DETROIT/PARIS - The global meltdown and resulting implosion in vehicle sales over the past year have pressured everyone in the automotive sector, creating opportunities for some players while leaving others subject to bankruptcy, consolidation or concessions.
The heads of auto suppliers Valeo SA (VLOF.PA: Quote, Profile, Research, Stock Buzz) and Dura Automotive Systems Inc (DRMV.PK: Quote, Profile, Research, Stock Buzz) said at the Reuters Auto Summit in Paris and Detroit on Tuesday that their companies intend to buy assets in the sector's continuing consolidation.
Meanwhile, pressures faced by factory workers on both sides of the Atlantic were on display as the United Auto Workers rejected concessions for Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz), while those in Europe agreed to cuts for General Motors Co's GM.UL Opel unit.
Valeo CEO Jacques Aschenbroich said the French supplier was looking at acquisitions in safety and comfort, vision and energy savings, saying the global economic crisis would lead to consolidation in the parts sector.
After every crisis, there's a wave of consolidations. There are more OEMs today than a few years ago, he said in Paris, referring to major automakers. Of course, we want to be an actor of this consolidation in the years to come.
Financial results will be better than previously expected by the end of 2009 due to car scrapping programs implemented across Europe, Aschenbroich added.
Auto sales in Europe and the North America have been hurt in the past year as customers tightened purse strings amid a weak economy. The economic meltdown came on the heels of already-weakening vehicle demand amid record-high gasoline prices last year, creating excess capacity in the supply base.
According to figures released on Tuesday, U.S. auto industry sales in October hit their best performance this year outside of the summer months which were boosted by federal incentives, suggesting the sector could finally be stabilizing.
On Monday, the CEO of an industry consultant told the Reuters summit that the U.S. auto supply industry had averted catastrophe during the collapse of vehicle sales this year but more than half of the private companies remain distressed. BBK's William Diehl said in Detroit that the sector must shrink rapidly to match industry output.
Dura CEO Tim Leuliette said the parts sector is severely distressed, with about 200 U.S. suppliers going through quiet liquidation processes in which they slowly sell assets to other suppliers or private equity companies.
Leuliette sees more supplier consolidation and liquidations globally in 2010 as valuations continue to drop. Dura is looking at buying assets from a supplier in Europe and another in Asia, he added.
We are a buyer in this market because we're paying with 8 cents (on the) dollar or 12 cents (on the) dollar, he said.
He told Reuters Television that Dura's two acquisitions, likely to close next year, would reflect $400 million to $500 million in revenue. He said Dura would continue looking at opportunities, with a focus on Asia.
While some executives at the summit talked on Monday of the industry reaching stability, Leuliette said Dura is planning for a double-dip recession and remains cautious about U.S. vehicles sales next year.
UNIONS STAY UNDER PRESSURE
Unions are facing their own kind of pressure as U.S. automakers turn to them for cost savings.
The United Auto Workers, which represents many U.S. factory workers, on Monday rejected a proposed cost-cutting deal that would have saved Ford an estimated $30 million annually.
UAW President Ron Gettelfinger said at the summit in Detroit on Tuesday that the relative health of Ford, the only U.S. automaker not to file bankruptcy this year, was a factor in the rejection.
GM and Chrysler will not receive any more government bailouts, he added. If they fail, they fail, Gettelfinger said.
The UAW was not the only union facing tough choices.
Before GM said late Tuesday that it would keep Opel, the labor force for the automaker's European arm had agreed to contribute $390 million in annual savings if GM finally sold a majority stake in that unit to a group led by Canada's Magna International Inc.
The weak market also suggests an initial public offering for GM would be premature, Dura's Leuliette said. On Monday, former GM director Jerry York called a GM IPO by the second half of 2010 the dumbest thing in the world to be talking about.
However, Gettelfinger wants a GM IPO sooner rather than later.
In Paris, the head of Daimler AG's truck division, Andreas Renschler, said at the summit that new truck orders at the world's largest commercial vehicle maker could decline through the first quarter of next year.
Outside the summit on Tuesday, BMW gave a tepid markets outlook while reporting shrinking earnings. The German automaker expects a gradual recovery in the coming year, but North American, European and Japanese markets are expected to generate low and below-average growth in the near term.
(Reporting by auto teams in Paris and Detroit, writing by Ben Klayman in Chicago, editing by Matthew Lewis)