North American automotive suppliers have benefitted from the restructuring measures they took during the economic downturn, as demand recovers and future growth prospects for U.S. auto sales—which are on a long, slow path back to 2007 levels—provide optimism. That is according to SupplierBusiness, an IHS Global Insight Co., which noted in a recent report that North American volume should reach 12.9 million next year, a 50% increase from 2009, but still less than 2007 when output was 15.1 million.
“With vehicle production still at the low end of a recovery, suppliers have been able to hold firm on their prices,” the report stated. “This has led to a series of outstanding results for suppliers, especially in the third quarter.”
With new fuel economy requirements on the horizon, which means innovations in the internal combustion engine, engineers experienced in the automotive sector are in short supply, said SupplierBusiness. Add to that the funding of expensive R&D activities. Increasingly, suppliers need to “stay ahead of the curve in order to survive and meet the innovation demands pushed down by the OEMs,” said SupplierBusiness. “With these opportunities and the larger rewards that flow to those that succeed, the industry leaders will press on, and use this year’s good results to consolidate in 2011 while many essential Tier Two [think molders and moldmakers], and lower, suppliers will struggle.”
SupplierBusiness noted that there were a number of acquisitions in late 2010, and it projects that M&A activity “is likely to continue to be busy in 2011,” with Johnson Controls and Autoliv two of the larger names announcing that they are looking at acquisition possibilities.
In fact, Johnson Controls Automotive Experience (Burscheid, Germany), in a Dec. 30, 2010 press release, announced that as of that date, it signed a purchase agreement to acquire Keiper (Kaiserslautern, Germany) and the automotive sport and specialty seat business of Recaro. Keiper is a leader in recliner system technology and is known for its engineering and manufacturing expertise in metal components and mechanisms. Johnson Controls noted that the acquisition will include approximately 4750 employees globally in seven countries.
Automakers source complete seating systems as well as single metals and mechanism automotive seating components, according to Johnson Controls’ release. With the acquisition of Keiper and the automotive seating division of Recaro, Johnson Controls expects to strengthen its competitive position in key seating components with expanded opportunities to develop new differentiating products and technologies.
“This acquisition further strengthens our metal components and mechanisms business through the addition of the Keiper and Recaro brands, which are synonymous with quality, technical expertise, and innovation,” said Beda Bolzenius, VP, Johnson Controls and president, Automotive Experience. “It provides leading technologies that we can leverage across our current seat component portfolio, and expand in China and North America.”
Additionally, on Dec. 1, 2010, Johnson Controls signed a purchase agreement to acquire C Rob Hammerstein Group (CRH) in Solingen, Germany, a supplier of metal seat mechanisms. CRH has 3600 employees in nine countries. The combined manufacturing footprint will facilitate growth, particularly in China, Mexico, Turkey, Hungary, and Romania, said a Johnson Controls press release. CHR will also become part of Johnson Controls Automotive Experience.
SupplierBusiness noted that the Detroit Three plans to “further reduce and consolidate their global platforms and supply bases are coming fruition, with the 2008 crisis providing the imperative. With this, larger suppliers will keep getting a larger slice of business, with only those smaller suppliers endowed with the ability to serve the Detroit Three carmakers on a global level [as platforms become standardized across the globe] able to pick up business.” —Clare Goldsberry