International Automotive Components (IAC) is a Tier I supplier of interior systems and components specialising in instrument panels and cockpit systems, door assemblies, overhead systems, door and trim systems, and flooring and acoustic systems. It was formed in 2005 by investor Wilbur Ross and Franklin Mutual Advisers following the acquisition of Collins & Aikman’s European assets. Dave Leggett caught up with IAC’s John Smail – who manages the firm’s North American business relationships with OEMs – at the company’s Dearborn (Detroit) headquarters this week.
When the economic crisis of late 2008 and early 2009 hit Detroit, International Automotive Components (IAC) was already no stranger to the world of corporate restructuring. A privately-held company, IAC North America is owned by WL Ross & Co. LLC (37.5%), Collins & Aikman Creditors (25%), Franklin Mutual Advisers (18.75%) and Lear Corp. (18.75%). International Automotive Components (IAC) Group North America was formed on March 31, 2007, following the acquisition of Lear Corporation’s Interior Systems Division.
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“When IAC Group North America was formed in 2007 we were already on the road to restructuring because we had plants we had to close,” says Smail. “When the world changed in ’09 we accelerated that restructuring to take account of new market conditions. We have closed eight plants over the past three years. That has left us with capacity aligned with where we think volume is going to be over the next few years.”
Smail believes that the excess capacity in what was Collins & Aikman and Lear’s interiors business has now been taken out – especially ‘hard trim’ (the IP, door and console side of the business) – and he doesn’t foresee any more downsizing for IAC in North America.
He’s also cautiously optimistic about the state of the US auto industry. He’s in a good position to know how the industry is faring – IAC North America supplies to Chrysler, Honda, Ford, GM, Toyota, Volkswagen, Nissan and BMW. IAC North America turned over an estimated USD1.4bn in annual sales in 2009, which is expected to grow to just over USD2bn this year reflecting the recovery to industry volume from last year’s lows.
But, like many others in the US auto industry, he’s not expecting a sharp pick-up to industry volume.
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By GlobalData“We hope that volume for the industry will continue to trend upward so that we can get back to that 15m or more [annual sales] kind of area where the industry used to sit. Right now we’re thinking that’s going to be 2014 or 2015.”
Smail stresses the importance of the sort of business IAC is pursuing. The company wants to leverage the scale and footprint benefits that flow from supplying to global platforms and IAC is firmly targeting the big OEMs.
IAC is also highly vertically integrated, something that Smail believes gives it a major competitive advantage.
“We need to deliver on quality and on cost,” he says. “And we also need to be able to offer a broad range of products for our customers’ needs, which are changing – which means we need to innovate and do that from a position of deep understanding of what’s required and how we achieve that.
“And that comes with things like having our own materials capability. We are not a ‘shoot and ship’ plastics company. There is a tremendous amount of technology and R&D behind our products. For example, we have a testing facility in Troy [Michigan] which is very comprehensive, dealing with prototyping, validation testing through material developing laboratories. We do our own tooling and controlling that means we have more control over things like grain pattern. We also have an NVH testing facility which is becoming even more important as voice command systems perform better with less road and external noise present in the cabin.”
On the innovation side, IAC works closely with the OEMs to assist them in areas like weight reduction. But styling is increasingly important, too. Smail cites studies that suggest the final customer now rates the quality of automotive interiors as highly important, something that was not the case in North America a few years ago.
“Interior comfort, quality of workmanship, styling – these are now much bigger influencers in the consumer purchase decision,” he maintains. “And the products we make directly influence that. So the importance of fit and finish, craftsmanship, cut and sew stitching is much bigger now than it was.”
And he suggests that vehicle manufacturers are now having to respond to changed consumer expectations.
“Interiors were poor in a lot of vehicles and the customer got used to that over a long period of time. But finally there has been realisation – especially for the Detroit Three – that you have to spend some money on the interiors if you want to positively impact the customer’s perception of vehicle quality.”
Turning to China, Smail is excited by the opportunities presented by rapid market growth there, but wary about making investments that don’t fit with the strategy of developing global platform business with international OEMs. The bigger and more established Asian OEMs are already on the radar for new business, but IAC is less interested in the smaller and still emerging companies until it becomes clearer which ones are going to be successful and survive future industry consolidation.
“We will put plants up where we need to put plants up in order to service the global guys.
“We want to grow organically with the big players and leverage our global capability to support those platforms. The opportunities are there in China, but we want to pick our business partners carefully.”
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Biography: John Smail
Vice President, North American Commercial Group
John Smail is Vice President, North American Commercial Group for International Automotive Components Group North America (IAC). In this role, Smail oversees all program management functions with foreign and domestic manufacturers in IAC’s North American commercial group portfolio.
Smail has extensive experience in sales, program management and operations. He applied these skills in his previous post at IAC as Vice President, General Motors Commercial Unit. Prior to joining IAC, Smail held several positions at the former Collins & Aikman including Vice President and General Manager of the company’s General Motors and Ford Business Units.
Smail received his bachelor’s degree in Mechanical Engineering from Michigan State University and his master’s degree in Business Administration from Oakland University.
