By Judy McKinnon And Jeff Bennett
Magna International Inc. solidified its position as the
second-largest global auto components maker agreeing to buy German
automotive-transmission provider Getrag International GmbH in a
$1.9 billion deal that continues a buying binge taking place among
global parts suppliers.
The purchase of the family-owned Getrag is the sixth major deal
to be announced or completed since the start of the year and comes
amid a wider restructuring by Canada's Magna. Parts makers, now
flush with cash, are scooping up smaller targets to enhance their
global presence as they retool to be able to more comprehensively
offer products to car companies looking to meet increasingly
stringent fuel-economy standards and thrive in an emerging tech
war.
Earlier this week, turbocharger maker BorgWarner Inc. announced
a deal to buy alternator producer Remy International Inc. for about
$950 million. TRW Automotive Holdings Corp., a company specializing
in safety components, was recently acquired by German auto supplier
ZF Friedrichshafen AG for $12.4 billion.
"The trend among the suppliers is that we now have to be bigger
as the auto makers go to us to do more for them," Magna Chief
Executive Don Walker said Thursday. "They have limited resources
and we can provide them the expertise they need. You also need to
be global."
In addition to being a respected components supplier with
decades of experience, Getrag gives Magna a bigger entry into the
Chinese market since the company already has joint-venture
relationships with auto makers Jiangling Motors Corp. and Dongfeng
Motor Group Co. It also has a large partnership with Ford Motor
Co.
About 30% of Getrag's business is expected to come from
Chinese-based auto makers by 2019. Currently, about 10% comes from
China. Magna's purchase is expected to close by the end of the
year.
Mr. Walker says auto makers are looking to outsource more of the
development of the underpinnings of the car so they can instead
focus their development dollars on the top half of the vehicle that
customers care about the most. About 87 million light-duty
transmissions were produced in 2014, and that number will likely
rise as analysts expect global light-vehicle volumes to hit 100
million by decade's end.
Getrag is the world's ninth-largest producer of transmissions by
volume, churning out 3.9 million annually. It also has a strong
presence in manual and dual-clutch transmissions that are growing
in demand since they provide a better driving experience and
increase fuel efficiency.
The company, based in Untergruppenbach, Germany, was founded in
1935 by Hermann Hagenmeyer. It has about 13,500 employees and
operates 13 manufacturing and 10 engineering centers in nine
countries in Europe, Asia and North America. Four of those
manufacturing locations operate in China alone.
Getrag generated about $1.8 billion in consolidated sales in
2014. Including joint-venture sales, revenue equals about $3
billion and Magna expects that number to double by 2019.
Like its competitors, Magna too has been pruning its operations
and shifting focus to businesses generating high profit.
Earlier this year, the Aurora, Ontario-based Magna agreed to
sell its interiors business to Spain's Grupo Antolin for about $525
million. Mr. Walker said the company will hold on to its automotive
seating business, suggesting that it still could be in an
acquisition mode. Industry watchers have said Johnson Controls Inc.
might be shopping around its seating business.
Magna is the world's second-largest parts suppliers by value of
sales of components to auto makers, according to Automotive News.
The company generated $36.3 billion in sales in 2014, edging out
Continental AG but still lagging behind Robert Bosch GmbH with more
than $44 billion in revenue.
Write to Judy McKinnon at judy.mckinnon@wsj.com and Jeff Bennett
at jeff.bennett@wsj.com
Access Investor Kit for Magna International, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CA5592224011
Access Investor Kit for Jiangling Motors Co. Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CNE000000CV8
Access Investor Kit for Dongfeng Motor Group Co., Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CNE100000312
Access Investor Kit for BorgWarner, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0997241064
Access Investor Kit for Dongfeng Motor Group Co., Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2577382037
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
