3 compete to raise the roof
Can the lagging convertible markets in Europe, N.A. support Magna, Webasto and Valmet?
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After a round of bankruptcies and buyouts, the world of roof system suppliers has narrowed to three major players: Webasto Roof Systems, Magna Steyr and Valmet Automotive.
With convertible production in Europe and North America stuck at recessionary levels, it is unclear whether all three can make much money in the segment.
"Is there enough business? That is the question," said Webasto CEO Erik Roeren. "I'm optimistic that the market will come back, and I believe the automakers need three suppliers."
Like the rest of the auto industry, the convertible segment was hit hard by the global economic downturn.
In North America, convertible output halved to 63,685 units in 2009 from 131,647 in 2008, then slipped further to 52,280 in 2010, according to forecaster LMC Automotive. This year, production should rebound to almost 130,000, LMC says.
In Europe, convertible production fell to 338,866 in 2009 from 475,431 in 2008, LMC data show.
A rebound in 2010 and 2011 led LMC to predict that 511,000 convertibles would be made in Europe next year, but because of the region's debt crisis some auto executives believe that forecast is too optimistic.
"It's clear that buyers are very careful," Roeren said. "Convertibles are typically the second or even the third vehicle in the family."
Messy shakeout
Over the past three years, Webasto, Valmet and Magna emerged as the dominant suppliers of convertible tops in Europe and North America after a messy shakeout.
Webasto, a family-owned business headquartered outside Munich, nearly exited the convertible roof business in 2009 after sales collapsed. Instead, the company decided to try to dominate the segment. In 2009, it purchased the convertible roof business of Edscha, which was insolvent. In 2010, Webasto purchased Karmann's North American roof operation.
Meanwhile, Magna Steyr, a Graz, Austria, contract manufacturer, which had purchased Porsche's CTS convertible subsidiary in 2005, tried and failed to acquire Karmann's plants in Poland and Germany. European antitrust regulators blocked that deal. Instead, Valmet -- a Finnish contract manufacturer -- picked up Karmann's European assets.
Roeren and other executives say the industry's consolidation is likely complete. Webasto's boss also believes there is room for all three because of automakers' different sourcing strategies.
Given the convertible segment's modest prospects, each supplier has its own survival strategy.
Webasto is a key player in Europe's convertible market. The company's two major launches in Europe this year are the roofs on the Mini roadster and Volkswagen Golf GTI Cabriolet.
But Roeren is counting on panoramic sunroofs -- not convertibles -- for Webasto's sales growth. In 2000, the company installed its first panoramic sunroof in the Peugeot 806. In Europe, BMW Group and Volkswagen Group are big buyers of Webasto's panoramic sunroofs. And in North America, Ford Motor Co. is the company's biggest sunroof customer.
"It's a big-selling feature," Roeren said. "We definitely see a very strong trend in Europe from traditional sunroofs to panoramic sunroofs."
Back from the brink
While Webasto pursues sunroofs, Valmet is in turnaround mode. For the past two years, the company has been rebuilding the European roof system operations of Karmann, which had lost manpower and contracts during the company's insolvency.
"Due to the insolvency, we could not win new programs for a couple of years because of the uncertainty," said Michael Hannemann, Valmet's senior vice president of roof systems. "It takes time to convince the customers that you are really back."
But, Hannemann said, Valmet has won roof supply contracts with BMW, Daimler, Renault and Volks-wagen.
In 2011, Valmet opened an engineering office in Shanghai to work with Asian automakers, and this year it opened an office in Detroit.
"We are back, and we are available," Hannemann said.
Europe remains Valmet's key market, and the company has no manufacturing plans in North America or Asia. That means Valmet's convertible roof business is unlikely to grow quickly. Unlike Webasto, Valmet does not make sunroofs. Moreover, Hannemann does not expect Europe's convertible production to top 500,000 units next year.
Like Webasto and Valmet, Magna International Inc. has expanded its convertible roof business by gobbling up companies. The Canadian company entered the segment in 2005 when it acquired Porsche's CTS convertible roof operation.
After its failed 2009 bid for Karmann's bankrupt European business, Magna expanded its convertibles business in North America. In 2011, for instance, the company began producing convertible tops for the Chevrolet Camaro.
Magna Steyr also is building convertible roofs for the Mercedes-Benz SLK and Fiat 500C.
Like Webasto, Magna is entering the sunroof business. Last month, it said it plans to invest $10 million to produce sunroofs in Holland, Mich.
Although the convertible roof industry in Europe and North America is unlikely to grow much anytime soon, Webasto, Valmet and Magna can afford to be patient. Each has other businesses that it can count on for growth. Europe's automakers appear pleased with a market that has consolidated to a few suppliers.
Said Valmet's Hannemann: "I think the carmakers are happy to have three innovative companies in the market. We are challenging each other."
You can reach David Sedgwick at dsedgwick@crain.com.
