By Rhoda Miel, Plastics News staff
Detroit, Michigan -- In the nearly five years since his W.L. Ross & Co. llc created International Automotive Components, Wilbur Ross has seen the automotive supply industry both expand geographically with new business in China and India, and also consolidate as hundreds of firms closed.
And the wild ride is not over yet, he said.
"The next 10 years will witness a renaissance of the automotive industry as it morphs into a new business model," Ross said 13 Jan, during the Automotive News World Congress in Detroit. "The driving forces will be globalisation, consolidation and constructive collaboration between [automakers] and suppliers."
IAC, with North American offices in Dearborn, Michigan, first grew through a series of acquisitions in regions including the US, Brazil, Europe, Japan, China and India. The interiors specialist is a multi-billion dollar company that posted more than $1300 million in injection-moulding operations in North America alone in 2008.
Through 2009, IAC also grew by taking on business from its failing competitors, specialising in "airlift transfers" in which it went into a bankrupt company and moved carmaker-owned tools from that firm's presses to its own, he said. IAC transferred business from 12 companies within 18 months.
Ross said the auto supply business saw 60 bankruptcies in 2009, while an estimated 200 other firms just "quietly closed their doors."
Survivors of the past year are now getting used to a new business world in which suppliers and automakers alike have to find ways to make money at lower production volumes, he said.
Ross predicted that as the industry adjusts, there will be additional changes in the way that the carmakers and their suppliers work together.
"It might make sense for global [original equipment manufacturers] to bargain for global commodity pricing directly with raw material producers and direct supplier purchases," he said.
Some automakers, including General Motors Corp., have discussed resin commodity purchases in the past, although those programs never took off in large numbers. The time may be good for it now, though, he said.
"This would create lower commodity costs than individual suppliers could obtain," he said. "The commodity cost would be the same for each individual supplier and it would be known to the OEM, so competition between the vendors would be in their ability to deliver and control costs."
At the same time, IAC has looked at a variety of ways to keep its presses and other equipment busy when business slowed. It brought work previously done by sub-suppliers in house, Ross said, and also looked at new industries.
For instance, IAC's Brazilian facilities, which operate under the name Plascar, entered the housewares industry in 2009.
"Retooling was not that expensive and higher profit margins were achievable," Ross said. "As a result, they have dedicated a discrete portion of their operations to such injection-moulded items."