Supplier IAC says size matters more than ever
Automakers want partners that can follow them globally
Achieving scale is the only way to survive as a supplier in a fiercely competitive and globalized automotive market, a top executive at IAC Group said.
"Size means you have global presence. You need to be big to be a business partner," IAC Chief Commercial Officer Guido Widdershoven told Automotive News Europe.
The interiors specialist, controlled by New York investor Wilbur Ross, has expanded aggressively via joint ventures and acquisitions. It has acquired 16 rivals since it was founded in 2006 and now claims to be the largest company focusing solely on interiors.
“We have to be global. It is one of the key points to survival," IAC Group CCO Guido Widdershoven said.
IAC ranks No. 45 in the Automotive News top 100 global suppliers list. The supplier's sales rose by $600 million in its 2012 fiscal year to $4.7 billion, of which $2.0 billion was earned in Europe, the company said.
IAC's strategy is driven by the automakers themselves, Widdershoven said. "They are looking for partners that are able to follow them on a global basis."
However, increased global competition has stretched margins. "Automotive was always very competitive, but in last few years the challenges are getting bigger and bigger. Prices are under pressure," the executive said.
IAC's philosophy from the start was that only the biggest survive these price pressures. The weakness in others paved the way for growth by acquisition, Widdershoven said, "At least something in their business model wasn't working," he added.
IAC now has 79 manufacturing facilities in 18 countries, 27 of which are in Europe. Globally the company's biggest customers are General Motors, Fiat-Chrysler and Jaguar Land Rover, with the last accounting for a third of IAC's European business.
IAC works for every major car manufacturer in some capacity and is expanding business in Asia, which in 2012 only accounted for 4 percent of its turnover.
Widdershoven said the company controlled costs by not moving away from its core specialty of interior materials and by buying up suppliers.
"The more you do yourself, the fewer parties that are involved, the lower cost levels you can achieve," he said. One example of IAC's vertical integration is that it now makes its own packaging blocks. "In the last two years we have insourced the equivalent of $50 million in Europe," he said.
Customization is one of the key trends for IAC in interiors. In one of its largest operations the company trims and assembles cockpits for Land Rover's Range Rover Evoque. The factory is just outside Jaguar Land Rover's plant in Halewood, northwest England. There are 4 million different instrument panel combinations for the Evoque alone, according to the company.
"Customization is something we have seen growing over the last two to three years and is being pushed very hard," Widdershoven said. Lightweight materials is another focus. This is being achieved by thin-wall injection molding to reduce the thickness of instrument panel plastics from 2mm to as little as 1mm. IAC is also investing in light yet strong carbon fiber, although Widdershoven wouldn't say what structure the company would use the material in.
In June, IAC announced it would launch an initial public stock offering to raise up to $115 million. Widdershoven wouldn't comment on what the company plans to do with the money, although it's likely it will be used to fund continued expansion around the world. "We have to be global," he said. "It is one of the keys to survival."
You can reach Nick Gibbs at email@example.com.