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Suppliers Share Automotive Rebound

Alisa Priddle / The Detroit News:

With car and truck sales rebounding, restructured auto suppliers are gaining greater access to credit and are working more closely with automakers to ensure their mutual health, the chief executive of TI Automotive said Tuesday.

Private equity investment firms have money and are ready to start investing in the automotive sector again, William Kozyra, chairman of TI Automotive of Auburn Hills, said at an Automotive Press Association luncheon.

“Most suppliers are starting to make money again,” said Kozyra, who also is chairman of the Original Equipment Suppliers Association. “It’s a new day in the auto industry.”

During the recent industry downturn, many suppliers lacked financial resources and were unable to get the credit they needed to stay in business. That caused a shakeout among suppliers — which was welcomed because parts capacity in the supply base had grown far greater than what was needed.

The companies still in business have restructured and are better positioned to grow, he said.

Challenges remain as suppliers ramp up production to meet increased demand for new cars, as recent parts shortages that have idled vehicle assembly plants have shown. But Kozyra described that development as a temporary issue.

There will be continued consolidation among smaller and lower-tier suppliers, Kozyra said.

Surviving companies are being rewarded with larger, global contracts, he said. He noted as an example TI Automotive’s recent contract with Daimler AG to supply fuel tanks over 13 years.

TI Automotive, a private company that supplies automotive fuel systems, was on the financial brink and highly leveraged in 2008 when Kozyra joined it. The company did not have the cash to pay the interest on $1.4 billion in debt, and credit could not be found.

“It was clear the company would fail unless we swiftly made changes,” Kozyra said.

The CEO reduced TI’s white-collar headcount by 55 percent, salaries were reduced, bonuses eliminated and costs, such as travel expenses, were cut in half.

TI convinced shareholders to convert debt to equity and in December 2009 the supplier emerged as a restructured company, Kozyra said. Today, TI has $2.5 billion in annual sales, virtually no debt and a diversified customer base.

A public stock offering is a future option to help TI’s shareholders, many of whom wanted to be temporary stakeholders, sell their shares.

The CEO expects the “next three to five years will be a nice time of global expansion in the auto industry and shareholders can make a lot of money.”

The upturn also is being felt at Lear Corp., which exceeded analysts’ expectations Tuesday in reporting a $117.1 million fourth-quarter profit on net sales of $3.2 billion.

Lear, a supplier of seating and power electronic systems, attributed much of its 15 percent increase in revenue on the recovering North American market and growth overseas.

Lear also is reaping the benefits of cost-reduction efforts and manufacturing improvements during the past several years and expects revenue could reach $13 billion in 2011.

In other supplier news, Johnson Controls Inc. of Plymouth on Tuesday announced completion of the acquisition of seat-maker C. Rob Hammerstein Group in Solingen, Germany.

JCI specializes in seating, interiors and electronics. The acquisition adds 3,600 employees.

The supplier recently reported strong first-quarter earnings and is increasing production.

Powertrain supplier BorgWarner Inc. of Auburn Hills also completed an acquisition Tuesday — of the Traction Systems division of Haldex Group which has plants in Sweden, Mexico and Hungary.