What doom and gloom?
Just when you're sure the auto parts industry is once again crashing, along comes a company and an investor unafraid to buck the trend.
In May, Avon Rubber L.L.C. said it was selling Avon Automotive to the senior management group, headed by auto industry veteran Lee Richards and equity fund Red Diamond Capital L.P. That was a significant move, since Avon Automotive generated about 75 percent of Avon Rubber's overall sales.
The deal, which closed in mid-August, is all about one side being nervous, the other confident.
Avon Rubber said it was getting out of the auto parts business because it wants to focus on its high-end respiratory protection business and its dairy liner segment. One official admitted it was a relief to be out of the lower-end auto parts business.
Richards and company are undaunted by the task that lies ahead. He knows the major challenges the company faces-the continued escalation of material costs, the erosion of market share and other problems inherent to U.S. automotive suppliers. He maintains the company already has made major strides against these obstacles.
Avon Automotive in recent years has worked hard to get lean and diversify. Both tactics are part of its strategy. The company also will pursue growth in the firm's established low-cost country locations while maintaining its high-tech product base in the U.S, Spain and United Kingdom; expand its business in Asia; and build its growing non-automotive business.
Richards is a 20-year veteran of the automotive parts business at Avon Automotive, so he's not naive about the field. Yet he is confident there's money to be made in the automotive market, so confident his company is investing in plants in Michigan, as well as the United Kingdom, Turkey and Mexico.
Richard's message is clear. Avon Automotive is in it for the long haul. The company thinks the overall automotive industry still has strong segments and will rebound from its recent dive.
It's an encouraging viewpoint.