Minority supplier's next test: Ford-driven JV
Andra Rush has a history of capitalizing on opportunities -- from growing a meager trucking company funded by personal credit cards into a $115 million operation to creating an interiors joint venture with Canadian supplier Magna International Inc.
But a new venture with French auto supplier Faurecia could be her biggest accomplishment -- and challenge -- yet.
Ford Motor Co. sold its $1.1 billion book of business at its Saline, Mich., interiors plant this month to Faurecia. As part of the deal, Faurecia and Rush Group Ltd. created the joint venture Detroit Manufacturing Systems, headquartered in Detroit.
Rush owns 55 percent of the joint venture; Faurecia owns the rest.
The deal, expected to close June 1, will make Detroit Manufacturing Systems one of the largest minority-owned suppliers in the region. Andra Rush, CEO of the new joint venture, descends from the Mohawk tribe in Ontario.
Rush said Detroit Manufacturing Systems plans to hire 500 employees over the next two years.
Detroit Manufacturing Systems will take over 60 percent, or nearly $700 million, of the Ford business. Its first contract with Ford will be to assemble interior parts for the Ford Mustang, Ford Expedition and Lincoln Navigator.
Detroit Manufacturing Systems buys molding equipment from the Saline plant and expects to make parts for Ford, Rush said.
But it won't be an easy road. Deals orchestrated by automakers have a history of struggling, said Fred Hubacker, executive managing director of Detroit area turnaround firm Conway Mackenzie Inc., citing Bing Group and Plastech Engineered Products Inc.
Bing Group, which was run by Detroit's current mayor, Dave Bing, generated revenue of $130 million in 2007, down from $463 million in 2005; it was sold in 2010. Plastech generated revenue of $1.5 billion in 2007 before filing for bankruptcy in 2008 with $488 million in debt.
Both suppliers were overleveraged and relied heavily on Ford and other Detroit 3 contracts. The lack of a diverse customer base crippled the suppliers, Hubacker said.
"These deals don't have a great history," he said. "On paper, it [Detroit Manufacturing Systems] looks like a win-win ... but now that Ford has got it out of their Saline plant, they'll be looking for price reductions."
Ford opened the Saline plant under its own name, then spun it off into supplier Visteon Corp. in 2000. Ford took the plant back in 2005 when it created Automotive Components Holdings to oversee 17 struggling former Visteon plants.
The heart of the deal
Rush said Ford will be Detroit Manufacturing Systems' only customer for its first 18 months, but that the joint venture plans to secure contracts with other customers.
Ford approached Rush and Faurecia last summer about a potential joint venture, Rush said.
The deal is the result of Rush's previous work experience with Ford, said Todd Nissen, Ford's manager of corporate and supplier communications.
Rush Trucking Inc. and Dakkota Integrated Systems -- a joint venture with Magna International -- have contracts with Ford.
Dakkota, formed in 2001, assembles and manufactures cockpits, door panel assemblies, overhead systems, floor consoles and cargo systems in Lansing, Mich.
"Ford and Rush have an excellent working relationship from both Rush Trucking and Andra's Dakkota joint venture," Nissen said. "Rush's commitment to quality and efficiency were also reasons."
Ford was the key player in the deal, not only because it owns the Saline plant but through an interest in continuing its support of minority-owned businesses. Ford does $17 billion in business each year with minority suppliers, said Tony Brown, Ford purchasing chief.
"With this announcement, Faurecia is not only serving a critical business need for Ford, they are helping to provide leadership in our effort to build a financially healthy, diverse supply base," Brown said.
Under the deal, Faurecia will supply parts to the joint venture as well as expand and eventually consolidate its interiors operations across Michigan into the leased Saline plant, said Mike Heneka, president of Faurecia North America.
Faurecia's North American sales rose 33 percent in 2011. It had North American revenue of $3.3 billion in 2010, up from $1.6 billion in 2009.
North America and auto interiors have become more important markets for Faurecia since it gained its first foothold through the purchase of Sommer Allibert SA in 2000. In 2003, Faurecia boosted its presence with a deal to supply more than $1 billion in parts to Chrysler Group, and it has increased its capacity through new facilities since then, including a $20 million investment at its Fraser, Mich., plant last year.
Rhoda Miel contributed to this report