A shake out in the automotive supplier industry caused by the economic crisis will lead to good news for some businesses, according to a leading management consulting firm which said 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.
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These companies scored highest on a scale of those likely to acquire competitors hit by the recession drawn up by PRTM. Few North American suppliers make it on to the list and many are headed for bankruptcy, the consultancy added.
Chinese companies Guangzhou Automotive Components, a division of the 51% state-owned carmaker Guangzhou Automobile Industry Group, and Weichai Power, a state-owned diesel engine manufacturer appear on PRTM’s global top 10 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.
Companies seen as likely to become increasingly acquisitive include Denso, Toyota Boshoku and Aisin Seiki of Japan along with European businesses ZF Friedrichshafen, SKF Group and BASF.
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By GlobalDataDietmar Ostermann, global lead director for PRTM’s automotive industry practice and author of the report, said: “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, the diversified Pittsburgh glass and paint manufacturer, appears in the top 10.
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, have filed for Chapter 11 bankruptcy protection.
Other prominent US auto suppliers, such as American Axle & Manufacturing Holdings, whose leading customer is General Motors, could follow suit, PRTM predicts.
Osterman added: “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.”
The intensity of bankruptcies and consolidation is anticipated to be strongest among capital-intensive chassis and electrical/electronics suppliers. PRTM’s study showed that 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.
Ostermann said: “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.”
PRTM’s study evaluated more than 20 financial and qualitative criteria, such as cash flow and ownership structure.
