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Europe and China are top car parts suppliers.

Byline: JOHN CRANAGE

European and Chinese companies dominate a list of more than 350 automotive suppliers likely to emerge as winners in the global consolidation of the sector, a report claims.

They scored highest on a "global buyer scale" (those likely to acquire competitors hit by the recession) drawn up by PRTM, an international management consulting firm.

North American supply chain companies, in contrast, not only do not make it on to the list but many are are headed for bankruptcy, PRTM said.

Guangzhou Automotive Components, a division of the highly profitable, 51 per cent state-owned automobile manufacturer Guangzhou Automobile Industry Group, in China, and Weichai Power Co, a state-owned diesel-engine manufacturer in Weifang, China, appear on PRTM's global ten list.

Guangzhou already has been active in buying automotive assemblers and suppliers and is also a joint-venture partner of Toyota and Honda in China.

Suppliers to Weichai Power and Toyota Keiretsu (meaning a network of mutually supportive companies) such as Denso, Toyota Boshoku Aisin Seiki are also on the top ten buyer list, along with large, global European suppliers like ZF Friedrichshafen, SKF Group and BASF.

However, Dietmar Ostermann, global lead director for PRTM's automotive industry practice and author of the report, says: "Despite the fact that Toyota Keiretsu suppliers show very well as potential buyers in our study and have the financial strength and capability to be a consolidator, we don't expect them to be very busy with M& A activities. It is counter-cultural to Toyota, and I expect they will continue to grow organically or engage in joint ventures."

Only one US supplier, PPG Industries, a diversified Pittsburgh glass and paint manufacturer, appears in the top ten.

PRTM predicts that several of the remaining 31 largest global North American suppliers are most likely headed for bankruptcy or buy-out.

So far this year, Lear, Metaldyne and Visteon, among others, filed for Chapter 11 bankruptcy protection. Other prominent US auto suppliers, such as American Axle & Manufacturing Holdings, a leading a customer of General Motors, could follow suit, predicts PRTM.

In North America, the risk of failure is higher for the 31 largest global 100 suppliers than the next largest 30 suppliers.

"This is, in part, because the large, global North American suppliers have been under more intense scrutiny from auto manufacturers, and several of them are tied to Chrysler and General Motors," said Mr Ostermann.

The intensity of bankruptcies and consolidation is anticipated to be strongest among chassis (brakes, steering, axles, suspensions, and so on.) and electrical/electronics (wire harnesses, switches, door systems, etc.) suppliers.

Chassis systems are usually capital investment-intensive and so more affected by volume declines, while elec-tronisystems represent the future of the vehicle industry and many suppliers are trying to add electronic capabilities to their systems.

When PRTM studied the accelerating pace of the most recent 122 supplier bankruptcies it found that a significant number were chassis system suppliers, such as Metaldyne, Hayes Lemmerz International, Contech and J L French.

"Pair that with the relatively unconsolidated supply base with over 120 chassis suppliers of relevant size globally and the fact that this segment has the largest number of strong potential buyers and weak potential bankruptcy candidates, and it tells you that the M& A pressure will be highest in chassis systems," said Mr Ostermann.

The study covered 357 global suppliers from North America, Europe, South America, China, India, Japan and South Korea and was conducted by a global PRTM team between February and July 2009.

It evaluates more than 20 financial and qualitative criteria, such as cash flow and ownership structure.

DETAILS: For further information contact Danielle Bernier at dbernier@prtm
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Title Annotation:Features
Publication:The Birmingham Post (England)
Date:Aug 24, 2009
Words:604
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