Dura Automotive Systems Inc. has increased annual sales from $450 million to $2.5 billion in the past two years - almost entirely through the acquisition of other suppliers.
Dura, which makes doors and windows, has bought 14 companies since mid-1997. They include British cable manufacturer Trident Automotive; Excel Industries, a supplier of doors and windows; Adwest Automotive, a British manufacturer of gear shifters and parking brakes; and VOFA, a gearshift cable supplier in Germany. Dura, which is based in Minneapolis, now operates 31 plants in Europe.
Automotive News Europe reporter Edmund Chew spoke with Dura President Karl Storrie about the company's strategy. What follows is an edited transcript of their conversation.
What is the strategy behind Dura's acquisitions?
We want to make acquisitions in areas that complement what we already have. We need to have passenger door latches and mechanisms inside Dura, and we need to have a better presence in (windows) in Europe. We are very big in North America in that area, but not in Europe. Those three areas are an important part of our strategy.
How has your acquisition program boosted sales?
We will have sales of about $2.5 billion this year. That's up from $850 million in 1998, and $450 million the previous year. We have made 14 acquisitions in the past 21/2 years. We have the experience and financial means to do it. We can probably do it better than anybody else.
Most importantly, we have the ability to integrate the acquisitions. We know how to do that and how to do it very quickly.
What is the process of integrating a new company?
Before we close on a deal, we arrange a meeting with our managers and the management of the company being acquired. We develop a step-by-step process to identify what we are doing, when we are going to do it, and who is going to do it.
We do that right up front so our strategy is understood, even if people recognize that their operations, or maybe even their jobs, are going to disappear. And then we do something that I think is unique. We try very hard to take the best of Dura and the best of the acquired company and move along. We are just as likely to cut back on the Dura side as on the acquired company's side.
What do you do first?
We target purchasing and overhead costs (headquarters and staff functions) in the first six months. We typically attack purchasing to gain synergies.
What about the long term?
We usually end up with far too much capacity. Plant consolidations typically take 12 to 18 months. At Dura, we have the skill to consolidate plants quickly and efficiently. But if we acquire several plants at the same time, the consolidation process can take longer than 18 months. You have to be careful with customers, works councils and unions and pay attention to national interests.
Does consolidation take longer in Europe than in the United States?
Noticeably. It is also a European mentality. The American automotive supply community has recognized the need for consolidation. You need to have critical mass to survive.
Why do you think European suppliers have remained largely unconsolidated in your sectors?
In the past there was not a real mentality to go out and grow by acquisition. It is a difficult thing to do. You have to develop the skills to do it.
What are the risks in the acquisition process?
One risk is doing it too slowly. Another risk is not doing your homework properly. And that is another skill that we have developed - being able to size up a company quickly through their operations, their financial situation, their order book and their pricing. But we must be careful not to step outside our boundaries. We have been very careful to stay with technology that we already understand.
Probably the biggest risk is if you pay too much for a company. That is a huge risk.
Do the car companies play a part in pushing suppliers together?
Ford in North America has become much more active in want-ing to be part of an overall supplier strategy. It wasn't that way in the past, but as we get larger, we have gained more Ford business. Dura has nearly $1 billion of Ford's supply business. At one time it was less than $200 million. Now Ford is much more interested in where Dura is headed. We can then inform them about our plans, and what companies we are looking at. We have to be careful because of confidentiality clauses, but Ford is becoming more involved.