Asian auto suppliers eye U.S. companies

By Jui Chakravorty Das

NEW YORK (Reuters) - Asian auto parts suppliers hoping to gain a foothold in the North American market are eyeing U.S. companies as acquisition targets, an emerging trend expected to pick up speed in the coming years.

The acquisition interest from Asian suppliers -- particularly from India and China -- comes as U.S. suppliers struggle to cope with rising commodity prices coupled with demands from automakers to lower their price on parts.

Many of the U.S. auto suppliers have either been in bankruptcy or have restructured heavily. And tighter credit markets are not boding well for many of them to exit Chapter 11 protection any time soon.

"We are certainly seeing interest in those companies from all parts of the globe and in particular from Chinese and Indian investors and strategics," said Steve Brady, a partner with Grant Thornton LLP's transaction advisory services.

"It's going to be a positive thing for the industry," Brady said. "The Asian companies will bring in investment capital and they will be operation-focused. It's a good thing for a supplier base that has been struggling."

Lear Corp (LEA.N), ArvinMeritor (ARM.N) and Visteon Corp VC.N have all been through significant restructuring of their operations. Federal Mogul FEMO.PK and Dana Holding Corp (DAN.N) recently exited Chapter 11 protection.

Tower Automotive sold itself to Cerberus Capital Management in its effort to exit bankruptcy.

Collins and Aikman was liquidated in 2007, after going through bankruptcy in 2007. Dura Automotive Systems DRRAQ.PK, Delphi Corp (DPHIQ.PK) and Plastech continue to be in Chapter 11 proceedings.

"There are definitely several Indian and Chinese suppliers standing in line to make acquisitions in the U.S. supplier space," said one banker, who requested to not be identified because he is working on some of the deals.

It's a good time for Asian suppliers trying to gain a foothold in the North American auto market -- still the world's largest -- as acquisition prices for companies and equipment are lower than they've been in the past couple of years.

"The tightening in the lending markets has forced private equity firms to take a step back, thereby dropping the prices a bit," the banker said. "A weak dollar is also a help."

BEST OF BOTH WORLDS

Chinese and Indian auto suppliers see a chance to acquire U.S. operations with expertise in developing more complicated auto component systems, industry experts have said. In some cases, the goal is to combine higher-end engineering from the United States with their existing low-cost manufacturing base.

Valuations across the U.S. auto industry have been hammered this year by growing concern that industry-wide vehicle sales could drop to their lowest level since the early 1990s.

Jun Ni, a professor of engineering at the University of Michigan and an adviser to the Chinese government on industrial development, said he meets regularly with Chinese auto parts representatives touring the United States and looking for partnerships and acquisition targets.