Automotive Parts Supplier's "Flu Year"

As a prestigious auto parts giant, Delphi was once the world's oldest. However, in the 2008 global auto parts supplier sales list, the company's name has retreated to seventh place. The Lear Corporation, once ranked among the top four in the world, was squeezed out of the top 10.

A car industry person uses the term “clouds and rain” to describe the current world auto parts industry. In his eyes, many suppliers who have been brilliant for a while now have become yellow. Today, some manufacturers who seem to be living with relish may "not necessarily close down day after day."

From the point of view of the global auto industry in 2008, a typical “flu” symptom continues to spread: the auto market “sneezes”, which affects the healthy development of auto manufacturers, and vehicle manufacturers directly infect this to their next family. - Parts suppliers.

Depressing performance

According to Neil De Koker, president and CEO of the American Hosting Suppliers Association, his association is like a mirror of the rise and fall of American auto suppliers, reflecting the current trend of the entire industry. He believes that from the number of companies that have withdrawn and joined in the past year, suppliers are experiencing an inexplicable “labor pain”.

In the past year, 44 members of the association have disappeared, while 78 new suppliers have joined. In the first four months of this year, 13 have disappeared and 25 new members have joined. "This shows that a new wave of mergers and acquisitions is taking place," Neil explained.

The sales rankings and growth rates of suppliers in 2008 can also reflect the changes that are taking place. From the performance of suppliers in various regions, due to the impact of the impact and the different measures taken, the performance of companies varies greatly.

The overall poor condition of the industry is beyond doubt. For the top 50 companies, the total sales for the year were US$ 476.207 billion, which was an average decrease of 3.66% compared with US$ 494.298 billion in 2007.

One of the most pessimistic is the US auto parts supplier. Most of the 18 US companies that were shortlisted showed negative growth year-on-year, and their sales fell by an average of 5.73%, which was significantly higher than the average of the top 50 companies. One of the most notable is Delphi, which once ranked first in the world as a supplier. The sales amounted to US$18.06 billion, a decrease of 18.95% year-on-year. In order to reduce the burden on the company, the company has always been in a "downsizing" and has sold a lot of assets in the past two years.

Also depressing is the Japanese supplier. Among the top 50 Japanese companies that entered the top 50, except for Toyota Motor, Hitachi, and Keihin, their sales decreased from the previous year. Among them, Japan's largest automotive parts supplier sales of electrical equipment throughout the year achieved 27.762 billion US dollars, a decrease of 7.938 billion US dollars over the previous year, with a 22.24% decline led the decline.

In stark contrast to Japanese and US companies, it is Europe's spare parts supplier. Into the top 50 European companies, 13 sales have been achieved, of which the most eye-catching are the Bosch Group, which has been the number one global supplier in recent years. In 2008, the company achieved a global sales income of US$33.901 billion. Although it decreased 6.25% year-on-year, it still took the No. 1 position.

The culprit: "over-reliance"

“You may find it hard to believe that 100% of our products were supplied to Volkswagen. When we first came to the Chinese market, we had only two customers, namely the two German joint ventures of Volkswagen.” A wholly-owned auto parts manufacturer in Jiangsu Province The sales director smiled and told the author that after several years of hard work, the share of the Volkswagen Department now accounts for only 20% of their total market.

The phenomenon of “over-reliance on” an entire vehicle company like this is actually quite common in the global parts and components industry. Although globalization has been plagued for many years, it seems that the German suppliers are supporting the German manufacturers and the US suppliers are supporting the American manufacturers. Many people know that before Delphi applied for bankruptcy protection, more than 70% of the market was for GM, even after many years of independence from GM, many even saw it as a general-purpose subsidiary.

Perhaps because of this reason, the parts companies in the United States have been hit hardest and sales have dropped sharply. This makes sense. The financial crisis has caused the American automobile market to be in trouble. Two of the three major automakers in Detroit have been unable to protect themselves, and they are the main customers of these parts suppliers. Naturally, they are severely hampered.

The same problem exists in Japanese and Korean auto parts systems. In Japan, there is a close relationship between parts suppliers and auto makers. Many of them are even subsidiaries of the manufacturers, and they rely on the auto makers' markets to eat. When the auto market is seriously affected, it is these suppliers that bear the brunt of it.

For example, Aisin Seiki, whose sales increased by -7.4% in 2008, is the most typical example. Toyota implemented a series of production cuts in fiscal year 2008/09 and plans to reduce production by 12% globally in fiscal year 2009/10. As part of Toyota’s subsidiary, Aisin Seiki’s days have plunged into a difficult situation.

But in a bleak, there is no lack of bright spots. In the United States, where the auto industry was hit hardest, five component companies had miraculously achieved positive growth last year. They were Johnson Controls, TRW, ArvinMeritor, Cummins, and North American headlights. According to relevant personage analysis, these companies can maintain their contrarian growth thanks to their relatively independent market position and their unique competitive advantage on leading products.

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Mergers and Acquisitions: The Panacea?

In 2008, a European parts company was notorious: the Schaeffler Group acquired large-scale snacks and acquired a continental group that was several times its own size for $18 billion. This typical case of "snacks and swallows" mergers and acquisitions resulted in Schaeffler's sales growth of 30.83% in 2008, which also increased the group's liabilities from the beginning and fell into a financial crisis.

As a result, less than a year, a new "thunderstorm" news once again attracted people's attention: Continental Group reversed the acquisition of Schaeffler, has received strong support from the German government, mergers and acquisitions program has recently been approved by the consulting company. At present, the total debt of the two groups has reached 230 euros.

Mrs. Schaeffler paid a heavy price for her original impulse. However, when people were scrambling for this merger and acquisition case, they also discovered another problem: Many companies' mergers and acquisitions are blind or beyond their capabilities. The relaxed financial and credit policies of the modern society have brought about many convenient conditions for the enterprises, but they have also brought about the reverse effect. Sometimes, this seemingly favorable environment and conditions will become ruthless killers of the company.

At the Shanghai Auto Show, when a slightly unfamiliar vendor name IAC appeared in the eyes of people, few people would think that it came from the overall acquisition of the original Lear Corporation's interior business. With the rapid development of modern capital systems, self-development in the traditional sense is often overlooked, and acquisition is seen as the best way to increase the speed of development in a short period of time.

However, is the acquisition really a panacea?

At the end of last year, the world’s top 500 company Eaton announced its third-quarter 2008 financial report in Shanghai. Its chairman and chief executive officer, Ke Renjie, stated that Eaton will no longer conduct large-scale mergers and acquisitions in the short-term, taking into account future market risks. For Eaton, whose 40% growth comes from mergers and acquisitions, such a decision is obviously far-reaching.

The main source of funds for this company’s acquisition is the issuance of stocks and the issuance of bonds. Now that the credit crunch, stock market value has continued to shrink, the source of funding for acquisition has become a major problem. Although successful in a timely transition, Eaton has turned from a pure auto parts company to a comprehensive company that integrates aerospace, electrical, hydraulics, and auto parts businesses. However, leaving the acquisition strategy, the company will also temporarily Lose new growth point, how to develop in the future?

Uncertain economic outlook has exacerbated this doubt. Financial figures show that in the first quarter of this year, Eaton’s loss amounted to 52 million US dollars, which was the first quarterly loss since 1991. Worse still, Eaton’s auto parts sector is continuing to deteriorate, with a negative growth of 14%. When the new acquisition ceases, if it is not possible to be alone, will the company eventually abandon its auto parts business?

Perhaps, even Eaton himself could not find the answer.

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