Martens Sees More Supplier Consolidation

TRAVERSE CITY, MI – Having now worked both sides of the fence, Phil Martens, former Ford Motor Co. chief of product creation and recently departed president and chief operating officer of Plastech Engineered Products, says to expect more consolidation and retrenchment of the U.S. auto supplier industry.

The good news: some of it may be less painful than you think.

And to dispense with the obvious, Martens, whose career plans have been the subject of much recent industry speculation after abruptly departing interiors supplier Plastech, refuses to offer any insight about his own future.

“I’m not going to tell you,” Martens says, refusing to rebut any of the rumors circulating at the Center for Automotive Research Management Briefing Seminars here.

However, Martens does offer his view of the future for the supplier and OEM communities.

“The supply base is going to segregate itself” into companies with a vision of how to succeed and those lacking that ability, he says.

Many in the supplier industry would do well to examine the business structure and strategy of Robert Bosch GmbH, the world’s largest supplier, he suggests.

Bosch runs its business tightly and brings value to its customers, Martens says. In exchange, it can command solid returns.

Phil Martens

And it doesn’t hurt that Bosch is a private entity that doesn’t have to answer to shareholders, he admits.

For less-fortunate suppliers, Martens says he approves of bankruptcy as a method to restructure and shed legacy costs and heavy union contracts. Martens says in a presentation here the pressures of globalization will force down labor rates, in particular, in all regions.

He also believes there is a place for the private equity firms that recently have changed the supplier-industry environment as they buy at-risk suppliers and consolidate businesses.

This type of restructuring, currently typified by investment firms such as W.L. Ross & Co. LLC, is likely to increase – and be successful, regardless of the fact many do not think the firms have the suppliers’ best interests in mind.

Martens says the managers at these firms might bring valuable insight and talent to the struggling suppliers they purchase.

“Categorically, I wouldn’t call them vultures. They will be a positive influence,” he says. “If Wilbur Ross is given a shot, I think he will do the right thing.”

The new-age private-equity companies likely won’t bring about a scorched-Earth environment that happened during the 1980s mergers-and-acquisitions wild ride that “decimated entire industries,” he says.

Martens expects the next 18-24 months to see heavy consolidation in the supplier field, but he is less certain about the OEM industry, particularly where former employer Ford is concerned.

Martens won’t add to recent speculation Ford may be seeking a partner or trying to offload unprofitable divisions such as Jaguar Cars.

“You’ve got to let the Ford team figure out what they want to do,” Martens says. “If an acquisition (with another auto maker) makes sense, they have to decide.”

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