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Finance Panel Automotive News World Congress

Finance Panel Automotive News World Congress. William G. Diehl, BBK . Changing Supplier Industry Dynamics – North America. Mature market No longer shared by few OEMs Current playing field uneven due to significant cost factors: Legacy (pension & healthcare) Labor costs

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Finance Panel Automotive News World Congress

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  1. Finance PanelAutomotive News World Congress

  2. William G. Diehl, BBK

  3. Changing Supplier Industry Dynamics – North America • Mature market • No longer shared by few OEMs • Current playing field uneven due to significant cost factors: • Legacy (pension & healthcare) • Labor costs • Overcapacity vs. undercapacity • Supplier overcapacity exists in many segments • Current North American capacity • Global Impact All of this is creating turmoil in market

  4. Effect? • Substantial right-sizing must take place • Will take years to accomplish • Significant supply base consolidation What does this mean for suppliers? “Strong will Survive”

  5. The Days of “Bigger Means Better” are Over • 2005 Chapter 11 Supplier Bankruptcies • Amcast Industrial Corp 12/01/05 • Delphi 10/9/05 • Foamex International 9/19/05 • Allied Holdings 7/31/05 • Jernberg Industries 6/29/05 • MetalForming Technologies 6/16/05 • UniBoring 6/9/05 • Collins & Aikman 5/17/05 • Trim Trends, Inc. 5/17/05 • Meridian Automotive Systems 4/26/05 • Eagle Pitcher 4/11/05 • BBi Enterprises 3/4/05 • Tower Automotive 2/2/05 Source: Bankruptcydata.com and other publicly available sources.

  6. Common Reasons for Distress – Why are suppliers failing? • Lack of synergistic strategy • “Jack of all trades, master of none” • Narrow customer base • No diversification • Subject to volume declines • Highly leveraged • “No dry powder” • Lack of manufacturing execution • Product launch issues • Uncompetitive cost structure • Legacy costs • Unfavorable union contracts • Lack of performance improvement capability • Poor understanding of costs • No long term strategy • Are you buyer or seller?

  7. What Does that Mean for Financing Trends? • Creative Financing Alternatives Required • Auto industry dynamics have limited traditional financing • Distressed suppliers are negatively impacted by both macro and micro issues of auto segment • Financial Buyers vs. Strategic Buyers • Definite shift from strategic • Private equity/Hedge fund firms see opportunity

  8. How do you “Stay in the Game” & Succeed? • Solid business plan: • Clearly focus both team and resources on core competency • Maintain proper capital structure • Concentrate on performance improvement • Diversification of customer base, vehicle platforms and product offerings • Deal aggressively and realistically with market challenges Without a solid business plan, even creative financing is unattainable

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