DETROIT - David Stockman, the New York financier who engineered the 1997 buyout of American Axle & Manufacturing Inc., plans to raise $2 billion to bankroll an investment group that will purchase manufacturers based in the Midwest.
Stockman's company, Heartland Industrial Partners, will target automotive suppliers for some of its acquisitions.
It would become one of the 10 largest such funds in the world, according to one fund manager. The company may be headquartered in Detroit, and its advisory board chairman will be Richard E. Dauch, chairman of American Axle.
Stockman, 52, a former Michigan congressman, will resign from the Blackstone Group - an influential New York investment firm - to focus on his new company.
In an interview last week, Stockman said the productivity of American manufacturers makes them among the lowest-cost producers in the world.
'It will provide a wonderful opportunity to invest in companies that can become world-class performers and create enormous equity value,' said Stockman, who was director of the Office of Management and Budget during the Reagan administration.
Sam Valenti, a Stockman friend who operates an investment fund in Bloomfield Hills, Mich., expects Stockman to attract investors quickly. A fund of that size can be leveraged to create $10 billion to $12 billion in purchasing power by lining up bank loans and private debt, Valenti said.
Financial investors often are criticized for their desire to gain a quick payoff for their investments strategy, but Valenti said Stockman 'does not plan to buy and get in and get out.'
Stockman will focus on a territory between Chicago and Pittsburgh. He will have offices in New York and the Midwest, possibly including Detroit.
Although Stockman is resigning as senior managing director and partner at Blackstone, the private merchant bank where he has worked for 12 years, he will retain a connection with the firm; Blackstone will be an investor in Heartland, Stockman said.