Profitability Bound

International Automotive Components Group is about to become significantly bigger with the acquisition of 16 North American plants once part of Collins & Aikman Corp.'s Soft Trim division, with approval expected soon. But that growth will be temporary, as consolidating manufacturing sites and the workforce in an effort to achieve profitability will be a top priority after the deal closes, says James

Tom Murphy, Managing Editor

September 1, 2007

3 Min Read
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International Automotive Components Group is about to become significantly bigger with the acquisition of 16 North American plants once part of Collins & Aikman Corp.'s Soft Trim division, with approval expected soon.

But that growth will be temporary, as consolidating manufacturing sites and the workforce in an effort to achieve profitability will be a top priority after the deal closes, says James Kamsickas, president and CEO of IAC Group North America.

IAC was formed in April from Lear Corp.'s interior systems division, which was acquired by billionaire Wilbur Ross, who is among several private-equity investors seeking opportunities in the distressed automotive sector.

Although Collins & Aikman, which has been in bankruptcy since May 2005, and Lear have struggled to achieve profitability in North America, Ross says similar operations from the two companies can be combined into a viable entity.

Getting there, however, will not be easy, Kamsickas says. Without the C&A plants in North America, IAC has 18 U.S. manufacturing sites, most of them in Ohio, Michigan and Indiana. All the facilities, except for one, have union agreements.

Factor in 16 more C&A plants in the U.S., Canada and Mexico, and the need to close plants becomes evident.

“Inevitably, there will be more consolidation,” Kamsickas tells Ward's. “It's unfortunate. The toughest thing I have to do in my career is make that decision. But for the bigger picture, it will make the whole stronger in the long term.”

Until the acquisition of the C&A Soft Trim plants is complete, Kamsickas says it is too early to estimate how many plants could close.

One of the former Lear plants already has closed (in Northville, OH), and another closure has been announced as well (in Mississauga, ON, Canada).

The product portfolio is focused heavily on interiors: door trim, overhead systems, visors, instrument panels, floor consoles, seat plastic, flooring, acoustic damping materials and air ducts.

The supplier has significant content on a number of important new vehicles, including General Motors Corp.'s fullsize SUVs and pickups, Chrysler Group's all-new minivans and the Toyota Tundra pickup.

IAC's manufacturing footprint places its plants within 150 miles (241 km) of its customers' facilities.

And although the supplier is being asked to quote many jobs on a global basis and seeking opportunities in low-cost countries, Kamsickas says he is confident many IAC products will need to be manufactured in North America for domestic customers and can be done cost-effectively, when shipping costs are considered.

“The IP (instrument panel) programs, the large carpet programs, the big overhead system programs; we will still manufacture them in North America,” he says. “That's why we're growing so strong in Mexico to be able to accomplish that.”

IAC also is acquiring C&A's plant in Hermosillo, Mexico, which produces interior components for the Ford Fusion, Mercury Milan and Lincoln MKZ. A pricing dispute last year between Ford and C&A left the auto maker without parts, forcing it to temporarily halt vehicle production at its Hermosillo plant.

Kamsickas describes IAC's union relationships as strong. IAC is negotiating a number of new union contracts, as well, at the various plants.

Kamsickas declines to say whether profitability for the company hinges directly on labor's willingness to accept concessions in the new contracts.

“We have a road map that drives us to profitability very soon,” he says.

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2007

About the Author

Tom Murphy

Managing Editor, Informa/WardsAuto

Tom Murphy test drives cars throughout the year and focuses on powertrain and interior technology. He leads selection of the Wards 10 Best Engines, Wards 10 Best Interiors and Wards 10 Best UX competitions. Tom grills year-round, never leaves home without a guitar pick and aspires to own a Jaguar E-Type someday.

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