DETROIT—Shares of the sealing and fluid handling systems supplier are up more than 10 percent on the year with no sign of slumping. Cooper-Standard's offerings aren't as sexy as the technology that dominates front pages—autonomous-driving systems, in-dash interfaces or electrification—but it sells, and Wall Street is taking notice.
Cooper-Standard Holdings Inc., the parent company based in suburban Detroit, posted first-quarter net income of $30.6 million, a 46 percent rise driven by an acquisition and revenue of $862.5 million.
North American sales rose 7.7 percent in the quarter, but the company's expansion in Asia continues to bolster its bottom line. Cooper-Standard saw a 48.3 percent spike in Asian sales in the quarter, driven in part by its acquisition of Chinese joint venture Huayu-Cooper Standard Sealing Systems Co.
CEO Jeffrey Edwards aimed to diversify the supplier's geographical footprint and increase r&d when he came to Cooper-Standard from Johnson Controls Inc. in 2012.
Reporter Dustin Walsh of Crain's Detroit Business, an affiliate of Automotive News, sat down with Edwards to discuss the company's growth and how it plans to continue it.
What were the problems that needed solving when you arrived at Cooper-Standard?
We had some footprint challenges in China, Europe and India. We simply had a hole in those regions. We've since resolved that, and now we're positioned like other major tier-one suppliers around the world.
China's growth is slowing. How strategic is it to your growth?
We're growing at 1.4 to 1.5 times the industry growth rate. China is a major reason. Our (compound annual growth rate) in China is 29 percent. It was at $200 million in 2013, and we expect to reach $600 million by the end of next year and reach $1 billion by 2021 or so. North America is now our third-largest market. We're naturally hedged against economic headwinds.
Cooper-Standard makes fluid lines and seals. Those products don't get much play in an age of self-driving and electric cars. Where does Cooper-Standard fit in?
The products we make go on all of the 88 million units (passenger cars) being produced today. While we're not directly part of the megatrends, all those cars require our products. While we may not make the front pages in the news, our technology is in serious demand.
Is R&D as critical for Cooper-Standard as other suppliers?
Depending on where you are in the industry, risk and requirement to invest go up. I think our risk is less. We're the material science experts. We control the labs. We never saw ourselves being eliminated from the food chain, but someone can come by and innovate you out quickly. That risk is real. When I came here, we were at 5 percent ROIC (return on invested capital). We're now at 10.4 percent ROIC and will far exceed 14 percent by 2018. We reinvest strategically.
What's the result?
We've set out to transform the automotive sealing space. We think we've done that with Fortrex. It's still an oil-based sealing system, but it's 30 percent to 40 percent lighter. It won't fade and crack with the conditions (and) will maintain showroom quality regardless of the environment. Everyone is asking for technology to take out weight. We think we can save 12 pounds to 15 pounds per vehicle in large SUVs.
How do you think that product will perform for the company?
We've now entered into 10 development agreements and four pre-production orders. We believe we'll quote $250 million with this technology for the 2018-19 model years. We're targeting global platforms with 1 million to 3 million units per order.
You sit on the executive committee for the National Association of Manufacturers. What's the greatest threat to manufacturing right now?
We want a competitive playing field. Tax reform needs to be addressed. We have a tremendous opportunity if we can get a competitive (corporate) tax rate, leverage our country's energy advantage and get STEM education to be on par with other countries. It's naive to think these areas aren't causing headwinds for all businesses.