Auto parts firms may go for distressed assets

By admin January 12, 2010 5:16 am IST

A top-level management team from Delhi-based auto component supplier, Krishna Maruti, is readying to meet up with France-based Thyssen and Munich-based BMW to explore the possibility of acquiring their distressed assets.
The move marks a growing trend of second-rung Indian auto component majors looking at picking up distressed assets of international automakers and ancillary makers. The focus primarily is to access low-cost global manufacturing capabilities and also strengthen domestic capacities in a market, which is swiftly getting globalized. Officials privy to the development said companies such as Federal Moghul, Rane, JBM Group, Krishna Maruti and Sriram Pistons are closely looking at sparingly-used assets, which are now available at 20-30 per cent cheaper valuations.

Post the global meltdown, a host of fund-starved global component makers in the US and European markets are looking to sell their assets to interested buyers, especially the emerging markets such as India. Growth rates in the global markets are currently limping at single digits, while the Indian component market is growing at a more upbeat 15-20 per cent on the back of robust car sales in the country.  Till recently, Indian component majors such as Amtek, Sona, Mahindras and Bharat Forge acquired companies in the US and Europe to expand their customer base, global footprint and access latest technology. Now even smaller companies are getting ambitious and looking at strengthening their capacities and looking at global opportunities. “Mindsets are changing. With global component companies looking to liquidate the asset and create cashflows, back home the domestic component companies are getting these assets cheaper,” said Abdul Majeed, auto practice leader of PwC.
Some of the global component majors looking to sell distressed assets are Dana, Metalsa and Thyssen Group, and the global automakers include General Motors, Chrysler, Fiat and BMW.