ANALYST COMMENT: Europeans, Chinese and equity groups are descending on distressed American supplier assets
Amid all the gloom and doom in Detroit, last week was one of surprising hopefulness for the troubled US supplier industry.
Suddenly, the outlook brightened for the distressed units at Delphi, Ford's ex-Visteon businesses and other parts makers' money-losing divisions.
That's because new buyers - and potential buyers - are emerging for marginal American assets. The prospectors include Chinese and European suppliers, private equity firms and, in some cases, traditional US suppliers that have managed their finances astutely.
Make no mistake, the near-term future still looks bleak for most US suppliers dependent on the Detroit threesome. Chrysler and Ford are slashing production, and, despite an improving bottom line, GM is still declining at the top line.
Still, some of the distressed units of U.S. suppliers are beginning to look more valuable to the touch. After a long, dormant period, Chapter 11-ridden companies are seeing interest in their non-core units.
Dana and Ford last week announced deals to sell key supplier assets to European companies and the level of attention among private equity groups has also accelerated.
Ford and France's Valeo signed a memorandum of understanding for Valeo to buy Ford's Automotive Components Holdings climate control business, the former Visteon unit that reverted to Ford in 2005.
Dana, in Chapter 11, said it reached an agreement to sell its engine hard parts business to German supplier Mahle GmbH for $US157m.
The hyper-aggressive Hangzhou, China-based Wanxiang Group announced that is interested not only in picking up pieces of Delphi and Visteon but apparently also Detroit's three car makers.
Some US suppliers - learning to adapt to conditions that have felled others - are beginning to adopt sensible financial strategies.
For example, ArvinMeritor, under the guidance of former DaimlerChrysler financial executive CFO Jim Donlon, has increased liquidity with new credit facilities, reduced net debt and completed divestitures of its aftermarket operations. ArvinMeritor itself may soon be on the acquisition trail.
Johnson Controls is handing off more of its struggling interior trim business to ally Plastech. And Delphi's prospects are also looking stronger as it's restructuring seems to be taking shape. The former GM subsidiary is still gaining new business, having booked over $3 billion in new steering and half shaft orders this year.