If you think you've seen a lot of changes in the automotive supplier industry, stay tuned: More are coming.
Supplying the auto makers is a rough business, no doubt. The volumes are enormous, but the profitability has been lean for all but a few companies. The rubber components sector isn't exempt from that problem.
The Big Three auto makers have shared the pain of their poor financial performance with their suppliers, which is why many find themselves in a sad way, too. Despite that, and the fact Wall Street frowns on anything that smacks of automotive, big-money investors have made a habit of buying into the auto supply sector.
That's a trend that promises to continue, at least for now.
While Cooper-Standard Automotive and GDX Automotive operated under parent manufacturers, they now are owned by investment companies. Collins & Aikman went that route, although the company subsequently got into major financial trouble.
Now with Goodyear Engineered Products and Dana Corp.'s hose business on the block, there's a strong chance those operations will end up in the hands of a private equity group. Alternately, they might be added to a company being created by such entities.
Investor groups are interested in the automotive supply sectors because it is very much a buyer's market today. The business is highly cyclical, though, and the price may go up in the future, so now's the time. Take a struggling business, slice off the bad parts, and the eventual operation could become profitable, or generate a tidy profit if it is sold. At least, that's the theory-Donald Stockman, ousted CEO of Collins & Aikman, might say otherwise after the firm found itself in Chapter 11.
There may not be gold in the hills of the automotive supply business, but there's enough potential to keep investors mining it.