The global auto parts business gained four new giants last year. Automotive News' ranking of the world's top suppliers has eight $10 billion-plus companies - twice the number listed one year earlier.
Four U.S. suppliers - Lear Corp., Johnson Controls Inc., TRW Inc. and Dana Corp. - made the list, each by adding an average of $3.2 billion in original equipment parts sales. Each used a common strategy for growth: acquisition. The big gains by those four companies were only part of the supplier industry's story for 1999. Seven of the world's 16 biggest suppliers raised their revenues by more than 25 percent last year. Three of those shot ahead by more than 50 percent from the previous year. And one - Germany's Continental AG - more than doubled its business in 1999, to $4.9 billion.
Continental digested ITT Automotive's brake business. That transformed the German parent from what was a tire maker into a 'corner supplier' - a company that provides automakers with parts that include tires, brakes and suspensions. Lear, a supplier of seats and interior components, consumed UT Automotive, a major supplier of vehicle interiors and electronics. Lear, of Southfield, Michigan, reported an additional $3 billion in annual sales.
Meanwhile, TRW of Cleveland, Ohio, swallowed the United Kingdom's LucasVarity PLC. Dana, of Toledo, Ohio, engulfed Echlin Automotive. That move enabled Dana to lay immediate claim to Echlin's automotive fluid business and set up a new, billion-dollar-a-year business. Despite such changes, 1999 did not shake up the overall order of the industry giants. Nor did it suggest boom times for the Japanese auto industry.
DELPHI STAYS ON TOP
Delphi Automotive Systems Corp. remained the leader with original-equipment sales of $27.3 billion - more than 40 times the volume of the 100th-largest global supplier, Tokico Ltd. of Japan. Delphi was followed by U.S. rival Visteon Corp. and Robert Bosch GmbH of Germany. A year ago, fourth-ranked Denso Corp. outpaced fifth-place Lear by more than $3 billion in sales. The suppliers held their places a year later. But this year, Lear is just $146 million in sales behind Denso's $12.5 billion.
Johnson Controls, TRW and Dana placed sixth, seventh and eighth for the second consecutive year. The size of the biggest players will make it difficult for newcomers to crack the Top 100, especially its upper ranks. 'I don't think we're going to see any new companies showing up on this list for some time,' says Michael Schmall, managing partner of Planning Edge, an industry analysis and trends forecaster in Farmington Hills, Michigan.
'Obviously, as big companies near the top of the list merge together, there will be new companies entering at the bottom of the list. But it will be another 10 years before you will see totally new companies entering into these ranks, and they will probably be suppliers of components we don't already see - like vehicle computers or fuel cells.'
A glance at the biggest 25 suppliers provides a look at an industry that is reinventing itself but barely changing.
Of the top 25 companies, 11 are European, 10 are in North America and four are Japanese. Yet, the top 10 North American companies have combined global sales of more than the top 15 European and Japanese giants in the group - $113 billion for the 10 compared with $95 billion for the 15. One reality reflected in those numbers: The North American supply chain has consolidated more than the other major world markets.
For instance, the world's Number 6 supplier, Johnson Controls Inc., of Milwaukee, Wisconsin, a supplier of seating and interiors, posted a $3.5 billion increase for 1999. The jump partly reflected a full year of revenues from the Becker Group, an interiors supplier that Johnson Controls bought in 1998. But it also reflected the business benefits of the Becker acquisition: Now that the two companies are joined, Johnson Controls has begun winning contracts to supply combined seating and interior packages.
Such mergers and synergies are largely missing in the Japanese industry. Japan has been mired in recession for much of the past decade. In many cases, the growth that its automakers and parts producers have seen has come from expansion in North America and Europe.
You can e-mail Automotive News Mid-South Bureau Chief Lindsay Chappell at [email protected]