Last month's hostile takeover fight between two European telephone rivals will have an impact on the U.S. automotive market this year when Mannesmann VDO AG spins off into a new, publicly traded company.
The German supplier of instrument cluster and fuel systems already had been planning a spinoff from its parent company, Mannesmann, with an initial public offering envisioned for mid-2001.
But Mannesmann's noisy takeover last month by Vodafone AirTouch PLC has accelerated the plan. Mannesmann now plans to spin off its auto parts business in an IPO this year.
Under the plan, Mannesmann will create a new company called Atecs. Atecs will own Mannesmann's two auto parts operations, which include the U.S. subsidiaries VDO North America LLC in Winchester, Va., and Sachs Automotive of America in Troy, Mich. Atecs also will own the three Mannesmann engineering companies, Rexroth, Dematic and Demag Kraus-Maffei.
The spinoff should be good for the conglomerate's North American business, said Peter Grafoner, CEO of Mannesmann VDO.
'The U.S. is a growing market for us with a lot of new opportunity,' Grafoner said. 'We want to focus on what we feel is our technology leadership in the market, which is helping our growth. This will allow us to concentrate on our business.'
Grafoner said automotive operations derive 60 percent of sales from outside of Germany. Last year, the group's U.S. sales rose 20 percent to $285 million, he reported. Worldwide, the operations reached sales of more than $3.5 billion. Grafoner attributed the growth partly to VDO's spending on research and development, which last year totaled 10 percent of sales.
Automotive News ranks Mannesman as the world's 13th-largest supplier of original equipment parts.
Last year, the company began producing and selling fuel supply systems in the United States for the first time. That segment will become a key business for the newly public company, Grafoner said.
He said details of the public offering will not be revealed until later this month. It is unclear what minority of ownership Mannesmann will retain.
Also unclear is how much of the stock might be controlled by company employees.
Grafoner said there are no plans to expand the automotive company's manufacturing base in the United States. He indicated some future expansion might be achieved through alliances and joint ventures with other companies.
Grafoner said he is not worried the stock offering might suffer the recent plight of other automotive supplier stocks.
U.S. parts makers have seen their share prices languishing and even falling, despite profit growth, and some are attempting to repurchase their shares.
'Suppliers are under some pressure around the world. But we feel we have an excellent story to tell,' Grafoner said. 'I believe that if you are a true technological leader, you can distinguish yourself from the others.'