What's happening to Simpson Industries Inc. is ugly, troubling and would be a disaster if it becomes a trend for publicly held auto parts makers. A New York investment firm that owns 4.7 percent of Simpson—a maker of rubber dampers for engine vibration control—wants to break up the company. MMI Investments II-A L.P.'s goal: An '80s thing, auction off the pieces of the company "to ensure shareholder value."
Simpson's stock price is low, which is similar to the situation when corporate raiders went after Goodyear, B.F. Goodrich, Uniroyal Inc. and General Tire. But Simpson is not awash in red ink, nor is it without prospects.
Simpson just came off a terrific year. The automotive supplier's earnings per share climbed 26 percent from 1998, and sales jumped 7 percent to $532 million. The company expects to crack the $1 billion mark in sales by 2005.
It used to be, if a company got good results it was rewarded for its success with a higher stock price. Now, only the glitzy technology stocks catch the investor's interest. Simpson is an automotive supplier, operating in a sector investors disdain, reflected by weak stock prices.
So MMI Investments wants to cash out. Perhaps then it can invest in dot-coms, although more likely, in another undervalued business it can milk. That's been MMI's track record.
It's tough for an auto parts manufacturer to be successful when its automotive OEM customers bludgeon it into lower margins. Now they also can suffer from the stock market's disinterest. What's an automotive supplier do?
"Privately held" never looked so good. At least then you only have to deal with greedy auto companies, rather than rapacious stockholders.