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Further supplier mergers expected

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Further supplier mergers expected

Lenders spur trend, CEOs tell meeting



Auto suppliers might have turned the corner as sales pick up, but bankruptcies, buyouts and liquidations aren't over yet, the chief executives of two Michigan-based auto suppliers said Tuesday.

Which companies will be next will come down to who can't borrow money.

Lenders are driving the further consolidation among suppliers, said Tim Manganello, CEO of Auburn Hills-based BorgWarner.

"The companies that deserve the credit are getting the credit," Manganello said.

Manganello spoke with Dick Dauch, CEO of Detroit-based supplier American Axle & Manufacturing, during a Detroit Economic Club lunch at the Renaissance Center.

Dauch and Manganello agreed that despite the consolidation to come, the worst is over for the supply base.

"Detroit has some real gold mines ahead of us," Dauch said. "But we had to make some massive adjustments."

BorgWarner, Manganello said, had to learn how to operate "as a distressed company even though we were financially solvent."

Now the maker of turbochargers and dual-clutch transmissions is on the hunt for acquisitions.

BorgWarner isn't alone. Large auto suppliers that maintained their cash levels during the downturn and are now profitable have the flexibility to make acquisitions.

Federal-Mogul said Tuesday that it acquired piston ring supplier Daros Group. The move expands Southfield-based Federal-Mogul's presence in commercial engines and wind energy.

Direct suppliers to automakers survived the automotive crisis through deep cost cuts. The cuts put larger suppliers on a fast road to profitability as auto production ramped up.

A study released this week by AlixPartners shows that the supplier sector had bounced back to the profitability levels it experienced in the early part of the decade when production volumes were considerably higher.



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