It has become a trend for the auto parts industry

2022-08-26
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It has become a trend in the auto parts industry to split one into two, but why should it be dismantled

at present, the global auto parts suppliers are painstakingly separating their businesses, which is by no means accidental. Because they believe that after the spin off, they will be more favored by investors and industry customers. These companies "split" like amoeba. They separate driverless from the powertrain business department, separate old technology from new technology, or sell departments that do not help promote future scientific and technological progress such as car coupling and driverless

Shanghai) in the past two years, Delphi, Johnson Controls, Autoliv and Faurecia in the parts industry have witnessed such a "split". Honeywell has integrated and sold its turbocharger department, and GKN tried to avoid a hostile takeover of Melrose by splitting its automotive business and aerospace business. Even Continental, a German technology giant, is considering structural reforms

some analysts said that investment institutions on Wall Street and other parts of the world believe that the income potential of investing in high-tech (such as driverless, car service, etc.) in the automotive industry is better than traditional businesses, even though these traditional businesses are still profitable at present

component suppliers also believe that by building independent departments that focus on specific businesses, they do not have to compete for resources within complex large groups. Smaller companies with simple goals can also adapt to the complex and volatile market environment faster

automobile manufacturers need parts suppliers to provide necessary technological innovation, such as realizing driverless, car coupling, reducing fuel consumption, etc., and connecting and communicating with each other on the road. In order to deliver products to automobile manufacturers in the next decade to obtain the required funds and profits, the strategies adopted by various auto parts suppliers can be described as Eight Immortals crossing the sea, and each shows its magic power. Analysts believe that in the increasingly complex business environment, the most important thing for component suppliers is still to focus on their core competitiveness

"the traditional model of parts suppliers is to 'provide comprehensive services to every customer'. Now, this business model has become increasingly unsustainable." Michael robinet, director and general manager of IHS, an automotive analysis and consulting company, said. "Now, even large parts suppliers are thinking, 'where can we get higher added value? Where can we make more profits?'"

parts suppliers under the wave of spin off

in the recent auto parts industry split event, perhaps the most striking thing is, Delphi, which ranks 12th among the global top 100 parts suppliers, announced in December last year that it was officially split into two independent companies - "Delphi technology" and "APTIV". Among them, Delphi technology will focus on power systems and aftermarket, while anbofu will focus on active safety technology, car coupling and driverless. "Splitting is good for both businesses." Liam Butterworth, CEO of Delphi technology, said in an interview, "Delphi technology becoming an independent company will be more conducive to its future development."

although half of Delphi technology's products are "traditional technologies", Liam Butterworth believes that the separation and independent operation make Delphi's skills more flexible to adapt to the changes in the powertrain market. He pointed out that its product portfolio includes not only gasoline and diesel engines, but also electric motors and software products. "Now we can focus 100% on the power system, and all our investment will also focus on the power system, so that our R & D and application will be faster." He said, "if we are still a part of Delphi, the investment will be more dispersed and the work will be more time-consuming, which is detrimental to the study of dynamic systems."

like Delphi, the Swedish supplier Autoliv also regards high-tech as its future growth engine. In September last year, the company announced that it would split into two independent companies, one focusing on the company's traditional advantageous business - passive safety systems based on airbags and seat belts, and the other on visual systems, such as radar and advanced driving assistance systems

Jan Carlson, CEO of Autoliv, will turn to lead the new company called veoneer, because he still has some important work to complete

last year, Autoliv's orders for electronic components were only about $900million, while the company's passive safety products were $2.5 billion. Autoliv said in February this year that in the first few years of veoneer, "not only can't make money, but also there may be a few percentage points of losses". It is expected that the company can reverse the situation and make profits after launching new products in 2019. Nevertheless, this split still won the praise of the financial market. Cevian capital, a fund investment institution, revealed in March this year that they had acquired a 7% stake in Autoliv, worth about US $850million. Christer gardell, cofounder of cevian capital, said, "we believe that both Autoliv and veoneer have great potential to further create value."

it is clear that although the purchase and sale of business by large global companies has always been a routine behavior in the industry, today's split is to adapt to the rapid changes in the industry, so this strategy is unprecedented. In fact, in the past 30 years, auto parts suppliers have been expanding through acquisitions to make their own scale larger and their business diversified enough to meet the needs of customers

it can be seen that the business thinking of auto parts suppliers is changing. Another example is Johnson Controls

Johnson Controls spent decades building its car seat business into an industry benchmark through acquisitions and investments. However, in 2016, Johnson Controls split its seat business into a new company called adient, and said that the inspection profit of the seat business is low, and it requires a lot of capital investment to maintain operations, which the company is unwilling to undertake. For the split and independent operation, Byron foster, adien's executive vice president in charge of the Americas, Europe and Asia Pacific region, said: "from our first year's performance, adien operates well, and we will continue to invest in the seat business. Before, when we were under Johnson self-control, especially in recent years, we were more regarded as a cash cow." He also said that adient has made a profit of $3billion through its new business and will continue to improve its seat business in the future. "Our strategy is very clear, that is, to maintain an international leading position in car seats." He said

the performance of the stock market confirms the above view. Since its operation in October 2016, adient's share price has risen by about 50%, and was once twice the opening price

navigant research analyst Sam abuelsamid said that although automotive parts such as seats are becoming more and more commercialized, with the popularity of car sharing, the growth of the entire automotive market business will gradually stagnate in the next few decades, and this split will give adient a better chance to survive. "What adient has done in the past year is to enrich its product line and make it more in line with the development trend of shared cars and driverless cars in the future," abuelsamid said, "Adient thinks from the perspective of traditional seats, for example, how to redesign the interior of the car to better match driverless cars, and how to provide a better experience for different types of passengers in the car"

spin off is conducive to better opportunities

Honeywell has announced plans to sell its turbocharger department, which is a department with an annual turnover of $3billion in this $110billion corporate giant, Also 20 ~ 70hrc is the only automobile related department of the group. This sale was requested by third point, a radical investment institution, before which Honeywell also divested its aviation business unit

Olivier RABILLER, CEO of Honeywell transportation system, said in an interview with European automotive last December: "this sale has nothing to do with other businesses of the company. The Department will benefit from independent operation. The split is an affirmation of the achievements of the transportation department, which will achieve greater success in the future and bring more revenue to the group."

French auto parts supplier Faurecia sold its exterior decoration business to its former competitor plastic Omnium at a price of US $753 million in 2016. The sale not only allowed Faurecia to pay off its debts, but also provided enough funds for Faurecia to strategically acquire the relevant business sectors of other companies, such as seats, interior decoration and clean energy businesses. Faurecia spokesman said that the internationalization of the exterior decoration business department is not high enough, and the technical content is relatively low. "This fund guarantees the investment capacity of the group and enables us to gradually improve the technology sector in the future." In 2017, Faurecia invested in Pinot automobile company and Jiangxi good helper electronic technology company to improve the technical strength of car coupling and car entertainment system. In addition, it also acquired tiger engineering, which develops exhaust gas purification components

jean Michel szczerba, CO CEO of plastic Omnium, said that plastic Omnium's acquisition of its exterior decoration business also brought returns for itself. The company hopes to acquire bumper business in the profitable German market, and now they have achieved their goal. "We hope to establish business relations with Daimler, Audi and Ford in the bumper business." He said. Last year, plastic Omnium began to cooperate with Daimler, which will provide bumpers for Mercedes Benz S-class

on the other hand, plastic Omnium is now seeking to sell its environment department, which is responsible for the production of garbage cans and playground appliances. Although this department is one of the early businesses of the group, the company hopes to invest sufficient resources in the research and development of composite materials and hydrogen fuel cell energy storage

there are different choices of parts suppliers with risk of spin off

some auto parts suppliers are still following the traditional large group model. For example, Bosch, with global auto sales of $46.5 billion in 2016, ranks first among the global top 100 auto parts, and also sells household appliances, safety systems, commercial logistics software and even gardening tools. Another example is that several of Japan's largest suppliers, including Denso, which ranks fourth, and Aisin, which ranks sixth, have not announced plans to spin off or sell their major business units

it is speculated that the largest spin off in recent years may occur this year. Continental, with a market capitalization of $43billion, said it was negotiating a possible restructuring to achieve its growth goals. It is understood that potential changes include the stripping of the tire sector. "The supplier who chooses to integrate and expand the scale will become the final winner of the segment business. This strategy is practical." Neal g hydraulic universal testing machine, general manager of Deloitte Consulting, also began to mature and develop, anguli said, "therefore, we will see that suppliers say 'removing these businesses is conducive to pursuing more profits'."

however, not every time a business unit is spun off or split, it will succeed. GKN, a British supplier, is facing a hostile takeover by Melrose industries, a London investment group. GKN has been trying to spin off its automotive division and focus on aerospace and defense businesses. GKN

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