Sometimes it pays to take a second look.
In December 1994, MascoTech Inc. said it was selling $700 million in 'noncore automotive units,' including a small, nondescript roof-rack business.
At about the same time, longtime General Motors executive F. Alan Smith and Chase Capital partner Donald Hofmann began seeking an entree into the auto supplier business.
It would seem a natural fit: the MascoTech sale on one side and the interest of an automotive big shot and a Wall Street banker on the other. But a Dec. 23, 1994, Wall Street Journal article had lumped the roof-rack business in with several 'nonperforming' assets. The then-retired Smith saw the article and stopped reading at the word 'nonperforming.'
'So I wasn't really interested. We weren't looking to get involved in something nonperforming,' said Smith, GM executive vice president and CFO for most of the 1980s.
It wasn't until months later, on the recommendation of a Colorado skiing friend who told him it was 'actually pretty solid,' that Smith took a second look. And by September 1995, Smith and Hofmann had acquired the roof-rack business, then with $60 million in annual revenue.
Known then as MascoTech Accessories and today as Advanced Accessory Systems, the Sterling Heights, Mich.-based company has done well for a 'nonperforming' discard.
In the more than two years since the acquisition, privately owned AAS has become a dominant player in roof racks and its newest market, trailer hitches. It has evolved into a Tier 1 supplier to the Big 3 and other automakers, doing sales in that area of about $200 million. It also does about $100 million in replacement-part sales.
Today, AAS generates more business in towing hitches. Of its projected $300 million in sales this year, about $200 million will be in hitches.
For the future, AAS management is considering more acquisitions, a move into other accessory markets, such as the sunroof business, and visualizing itself with higher sales.
'We don't have to be huge. I think $300 million is a good size for us,' said AAS President and CEO Marshall Gladchun, though he admits he sees the company closer to $500 million in sales. Hofmann envisions sales closer to $1 billion.
'I like that we're strong on both sides, with the original automakers and the aftermarket. We're also strong in both Europe and the United States,' said Hofmann, general partner at Chase Capital Partners, the New York private equity arm of Chase Manhattan Corp. and majority owner of AAS. 'We'll get stronger with the sport-utility market being what it is.'
Though Hofmann and Smith may provide the money and industry expertise for AAS, both credit the company's growth and vision to Gladchun. Since 1989, Gladchun had been running the roof-rack business for MascoTech. After meeting with Hofmann and Smith, he had convinced them his division could be a global player.
'Marshall had the vision of what we've become in his head before Don and I were around,' said Smith. 'He held the company together at MascoTech and then got a buyer who believed in his strategy. He saw this all along.'
Gladchun saw several things:
Roof racks were already an outsourced job for most automakers, to the point that MascoTech Accessories was already providing 100 percent of Chrysler Corp.'s roof racks.
The roof-rack business had no multibillion-dollar players, unlike the seating or engine businesses, which are dominated by mammoth companies.
The rocketing popularity of sport-utilities could only help the roof-rack business, because most sport-utilities come with racks.
Looking back on MascoTech's decision, Gladchun said he also believed his division had mistakenly been lumped in with struggling companies.
'This was a very good-performing business,' said Gladchun, 50. 'It just required too much of MascoTech's capital and attention to grow.'
Even MascoTech, which today owns a competing trailer-hitch and accessory company called Draw-Tite Inc., acknowledges that AAS has become a worthwhile company.
'They're doing well, real well right now,' said Kurt Ruecke, MascoTech communications manager. 'It was gotten rid of as part of a major restructuring. It was a noncore business, deemed nonautomotive. We didn't think there was anything wrong with it. We were just abandoning that to focus on our metalworking business.'
Chase Capital owns about 51 percent of AAS; the rest is split among Smith, Gladchun and other current and former executives.
The division, which had been part of MascoTech since the mid-1970s and was previously called Huron St. Clair Inc., got into roof racks in the 1980s, about the time Gladchun got involved.
'I'm actually pretty passionate about roof racks and the accessories. It's not just a part, it's a product people like to use. You can't feel that way about stamping or nuts and bolts,' said Gladchun, a 26-year automotive veteran.
Since the purchase by Chase Capital, AAS has made seven acquisitions. The key buy probably was the October 1996 acquisition of Brink International BV, a Netherlands-based company that specialized in supplying towing hitches to European automakers.
'They gave us credibility in Europe and gave us roof-rack and trailer-hitch business in both North America and Europe,' said Gladchun.
The Brink acquisition, plus a deal late last year to acquire Valley Industries Inc. of Madison Heights, Mich., moved AAS into towing hitches. Brink is now the European branch of its hitch business; Valley is the North American side.
The company's roof-rack business is called Sport Rack Automotive. That's where all the old roof-rack business from MascoTech exists. The former division now has sales around $110 million.
AAS has about 700 employees in metro Detroit and 1,800 total. Its largest customer is Chrysler. It does about $35 million a year with Chrysler and is the automaker's sole supplier of roof racks, a rarity, says a Chrysler executive.
'It's fairly unusual for us to have sole source, but our experience with them is good. We wouldn't trust them with that much work if it was otherwise,' said Paul Shefferly, executive engineer for truck-vehicle development at Chrysler.
Towing hitches are about a $1 billion industry. So are roof racks.
The next industry AAS seems poised to enter is sunroofs. The three men at the top of the company - Gladchun, Smith and Hofmann - all mentioned sunroofs in separate interviews.
'Sunroofs make a lot of sense for us,' said Smith, chairman at AAS. 'Both they and roof racks are in the same place. I think those things will be interactive. It's a natural fit, and I can see us there,' he said.
While sunroofs appear to be in the future, public offerings apparently are not. All three said no initial public offering was in the works.
'I don't think that's our goal,' said Gladchun. 'I see one or two more acquisitions coming, but we have no specific agenda to go public.'