Europe’s fragmented bumper (fascia) sector looks set for a shake-up.
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Eight key suppliers are jostling for market share with a handful of minor players and OEM in-house operations. But one, US-based Venture Holdings, has a significant advantage.
Venture has an estimated share of around 28% of the European market, followed by Plastic Omnium at 15%, Dynamit Nobel with 13%, Decoma, 10%, and Faurecia 8%.
Why the impending shake-up? Despite Venture’s strong share – which, interestingly contrasts with a lowly 3% share of the North American market – a major slice of the company’s European Peguform operations remains up for sale.
The same goes for Dynamit Nobel, Europe’s No. 3 bumper supplier. Dynamit Nobel has recently been put on the block by parent company, mg Group, known as Metallgesellschaft until 2000.
Managers at Venture’s Peguform subsidiary filed for insolvency in their German operations in May 2002, blaming the US parent for financial difficulties.
Peguform was subsequently declared bankrupt in October 2002 despite a € 20 million bailout organised by such key customers as Porsche, Audi, BMW and DaimlerChrysler.
The operation is currently run by administrators. European plants outside of Germany were unaffected at first but Peguform France also filed for insolvency in October 2002.
In March of this year Venture Holdings filed for Chapter 11 protection.
Dynamit Nobel, which has annual sales of almost $1 billion to automotive customers, supplies bumper systems and other front-end components including grilles, panels and cockpit components.
It makes bumpers for the Mercedes-Benz A-, E- and S-Class in sequence, for example, and in 2003 won a supplier award for the bumpers it supplies to GM’s Bochum, Germany, plant. Its newest contract is for new multi-functional bumpers systems for the BMW X3.
Bumpers are an increasingly important area on vehicles. Carmakers are adding the likes of radars and infrared sensors for adaptive cruise control and parking assist systems and developing new functions such as self-deploying front spoilers.
They are also vital in new passive pedestrian safety systems.
Bumpers are a crucial part of a front-end module, whether added to the carrier or radiator before delivery to the OEM or installed on the final assembly line.
Important European front-end module suppliers such as Plastic Omnium and Faurecia are also bumper makers. Others, such as Hella-Behr Fahrzeugsysteme and Valeo, are not.
Potential purchasers of these businesses include existing bumper and other suppliers and financial buyers. But one, Decoma, appears content to stay on the sidelines for now.
Decoma, the clear market leader in the North American market, with a share of around 39% of the bumper fascia market, announced an initial € 10 million bid for Peguform France’s bumper operations in January 2003. One month later, following due diligence, the bid was withdrawn.
At a November 4, 2003 board meeting, Decoma reviewed two potential acquisitions and flatly rejected them. “We’ve got to make improvements in Europe and until we’ve done that most other things will be on the back burner,” said Al Power, Decoma’s President and CEO.
Plastal, a minor player in Europe but a key supplier to Volvo, also pursued Peguform France.
“We were very much involved in acquiring Peguform France, having filed for receivership,” said Christer Palm, President of Plastal in a recent interview with Utility Vehicle Manufacturing.
“We were the only bidder in the end until Venture came back as an interested party, being their ultimate shareholder through Peguform Germany. They were successful and have now gained control.”
Meanwhile, a deal for Peguform Germany is imminent, with three financial investors and three suppliers in the running. Plastal has already admitted its interest.
Says Palm: “We have also been looking at quite a number of other [acquisition] candidates, recently announcing our interest in Peguform in Germany, which we are still in talks with.”
Decoma is more interested in picking up additional business following a deal done by others. In the meantime it believes Peguform’s difficulties are paying off in the form of reduced pricing pressures in the bumper market.
“There’s an awful lot of uncertainty in Europe right now, resulting in pricing pressure not being as intense as it was,” Power said.
Both of these players are undoubtedly also viewing developments at Dynamit Nobel with interest.
Plastic Omnium may also see opportunities to lift its European share significantly, although it too is currently focused on squeezing higher efficiencies from its recently expanded manufacturing footprint in Europe.
Existing non-bumper suppliers cannot be ruled out. For example Valeo currently has to rely on a partnership with Plastic Omnium to compete in the FEM segment.
Decoma believes a sale to financial investors is the most likely outcome.
“A lot of financial buyers are going after these assets and potentially bidding up prices,” said Power. “The numbers we are hearing for Peguform Germany are out of left field. We think it will be a financial buyer that takes over that business. If they overpay and don’t have operating experience, life couldn’t be better.”
