Intier Automotive Inc. is starting to see opportunities for low-cost acquisitions in the auto parts industry as the Big Three auto makers squeeze their suppliers on price.
"Lots of things are for sale," said Don Walker, Intier's president and chief executive officer. "There may be opportunities to pick up suppliers because they are being squeezed until they fold."
In a conference call with analysts yesterday, Mr. Walker said Intier is patiently waiting for a suitable acquisition to come on to the market. He said he is in no hurry to buy anything soon.
"We're biding our time. Lots of suppliers are struggling, but we're not sure when the cycle will bottom out. Some stuff is still overpriced, but prices are coming down."
Mr. Walker would not say how much he plans to spend on an acquisition, or whether he had a target in mind. He said he is more likely to buy in Europe and Asia, but there are a lot of auto parts companies coming onto the market in North America.
Based in Newmarket, Ont., Intier is the third-biggest maker of automobile interiors in North America after Johnson Controls Inc. and Lear Corp., two U.S.-based giants. Formerly a unit of Magna International Inc. of Aurora, Ont., it was spun off a year ago in a $100-million initial public offering. Magna retained control through its class B shares.
Intier makes door panels, seats and other interior parts for a range of cars that includes Cadillac, Mercedes, Audi, Jaguar, Mini Cooper, Lincoln Navigator, Dodge pickups and Ford Fiesta.
Intier has also been affected as the Big Three auto makers cut their prices to suppliers. "We are in pretty good shape, but our margins are not where we would like them to be," Mr. Walker said.
He said Intier has been able to win a number of major contracts with auto makers on both continents.
While most of Intier's business is with the North American and European auto makers, he said he hopes to increase business with the Japanese car companies. Many of these companies are looking for alternatives to their traditional suppliers, and they are coming to Intier.
Intier made a profit of $26.4-million (U.S.) or 46 cents a share in the second quarter ended June 30 on sales of $996.4-million. In the year-earlier period, it made a profit of $18.4-million or 40 cents on $851.1-million.
In the six months ended June 30, it made a profit of $39.4-million or 71 cents a share, up from $25.2-million or 57 cents. Sales rose to $1.9-billion from $1.7-billion.
The company reported pro forma earnings per share in the year-earlier period because of a corporate reorganization in August, 2001.
The initial share offering was priced at $21 (Canadian) on the Toronto Stock Exchange. The shares closed yesterday at $25.25, down $1.60 on a volume of 3,000 shares.
Mr. Walker told analysts that the company had record sales and profit in the second quarter. But he said the future is hard to predict because of the nervous economy in Intier's two major markets of North America and Europe.
Staff