French automotive supplier Faurecia and AP Automotive Systems Inc. are in advanced merger talks, moving toward a deal that would create a new global exhaust-system supplier.
According to people familiar with the talks, Faurecia is expected to acquire AP Automotive of Toledo, Ohio, in a deal estimated to be worth more than $300 million.
A merger would create a major rival to North America's two largest independent exhaust-system suppliers, Arvin Industries Inc. of Columbus, Ind., and Tenneco Automotive Inc. of Lake Forest, Ill. The resulting price competition could provide major savings for customers such as General Motors and Ford Motor Co.
A merger also would expand the North American presence of Faurecia, a huge supplier in Boulogne, France, that wants to muscle into this market. AP Automotive's factories would give Faurecia the North American manufacturing capacity that it lacks.
The talks come as Faurecia is solidifying its position as a key GM seat supplier. Earlier this year, Faurecia won its bid to supply seats for GM's Epsilon platform. Epsilon is GM's next-generation platform for the Oldsmobile Alero, Pontiac Grand Am, Chevrolet Malibu and Saturn L series sedan.
GM SUPPORT LIKELY
If the deal is completed, industry analyst Craig Cather said, GM probably will bless it because GM seeks global suppliers.
'It will get (GM) another supplier in North America and GM wants more competition,' said Cather, CEO of the automotive forecasting firm CSM Corp. in Northville, Mich. An announcement could come soon, sources said. A spokesman for AP Automotive declined to comment. Calls to GM and Faurecia were not returned.
Sources say Faurecia, in which French automaker PSA/Peugeot-Citroen SA owns a majority stake, wants to grow quickly in North America.
That's a mandate for acquisitions, and AP Automotive is a tempting target. With $600 million in sales last year, it is the continent's third-largest manufacturer of original-equipment exhausts. The company ranks 83rd on Automotive News' list of top North American suppliers.
AP Automotive has footholds in Europe and South America, plus a joint venture in Korea. Customers include Ford, Volvo, DaimlerChrysler and GM.
This is not the first time Faurecia has tried to buy AP Automotive. Two years ago, Peugeot's exhaust system subsidiary, ECIA - Faurecia's predecessor - was edged out in the bidding by Questor Partners Fund LP, a Southfield, Mich., investment fund.
In March, Peugeot merged ECIA with French supplier Bertrand Faure to create Faurecia. With sales of about $4 billion, the supplier produces cockpits, instrument panels, door panels, steering wheels, seats and exhaust systems.
Faurecia is expected to pay considerably more for AP Automotive this time around. Questor managing principal Jay Alix, a turnaround specialist, rebuilt two troubled companies into the now-profitable AP Automotive.
Tube Products Corp., whose troubles forced GM to seize control of its operations, was acquired Feb. 23, 1996, by Questor. Later, on Nov. 30, 1997, Alix acquired AP Parts International Inc., a company rebuilt by veteran industry executive Ralph Reins. The new company was renamed AP Automotive.
Alix declined to comment on Questor's plans. Of AP Automotive, he said, 'We are very pleased; it's been a remarkable turnaround, and it's a growing company.'
THE CHOSEN ONE
GM appears to have still bigger plans for Faurecia. In what analysts say was an unusual move, GM last year passed over industry exhaust system giants Tenneco and Arvin and asked a consortium of three suppliers to make exhausts for GM's next-generation Delta family of small cars.
The consortium comprised Faurecia, AP Automotive and Italian supplier Magnetti Marelli S.p.A. Faurecia was to supply GM in South America, AP would supply GM in North America, and Magnetti Marelli would do so in Europe.