In the Driver's Seat: Up Close With Visteon's Peter Pestillo

In the Driver's Seat: Up Close With Visteon's Peter Pestillo

To paraphrase an adage, behind every great automaker is a great automotive supplier, the company that provides the behind-the-scenes integrated technology solutions that customers want -- and demand -- in their automobiles. Standing behind many well-known automotive giants is Visteon Corp., a company with a not-so-famous name that currently ranks number two in the marketplace it serves. It has earned this standing in part because of an unparalleled commitment to the environment, says chairman and CEO Peter Pestillo, who emphasizes that there can be no distinction between good business initiatives and sound environmental ones. By Katie Sosnowchik

Few people can hold an intelligent discourse on the advantages of such systems as PZEV Plastic Fuel Tanks, Long Life Filtration, Energy Efficient Thermal Systems, Laminate Insert Molding or CO2 Refrigerant Systems, yet Visteon is banking on these and other such developments to grow its business as the second largest automotive supplier in the world. Collectively, what these and other similar developments demonstrate is Visteon's commitment to environmental stewardship, a priority clearly identified in its corporate mission statement:

"To increase shareholder value by delivering systems solutions that help our customers exceed their goals, are safe and environmentally responsible and distinguish Visteon as the supplier, employer and community citizen of choice."

As a result, says chairman and CEO Peter Pestillo, regard for the environmental impact of all its products and processes is standard operating procedure for the Dearborn, MI-based company, which currently has approximately 80,000 employees in 25 countries. All of its eligible plants around the world have completed ISO 14001 certification, the framework for integrating environmental responsibility and management standards into everyday business operations.

This regard for environmental initiatives, Pestillo says, stems from the company's history. It was officially launched as a separate entity in 2000, a spin-off from Ford Motor Co. where it had 80 years experience in accomplished integrated systems. With its independence, Visteon has expanded its non-Ford business and now works with nearly 20 automakers. And while automotive systems continue to claim the largest share of its annual revenues, Visteon is also involved in the Automotive Aftermarket and Architectural Glass fields. Technology affiliates include leading-edge, consumer-focused companies such as SpeechWorks International, Dow Automotive, Microsoft, Intel, Nintendo, Bang & Olufsen, Texas Instruments, Fujitsu, Sirius Satellite Radio, XM Satellite Radio and Motorola.

Eleven "Blue Sky" attributes clearly spell out priorities that Visteon has identified in its strategy for conducting its business in an environmentally and socially responsible manner. Attributes range from eliminating the concept of waste to thinking smaller is better, from leaving a "no trace" mentality to increasing natural resource productivity, from respecting people and ecosystems to being transparent to the communities in which it operates. But attributes also spell out priorities that go beyond the typical aspects of conducting a business by referencing the desire to "improve brilliantly and passionately" and "celebrate achievement."

A recent conversation with Pestillo revealed a deeper insight into the company's environmental agenda and the steps it is taking to arrive at its desired destination.

Q: Visteon's environmental commitment states, "Environmental stewardship is among Visteon's highest corporate priorities." How did the environment become such a high priority?

We come from a rich history of support for environmental initiatives, so we started the company with the understanding that we're going to run it in a way that was responsible and make it part of our overall process. In my view, if you don't disassociate [the environment] from what you do, you tend to do better. We ought not to have business initiatives and environmental initiatives. We ought to have solid business initiatives that embrace environmental considerations.

Q: Who or what drives environmental policies at Visteon?

I'd like to think all the people at Visteon do. Our mission statement is, hopefully, a simple, clear expression. Take, as an example, waste. The determination to deal with waste embraces three things: it saves costs; it means behaving responsibly; and it also spares you having to deal with the shortcomings that you've got at the end of the day. So if we say that the elimination of waste is an absolute objective of the Visteon corporation, that's pervasive—you don't have to explain that to somebody. Beyond that, you don't have to quantify it; the guy who saves just a little is as important as the one who develops a great breakthrough.

Q: Isn't it a challenge to communicate that to 80,000 employees in 25 countries?

Sure it is, but if it's part of your essence, it gets easier. We have a simple statement, and we declare it. We are for this without qualifications. We're not for it only if we've got the time or if we have anything left at the end of the quarter. We're for it because it's part of us.

Q: Do you have priorities within your environmental mission?

Everybody is able to do something all of the time. As I've said, dealing with waste is an ultimate consideration. Then you begin to deal with things as you confront them. The thing I like most about the relationship I have had with Bill McDonough over the years is this: you can view Bill as an ethereal character who is only worried about things in the distance. As a practical matter, the distance to Bill is that period of time that allows you to plan for things and his view. The principal thing he taught me is that if you start out wondering what you can do better, you can more quickly build that into your process rather than tinkering as you go along. Don't start with the assumption that you're going to do a little bit better than your last model. Start with the assumption you're going to do it right and then deal with impediments as you go.

Take plastics, for example. We use a lot of plastics. Early considerations were color consistency and low price. New ones are energy, petroleum use, costs in terms of the energy required to produce, recyclability, lifespan and things of that kind. So you begin to weigh all that, and you say, "Let's go out and look for something else." We do a lot of interiors and our ambition is to do the ultimate green vehicle. We recently did the interior in GM's first fuel cell vehicle. And we'll be able to do better with more time. But again, we've got some plastics in there and some forming methods that are, to some extent, more energy efficient; and we'll find better compounds as we go. But we've embraced the notion that we're going to do this. So now we turn to guys like Bill McDonough and say, "Tell us what's out there that's better."

We all started with a too simplistic notion of what environmental responsibility was—we thought, let's just get something a little bit better. But now we know to go to the end of the vehicle's life. Before we didn't worry much about bonding or what fabric or interior contents did at the time you took them out or how difficult they were to dispose of. However, if you've got a product that's disposable or, in fact, will return to its base form; but the energy cost of doing so is colossal, you ought to be looking at that. Again, that's waste. We're determined to get better—that's what continues to drive us.

Q: Have you set specific goals to be established within specific time frames?

No because, again, to me quantification is kind of a needless taxonomy. We should all be working on everything we can all the time. So we've embraced the notion that says, "Get on it and work at it to the extent you can. Don't be driven off by the fact that it's difficult or you've got two or three things to worry about, but enter this into your business process." If there's one priority for Visteon, that's it; and I think it is pervasive.

Q: Some of your "blue sky" attributes talk about having fun and celebrating achievement. From where do those influences come?

People respond best when they're committed. You can drive people on fear for only so long. And the extent to which people are committed, they'll go out and do things on their own, they'll figure something out. Much of what we say about having fun and being committed embraces the great McDonough quote that says let's not worry about enhancing work, let's worry about enhancing life. We're entering a generation that's past the third phase. The first was to ignore it, the second was to wonder about it and the third says, let's engage this in our process. Let us accept this responsibility for the next generation and make it work. So I think the commitment is in the mission statement. We don't write things down that we don't believe in.

Q: How do you partner with customers on environmental initiatives? Do you bring technology to them, or do they come to you with what they want to achieve?

It's a combination. For example, the fuel cell vehicle for General Motors, which we had a role interior-wise, was the product of a conversation I had with Harry Pearce where we decided to do something together. There's no sense in having a fuel cell vehicle with a "dirty" interior. Well, GM doesn't do interiors the way we do, so you engage in that. We're also working on a project with Dow that I'll call the energy efficient interior. We're very capable at designing air conditioning management systems, and we've got a modeling capability that will tell you the right place to put the vents and about how much energy you'll have to dissipate to fully cool the vehicle in the most efficient manner. Also, if we use solar resisting window panes rather than simple glass, you allow less heat in and, therefore, you have less heat to dissipate. We've got a new compressor that is six percent more energy efficient, and that improves fuel economy. We're also working on CO2, a refrigerant that is a far less invasive gas. All of these things are part of an energy management cooling deliverance system that is environmentally responsible.

So, I can sell it to you a couple of ways. I can give you six percent better fuel economy if you put my system in. That's useful in selling cars in Europe. If you want it from a raw economic standpoint, does a sufficiently large part of the population buy on that basis? No. But is it a factor in the purchase decision? Yes—more and more so. I think we will see a generation who will make that a determining consideration. They're almost there in Germany today, and we're becoming more so here in the U.S. You hope it will be cost neutral, but if it's a premium, to what extent can we defend it? We went through this battle in a different era with airbags. They came to be mandated. Well, this may not necessarily come to be mandated, but it is going to be a purchase consideration. I believe GM is thinking that if it can put that stuff in its cars and put a responsibility certificate on it, if you will, then that's going to bring people in that it wouldn't have otherwise. Beyond that, GM is determined to do this because it's right anyway. So we're emerging into a marketing consideration from a social one. And that's fine. We can do our business and do good at the same time.

Q: What advancements in the auto arena do you feel hold the most promise?

There are a host of exotic considerations, but there are some very practical near-term ones, too. There's thermal management, which we think we do a pretty good job of with our compressor. There's a lot we do to make internal combustion engines more efficient. We're doing some work on the 42-volt integrated starter alternator systems, which represent a better chance to get better fuel economy. And to the extent to which we can get better fuel economy, we also can reduce carbon dioxide—that's a naturally valuable thing. As fuel prices soar, it becomes a personal consideration, as well. The guys who don't do it because it's right, do it because it's cheaper.

Q: What are Visteon's biggest challenges?

Keeping in focus and not getting distracted by the burdens of these times, and I don't think we will. All our plants are ISO 14001, and to the extent to which they stay responsible, manage their products, manage their waste and the like, they'll meet their business conditions as well. But, our point very clearly is we're not going to accept a difficult business climate as a means for shirking these responsibilities. We don't accept that excuse.

Q: Is it just younger consumers who are interested in the environmental aspects of the cars they buy?

It is to some extent generational, but I think there are two things coming: a younger generation that is aware and more interested, but also an older generation that has grown concerned. There are some who want to buy the responsible vehicle, and that's it; but there are those who say if you'll do this a little better than the others or show a concern for it, that's important, too. Now the beauty of this for us is we don't have 18 million customers. We've got 17, total, and to the extent to which we can engage manufacturers in this process and find those who are more interested, we are going to be okay.

My first thought is that it would be the German OEMs because of the green movement in Germany and their ability to price a little higher typically than their North American counterparts. But I give GM great credit and Ford and Chrysler as well. They're beginning to pay more attention. I think the fact that we worked the [fuel cell] vehicle with General Motors and plan to do more suggests that they are not going to abandon leadership in this area.

Q: Will consumers give up their SUVs to make those kinds of choices?

No, and that's an issue that Bill [Ford] has. You can argue that we can double America's fuel economy two ways. One way is to do as we did in the past, take the fuel economy of the Ford Pinto and give it to the Lincoln Town Car. Now, can we double the Town Car again? Not with technology as we know it. Can we take everybody out of SUVs and put them into smaller vehicles? Yes, but this is a country built on choice; and the extent to which we continue to have a marvelous highway system, a greater willingness to travel away from public transportation and people who want to carry seven, eight or nine people, there is going to be a market for those vehicles. Bill's point is one I would echo. I want to make them better than anybody else does, more responsible. Can I make them ideal? Probably not, given the physical constraints they bear. But I think we need to keep dogging it. Bill's looking for 25 percent fuel economy improvements, better emissions controls, things of that kind. That's a great enhancement of fuel economy. So yes, those vehicles are here to stay because they came here by choice. I don't think we'll regulate them away, so that means let's continue to make them better. I think it's the McDonough principle: if you start out trying to make it great, don't stop when you've made it better, get on to making it great.

Q:Do auto manufacturers have a responsibility to educate consumers about the environmental impacts of the products they sell?

I think they do. To some extent it's a defensive education—the assertions are bolder than the truth, necessarily, and so they have to deal with the issue. And I think they are. I think they deal with it in a couple ways: by defending their products and by supporting environmental causes. I'll go back to our Ford days because we were far bigger then. We worked with Conservation International and others to develop an agenda that was, to some extent, ameliorating at least some of the other things that we did that were going to be done anyway. I'm not saying that one should willingly confer harm to the public and say, "Oh, everybody does it." If it's wrong, you can't do it. But I don't think that selling SUVs is, of itself, wrong.

Q: With whom does Visteon work to help move its environmental agenda forward?

We go back to our old Ford relationships, for example, the Conservation International School—which was our creation. So we've got some informal, non-chargeable prowling rights as we go around . . . we keep our hand in even though we don't pay or get paid for what's done. We've initiated of a lot of activities, which are now bearing fruit.

And again, we don't sell retail, so the broad, public engagement really is for the OEMs. You know, Ford's advertising budget, in a good year, is larger than our net earnings.

Q: Do you choose companies to work with that share your environmental commitment?

I think that one of the measures of our excellence is the kind of people with whom we're associated—the likes of the Intels, the Microsofts, the Sonys—responsible companies that embrace some of our technology to enhance their products and allow us to use their technology to enhance ours. For example, the car in Microsoft's House of the Future is a Mercedes. It's got our technology in it. These companies have sufficient brand recognition; they won't deal with malefactors. I think that's what is important to us.

Q: What differentiates Visteon from its competitors?

I hope we're quicker to the market with good things. We do a lot of market research. On a given day we're the second largest supplier. We're in all three major markets: Europe, U.S. and Asia. We can do 40 percent of the car. So we're big. It wouldn't be for me to say we're good, but I would claim it.

Q: How many of your employees are dedicated to research and development?

We spend six percent of our budget—6.5 percent—on R & D. Some of that's commissioned research. I couldn't take you from the total cost of that to a translation of number of employees. Usually the figure people use is the percent of your revenue spent on R & D; six-and-a-half is high for a company like ours. Other parts of the industry might be at three or four percent, for example.

Q: Of which environmental accomplishments are you most proud?

I'd hate to single things out lest people who read it contend that their efforts were less important, but I think ISO 14001 is, of course, very important because it says the corporation is committed. It also sends a signal to our communities—I think we were the first auto supplier to become a Michigan Clean Citizen. It's important for our people to know that somebody is paying attention. It's something I can't quantify, but when you're recognized in the communities where our people live—one of the values of corporate citizenship is you get good people to come work for you.

Q: What's next on Visteon's environmental agenda?

More of the same, and finding that essentially great interior. We'd hoped to have something ready for Frankfurt, but we didn't. We have to demonstrate our capabilities because that's what sells. We can talk all we want to manufacturers about concepts, but in my view, it is of limited yield to do two-thirds of a car well and then leave a third. Again, I'll go back to McDonough. If that's the best you can do, do it—and get somebody thinking about that last third. I believe you can get there with the right materials, the right plastics, the right fabrics. Then work on fuel economy because that's important and something over which we have some control, some leadership. We've got to find ways to continue to sell manufacturers on that technology. We're pressing all initiatives. We do know a lot about plastics, and plastics play a huge role in all of the environmental activities from evaporative emission control on through recyclability, but we don't know enough about them.

Q: Where do you find your inspiration? How do you avoid becoming overwhelmed?

You integrate this into your business, and then you do your business—you do that which you can control. I wouldn't want him to think he's an inspiration because I like him, and I don't want him getting arrogant; but Bill McDonough has been great at giving me, personally, a horizon, a time frame to figure out what's out there and keep getting better as we go. I think that's been very helpful in thinking about interiors. We're not there yet, but it's a worthy concept. And I've watched, because he's a friend, Bill Ford dance the fine line between the environmentalists who are his friends crowding him to do things that are imprudent business decisions and striking a pretty good balance. And we look at companies like DuPont and what it has been able to do in turning around its processes. And BASF, which has found a way to take water-based paints and give them luster, which is not easy to do. [I admire] guys who refuse to accept a technical or physical impediment and just get on with the determination to get it right.


By Katie Sosnowchik. [email protected] is a GreenBiz News Affiliate. This story appears by permission. Story copyright 2001 [email protected] magazine, all rights reserved.