As Constellium turns 10, Jean-Marc Germain, the company’s CEO, and Dick Evans, Chairman of the Board, are taking stock of this first decade, discussing the evolution they have witnessed, and sharing their views about the future. Here is an abstract of an internal webinar they recently hosted.
How has the industry evolved in the past 10 years?
Evans: The split that occurred 20 years ago between the upstream and the downstream businesses in the industry has really matured. Just like Constellium has grown and become an independent, strong player, so have some of our biggest competitors. Most of us used to be part of fully integrated companies, and are now independent, value-adding businesses. Two other trends are very significant. One is the growth of aluminium use in automotive. It’s been steady over four or five decades, but it’s really growing, particularly with the advent of EVs in the last five to ten years. And then, of course, the emergence of sustainability as a major criterion, and the whole concept of Environment, Social and Governance (ESG).
How has Constellium adapted to those industry changes?
Germain: We have become a well-established and respected player in our industry. The first way we adapted was by making the strategic decision to focus on advanced solutions for market segments where we add value by bringing something different, where we can rely on differentiating products, strong assets, industrial and innovation capabilities, technologies based on unique intellectual property, and employees who are experts in their fields. That led us to focus on three main markets—automotive, aerospace, packaging—and a number of niches where we are well established. We have reduced our risk profile by becoming more diversified and equally capable in the U.S. and in Europe—it gives us access to more customers and more options. It’s interesting to see how successfully we’ve managed – and continue – to cope with the current Covid-19 crisis. I believe we are actually emerging from it stronger.
A year into Covid-19, what changes have you seen?
Germain: One of them is around how we interact with each other. We’ve learned to work remotely, which is a great opportunity. It means people have more freedom around their working hours. Especially as we are trying to recruit a diversified pool of new talent at Constellium, the ability to offer more flexible hours is essential. It’s helping our customers as well. We’ve got technical experts, people at C-TEC, who can do remote diagnostics, planned visits or machine center investigations. Think about it: if surgeons can operate remotely, why can’t we fix our production equipment remotely as well?
The Covid-19 crisis also reinforced our commitment to sustainability, as the crisis strengthened in many ways our customers’ and society’s demands for sustainable solutions. I see many opportunities for Constellium to benefit from very real, sustainability-driven megatrends such as lightweighting in transportation, the electrification of the automotive fleet, and the development of a circular economy driven by recycling.
Overall, I believe this crisis brought out the best of Constellium. Our employees demonstrated courage and commitment, served our customers, and ensured the continuity of our business. We managed to build a stronger and more resilient Constellium to seize the opportunities that will come.
What global changes have surprised you in recent years?
Evans: Three things have been top of mind: sustainability, cybersecurity – especially now that we have entered the “Industry 4.0” area – and trade. The emergence of these changes has not surprised me, but the way they have evolved has. In prior cycles, sustainability always came up in the guise of energy security and prices. Now it’s a more holistic view—recycling, resource and emissions reduction, social impact, governance—in which we are still advantaged as an industry. About cybersecurity, I think everyone of us have heard of at least one company that was under attack this last year. Just recently, the largest gasoline pipeline in the U.S. was down for a week due to a cyberattack and I saw estimates that global losses from cybercrime are projected to hit nearly a record $1 trillion for 2020. I have known for some time that cybersecurity was an evolving issue – however, I would not have guessed that it would metastasize into a global trillion-dollar organized crime business.
Trade is another topic that has changed dramatically. China’s unfair trade practices have been a threat to our industry for about three decades, but in the last 10 years, it has become a more pressing issue –a recent OECD report documented massive subsidies for Chinese aluminum producers, more than $70 billion. The U.S., and more recently Europe, are building trade barriers to protect their markets from these huge volumes of subsidized products. This led to major shifts in trade as much of the dumping from China is now moving to other countries, which are in turn trying to export their displaced production into the U.S. or Europe. Until we are able to address this issue by applying bilateral or multilateral pressure on China, I believe we will continue to see these challenges in the marketplace.
What does Environmental, Social, and Corporate Governance mean to you?
Germain: ESG has become a critical topic in recent years. It is something that matters to our employees, our customers, our shareholders—each with their own perspectives on the topic. We have to make sure we prioritize where we can make a clear contribution. Environment is a priority; we have targets around GHG emissions intensity reductions and recycled input, and have issued sustainability-linked bonds both in the US and in Europe – a first in the metals industry. On the social and governance side, external auditors and ratings agencies rate us well, but we know, however, that we need to improve in a number of areas. The most glaring one is hiring, retaining and promoting more women. They are about 50% of the population, but only 13% of employees at Constellium are women, and 17% in management. We need to address this missed opportunity and we will continue to work with the industry to make the manufacturing sector more attractive for everyone. The pandemic also taught us we can create a more diverse and inclusive environment, so we can tap into a diverse pool of talent, including those who may not know – yet – that Constellium can be a great place to work.
Evans: From a Board of Directors standpoint, we decided to broaden the scope of our EHS committee to include sustainability topics, and to rename it “Safety and Sustainability Committee”. And we recently recruited four new Board members with significant experience in the ESG area. Also, we intentionally wanted to improve our gender balance, so two of the four new members are women, bringing the total to five women out of the 11 Independent Directors.
Where is the industry going in terms of innovation?
Germain: Digitization is definitely here, opening up a whole new world for us. We have a number of programs underway—"cobots” (collaborative robots), condition-based maintenance, remote monitoring, twin technologies… We have built a three-year digital strategy and have decided to create an innovation fund to help our plants explore digital projects that could become promising initiatives. We want to be more creative, more entrepreneurial, and to allow smart ideas to flourish. To do this, we are putting in place dedicated training programs to strengthen our digital skills internally.
As another generation begins to retire, how are you retaining their knowledge and expertise within the company?
Germain: We are being proactive in identifying the people and skills that we are likely to lose though retirements, and are developing plans to train new team members. We strive to retain critical skills on a consulting basis, so the transition phase is smoother. We also recruit experienced people from the industry who are very knowledgeable where we have identified a gap in expertise. It is a constant challenge but our company reputation is helping us recruit. The fact that we can work remotely also helps a lot. Wherever an expert is located, their knowledge can benefit multiple sites. Collaboration is therefore key and we need to continue to improve how we identify and share best practices.
After this first decade for Constellium, what do you expect from the next one?
Evans: I’d like to see us be a sustainability champion, and one respected by employees, customers, suppliers, and investors. I’d like us to be the employer of choice. We’ve made some great steps in that regard. And of course it’s important that we are a valued partner to customers in terms of product development, technology development, and service excellence – by building close, long-term relationships, and helping our customers grow with us.
Germain: By 2030, I want our company to be the safest, most exciting place to work in our industry. It takes a steady hand focusing on our processes, our people, our customers. Our industry is about incremental innovation, but from time to time big bets are made that pay off, such as Airware®. Today we are expanding in additive manufacturing and 3D printing, EV battery box design, new alloys… As long as the company continues to be strong and steady in its main markets, we have the ability to anticipate, take risks, develop digital projects, and out of that will come good things. I’m very optimistic about the future.