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Auto Suppliers Expect an Acquisition Binge

But don's expect much job growth, cautions survey.

by on Dec.18, 2015

Many of the mergers and acquisitions are likely to happen in high-tech areas.

As tough as the Great Recession was on automotive manufacturers like General Motors and Chrysler Corp., it arguably was even tougher on industry suppliers, scores going bankrupt and many force to close their doors for good.

Now, the dramatic upturn is buoying bottom lines and, flush with cash, a new survey finds, the industry’s parts manufacturers are set to go on a buying spree. That said, suppliers aren’t just tossing their money around, more than three out of five saying they plan to focus on cost cutting and other efficiency matters in 2016.

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“Nearly 60% of survey respondents are expecting to pursue acquisitions in the next 12 months,” according to the annual Capital Confidence Barometer pulled together by consulting firm EY.

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American Motorists Big on Customization

SEMA Show wraps up – but aftermarket hits record sales.

by on Nov.11, 2013

If there's something you can do with a vehicle, you'll likely find the parts and accessories at SEMA.

Whether you were looking for a high-performance crate engine, off-road tires or something as goofy as “eyelashes” to attach to attach to your car’s headlights, there was seemingly something for everyone wandering through the sprawling Las Vegas Convention Center during the course of the last week.

It was all part of what has come to be known as the SEMA Show, the annual gathering of the Specialty Equipment Marketers Association. The largest trade group for automotive aftermarket suppliers says it’s on track to report close to $32 billion in sales this year, reflected by the record turnout of more than 2,500 vendors and many as 150,000 visitors to this year’s event.

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“Anything you can put on a car or fix a car with, they have it at the SEMA Show,” gaped Chris Perry, the general manager of Chevrolet.

The largest of the General Motors divisions staked out a major presence of its own at SEMA, with dozens of production models and concept vehicles – ranging from a high-performance version of the Spark EV to two special edition Corvettes – on display.

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Delphi Back on the S&P List

Back in good graces after decade of turmoil.

by on Dec.24, 2012

Seven years after a bankruptcy filing launched what became a sweeping reorganization – and the longest corporate run through the Chapter 11 process in American business history — Delphi Automotive is final returning to the good graces of Wall Street.

The auto parts manufacturer Delphi Automotive (US:dlph) will replace Titanium Metals Corp. in the S&P 500 index, S&P Dow Jones Indices said in a statement Tuesday evening.

The change will take place after the close of trading on Dec. 21, when Precision Castparts Corp. is expected to complete its acquisition of Titanium Metals.

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Delphi, which assumed control of a substantial portion of General Motors’ in-house parts empire in 1999, filed for bankruptcy in 2008 as its struggled with an unwieldy cost structure built around traditional union contracts that had been undercut and rendered unsustainable by the rapid globalization of the auto industry.

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General Motors and Ford want American suppliers to follow them into Russia.

GM planning $1 billion investment in old Soviet heartland.

by on Jan.25, 2012

Cars move along Ford's assembly line in St. Petersburg.

General Motors is planning to invest more than $1 billion in Russia over the next five years, said James Bovenzi, managing director of GM Russia and CIS, and it expects production, including production by its joint venture partners, to double from 232,000 units in 2010 to more than 520,000 units in 2015.

But the maker doesn’t want to do it alone.  GM wants its traditional supply network to follow along.  And so do Ford, which sees significant growth potential of its own in Russia.

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“The reason we are there is we see opportunity,” Bovenzi said during a dinner meeting arranged by the U.S.-Russia Business Council to encourage American automotive suppliers to consider investments in Russia.

“There is a lot of pent-up demand in Russia” he noted. “The average vehicle is more than 10 years old.  The middle class is growing and nine of the 10 best-selling cars in Russia are foreign brands,” noted Bovenzi, adding GM’s Chevrolet brand was a top seller.

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Renesas Reboots

World’s largest auto chipmaker races to bring production back online months ahead of schedule.

by on Aug.29, 2011

Renesas is the single-largest supplier of automotive micro-controllers in the world.

In a matter of minutes, the earthquake and tsunami that struck Japan’s northeast coast, last March, took tens of thousands of lives and created hundreds of billions of dollars in devastation.  Few industries felt the impact more directly than the automotive world – parts shortages still plaguing many of the industry’s major manufacturers.

While the March 11 disaster had a wide-ranging impact, causing shortages of a variety of parts, including plastic and rubber goods, perhaps the biggest problem was a shortage of electronic components.  Among the manufacturers hardest hit by the quake was Renesas Electronics, the world’s largest supplier of micro-controllers.

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Renesas provides 40% of the chips used by the automotive industry, and without those silicon circuits carmakers like Toyota and Honda saw many of their assembly lines come to a screeching halt.

Bringing its operations – which center around multi-billion-dollar “clean room” facilities in the region hardest hit by the March disaster – hasn’t been easy, but in recent weeks Renesas has been ramping operations back up and plans to be back to full capacity next month, TheDetroitBureau.com learned during a discussion with senior executives from the chipmaker.

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Toyota Tops in Supplier Relations – But Just Barely

Japanese sliding, while Detroit makers markedly improving relations with parts vendors, says new study.

by on May.23, 2011

Toyota rises to the top in a new study of supplier relations - but Detroit makers are catching up.

Toyota has the best working relationship when it comes to its suppliers, reports a new study, something that can pay off handsomely in terms of quality, reliability and cost – and also result in getting new technologies ahead of the competition.

It was the first time in three years the Japanese maker topped the list.  But Toyota actually saw its score decline, year-over-year.  It landed in the number one spot only because last year’s leader posted an even sharper dip.

Honda this year came in second in the annual study by the suburban Detroit-based consulting firm Planning Perspectives.  But the U.S. Big Three, General Motors, Ford and Chrysler, followed close behind, apparently reflecting their recognition that simply hammering suppliers for lower prices isn’t a long-term solution.

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“In the last several years the US automakers, realizing that an adversarial approach to working with suppliers won’t work, have been working hard to work more collaboratively with their suppliers,” according to study author John Henke.

The Japanese leaders, he added, “continue dropping,” while “the domestics are getting better, and quite uniformly.”  In fact, said Henke, Ford is well positioned to pass the Japanese leaders in the coming years.  He also noted that GM could surpass Nissan, which held its score stable this year. In the next two to three years.

“We are pleased that suppliers have acknowledged our progress as reflected in the latest survey by Planning Perspectives, but we still have a long way to go on this journey,” said Dan Knott, Senior Vice President of Purchasing and Supplier Quality.

Developing better relations with suppliers is “paramount to us,” added Knott, reflecting the comments by other industry executives.

But building a good relationship isn’t always easy, and Detroit makers have had an especially tough time over the years.  General Motors, in particular, was frequently criticized by vendors frustrated to see it focus most of its efforts on driving down costs – even if that meant risking quality, some suppliers contended.

Things turned especially sour as the domestic makers started plunging into financial trouble prior to the U.S. economic meltdown that led GM and Chrysler to ultimately file for bankruptcy.

Since then, Planning Perspectives’ data suggest, the Detroit makers have begun rebuilding relations.  At the same time, Japanese makers have been running into more trouble.  Why? A variety of factors could be at work, including quality issues, like those that struck Toyota, resulting in the recall of more than 10 million vehicles over the last two years.  The Japanese are also scrambling as their long-held cost advantage over Detroit has begun to close.

GM, meanwhile, has taken a number of steps to improve relations, including speeding up payments for parts, a frequent complaint of vendors – though a senior executive with a German parts supplier cautioned, “They still have a long way to go.  It’s still difficult to work with GM compared to Ford and some of the Japanese.”

The focus on improving relations comes as automakers have steadily outsourced much of the work that was once done in their own plants.  That means they are much more dependent upon suppliers to not only hold down costs and maintain quality but also to deliver the latest technology, noted Ernst Lieb, the CEO of Mercedes-Benz U.S.

Indeed, significantly, “One area where Toyota and Honda still have a meaningful lead over the US Big Three is in their respect for suppliers’ proprietary information and intellectual property such as patents and confidentiality of technical innovations,” noted Henke.  For the Japanese, that translates into suppliers being more willing to share new technology even before they have been given a purchase order.

Vendors are more likely to deliver their newest and best to “friends you trust,” said Henke.

The Planning Perspectives study has traditionally focused on U.S. and Japanese manufacturers but this year began looking at some Europeans, as well.  Since there wasn’t enough data to show historical trends, the authors didn’t rank them but Mercedes-Benz would’ve topped the list, with BMW coming in third and Volkswagen sixth.

Nissan to Increase North American Production, Trim Use of Japanese Parts

Maker also announces more Leaf battery cars coming to U.S.

by on Apr.21, 2011

Nissan will sharply increase the use of locally-produced parts, reducing its reliance on Japanese suppliers.

Nissan will sharply expand the use of locally-produced parts at its North American assembly plants, said Carlos Tavares, president of Nissan Americas.

That move will come at the same time the second-largest Japanese maker shifts production of more of its vehicles, including the Rogue crossover from Japan to factories in the U.S., Canada and Mexico.

“We will significantly reduce the number of parts coming from Japan,” said Tavares, keynote speaker at the 2011 New York Auto Show.  The goal is to jump from the current level of 69% locally-sourced components to 85%, he added.

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Like rivals Honda and Toyota, Nissan was hard hit by the series of disasters that struck Japan on March 11, losing the better part of a month of production in the home market alone.  But Tavares said all of Nissan’s plants are now in operation, the maker having found ways to “bypass parts shortages” caused by the crisis.

In his speech and a subsequent question-and-answer session, the Portugese-born (more…)

Domestic Makers Wary of Disruptions from Japanese Disaster

Problems with Japanese suppliers threaten Detroit’s Big Three.

by on Mar.15, 2011

Shortages of Japanese-made components, such as semiconductors and batteries, could bring trouble for U.S. makers, including Ford, which uses Japanese batteries in its Fusion Hybrid.

While the Japanese auto industry reels from the devastating one-two-three punch of earthquake, tsunami and multiple nuclear accidents, domestic carmakers are also growing increasingly anxious about the global reach of the catastrophe.

Officials from General Motors, Ford Motor Co. and Chrysler Group report they are monitoring the situation carefully – while also exploring the potential for alternate sourcing of components currently purchased from Japan.

The lack of a single key component could bring an assembly plant to a sudden halt, industry insiders fear.

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“One area of growing concern is the supply of automotive semiconductors,” noted analyst Rod Lache, of Deutsche Bank.  “Auto Industry purchasing execs had already expressed concern about tight supply of Auto Semis even prior to the disaster.”

These are the central components of today’s digital automotive componentry, whether used in engine management systems, airbag controllers or an infotainment like Ford’s Sync.  Japan, said Lache, produces about 22% of global auto semiconductors.  But the production process is particularly sensitive, and “even millisecond (electric) outages or small tremblers can result in the scrapping of weeks of in-process production.”

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Visteon Close To Exiting Chapter 11

But parts maker will be smaller, more targeted.

by on Sep.29, 2010

Parts making giant Visteon may soon exit bankruptcy after reaching settlement with Ford.

Ford Motor Co.’s one-time partsmaking operations, now known as Visteon, may soon be able to exit bankruptcy protection, following in the corporate footsteps of Delphi Corp., the former General Motors parts arm that this year finally wound up the longest run under Chapter 11 of any company in American history.

The two units were initially created to help Ford and GM spin off stamping and other component operations that they no longer believed possible to operate profitably, especially under their expensive union labor contracts.  But even on its own, Visteon, created in 2000, was almost immediately struggling to survive.

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The maker filed for Chapter 11 protection in May of last year and many observers believed that without some assistance from former parent Ford, it would not be able to re-emerge.

But the two companies have resolved a number of outstanding issues, Ford agreeing to waive $268 million in pension and retiree benefit claims against Visteon.  The automaker has also agreed to move forward with $600 million in critical new contracts.

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Magna Co-CEO Russia-Bound

Siegfried Wolf lands job with metals oligarch.

by on Sep.13, 2010

A senior manager heads for Russia.

Magna International Co-CEO Siegfried Wolf is leaving the Canadian automotive supply giant in November to take a job with Russian metals tycoon Oleg Deripaska.

The move comes less than a year after a bid by Magna and a Russian partner to take control of General Motors’ struggling European Opel subsidiary collapsed.

Wolf, who is also head of Magna’s Austrian-based vehicle building unit, Magna-Steyr, will take an executive position with Deripaska’s Basic Element and its machinery division OJSC Russian Machines, the parent company of Russian automotive OEM, GAZ Group.

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Donald Walker, who shared chief executive duties with Wolf, was confirmed as Magna’s single CEO, following Wolf’s resignation.

“When Oleg Deripaska recently approached us for permission for Basic Element to make an offer to Sigi, we made it clear that the decision should ultimately rest with Sigi,” Magna Chairman Frank Stronach said in a statement.

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