FACING THE NEED to globalize, European automotive suppliers are coming to North America.
First, North American partsmakers went on a shopping spree, buying European companies to get an overseas presence. Suppliers that failed to do so risked losing out on world cars launched by General Motors and Ford.
Now Europe's suppliers are trying to join the action. In 1997, 10 North American suppliers were acquired by European companies, according to Bowles Hollowell Conner & Co., an investment banking firm based in Charlotte, North Carolina. So far in 1998, five additional deals have been consummated.
Of course, some European suppliers have been entrenched in North America for decades. Now, other suppliers that had been content to be regional players believe they must have a global presence.
Besides, the USA is a competitive place to do business, says John Casesa, an analyst for brokerage firm Schroder & Co.
'North America doubles the market potential of a European supplier,' Casesa said. 'It's a very attractive place for a newcomer to do business. If you start fresh, productivity is high and labor flexibility is high. There is a lot of land and a lot of capital to do what you want to do.'
Consider these recent megadeals, neardeals and wishful deals:
In February, the French seat maker Bertrand Faure tried and failed to purchase Delphi Auto-motive Systems' seating operation.
In May, Valeo Chairman Noel Goutard announced his intent to make a major North American purchase. Almost casually, he named the type of companies he would consider, such as ITT Automotive, Meritor Automotive Inc., AlliedSignal Inc. and Cooper Ind-ustries Inc., as possible targets.
Last October, Mannesmann VDO bought Philips Car Systems, a supplier of radios and navigation units with North American sales of
$700 million. The German supplier plans to transfer its North American headquarters to the Detroit area. To coordinate its efforts, Mannesmann hired Herb Everss - formerly of Siemens Automotive, an established player in the US market - to be president of its North American operations.
French trim supplier Sommer Allibert announced plans to double North American sales by 2000. In an April interview, its CEO said he regretted missing previous opportunities to buy Masland Corp. and Automotive Industries Inc., and he hinted at future acquisitions.
In the 1980s, Japanese suppliers followed Toyota, Nissan and Honda to North America. At first, they sold parts primarily to Japanese automakers, then gradually won contracts from the big US manufacturers.
Some European suppliers adopted a similar strategy when Daimler-Benz and BMW set up assembly plants in the USA. But there is one major difference: Japanese suppliers generally prefer to build their North American organizations from scratch. European companies are willing to try a variety of tactics, including acquisitions.
Here are some examples of European tactics:
The blockbuster acquisition. In 1996 Autoliv of Sweden acquired the automotive operations of Morton International Inc. in a stock swap. The deal created the world's biggest maker of airbags, and Autoliv - formerly a small player in the region - now ranks 28th on Automotive News' list of top North American suppliers.
The joint venture. Last September, Munich-based Siemens Automotive formed a joint venture with Breed Technologies Corp. to design smart airbags. Siemens obtained a 10 percent equity share in Breed, which is based in Florida.
Following the customer. In 1995 Plastic Omnium built a plant in South Carolina to produce plastic gas tanks for BMW and General Motors. The French manufacturer had previously supplied both companies in Europe. After establishing a foothold, the company formed a joint venture with the Becker Group, to produce exterior trim. Last month, Plastic Omnium bought out its partner.
Internal growth. After its failed bid for Delphi seating, Bertrand Faure is building its business by selling components to Tier 1 suppliers like Johnson Controls.
'We are paying our dues,' said Paul Campbell, the company's director of North American sales.
Since 1992 Bertrand Faure's sales have risen from $40 million to
$170 million. Campbell hopes to maintain that pace.
Suppliers that don't go global are already losing out, he says. Recently, one automaker - he won't say which - took bids on seats for a future vehicle.
'The package included production in Mexico, Portugal, Spain, Colombia and Argentina,' Campbell said. 'There were several suppliers who were not invited to bid. And that's how they got the message that they are not invited to the big game anymore.'