To say that Motherson Sumi is not a household name in North America is an understatement. But the Indian automotive conglomerate has been on a tear here for the past two years, gathering new customers, acquisitions and big contracts.
Two years ago, Motherson was ranked No. 81 on the Automotive News list of North America's largest original-equipment suppliers, with 2015 sales of $739 million. One year later, it is No. 47 on the list, with North American sales of $1.7 billion.
Now the supplier of parts ranging from wiring harnesses and rearview mirrors to plastic components is about to get even bigger.
One of its subsidiaries — it has 134 subsidiaries and six joint ventures — Samvardhana Motherson Automotive Systems Group BV, has expanded operations of its Samvardhana Motherson Peguform division here to take on large North American market orders.
Parts factory
Next year, the Motherson unit will launch a $154 million, 700,000-square-foot parts factory in Cottondale, Ala., employing 650 new hires to produce bumpers, door panels and cockpits for future Mercedes-Benz models built nearby in Vance, Ala.
That contract alone is worth $2.45 billion over several years, according to analysts who track the Indian company. Mercedes-Benz declined to comment on the supplier's new role.
Mike Jackson, head of strategy and research for the Original Equipment Suppliers Association, said landing a deal that size is proportionate to the growth Motherson is experiencing.
"Is it a big contract? Absolutely it is. But what we're talking about is a lot of different applications," he said. "Motherson is a huge conglomerate; it's capabilities are expansive."
At the same time, the company is targeting global growth, largely through acquisitions in Europe and the United States. Founded in New Delhi in 1986, the Samvardhana Motherson Group has acquired 19 companies since 2002, and posted $5 billion in worldwide sales last year. The company believes it is on track for $20 billion in sales in 2020.
This year, it paid $619 million to buy the wire harness supplier PKC Group of Finland, a move that doubles Motherson's global wire harness volume. Shortly before that, the Indian company bought Abraham and Sons Ltd., a Hungarian supplier of plastic components and assemblies, for $10.7 million, as well as Kobek Siebdruck, a German producer of automotive lighting materials.
By request
Indeed, many of Motherson's acquisitions have come at the suggestion of automakers, according to V.G. Ramakrishnan, managing partner at Avanteum Advisors, a strategy and consulting firm in Chennai, India.
"In a majority of the acquisitions done by Motherson Sumi, the target company was referred to by an OEM," Ramakrishnan said in an email. "The companies that were taken over were struggling to run operations and OEMs that had long, well-established relationships with these companies preferred to continue sourcing."
Dave Andrea, executive vice president of research at the Center for Automotive Research, said that the growing North American footprints of unfamiliar suppliers illustrates a key change in the auto parts industry.
"It's not new suppliers, it's new ownership structures," Andrea said. "It's a dance of consolidation. Even though we may have tens of thousands of suppliers serving the market, the financial ownership behind those suppliers is consolidating."
Ramakrishnan said Motherson's strategic model of buying smaller, often struggling suppliers has worked successfully through some of the most trying times for the automotive industry — the U.S. financial crisis, an economic slowdown in Europe and more recently Brexit.
"They keep business independent as much as possible and fund the acquisition through internal accruals of the acquired company," Ramakrishnan said. "They do not necessarily impose a new CEO or senior management from the group to run operations.
"The key for continued success is to build business based on their ability to understand industry and technology risks, business and financial risks of the target company," he said, "and paying the right price for acquisitions."
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