Xtrac: Berkshire’s motorsports manufacturing success story

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Xtrac chairman Peter Digby

Peter Digby is chairman of Xtrac, the leading supplier of gearboxes and transmissions to motorsport teams around the world. As the new Formula 1 season begins, he discusses UK engineering, the EU referendum and how his company’s ownership model is vital in staying ahead of the pack

Take a trip from Warwickshire to Berkshire and you will be travelling through the heart of Motorsport Valley. Here you will find some 3,500 British companies, including eight Formula 1 teams, employing somewhere in excess of 40,000 people in the motorsport industry, which is said to be worth £9bn to the British economy.

One of the giants in the Valley is Xtrac. Formed in 1984, the firm is now the world’s number-one supplier of gearboxes and transmissions to teams competing in events globally, including F1, Le Mans and IndyCar as well as Touring Cars and the Dakar Rally.

The chairman, Peter Digby, explains how British motorsport grabbed pole position ahead of its competitors around the world. “Firstly we had a lot of derelict airfields available in this part of the world after the Second World War and people wondered what we could do with them. It so happens they made ever such good racing circuits.

“We also had a collection of incredible engineers who had previously been making planes and armoured vehicles and they got involved in the automotive industry. Of course, the UK is renowned as a nation of inventors, although some say we’re not so good at taking those inventions to the next stage! There was an industry that grew up during the 1970s and 1980s with Cosworth and Lotus, and Xtrac came on board towards the end of that embryonic growth. It’s been a great success story.”

Xtrac formula 1 car

Racing pedigree

Digby’s own personal success story began at the age of 12, when he says his parents were “stupid enough” to let him buy a car and tinker with it in the garage. After leaving school he was competing in the Formula Ford series while also serving an apprenticeship at British Airways.

“I thought why not combine my love of motor racing with my new mechanical engineering qualification,” he recalls. “So I wrote to every Formula 1 team and I was offered two jobs: one was to be Nigel Mansell’s mechanic in Formula 3, but very shortly after that I was offered the chance to work for the Williams F1 team.”

Six years spent at Williams was followed by a year at the Haas F1 team. Digby decided to start from scratch at a new company called Xtrac, founded by his close friend, Mike Endean.

“Back then there were only four guys working here but they had a great idea,” he says. “Xtrac identified a hole in the marketplace for what is basically a bespoke transmission [in a Formula 1 car, the transmission delivers a near instantaneous change of gears with minimum loss of drive]. Rather than just do small, medium and large we were able to deliver a finely tuned transmission for each car’s installation. Bespoke, high-quality solutions became our speciality.

“The business took off. We bought machines as quickly as possible and over the next 10 years we grew to around 150 people and occupied five factories near Wokingham. But it was a drain upon everybody.”

March-2016-Interviews-manufacturing-Xtrac-5

Ownership model

In 1997, Endean had decided that he wanted to step aside and Digby had a ‘eureka moment’. He remembered reading a book titled Sharing the Success by Sir Peter Thompson. It tells the story of how the National Freight Corporation became one of the first state-owned industries to be privatised under Margaret Thatcher’s government.

“It’s all about employment benefit trusts and sharing ownership of the company,” explains Digby. Thompson led a management/employee buyout and took a business that was haemorrhaging money in the mid-1970s to one that, by the end of the 1980s, was listed on the Stock Exchange and every member of the 33,000-strong workforce owned shares in. Digby recalls, “I handed it to Mike and said ‘Have a read of that.’

“The biggest and best decision of my working life was to make sure a chunk of a company was owned by the employees. It is basically an employee benefit trust.

“I put forward a package to Mike and said, ‘If you want to stand down then let all of us buy the business.’ The financial backing was going to come from a bank but, as it turned out, it was Mike who decided to back us.

“The only stipulation that I gave was that the management needed to own 51 per cent because this is a very dynamic business. If we need to buy a machine for £1.5m, then we can’t run a co-operative. I need to be able to speak to two managers and then go out and do it.”

Digby wholeheartedly believes that other companies should follow suit. “If I had to make one recommendation or pass on one golden nugget of advice I would say go and empower your employees and give them a shareholding because you will not believe how much it motivates them.”

Xtrac premises

Export driven

Meanwhile, Xtrac continues to go from strength to strength. Says Digby: “Every year is a record year for sales. We’ve got a massive order book, the biggest we’ve ever had – it’s 25 per cent up on last year and exports make up 77 per cent of turnover. We are growing seven to 10 per cent per annum at the moment and that is perfectly sustainable. If we were growing at 25 per cent I think we would struggle to keep the DNA of Xtrac. We have a sensible business model at the moment.”

Last year, Digby put into place a new management structure at Xtrac. “I’m 58, and I started to realise that I mentored most of the team. They’ve been with me a long time. But they don’t want to sit on the shelf waiting for me to pop my clogs. So, we restructured Xtrac to increase the involvement of the 10 key managers who are instrumental in running the business.” But Digby is keen to stress that he has no intention of taking his foot off the gas. “There is absolutely no chance of me leaving. I’m loving it here.”

Even so, there are external factors which may give cause for concern, for example, the EU referendum. Given that half of Xtrac’s products are exported to Europe there are no prizes for guessing that Digby wants Britain to stay in the EU: “That said, we don’t want to be part of the EU’s Working Hours Directive. We don’t work normal hours and thank goodness the directive has not been as heavily imposed as it has with our European counterparts. We can work nights and we do work weekends to ensure our product gets to the racetrack on time.”

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Engineering talent

Investing in British talent has been the cornerstone of Xtrac’s success.

“Apprenticeships are very important. Our first apprentice, who we took on 25 years ago, now runs our North American trackside support operation. Also, Xtrac trained every head of transmission engineering currently working for an F1 team,” he says. “We need to encourage kids to get into engineering. In this country people often view an engineer as somebody who comes round to your house to fix your washing machine, whereas in Germany an engineer is a well-respected position.

“We invite schoolchildren to have a look round and see how state of the art it is. It doesn’t conform to the traditional view of an engineer working in a factory.”

With the new Formula 1 season due to start in Melbourne on 20 March, Digby acknowledges that the sport has got stuck in a bit of rut of late. “The regulatory structure has changed. The teams have more of a say in how things are run and it is dominated by three engine manufacturers and the big teams, so you do feel a bit sorry for the smaller teams.

“A lot of people have got a lot of ideas. They want to make the cars louder, to improve the spectacle of the races and they are going to race at some interesting new circuits. The business model started back in the 1970s by Bernie Ecclestone, who has done some excellent things for the sport including safety improvements, has been going for a long time and has probably got a bit long in the tooth. The decline of Formula 1 has probably helped the other Formulas. The reason why the likes of Porsche, Toyota and Audi are loving Le Mans and the sports car arena is because a lot of people are watching it.”

Meanwhile, Xtrac’s expansion into motorsport events in South America and investment in young British engineers continue to pay dividends and, in 2013, Digby won the accolade of IoD Director of the Year. He says: “I wish I’d joined the IoD earlier in my career. When you’re growing a business and you’re working up to 60, 70, 80 hours a week, it’s pretty hard to try and convince yourself to give up even more time to work with people such as the IoD, the CBI and so on. “

But now I’m part of that, I’ve been very lucky to be invited along to some of the breakfasts and lunches and it’s great to meet other chief executives. One moment I’m talking to the guy who runs Gett (formerly GetTaxi), then I’m talking to the boss of Tyrrells Crisps, and then there is the chap who runs AGA. There is such a diverse range of industries and everyone thinks their industry is different. But, in fact, they are all the same. It is about employing the right people, looking after customers and making sure you don’t just try and sell to the UK. You’ve got to go out and sell around the world.”

Xtrac is set for another successful year. But what about Digby’s own personal targets? “Hopefully, I can start to put something back. If I can bring more apprentices into the industry, make people think engineering is sexy and bring more women into our industry, then I’ll be happy.”

Xtrac HQ, Berkshire

Xtrac vital stats

HQ Thatcham, Berkshire

Formed 1984

Turnover £43m

Staff 285 (including 20 based in the US and 30 working night shifts)

High point A buyout in 1997 led by current chairman Peter Digby created a structure that meant 49 per cent of the company was owned by the employees and 51 per cent by senior management

Low point Xtrac managed to emerge from the global recession largely unscathed but had to cut its workforce from 250 to 240 people

Did you know? Xtrac chairman Peter Digby has also been a vice-president of Chelsea FC since 2003

To learn more about Xtrac’s business, watch the video here

xtrac.com

Peter Digby is a member of IoD Berkshire

 

About author

Ryan Herman

Ryan Herman

Alongside his work for Director, Ryan has written for SportBusiness International, VICE Sports, Populous, Audi and Gallop Magazine and was previously editor of Sky Sports Magazine.

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