s, for cloning and reprogramming. It is called Magic Motorsports, Italy.

Q: What are your key markets except for the German? What is your geography?

This is changing all the time. For many years we had a lot of overseas business relations. For example, we sold very big quantities to the USA. This went down over the years. Today, definitely, the German market is the biggest market for us. Also because of the OE’s we work for, but we have several countries where we are pretty strong – for example, Italy, Romania, France, also Asia, China, New Zealand. The Asian market requires OE – pretty curious thing: on one hand, they sell quite a lot of products to abroad and to overseas but, on the other, the Chinese of their own insist on OE products. They are willing to pay more to have OE quality. As we have quite a few important factories in Germany and Europe, we buy direct from them: molded pistons, solenoids, frictions and steels – then also OE parts from dealership at discounted prices… This is quite an interesting business. We sell really worldwide.

Summing it up, roughly 50% of what we do goes to the German market and the other 50% to other European countries and further. Importantly, the longer the distances are – the bigger the quantities. Abroad, we have big dealership that buy a complete box, pallets with parts. In Germany or Europe it is minor orders day to day. We also do business for rebuilders – when a part is ordered today and they receive it tomorrow, so called ‘next-day operations’.

Q: How do you estimate the European market for the ability to invest in dyno test stands, which are quite expensive? This revolves around 80,000 EUR. What is the market capacity for this type of equipment?

We are open to buying a dyno, but we need help and support. What needs to be understood, is that certification is a must. It protects the people who buy the machinery. If you are producer or importer, especially if importing from long distance – for example, USA – you bear full responsibility for the supplied product. Because if it is from the USA, that USA party cannot be held responsible. As an importer, you have to do risk evaluations; you work out all the possible dangers and minimize them to avoid harm to operators.

Indoor seminar at Hetzel FZTH

Q: Do you think this certification is truly required or it is more of a restriction?

In my opinion, it is absolutely necessary, it is just OK, not overestimated. It puts responsibility to the ones who make money with it. If you want to earn profit, bear responsibility. And, there is nobody really who controls you. A control happens when an accident happens. People will check if you have fulfilled all requirements. They will analyze the causes of the accident. If they find out, you didn’t your job well, then they take you for responsible. If they find out, you did all that was needed, the reason may be declared for unforeseeable circumstances. It is difficult to understand this system because it is a self-control system. And you have to write it officially, that when you do import, you have done everything that was needed to prevent harm.

Q: Understood. Actually, the initial question was: what is the capacity of the European market to afford buying a transmission dyno? What is the demand for transmission dynos in Europe?

Very small. This is a niche in the niche market. Automatic transmissions for me are still some kind of a niche. It grows, yes. It will continue to grow, yes, but it was a niche market, not a virgin market any longer, but it is not a big market. Therefore, we have worldwide networking because you don’t find partners and knowledge in the neighborhood. You need to have certain volume and payoff to make it effective. The necessity is there if you do an OE business: you rebuild for a car manufacturer, for an importer. Then they require it from you that you test what you rebuild. There aren’t so many companies that need it: 70% of the companies are 1-man band, 20% - 2,3,4,5 people, and just a handful - more than 10 people working with automatic transmissions only. The market is very narrow.

Q: You include CVT’s and DSG’s in the same field, correct?

Exactly. Everything that is automatic. There is one exception for us, which is automated transmissions. There are 2 reasons for this exclusion: first thing is if there is enough value to compete with the OE’s. If you drive a manual transmission, you can buy it for 1,000-1,500 EUR from the dealers. There is not enough value to compete. However, if a transmission costs 5,000-10,000 EUR and you can offer it for half of the price, then there’s a huge buffer in between. For example, all the CVT’s, they’re the same volume as normal automatic transmissions and DSG’s. The automated manuals, on the other hand, are of lesser value and lesser comfort. Therefore, we do not touch them. They are more economical, however, because of the technology. Nevertheless, the technology here is not the problem.

Chef mechanic Kim

Q: What do you think of the electrification trend happening now in the automotive industry? How soon will electric cars take over the market? Aren't you afraid that this trend will put you o ut of work?

There are many different feelings about this. Personally, I was pretty much afraid of the Diesel scandal. People were unsure if they could have a diesel car, if they will be able to drive it in cities. There was much uncertainty around it at that time. Edi was sure that it would take longer to change. We’ve done our homework, however. We’ve spoken to car manufacturers, to suppliers like BorgWarner, ZF. All said it wouldn’t come so quick. Otherwise, it would have been a disaster.

There are so many problems with electrification development. No infrastructure, no stations to charge the batteries. And charging takes too long. Also, many cars don’t match the charger, many vehicles have to be towed. Maximum you can drive is 200-300-400 kms. If you turn on the heater, radio, air conditioner – it may come a half of this distance. It is not an equal alternative to combustion engine. The hybrid technology is a different thing though – it is a working technology with fewer issues rather than 100% electrification. The hybrid technology is nothing to be afraid of in terms of rebuilding. You have to rebuild them the same way as the automatic boxes.

We see that car manufacturers try to polish their ecological image by taking about the hybrids the same way as about the 100% electric vehicles. We see now that the hybrids are getting a bigger share of the newly sold cars, while the CE cars are getting fewer, and the electric cars are 1,5-2% of the total. Therefore, there is a big increase in percentage but in real numbers 100% electric cars are slow. Nobody wants to take all those problems. This is summing on our evaluation of the electric vehicles’ market.

With the hybrids, you need to know how to work with high voltage. Not many people know how hazardous it is, touching hybrid electrical system may cause death. We have started very early with hybrid transmission because we have a contract. We rebuild them for an OE company. We have been having this contract for over 5 years. We are prepared for the future.

Hybrid Transmission

Q: How do you establish good and lasting relations with prominent car manufacturers?

For many years, Edi was saying that we needed to have the right stand. For a long time we were not prepared to invite OE companies. If they had come to our former building, they wouldn’t see all that we do, the quality that we produce. You have to give it the right outfit to put forward your quality. There are many rebuilders outside that produce very good quality and you can rely on them. However, nobody really knows them because they don’t have the right approach to the market. 8 years ago, we opened our new building where everything is well-organized. This is the approach now, when people see our company they understand that we do the right job. The OE’s recognized this. It fits altogether now.

We know people in the market. We have many friends and partners and we see them again and again. For example, we have a partner in France: Jean-Claude who had worked for the GM factory in Strasbourg for over 38 year. He was the right hand of the factory boss there. He settled the connection for us and was a bridge for connection with BMW. When people recognize your work with OE’s, they want to do more with you. We also have ZF as our customer. This happened around the same time. We work close with them, we’ve known people from ZF for decades, we met in the USA, at transmission expos. Finally, at some point they said: “Hetzel can work with us”. It is like building a house, you start with the foundation, a solid concrete. It also takes time and strong relationships. We’ve worked hard on this. We also support the international networking and we stand by the same values as 10 years ago, we are consistent and do not let people down.