DETROIT - The automotive exhaust system business could heat up after French auto parts maker Faurecia's planned acquisition next month of AP Automotive Systems Inc.
Faurecia, of Boulogne, France, would become North America's third-largest supplier in a fragmented industry that appears ripe for further consolidation.
'Having these guys in the market will certainly heat things up,' said Merrill Lynch analyst Steve Haggerty.
Faurecia agreed last week to acquire AP Automotive, of Toledo, Ohio, for $340 million, including assumed debt. Pro forma combined sales for 1998 would have been $1.1 billion.
The seller is Questor Partners Fund I, a Southfield, Mich., investment fund managed by corporate turnaround artist Jay Alix.
Alix acquired Tube Products - AP Automotive's predecessor - in 1996 when the firm was near bankruptcy. After installing new management and expanding the company through an acquisition, Alix is turning over a company that is profitable and growing.
Faurecia is Europe's largest supplier of original-equipment exhausts. But it is an also-ran in North America, which is dominated by Arvin Industries Inc. and Tenneco Automotive Inc.
That could change if Delphi Automotive Systems Corp. and Ford Motor Co. parts maker Visteon Automotive Systems quit that business. Together, those two companies do 31 percent of the original-equipment exhaust business in Europe and North America.
But in a recent report, Merrill Lynch analyst John Casesa argued that exhaust systems are not a strategic business for either Visteon or Delphi. Those operations could be picked up by one of the major independents, he said.
Delphi spokeswoman Linda Beckmeyer said Delphi regularly evaluates its operations. 'For obvious competitive reasons, we would consider those reviews to be internal.'
Visteon spokeswoman Cheryl Eberwein said it is premature to comment on Visteon's plans for its exhaust business.
Despite the plants, employees and research centers Faurecia inherits from AP Automotive, analyst Haggerty said Faurecia still must expand its North American infrastructure to support the automakers.
Faurecia got a boost in North America earlier this year when General Motors awarded its contract to make exhausts for GM's next-generation Delta family of small cars. GM gave the job to a consortium that included Faurecia, AP Automotive and Magnetti Marelli S.p.A.