US/UK: Billionaire investor eyes components industry consolidation
Billionaire US investor Wilbur Ross is eyeing European car part makers, including British group GKN, as he steps up his attempt to consolidate the highly fragmented industry, according to a British newspaper.
The Daily Telegraph said the former Rothschild banker, who rescued the ailing US steel industry before selling his International Steel Group to Lakshmi Mittal for US$4.5bn last year, plans to build on recent investments in Oxford Automotive of France and Wagon in the UK and is understood to consider GKN an attractive business, but would not be drawn on whether he might bid.
Asked if he had other UK companies in his sights, he told the paper: "There may be but I don't think it's fair to people to make a hit list."
The Daily Telegraph said Ross plans to repeat the success he had in consolidating the disparate steel industry - creating one of the world's lowest-cost steel producers and dragging the US industry from the brink of bankruptcy.
He told the paper: "The automotive component market globally is a $550bn business and no one has as much as 5%. I think there's room for someone to have 10%, 15% or 20%.
"The sector is operating at about 60% capacity. As you can imagine, it's very difficult for any manufacturing business to be particularly profitable."
The paper said this rationale closely resembles Mittal Steel's reasoning for its £12.7bn bid for European rival Arcelor. Ross is on the board of Mittal and is clearly an inspiration for Mittal's 30-year-old finance director, Aditya Mittal - son of founder Lakshmi Mittal and the brains behind the company's tilt at its European competitor.
According to the Daily Telegraph, Ross echoed Mittal Steel's argument for creating a more consolidated steel industry with claims customers would be better served by having fewer car parts suppliers.
"The average car has over 2,000 parts in it, so imagine if a car company makes 10 models of a car in 10 countries. That's 200,000 parts. Arranging the supply chain for that is a daunting task."
The paper noted that Ross began his move with the automotive interiors business of US group Lear and the UK and European assets of bankrupt group Collins & Aikman.