Worst of Storm Is Over and Aut

Powertrain, Chassis, and Exterior System Auto Suppliers such as Cummins, Eaton, and Guangzhou Auto Group Among Likely Consolidators; Private Equity Activity Is also Increasing

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DETROIT -- PRTM, a global management consulting firm, is releasing findings from 鈥淏ankruptcy and Consolidation in the Global Automotive Supply Industry 2010,鈥?their third annual study of the winning and losing auto suppliers worldwide. The expanded 2010 study includes 560 suppliers with aggregate revenues of US$2.14 trillion in 2009 from Europe, North America, Japan, and South Korea, as well as Coach bag from fast-growing auto markets including Brazil, China, and India.

With the worst of the global auto industry crisis over, auto supplier bankruptcies continue to slow while acquisitions are approaching record levels, according to the PRTM study. Far fewer U.S. suppliers will declare bankruptcy in 2010 than in 2009, while European supplier failures will continue into 2011. Merger and acquisition (M&A) activity is accelerating in traditional markets like Europe and the U.S., and suppliers in China and India are becoming strong enough to actively participate. The study reveals that for the first time in the industry鈥檚 history, competition for underpriced assets and divestitures is truly global.

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鈥淥ver the next 10 years, the rapid rise of China鈥檚 auto sectors will force today鈥檚 industry leaders to rethink their definitions of 鈥榞lobal鈥? and to understand the importance of localization as part of the new global view,鈥?says Dietmar Ostermann, PRTM partner and one of the authors of the study. He continues, 鈥淎uto executives must take a harder look at how the industry will change, and the winning suppliers must be able to support global OEM platforms. Additionally, now that liquidity is returning for some suppliers, strong suppliers have an unprecedented opportunity to optimize their product portfolios and geographically expand their customer base.鈥?

Private equity activity is also increasing, according to PRTM. A few new private equity players, together with several established firms, are snapping up undervalued assets and evaluating suppliers in still-fragmented areas of the industry. PRTM鈥檚 study also predicts which suppliers are likely to accelerate out of the postrecession era by making acquisitions or divesting noncore assets and which suppliers may still require financial assistance or restructuring.

PRTM鈥檚 2010 list of top 25 potential buyers within the global 100 suppliers comprises an equal number of European, Japanese and U.S. companies. More than half of the companies on this year鈥檚 list are diversified, such as DuPont, while the rest are pure-play automotive and commercial vehicle suppliers, such as Cummins and Michelin. Each potential buyer has also been evaluated on their 鈥渂uyer attitude,鈥?a measure of their willingness to cheap watches make acquisitions.

Visteon, TRW, and Delphi in the U.S., Continental and Faurecia in Europe, and Calsonic in Japan, are likely to divest certain businesses or change owners. Powertrain, chassis, and exterior systems face the greatest consolidation pressures of the six main vehicle systems.

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