Faurecia CEO Daniel Dewavrin has moved closer to becoming a major supplier in North America.
This month's acquisition of AP Automotive Systems Inc. for $340 million, including debt, turns Faurecia, Europe's fifth-largest parts maker, into North America's third-largest automotive exhaust supplier.
But the former French air ministry weapons engineer has an intercontinental battle on his hands: Faurecia is still a distant third behind Arvin Industries Inc. and Tenneco Inc.
Moreover, one analyst believes that neither Delphi Automotive Systems Corp. nor Visteon Automotive Systems views its own exhaust business as strategic. If both were to depart, as much as 20 percent of the European and North American original equipment exhaust market could be up for grabs, according to analyst John Casesa of Merrill Lynch.
Faurecia, based in Boulogne, France, was created in 1998 by the merger of Bertrand Faure and PSA Peugeot Citroen's ECIA subsidiary. Faurecia made a vigorous bid for General Motors' Delphi seating business two years ago, only to be outbid by Lear Corp.
Analyst Craig Cather said that while Faurecia is far from being in a North American leadership role, the AP Automotive Systems acquisition offers the foothold it needs.
'AP gives them capacity and market presence,' said Cather, CEO of CSM Worldwide, a Northville, Mich., automotive forecasting firm.
'They have a solid, conservative approach and a plan to build a strong relationship with GM. They have the right concepts in place.'
Dewavrin employed that strategy to turn Faurecia, which had formerly supplied just metal seating parts to North America, into a Tier 1 seating supplier. Faurecia surprised the industry last August by winning the GM contract to supply seats for the automaker's next-generation mid-sized cars. The deal is worth an estimated $500 million annually.
Now Faurecia wants to use its AP Automotive Systems Inc. to duplicate the earlier feat. Faurecia agreed to acquire AP Automotive, based in Toledo, Ohio, last November from an investment fund managed by Questor Management Co. of Southfield, Mich.
Questor, headed by industry turnaround specialist Jay Alix, created AP Automotive with the acquisitions of troubled Tube Products Corp. in 1996 and AP Parts International Inc. in 1997.
Terry Bernander, who was instrumental in rescuing Tube Products, will continue to head the company under Faurecia's ownership. Bernander built company sales to about $550 million in revenue last year.
Despite AP Automotive's rise as a leading North American supplier, growth was limited. 'There are not many (industry) pieces for sale, so we were better off selling the company, said Wallace Rueckel, a Questor principal.
He said the industry is consolidating, 'and it was clear Faurecia will be a survivor.'
Jacques Le Morvan, president of Faurecia North America in Mississauga, Ontario, said the company has achieved its first step. 'We're getting stronger and better in North America, but we need to get global in exhaust and seating.'
Faurecia still faces the Arvin challenge. Arvin, of Columbus, Ind., is the market leader in its largest business, original equipment exhaust systems in North America and Europe. It had sales of $1.5 billion last year.
Tenneco, of Lake Forest, Ill., is Arvin's primary rival. It enjoys greater strength and a larger share in the exhaust replacement market.
CSM's Cather said Faurecia must attack the North American exhaust business the way it went after seats: by getting big contracts.
That means providing complete packages - from the exhaust manifold to the tailpipe. Exhaust systems require numerous variations because of powertrain configurations, styling iterations, state-ordered specifications and other variations.
'It's a headache automakers would love to lose,' Cather said. But it means a big opportunity for the right supplier.