Who Will Buy Textron?

Automotive Industries, May, 2001

As many readers know from experience, there are few things in this business more unsettling than having your company for sale. Make that having your company for sale frxr a long lime.

We suffered that agony here at Automotive Industries for nearly a year, enduring the uncertainty that comes with going to work every day in a protracted limbo. Well, I'm delighted to report that this magazine's finally got a proud, well-equipped new owner that has us all revved up again. (Publisher Andy Cummins writes more about this in his column on page 56.) And having survived a year of limbo-hell, I can honestly sympathize with the employees of Textron Automotive, which has also been on the block for about a year.

Textron people know how the "For Sale" sign can mess with your stomach and your mind. Trouble is, they don't know what their collective fate will be. From what I hear from well-placed sources, that fate may be decided soon.

Who will buy Textron's auto business? If you've got $1.6 billion, and don't care that the rough-and-tumble auto business will probably net you only five percent returns (at best), you can join the list of potential suitors. Oh, and bring cash, because that's what Textron wants for its automotive group.

Among the top 50 Tier 1 suppliers, there are only a few giants. Everybody else is a sub-$10 billion enterprise. There aren't a lot of deep pockets out there with over a billion in cash. Smart bets are on a suitor that won't consume all of Textron's assets, but rather keep some and spin off others. Would you keep the stamping business? That might be one to off-load and get a quick return. Ditto for the plastic fuel tank business (ex-Kautex).

But then you've got the same problem with these dispositions. You'll probably want cash for the spin-offs.

So what do you get from Textron's core automotive business, about half of which is with Daimler-Chrysler, the rest with Ford and scattered customers overseas? You get a well-respected instrument panel (IP) business, whose primary customer is DCX. Too many eggs in one basket? It depends on the buyer. Textron would be an astute purchase for a supplier that wants to beef up its portfolio by gaining the Daimler business. You'd buy market share and balance your customer base, if you're primarily serving GM, Ford or one of the Asians.

Besides getting DCX, you also get the IP. Not real high-tech stuff but it's a nice asset if you're in the booming telematics business. The IP gives you a place to put your telematics guts, although other areas of the vehicle cabin (windshield, header, etc.) are emerging as alternative locations.

Is Visteon a logical candidate? Hmmm. Visteon's biggest customer is Ford. Its second biggest customer is Hyundai. Buying Textron Automotive would give Visteon the DCX business and a more balanced customer portfolio. It would also give Visteon a place to put its industry-leading voice-activated telematics system.

But not so fast. Visteon doesn't have the cash. Nor does it need blow-molded fuel tanks.

What about Delphi as a potential suitor? JCI? They're not really interested, I'm told. Magna? Don Walker is on record saying he doesn't want Textron. How about Faurecia, once it digests its Sommer-Allibert acquisition? Faurecia needs to boost its North American presence.

I wouldn't bet on any of them. It's gotta be someone who wants to invest in the auto business and can muster $1.6 billion in cash. My bet is that Textron Automotive will be purchased by a financial player. Somebody like Heartland Financial Partners, though Stockman, Lieuliette and Co. aren't the only logical candidates.

Yes, my money is on an investment group with automotive leanings. Or more correctly, automotive lienings, once they get done signing the check.

Lindsay Brooke is editor-in-chief of Automotive Industries