DUSTIN WALSH

New Federal-Mogul co-CEO's mission: Accelerate supplier's aftermarket business

Dustin Walsh covers suppliers for Crain's Detroit Business, an affiliate of Automotive News.Dustin Walsh covers suppliers for Crain's Detroit Business, an affiliate of Automotive News.
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DETROIT -- For years, rumors circulated of activist investor Carl Icahn's desire to sell his investment in Federal-Mogul Corp.

The board in 2012, under Icahn's push, split the diversified auto parts supplier in two -- one arm for direct automaker business, the other for aftermarket force. It appeared a calculated move to sell at least one of the businesses in the private equity feeding frenzy of the post-recession.

Yet, the deals never transpired, and for now it seems Icahn is focusing energy, and capital, to growing its aftermarket business into an international juggernaut with a mainline to his oversight.

Federal-Mogul's board on Thursday voted one of its own as co-CEO of the company and CEO of its aftermarket business.

Daniel Ninivaggi was the president and CEO of Icahn's investment company, Icahn Enterprises LLP. Clearly Icahn is serious about Federal-Mogul's aftermarket push.

Kevin Freeland, the co-CEO who Ninivaggi replaced, left for personal reasons, the company said in a statement. There's no evidence to support otherwise.

In an interview with Crain's Detroit Business, an affiliate of Automotive News, Ninivaggi confirmed that Icahn is not planning to sell his stake in Federal-Mogul and that his own directive is to lead the company's long-term growth.

"We're not interested in selling either side," he said. "Both businesses have a tremendous upside and now we have a sense of urgency."

Ninivaggi said his job is to accelerate the aftermarket business for Federal-Mogul because the industry is "moving fast" and market share is at stake.

"Our key customers are all doing great, but they need more support and bigger global suppliers," Ninivaggi said. "There's been a significant consolidation in the industry and as our customers have become very large companies, we need to do the same thing; we need to grow fast, improve our capabilities and expand our product lines."

Ninivaggi said the company will focus on expanding to filters, belts, hoses and other large aftermarket parts areas. Federal-Mogul currently supplies aftermarket customers with brakes, chassis and engine components, seals and wipers under the brand names of Anco, Champion, MOOG, etc.

Its supplies aftermarket parts to nearly all the major retailers, including Advance Auto Parts, O'Reilly Auto Parts, NAPA Auto Parts and AutoZone.

The supplier acquired two aftermarket units already this year and more are in the pipeline, Ninivaggi said.

The relationship between Ninivaggi and Icahn improves the supplier's ability to access capital for deals quickly, he said.

"We're going to invest in people, infrastructure and products," Ninivaggi said. "In an environment where you need to move fast, an alignment between the owners and the company is important. Any organization that is more streamlined is more effective."

He declined to specify particular acquisition targets or hiring projections, but noted that opportunities for Federal-Mogul exist in markets such as Japan and China.

"Look, we have plenty of capital," he said, noting Icahn's backing. "Obviously, we have to use it efficiently, but now we're clearly defining what opportunities are out there and we're ready to execute."

Since emerging from bankruptcy in 2008 under Icahn, the supplier has struggled with profitability, reporting a net loss of $45 million in 2009 and a net loss of $117 million in 2012.

However, the company implemented significant cost-cutting strategies in 2013, including the closure or downsizing of seven plants and a divestiture. In June, the company sold its connecting rod and camshaft business to Addison, Ill.-based JD Norman Industries Inc.

The measures led to a positive net income of $38 million in the third quarter, which ended Sept. 30, on revenue of $1.7 billion. Its aftermarket segment reported revenue of $734 million or 43 percent of the company's total revenue.

You can reach Dustin Walsh at dwalsh@crain.com.

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