Reflections on Sumi Motherson's acquisition of Visiocorp
By: Colin Whitbread, Monday, March 09, 2009, AutomotiveWorld.com
A collective sigh of relief is almost audible among many leading OEMs at the news that a subsidiary of Motherson Sumi Systems Limited (MSSL), Samvardhana Motherson Visicorp Solutions Ltd (SMVSL), has completed the acquisition of UK-headquartered Visiocorp Group. These same OEMs, anxious not to see Magna and Ficosa gain duopolistic dominance in the rear-view mirror systems market in Europe (and respecting Visiocorp's manufacturing technology), have provided vital encouragement and support to the deal.
Visiocorp, which morphed from the crisis-ridden Schefenacker AG and the insolvent Engelmann group and subsequently the very troubled Schefenacker plc business, has continued to struggle with a debt-laden balance sheet and significant operating losses, even since major financial restructuring in May 2007. According to sources close to the deal, Visiocorp essentially ran out of cash at the end of November 2008 and subsequent survival has been challenging.
Despite its financial woes, Visiocorp is a key supplier of external and interior rear-view mirrors to a number of major OEMs, including BMW, Chrysler, Daimler, Ford/Volvo, GM, Hyundai/Kia, Mahindra & Mahindra, Maruti Suzuki, Mitsubishi, Porsche,PSA Peugeot Citroën, Renault/Nissan, Tata JLR, Toyota, Volkswagen/Audi etc. Unsurprisingly, these customers have viewed Visiocorp's recent financial woes with considerable concern and have clearly been supportive of efforts to bring the company under a more robust corporate umbrella.
A key aspect of the acquisition is that Indian auto supplier MSSL not only has secured an outright acquisition in the European auto supplier sector but has also gained a European/global leadership position in a key automotive system (rear-view mirrors) into the bargain, the first time this has happened. To date, MSSL has pursued overseas expansion and technical development through a host of joint ventures with such leading suppliers as Calsonic Kansei, Magneti Marelli and Webasto. Perhaps best known for its leading supply position in electrical distribution systems (wiring harnesses), MSSL also had a 13-year joint venture in India with Visiocorp – Visiocorp Motherson Ltd - whose roots go back to the Britax mirrors business previously acquired by Schefenacker.
Absorbing Visiocorp, which had revenues of around €660m (US$832m) in 2008, has almost doubled the Sumi Motherson Group's size to sales of US$1.6bn and given it a global footprint spanning 20 countries and 80 manufacturing units. The acquisition is also paving the way for MSSL to accomplish its stated goal of reaching a sales turnover of US$1bn by the year 2010.
But the acquisition still leaves much to be done to improve Visiocorp's operating structure and performance, even if debt has now been all but removed via Visicorp plc going into pre-packaged administration. The departure of Visiocorp's former chief executive officer, ex BMW and Daimler executive Ulrich Bruhnke, and chief operating officer Karl-Heinz Bierenbreier, means the focus will now be on rationalising the manufacturing network to eliminate some highly unprofitable facilities. Sources have conceded to AutomotiveWorld.com that at least one plant closure is almost inevitable. Visiocorp has talked in the past of 'considerable' losses by its plants in Germany and Hungary, despite previous restructuring. Schefenacker's German (door-handle) business, acquired as part of Engelmann, was a particular problem, while the operation in Hungary suffered from quality and operating shortcomings. The company has previously rationalised its production in Spain, closing a plant in Liria and focusing production in Epila (Zaragoza). Future cost savings should also come from greater synergies as the existing businesses of the Sumi Motherson Group supplement Visiocorp's needs for products and services, particularly in design engineering services, IT, injection moulded parts and assemblies, moulds and wiring harnesses.
While excellent news for Visiocorp's OEM customers, the elevation of Sumi Motherson to one of the largest global manufacturers of automotive mirrors may not be such good news for rivals such as Magna Mirrors, Ficosa, Ichikoh, Gentex and Murakami Kaimeido. A more financially stable and reinvigorated Visiocorp will be far better placed to play a leading role in the increasing sophistication of rear-view mirrors and their evolution into higher technology electronic modules incorporating a host of functions including electrochromic glass, lights, small cameras, antennae, hydrophilicity, power folding, heaters, various sensors and detection systems etc. MSSL will also likely further develop Visiocorp's blind spot detection technology which found application on Volvo's XC70 model and which could have further market potential.
Published on Monday, March 09, 2009
Free e-newsletters
Our free E-Newsletter service is an excellent way of staying up to date with news and features from around the global auto industry.
