Big suppliers got bigger in '04

By Bradford Wernle, Automotive News

Automakers are racing to load vehicles with more features and gadgets, and the innovative companies that help them supply that content are reaping a revenue bonanza.

During 2004, big companies grew even bigger in the auto supplier world. Aggregate revenues for the Automotive News list of top 100 global original-equipment parts suppliers grew 13.0 percent in 2004 over 2003. The Top 10 suppliers on that list grew 12.9 percent. But if Delphi - where revenues dropped an estimated 8.0 percent - is taken out, the remaining companies rose 16.9 percent. That is in spite of global vehicle sales growing just 6.1 percent.

Static markets

"If somebody is looking at just North America and Europe, you're looking at static new-vehicle markets, but even at that, there's a tremendous amount of content that adds revenue," says Jim Gillette, analyst for CSM Worldwide in Farmington Hills, Mich.

Gillette says companies that develop features their customers will pay a premium price for will win. For example, driver and passenger airbags have become a commodity. But extra airbags, such as side curtains or knee bolsters, are promoting growth for companies such as Autoliv Inc.

"There are more and more sensors and actuators," Gillette says. "The whole market in the developed countries has gone nuts relative to driver features - power sliding doors in minivans. You've got this huge motors market."

A supplier of power sliding door and liftgate mechanisms - Mitsui Kinzoku of Japan - was the fastest growing company in the top 100, with a worldwide sales increase of 59.0 percent over 2003 to $1.14 billion.

Suppliers that can develop such electronic gizmos that replace mechanical functions will gain in this market, says Dave Royce, manager of corporate strategy for Siemens VDO Automotive Corp. in Auburn Hills, Mich. Siemens, No. 10 on the list with global revenue of $11.6 billion, supplies electronics and software.

"I don't think you're going to see a lot of growth in areas where people are providing fundamental hard parts for vehicles," Royce says. "There are only so many axles being made. But a company involved in something like emerging restraint system technology will have more opportunities."

One innovator, Robert Bosch GmbH, leapfrogged Delphi in 2004 to become the world's largest supplier, measured in dollars. Bosch's revenue grew 17.2 percent to $27.2 billion. Bosch is a big player in electronics. Bosch benefited from the strength of the euro against the dollar.

Bosch of Germany grew 6.3 percent to 21.8 billion euros in 2004 from 20.51 billion euros in 2003. Bosch used a euro conversion rate of $1.24 for 2004 and $1.13 for 2003. Similarly, Faurecia grew 5.9 percent to 10.7 billion euros in 2004.

Wide reach

Johnson Controls Inc. - a Milwaukee maker of seats, cockpits and interiors - has benefited from the complexity of seats and interiors. Johnson Controls jumped from seventh on the list in 2003 to fifth in 2004 with $19.5 billion in OEM revenue, up 28.4 percent from a year ago.

"The thing that jumps out about Johnson Controls is their broad customer base," says Donald Montroy, another CSM analyst. "They do probably the best job of any American company with the new domestics, especially the Japanese transplants."

Magna International Inc. made the biggest jump in the top 10, from sixth to third with a 32.3 percent increase in revenues. Magna of Aurora, Ontario, got a big boost from its Magna Steyr contract assembly plant venture in Graz, Austria. Magna builds the BMW X3 and Saab 9-3 Cabrio.

Delphi was the biggest loser in the top 10, dropping about 8.0 percent to $24.1 billion from 26.2 billion in 2003.

The top 10 suppliers included two German companies, Bosch and Siemens; four U.S. firms, Delphi, Johnson Controls, Visteon Corp. and Lear Corp.; two Japanese, Denso Corp. and Aisin Seiki Co.; one Canadian, Magna; and one French company, Faurecia.

Gillette doubts that profitability tracked at the same pace because of industry price pressures.

"The price pressures of automakers combined with commodity price increases," he says, "so no matter how many headliners or cross-body members or whatever they're producing, they can't make up for what they're losing."

From Automotive News