Auto parts companies mergers and acquisitions battle

These days, we have been paying attention to the news of auto parts, because the parts have become a new hot spot as the auto market improves. Not only personnel changes, but at the capital level, small-scale parts and components companies have become the new darling of international capital.

At the end of May, Germany's third largest component company ZF CEO Hart accepted a new appointment and became a member of the supervisory board of the Virginia Group, the largest car manufacturer in France. Virginia currently belongs to the Peugeot Citroen Group, which manufactures interior, exhaust and front-end modules. Among the annual sales, German auto companies account for 40%. Hart, 65, will continue to work as CEO at ZF, where he has worked for the third largest parts company in Germany for a lifetime. According to the contract, Hart's tenure in Virginia ends in 2016.

You should never think of it as an alliance in a certain sense. In fact, this may be considered more of an open mind. After experiencing a trough that has not happened for several years, the auto industry has begun to try to learn useful abilities at different levels while regaining confidence and coming out.

For example, KlausMaier is now one of the five members of the newly established advisory board of Valeo, another French component company. This committee will provide Valeo's management with advice and support from the strategic to the executive level, including regional operations. Currently, Valeo plans to expand in China, India, Brazil, Thailand and Turkey, and establish new plants in Russia.

How attractive is the automotive industry? The number is the most convincing. At present, the annual production and sales of automobiles in the world is 57 million, and the future growth space will reach 30 million. This is a paradise for suppliers and a paradise for investors.

The climbing auto industry has attracted a large number of hedge funds, PE (private equity investments) and competitors to select projects. In less than two years, these companies have experienced a huge downturn in the industry. In the process, everyone has cut costs and improved product capabilities, and now it is just a time to look for new opportunities. Paul Elie, head of PwC Automotive Business Services in the United States, estimates that in 2010, the number of M&A in the parts and components sector will increase by 25%.

It’s not that small companies will be the target. On the contrary, the bigger the company may be acquired, the bigger it may be. The reason is that these companies had a lot of business before, and they were all dragged down. Their business conditions were not good, but their actual business capabilities were not weak. Especially at the research and development level, these companies did not relax.

Enterprises that have gone out of bankruptcy protection have adjusted their business lines and strategies, and have gained a lot of cash while acquiring new vitality. Federal-Mogul CEO Jose Maria Alapont estimates that they have about $1.5 billion in cash. But the new acquisition of Federal-Mogul will be more rational and more strategic. Federal-Mogul hopes to acquire companies that produce hybrid and electric vehicle accessories to control emissions or improve safety.

BorgWarner Global CEOTimManganello told the author in January this year that many parts companies will go bankrupt this year. He does not intend to buy large companies, and the size of the assets is between 350 million and 500 million.

More suppliers have found their way. On May 19th, IAC opened a new factory in Beijing to produce carpets. The company belongs to investor Ross, who bought 12 bankrupt suppliers in 2009 and added more than $100 million in sales to himself.

However, the gambler's mentality still exists. At some point, the funder only wants 10% of the total assets, while the seller wants to return 60% to 70%. Visteon in bankruptcy attracted Johnson Controls, which invested $1.25 billion to acquire Visteon's electronics and interiors business (the two divisions totaled $4.1 billion in 2009). However, Visteon issued a statement on June 1 stating that the company's board of directors unanimously voted to reject the Johnson Controls acquisition plan.

Not long ago, Virginia had bought a Visteon factory in the United States to produce automotive interior parts.

If you don't find the direction earlier, maybe Visteon would be dismantled and sold. How many opportunities are there for Chinese companies? Chinese companies are not short of money, but they seem to lack a little observation.

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