In 2005, Wilbur L. Ross had a vision that the global automotive industry needed more than just innovative and cost efficient suppliers. He believed that the industry also needed financially stable and well capitalized suppliers of essential components and systems. So he set out to create one of the industry’s largest, globally acting suppliers of interior and exterior components. Following his vision, Mr. Ross started to build International Automotive Components Group (IAC Group) in October of that year. Now the company is represented on three continents – Europe, Asia, and South America – with North America to be added before the end of March.
IAC Group was formed by WL Ross & Co. LLC and Franklin Mutual Advisers, LLC to acquire the European assets of Collins & Aikman. By March 2006, IAC had bought Collins & Aikman’s European operations effectively creating IAC Group’s European arm. The newly born company’s revenues stood at $600 million and were spread across Belgium, Czech Republic, Germany, Netherlands, Slovakia, Spain, Sweden, and the United Kingdom serving Ford, General Motors, DaimlerChrysler, Porsche, Saab, Volkswagen, Volvo and other original equipment manufacturers.
IAC Group was expanded in October 2006 after also acquiring the assets of Lear Corporation’s European interiors business. Under the terms of the deal between WL Ross & Co., Franklin Mutual, and Lear Corporation, Lear contributed all of its European Interiors Systems Division (ISD Europe) to International Automotive Components Group, LLC, in exchange for one third of IAC equity. With this acquisition, IAC added nine of Lear’s European manufacturing facilities that manufacture $750 million worth of instrument panels, cockpit systems, overhead systems, door panels and interior trim for many original equipment manufacturers.
After these two significant acquisitions, IAC Europe is up-and-running and on the way to play a key role in the European automotive interior and exterior market for parts such as instrument panels and cockpits, door panels, headliners, complete carpet & acoustic systems and bumpers. IAC Europe projects 2007 revenues of more than $1.5 billion and has 21 manufacturing facilities located in Belgium, Czech Republic (two), Germany (five), Poland, Slovakia, The Netherlands, Spain (two), Sweden (five) and the United Kingdom (three). According to IAC, financial stability, highest quality products and services, and best-in-class solutions are key success factors for the growing company.
IAC South America
In April 2006, IAC Group acquired Collins & Aikman’s 56% interest in Plascar Participacoes Industriais S.A. Plascar, the largest plastics company in Brazil, is a leading supplier of interior and exterior parts to customers in South America, but also to customers in North America, Europe, and Australia. The customer portfolio includes Volkswagen, General Motors, Fiat, Toyota, Ford, Scania, and Mercedes Trucks. The four plants in South America – three in Brazil and one in Argentina – generate approximately $215 million in annual revenues.
Later in 2006, Ross announced that IAC completed the acquisition of Mitsubishi Belting Kaseihin Co Ltd (MBK) from Mitsubishi Belting. With this acquisition, IAC got MBK’s three manufacturing facilities in Japan with $170 million in sales that manufacture automotive interior and exterior plastic parts to every major OEM in Japan including Toyota, Nissan, Honda, Calsonic Kansei and Mitsubishi. For MBK, the transaction meant that it could follow its OEM customers overseas for the first time. Additionally, two joint venture companies in China (one for interior trim, one for carpet & acoustics) are included in a North American agreement with Lear, giving IAC access to the fast growing Chinese automotive market and strengthening IAC’s footprint in Asia.
IAC North America
In addition to the European Lear ISD acquisition, Mr. Ross announced on December 1st, 2006 a definitive agreement for IAC North America to acquire Lear Corporation’s North American Interior Systems Division. The operations being acquired by IAC NA include 26 plants located in the United States, Canada and Mexico with revenues of approximately $2.5 billion. The facilities supply instrument panels and cockpits, door panels, flooring and acoustics, interior trim and overhead systems to various original equipment manufacturers. The North American transaction is expected to close in the first quarter of this year.
For Mr. Ross, his plan to consolidate loss-making auto parts companies under the IAC brand is well on track. Once the North American deal is complete, IAC group companies will have more than $4 billion of revenues, approximately 20,000 employees and a truly global footprint in 16 countries in North and South America, Eastern and Western Europe, Japan and China.
Following Mr. Ross’ vision to focus on being a high quality automotive supplier of plastic interiors and exteriors applications, IAC specializes in providing integrated interior and exterior systems to automotive manufacturers worldwide. According to the company, the vehicle interior has become one of the most important areas in which OEM’s can differentiate itself from the competition. Therefore, IAC offers their customers specialized know-how and expertise from concept, development and validation through to manufacturing, in order to deliver best-in-class solutions. “Our designers and engineers at IAC are committed to exceeding the expectations of our customers through continuous improvements in technology, design and efficiency,” says a statement on the company website.
In Europe, IAC supplies automotive interior and exterior systems and “best-in-class” solutions to nearly all the major automotive OEM’s such as Ford, Volvo, Land Rover, Jaguar, Porsche, Volkswagen, Audi, Skoda, Opel, Saab, Mercedes, Chrysler, BMW, Suzuki, MAN, Scania and Renault-Nissan.
IAC Europe says that its core competencies include one-shot technology and world-class assembly of cockpits, door panels and headliners. It also specializes in surface technologies like slush skins, foils, fabrics and carpets. IAC specializes in water-based painting for interior and exterior parts and plastics substrate with foam, skin and metal reinforcements. The company says its strength lies in concept development, benchmarking, cost reduction programs, best cost solutions and probably most importantly – low cost production and sourcing.
Automotive Industries spoke to Wilbur L. Ross and asked him about IAC’s future acquisitions.
AI: There are reports that IAC is keen to acquire some of Visteon’s facilities in the US – is this true? Can you please tell us whether IAC is close to acquiring any automotive parts companies this year? If so, which ones and why?
We look at everything that is for sale in the automotive space and now are parties to about a dozen confidentiality agreements so we cannot comment on any individual situations.
AI: How about acquisitions in countries like India, China and in South America? How important will lower-cost manufacturing bases be to IAC’s future success and why?
We control the largest automotive plastics company in Brazil and also have meaningful operations in Mexico. Several of our automotive businesses are in China, Czech Republic, Poland, Slovakia and South Africa. We need to be in India. The less developed countries are important both because of lower costs and rapidly growing domestic auto markets.
AI: In your opinion, what do you think will happen to automotive companies in North America and Europe? Do you think manufacturing will continue to shift to lower-cost countries and is there any way to reverse this trend?
Manufacturing will continue to shift because of low costs and rapidly growing markets but huge existing capital investments and restrictive labor agreements in the Western world will keep some production there. Meanwhile, Asian automotive companies will establish more factories in the West to hedge against potentially restrictive trade barriers. I would guess that they will produce in the West half of the cars they sell there.
AI: What advice would you give automotive companies globally in order to ensure success? Is customization going to be the next competitive edge for these companies?
I believe that global platforms vary locally as to interior and exterior finish details and that gadgetry will be the wave of the future. This trend will necessitate the supplier industry’s consolidation into a small number of major players.
Automotive Industries also spoke to Jens Hoehnel, CEO of IAC Europe and asked how the recent acquisitions have helped the company.
AI: How have the recent acquisitions of Lear’s European operations and MBK’s Japanese facilities changed the way your company is doing business globally?
The acquisition of Lear’s European interiors business occurred in October 2006 followed by a structured integration process during the rest of the year. Now that the integration process is successfully completed, IAC Europe is one company with one organization, one goal, and one face to the customer.
Our new European footprint enables us to now serve our customers with a complete product range which is instrument panels and cockpit assemblies, door panels, headliners, complete carpet and acoustic systems, and in special regions, also with bumpers.
Additionally, with our Japanese MBK facilities, we are able to directly strengthen our relationship to all Japanese OEM’s in Japan, and together we can develop, produce and deliver for global programs. Being in Japan is very much helping us with our global growth strategy.
AI: Where do you see IAC Europe’s growth coming from in 2007? Is there any particular European region where you think business will boom and if so, which part of Europe would it be?
Our 2007 and 2008 growth for IAC Europe is based on our order book which includes almost all possible customers in Europe. During this period, we are launching several large programs within our complete product range. These programs are launched close to our customers all over Europe in countries such as Germany, Belgium, Netherlands, Sweden, UK, Spain but also in Czech Republic, Slovakia and Poland.
We are seeing a trend going to Eastern Europe, the so called “low cost countries” if parts are shipping well and technical know how is available. With our very good footprint in Eastern Europe – at the moment we have 4 specialized plants with tremendous technical expertise – we feel prepared for future opportunities in Eastern Europe. And by the way, we are expanding our business and capabilities in Eastern Europe more than in any other region.
One more point, the automotive market in Russia is projected to grow at a large rate over the next three to five years. IAC Europe has a specific focus to enter Russia, perhaps with a strategic partner, to not only support the western and Asian OEM’s who are building or increasing production capacity in the region, but also to support the Russian domestic OEM’s.
AI: What are some of IAC Europe’s future plans in terms of acquiring new companies – or do you think IAC is in the period of consolidation?
As mentioned earlier, our integration process with the former Lear interiors plants is finalized and we are already working within a defined 2007 budget, under agreed goals and targets, and we are looking forward to strengthen our position in our core businesses.
Regarding potential further acquisitions, our next step could be in the area of carpets and acoustics where we see a chance to strengthen our market position. We are watching the market carefully and we will take the chance if it is coming.
We are also focusing ourselves on organic growth through the opportunities we see with our existing customers. Currently, we are processing more than 150 RFQ’s from our customers which are giving us a good feeling for what we can achieve. Approximately 35 new business awards since we became IAC Europe are speaking for themselves and signals the trust and confidence our customers have in IAC.