Faurecia Chief Executive Daniel Dewavrin has taken a step closer to establishing his company as a major supplier in North America.
The December 31 acquisition of AP Automotive Systems Inc. for $340 million, including debt, turns Faurecia, Europe's fifth-largest parts maker, into North America's third-largest automotive exhaust supplier.
But the former French air ministry weapons engineer has an intercontinental battle on his hands: Faurecia is still a distant third behind Arvin Industries Inc. and Tenneco Inc.
Moreover, one analyst believes that neither Delphi Automotive Systems Corp. nor Visteon Automotive Systems views its own exhaust business as strategic. The departure of both could start a battle for as much as 20 percent of the European and North American original equipment exhaust market, according to analyst John Casesa of Merrill Lynch.
Faurecia, based in Boulogne, France, was created in 1998 by the merger of Bertrand Faure and PSA/Peugeot-Citroen's ECIA subsidiary. Faurecia made a vigorous bid for General Motors' Delphi seating business two years ago, only to be outbid by Lear Corp.
Analyst Craig Cather said that while Faurecia is far from a North American leadership role, the AP Automotive acquisition offers the foothold it needs.
'AP gives them capacity and market presence,' said Cather, chief executive of CSM Worldwide, an automotive forecasting firm based in Northville, Michigan, USA.
'They have a solid, conservative approach and a plan to build a strong relationship with GM. They have the right concepts in place.'
Dewavrin employed that strategy to turn Faurecia, which had formerly supplied just metal seating parts to North America, into a Tier 1 seating supplier. Faurecia surprised the industry last August by winning the GM contract to supply seats for the automaker's next-generation mid-sized cars. That deal is worth an estimated $500 million annually.
Now Faurecia wants to use AP Automotive to duplicate the earlier feat. Faurecia agreed to acquire AP Automotive, based in Toledo, Ohio, last November. It has annual revenues of $550 million.
Jacques Le Morvan, president of Faurecia North America in Mississauga, Ontario, said the company has achieved its first step. 'We're getting stronger and better in North America, but we need to get global in exhaust and seating.'
Faurecia still faces the Arvin challenge. Arvin of Columbus, Indiana, is the market leader in its largest business, original equipment exhaust systems in North America and Europe.
Moreover, Arvin has major contracts on many important and high volume exhaust programs.
Tenneco, of Lake Forest, Illinois, is Arvin's primary OE rival. It enjoys greater strength and a larger share in the exhaust replacement market.
CSM's Cather said Faurecia must attack the North American exhaust business the way it went after seats: by getting big contracts.
That means providing complete packages - from the exhaust manifold to the tail pipe. Exhaust systems require numerous variations because of powertrain configurations, styling diversities, state-ordered specifications and other differences.
'It's a headache automakers would love to lose,' said Cather, and it means a big opportunity for the right supplier.