Varroc Lighting Systems has gotten where it is today by taking advantage of lucrative acquisition deals. But the Plymouth, Mich., supplier — created when India's Varroc Group entered the segment by buying Visteon's U.S. lighting operations — has a new game plan: It wants to rely on organic growth.
Varroc goes organic with growth plan
CEO Stephane Vedie is shifting tactics this year to expand sales with less reliance on mergers and acquisitions, which he said have become too pricey.
"When you look at the current business situation, you look at the valuation of companies and they are crazy-high right now," Vedie told Automotive News. "It's a lot cheaper to grow organically when you can. We have very much accelerated the organic growth in advance of what we had planned."
Vedie's target is annual sales of $2 billion by 2022, roughly double what it was for the fiscal year that ended March 31, 2018.
Doing that will be a combination of deepening customer penetration, overseas expansion, product enhancements — and also a touch of M&A when the numbers make sense, he clarifies.
But Vedie had been expecting additional acquisitions to deliver about half of the business growth he wants. Instead, Varroc is already on a pace to reach $1.7 billion in annual sales, and most of that increase over 2018 levels has come organically.
Non-U.S. sales are providing a major tailwind for the company, which the diversified Varroc bought from Visteon in 2012.
In May, Varroc opened a manufacturing plant in the Czech Republic to produce rear lamps and front fog lamps, with annual production capacity of about 1 million units. In March, the company opened an r&d office in Krakow, Poland, and at the same time announced that it will open another manufacturing plant in Niemce, Poland, this year.
"We decided to launch in Poland because we have a lot of organic presence already in Central and Eastern Europe, and in the Czech Republic. This will be the main growth site for us in Europe and in Poland," Vedie said.
Varroc also opened a manufacturing facility in Tangier, Morocco, in February 2019 to produce headlamps, rear lamps and daytime running lamps for its customers in Morocco and Southern Europe, especially Spain and France.
Last year, the company opened an office in Tokyo, expanding a smaller presence in Japan, in part to provide more local engineering support for Japanese OEMs. It also expanded an existing plant in Vietnam, near Hanoi, with the intent of growing its car business. Previously, production there was aimed at motorcycles.
Acquisitions are continuing where they make sense. Varroc last year acquired the Turkish lighting supplier Sa-Ba Automotive. Besides giving Varroc a factory near Istanbul, the deal came with a second plant under construction in Bulgaria. Under Varroc's ownership, the plant opened in January 2019, making smaller lighting products, including center high-mounted stop lights, fog lamps and turn indicators.
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