Auto Parts in Roller Coaster Comeback

Wed, 13 Oct 2010 19:12:07 +0000

NEW YORK (Reuters) – A little more than a year ago, U.S. auto parts suppliers were wondering if they would survive a massive industry restructuring, but 2010 is shaping up as one of the best years ever for the industry.”Talk about a roller coaster ride,” Mark Leder, co-founder of private equity turnaround firm Sun Capital Partners, said at the Reuters Restructuring Summit on Wednesday.

“That business absolutely fell off a cliff in the fourth quarter of 08, was dead for a year, and 12 months after that, it has probably been among the best years for it,” he added.

Chrysler Group LLC, General Motors Co. and their suppliers, including Delphi Corp., Lear Corp., and Visteon Corp. have used the bankruptcy process over the past few years to sharply reduce debt, and the auto sector has been buoyed this year by a sharp increase in U.S. auto sales. But Leder said there just aren’t many distressed auto parts companies now.

U.S. auto sales have trended gradually higher from 11 million in the first quarter to 11.3 million in the second quarter, on the annualized basis tracked by analysts.

Delphi, which exited bankruptcy last year as a privately-held company, has begun sounding out investment banks about the prospect of an initial public offering as early as next year, people familiar with the matter told Reuters in July.

Visteon, a top supplier to Ford Motor Co., emerged from bankruptcy last week as an independent supplier. Earlier, it rejected a potential tie-up with rival Johnson Controls Inc. When it filed for bankruptcy in May 2009 Visteon had warned of the potential for liquidation.

“There’s been such a rapid increase in sales, that no one is really struggling at this point. The issue companies are having is funding the pick-up in working capital that they require and that is creating opportunities for us,” said Leder, whose firm buys struggling companies and works to turn them around.

A unit of Leder’s Florida-based investment firm recently completed a deal to buy California auto accessories company Auto Expressions from a unit of Pennzoil-Quaker State Company, which itself is owned by Shell Oil.

Leder said the less than $100 million deal, was mainly a chance for the seller to leave a non-core business, but that even though the sector has grown more attractive to investors, significant auto parts mergers and acquisitions may still be a long way off as investors want to see more stable cash flows and profits.

“For the most recent year there’s been such a spike in performance, that it’s really hard to determine what is a steady state level of sales and profitability,” Leder said.

Toyota Acceleration Issues

Wed, 13 Oct 2010 18:34:14 +0000

The issue of unintended acceleration in Toyota vehicle has been a current issue and the government is trying to meet its deadline of this late fall to figure out if it is an electronic or throttle issue.

“We’re working hard to get this to you,” Richard Boyd, acting director of the National Highway Traffic Safety Administration’s defect investigations unit, told the chair of a science panel that is looking at unintended acceleration industrywide, not just in Toyotas.

“It will be sooner rather than later,” Boyd said at a Tuesday public meeting of the National Academy of Science.

NHTSA has set a late fall timetable for releasing the preliminary findings of its investigation of Toyota throttles and other systems. U.S. space agency experts are assisting NHTSA and will release a separate report on more sophisticated aspects of auto electronics.

The government’s effort was structured as the most rigorous examination to date of the issue that prompted thousands of consumer complaints over several years, two recalls totaling 6.5 million vehicles, and three congressional investigations.

Complaints ease

Electronic throttle control has been cited in consumer complaints reporting 52 Toyota crashes and 62 people killed since 2000, according to raw NHTSA figures. Safety advocates say more than 100 deaths can be linked to unintended acceleration in Toyota vehicles and thousands industrywide over the years.

Toyota’s worst safety crisis this year jolted its reputation for quality and reliability and cast a cloud over best-selling models.

Acceleration-related complaints have eased substantially from their early-year highs — 15 reports for the best-selling Camry in September, according to NHTSA figures compiled by Carnegie Mellon University safety expert Paul Fischbeck.

But the Japanese automaker faces an estimated $10 billion in potential U.S. civil liability, and U.S. business has been hit hard. Toyota sales are up only 2 percent in 2010 while the market as a whole has risen 11 percent. Lost market share has gone to Korea’s Hyundai and Ford Motor Co.

Investigations continue

The National Academy of Science panel, which is in the early stages of its 15-month industrywide review of unintended acceleration, acknowledged confusion over when the government planned to make the information from its investigations available.

The group’s chair, Louis Lanzerotti of the New Jersey Institute of Technology, also expressed dissatisfaction with NHTSA presentations at Tuesday’s meeting. He said the panel was not aware of who was speaking and what regulators planned to say until the last minute.

“I don’t think the presentation was well organized to get to the guts of what we need,” Lanzerotti said. “It’s rather frustrating for the chair and the committee.”

NHTSA officials, who focused their three-hour presentation on an overview of how they receive and manage consumer complaints, automaker warranty claims and other safety data, told Lanzerotti they would return at a later date.

The National Academy of Science is seeking a range of industrywide mechanical, engineering and other scientific data about vehicle systems and designs, component failure analysis, data recorder reliability, and driver behavior.

Root cause sought

A number of questions this week from National Academy of Science members centered on the design of brake and accelerator pedals, aftermarket electronic products, and whether electromagnetic interference could play a role in unintended acceleration.

NHTSA has little expertise in electronics and its long-held explanation for unintended acceleration has mainly focused on driver error.

In previous investigations, regulators never found a defect in Toyota vehicles that could support complaints related to vehicle electronics, specifically the throttle system. Toyota also says its throttle system is sound.

The two big recalls in late 2009 and early 2010 were blamed on loose floor mats that can jam the accelerator and gas pedals that would not spring back as designed.

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Gill's Automotive

Auto Parts in Roller Coaster Comeback

Toyota Acceleration Issues