Ivan Mihaylov, Visteon: We cannot talk about growth in 2020 but about slow recovery

The chairperson of the Board of the Automotive cluster Bulgaria and CEO of Visteon Electronics Bulgaria with an interview for Capital Weekly by Konstantin Nikolov, June 6th, 2020

How did the state of emergency affect the automotive sector in Bulgaria?

Yet before COVID-19 we expected to have reduction in the volumes of production during this year. But the pandemic showed up as a catalyst and brought about for the complete halt of production across the entire supply chain. Engineering companies aren’t experiencing the same situation as our projects are in the development stage and enter production after at least one year.

In the automotive cluster, we started sharing between each other who did what, as that is the point of an association – to help and support each other. As a significant number of companies are foreign, the parent groups had already taken some measures. Some of our members responded very quickly and changed their production to helmets and other products necessary for the healthcare system.

I wouldn’t say the industry has made use of the 60/40 measures. As a whole in many countries, there is a large amount of direct state help for the automotive industry and Bulgaria practically doesn’t have one.

Some productions were stopped by the companies, while others are with a reduced work time and capacity. We all had to orient ourselves in this new reality.

The engineers in many of the sector’s companies began working from home – that was very valuable experience for us as well. Our home office was something like a boon to our employees, but not to this scale.

All companies in the automotive as well as the IT sector have plans for returning to a new normality – keeping distance, a certain amount of people in offices etc. But the work from home at a rotational principle will continue for a significantly long time, and this could even become the “new standard”. Of course, there are specific situations where that is possible and not possible. Not everyone can just take their laptop and work from home – it’s just not that simple in the automotive industry.

We’ve noticed in some companies and activities, mainly in R&D, an increase of work capability and results. This is probably due to some time and social effects – people didn’t commute to work, they didn’t hurry to take their kids to kindergarten and etc.

Would this lead to long-term changes in the way things work?

Certainly. None of the colleagues expects a 100% return to offices. The feeling is that offices will gain a different meaning. We want to smoothly and in a controlled manner return people under strict measures and situation assessment, measuring the temperature, protective equipment etc., so that we can get a smooth loading of the system.

It is now the time to learn our lessons from this crisis as it was not accepted that you could work to this degree from home. There are operations, of course, that cannot be done from home – laboratories and specific measurements that cannot be done anywhere else.

We noticed another effect – people organized themselves quickly, there was a very disciplined reaction to something new. Everyone responded responsibly and work continued without significant interruptions.

We also saw what works and what doesn’t. This crisis has a serious psychological effect and it’s not out of the question that even for lighter viruses in the future, a similar reaction could occur and for this purpose we have to be very flexible. A serious re-evaluation of the infrastructure environment, of the tooling and the level of digitalization is at hand, without this leading to a stop or slowing of the development activity. Serious changes will become apparent.

Will the meaning of offices change?

Offices will continue to be a workplace where developments, measurements etc. are made. This is because Bulgarian companies work hard in creating the final product. But we are yet to establish the exact model. People want to feel like part of their company’s team – it is a dangerous tendency to move 100% to work from home. At some point, people may lose their belonging and feeling that they are part of a larger global team and project. We cannot allow this to happen and so we will look for flexibility.

What are your expectations for the whole automotive industry during this year?

We are very carefully monitoring the process of restarting the production with our customers by following two-three important aspects. The first is at which stage are our customers ready to open production. There is no way for everything to go back to normal the next day. Restoration is a continuous process as everyone is protecting the health of their personnel.

On the other hand, we also monitor our supply chain as there are many “agents” on the path of development for a certain component until it is implemented in the vehicle. It has to be seen if this chain remains firm, before the production volume is increased.

We should also not forget the global picture of demand. Because of the rising number of unemployed people, we cannot talk about an active market and demand, and subsequently of supply.

We rely on the historic fact that the automotive industry stops quickly at an unstable market but also gets out of the negative cycle just as fast.

So, we expect 2020 to be a time of restoration for our own productions and work capability of enterprises, as well as the entire chain of supply. At this moment, I doubt anyone can make a specific forecast as there are too many variables.

This environment creates more conservative expectations. We cannot talk about growth in 2020 but about a gradual restoration and consequently in the next one or two years (depending on economic processes) the restoration to the levels at the end of the past and beginning of this year.

The automotive industry had its largest transformation in history even before this crisis. Do you see a new chance for the Bulgarian companies as suppliers in this new world?

The automotive industry is certainly going into a period of restoration, there is no doubt. The question is when and how fast will it happen. In some aspects, in this new situation the transformation will speed up – electric mobility will increase with even faster speeds. This can lead to a bigger jump and new technologies, for example hydrogen engines that were previously only in early builds of prototypes.

It is still too early to talk of fully autonomous cars, but assisted driving will certainly continue to develop.

With regard to Bulgarian companies, the crisis in 2008 was not as visible at least in the context of the Bulgarian car industry, as the volume of the companies was not as big here. Now we’re talking about over 250 companies and 65 000 employees before the crisis, which is a serious amount. Each company aims to preserve itself and keep going as hard as it can. As we’re talking about a globalized industry, I sincerely hope that there is a time when production and development starts again in parent companies as each of them has invested in production and development activities in our country. This know-how cannot be easily transferred. That is why the time has come for the role of this industry to move forward. I am optimistic that the focus on Bulgaria and the role of Bulgaria will continue to be a leading one in the future.

You made a parallel with the previous crisis. What are the similarities and differences with this one?

The 2008 crisis was primarily financial, while this one is a new type, where there’s a crisis in both supply and demand. Yes, the final effects are somewhat similar, but the genesis and getting out of it are different. Purely in the context of Bulgaria, it was not felt the same way as the footprint of the industry was smaller, while now we’re talking about larger enterprises and a larger number of people. In 2008 there was a focus on restoring the supply chain, but it was primarily about financial survival and now there is a health aspect, as well. There was uncertainty in the market back then as there is now. But we shouldn’t forget that we had long years of recovery after that as well.

As a manager, did this crisis change you?

Of course, it has left its mark on everyone. For me, the periods of change were initially uncertain with what this state of emergency could bring, how things could continue from home. The perception is different and new approaches are required. I think that from here on out, the important thing in management is how fast an assessment for a flexible reaction in these situations can be made, as this will certainly not be the last such crisis. We were used to an upward trend for too long, to constantly grow and control the growth. Suddenly we’re in a cycle of a new type of management, where such information is not always available and in front of you. So there are indeed many changes, but I always aim to seek the benefits and possibilities in a crisis, currently work is focused on learning our lessons quickly, so that we can be ready for the next stage.

What platforms of communications do you use during remote work?

We use the Microsoft platforms. At the start, the challenge was that everyone spends too much time chatting online before we could determine what part of the work can be done through meetings and what through e-mails or other means of communication.

Who is Ivan Mihaylov

Ivan Mihaylov is the chairperson of the Board of Automotive cluster Bulgaria. He has been also the CEO of “Visteon electronics Bulgaria” since 2012. He graduated from the University of Texas at Austin – The Red McCombs School with a master degree in business administration in the field of innovation and technology. He has a master degree in Economic Management from the Sofia University “St. Kliment Ohridski” and in Computer systems and technology from the Technical University – Sofia. Before “Visteon” and “Johnson controls” (the predecessor of “Visteon”) he led the IT department at Sofiyska voda. He has also worked at Globul.

About the Automotive Cluster Bulgaria

Automotive cluster Bulgaria (ACB) is an organization that has many of the producer and supplier companies that provide services in the automotive industry as its members. At the moment, the association is made up of 54 companies that have over 47,000 employees in Bulgaria and over 665,000 in the world.