David Stockman's Heartland Industrial Partners seeks to consolidate small suppliers into powerful groups with a focus, such as metal-forming. Staff Reporter Robert Sherefkin interviewed Stockman last week.
You've begun a $1 billion investment plan in the auto sector just as the market is sliding, a recession appears to be looming and banks are still tight with credit.
We're not thrilled to have to grapple with it. Every quarter won't be a record. But trend-wise, we are very optimistic about the next five years.
What makes you so confident?
The economy will be strong and affluent. The size of the fleet keeps growing, the population keeps growing, as does the growth of per capita income. A lot of vehicles will be replaced because the last selling boom of the 1980s is reaching the rust bucket - literally. Most important, we have an industry that is focusing on vehicles people want.
Is Heartland focused only on North America?
No. We think most of the industries that we are focused on are global in nature. The platforms will be in North America. Most of our platforms will have a major presence in Europe, Mexico or Latin America.
What is your strategy?
Our whole model is to create a vertically integrated company that can move upstream and supply a Tier 1, starting with the raw material.
So with Metaldyne, we can take on the forming, machining and first stage assembly and deliver a full package subassembly to the integrator.
Even if you create an 800-pound gorilla, how do you get pricing power?
We can find ways as we scale up these platforms and improve our business model. We can provide the same package at lesser cost and maintain our margins. We add functions and capabilities without any increase in the cost per unit of the package.