Southtec to add 200+ jobs in Wilson County

Automotive parts manufacturer plans $23.6M investment
Jun 11, 2014 11:56 AM

Survey: Almost half of auto suppliers see factory renaissance enduring

Even after upswing, a third of parts makers see much better '14; buyers should expect sales incentives — and soon
Oct 21, 2013 2:41 PM

Financial sector still cautious with auto companies

Automotive companies are becoming more confident that their industry's growth will last a little longer, a new study detailed at Thursday's AutoConnect conference at the Omni Nashville downtown.

Ernst & Young Capital Advisors Partner Jim Carter told attendees of the gathering, hosted by law firm Frost Brown Todd, that a greater number of manufacturers and suppliers are seeing better credit availability these days. Similarly, a increasing number of them are exploring mergers or acquisitions to take advantage of the growing market — and generally are seeing the price gap between potential buyers and sellers grow smaller.

Yet, Carter pointed out, actual M&A activity has dropped off significantly in 2013, returning to levels last seen during the dark days of 2009.

Explaining that discrepancy comes down in large part to a liquidity crunch, a shortage of capital for an industry that needs a lot of it. On the equity side, Carter said, mutual fund managers often don't want to put money into more than a small number of names, leaving much of the publicly traded companies in the industry out in the cold. And the debt markets don't rate many auto suppliers as investment grade, which has meant much of the activity there in recent years has been confined to refinancings.

Similarly, traditional bank lending hasn't grown as quickly as might be expected. On the one hand, that's because many bankers are still very cautious about overextending themselves — especially to a cyclical industry — after they have just cleaned house from the last bust. But caution also still hangs heavy in the air at company leaders, many of whom saw peers and rivals implode during the last downturn.

"It's been a softer year than expected," said Tim Ashley, a Michigan-based corporate banking manager for PNC Financial Services Group, during an AutoConnect panel. "So many people were so burned during the recession and they're still hesitant to invest" even as the industry is growing quickly.

That caution is borne out in another E&Y stat Carter showed AutoConnect attendees. The average debt-to-EBITDA ratio among automotive suppliers, he said, has improved to 1.8 as of mid-2013 from 2.0 three years ago as companies have cut back on capital spending even as sales have risen. (Within that supplier universe, those ratios can range from well below 1.0 for the healthiest companies to 4.0 or more for struggling manufacturers.)

Oct 17, 2013 3:24 PM

Economist: Small auto suppliers could become industry weak spot

'Free-ride' dynamic at manufacturers working for multiple brands contributing to potential problem
Oct 17, 2013 1:31 PM

Auto sector's rebound brings opportunity for minority-owned firms

The growth in the U.S. automotive sector has brought with it a lot of opportunity for suppliers who survived the Great Recession. The industry's big names are cranking up production levels but the supplier base shrank a good bit during the downturn and many component makers are stretched these days.

Among that group are minority- and woman-owned businesses that can help the industry's biggest fish meet diversity participation goals. Speaking to Frost Brown Todd's AutoConnect conference at the new Omni Nashville Hotel, Phil Goy of consulting firm BBK said the large car makers and their top-level suppliers — think well-known names such as Magna, BorgWarner or Magneti Marelli — are increasingly focused on building stronger relationships with minority-owned companies.

That said, simply being a minority-owned supplier won't be enough to get on the radar of potentially lucrative customers. Original equipment manufacturers, Goy said, "are really looking for people who can partner with them and grow with them — people they can relate to. "If they find a business with the right potential, they will take the time to help it grow. That could take the form of building a better understanding of industry trends and customer needs or improving financial or operating systems.

More strategically, that could also lead to support for affiliations, partnerships or outright mergers with other suppliers. (One extra hurdle to clear in the latter, Goy pointed out, is maintaining the minority owner's stake of at least 51 percent. He added that a number of private-equity firms have been active in those types of deals.) But a key for executives looking to pull off such deals is having the proper operational underpinnings.

"It's a good opportunity for companies to assess their own capabilities and not just be a commodity player," Goy said.

Oct 17, 2013 11:57 AM

The global backdrop to Hankook's investment

Analysts at Fitch Ratings have written down some early reactions to news of Hankook Tire's $800 million plans for Clarksville. The new plant will likely put pressure on tire prices, which they say would appear to hurt Goodyear most. But more fundamentally, Fitch's researchers note, the move by Hankook illustrates how "up-and-coming manufacturers increasingly have the ability to pose a formidable challenge to dominant players" such as Bridgestone.

Oct 16, 2013 6:58 AM

Brookings: State's auto sector needs 'urgent action' to sustain momentum

Study calls for more strategic approach to workforce, innovation
Oct 4, 2013 2:28 PM

Nissan supplier plans big regional expansion

Smyrna operations set to add 180+ jobs as part of $109M plan
Sep 3, 2013 2:26 PM

Brentwood auto tech venture to liquidate

Big local names among investors in leak detection company that never took off
Jul 2, 2013 7:00 AM

Just one word: Italian company chooses Lebanon for Americas HQ

SO.F.TER. investing $11.5M in project's first phase
Jun 25, 2013 12:46 PM