GM’s completed sale of Nexteer to Pacific Century Motors (PCM) marks the start of a new chapter for a 104 year old supplier once known as Saginaw Steering Gear. As part of the deal, PCM will leave Nexteer’s existing management team in place and headquartered in Saginaw, Michigan.

Nexteer is already well positioned with a global development infrastructure and local production.  And its engineering capability looks set to strengthen in the coming months, too. The supplier is currently looking to recruit 100 engineers for its headquarters in Saginaw, Michigan by the end of the year.

While today’s announcement puts the official seal on a deal that has been negotiated for several months, it is particularly interesting to note Zhao Guangyi’s comment that PCM will provide Nexteer with access to capital investment that will allow the steering supplier ”to continue its global growth in technology and manufacturing, particularly in China.”

The power steering market is fragmented in China.  Like many competitive industries, there is downward pressure on selling prices and Nexteer faces strong competition from the likes of China Automotive Systems, Shanghai ZF and First Auto FKS.

In our view, one of the ways to achieve growth in this market will rest on Nexteer’s ability to find and develop local suppliers with the appropriate skills and process controls to make components for power steering systems.  Meanwhile, Nexteer can expect PCM’s existing business relationships to open new doors to the blossoming Chinese automotive market.

While hydraulic powered steering systems are in decline in both North America and Europe, we are seeing modest growth for such systems in emerging markets such as China.  However, over the longer term, these markets will also move to full electric steering as market pricing for electric power steering (EPS) matures and scale is achieved.

And while we see an appetite in terms of functionality of EPS in China, it may prove challenging for Chinese workshops.

Matthew Beecham

See also: US: Steering specialist Nexteer sold to Beijing investors