Ripplewood eyes assets, sees consolidation
DETROIT (Reuters) - Ripplewood Holdings would consider acquiring auto parts suppliers with a global reach or ones that are based overseas, Thomas Stallkamp, a partner at the private equity firm, said on Monday.
Speaking at the Reuters Autos Summit in Detroit, Stallkamp also said the U.S. auto industry has too many suppliers and consolidation is very likely in the coming year.
"We have to keep fixing the companies we have, as volumes fall. We are looking for other assets, they have to be global or help us become more global," Stallkamp said.
"Europe has opportunities and particularly the Far East, China, India, Thailand...it would be a company that helps (us) become global."
Stallkamp also said there are "too many" suppliers in the United States and that consolidation is inevitable.
Valuations across the U.S. auto industry have been hammered this year by growing concern that industry-wide vehicle sales, which have dropped to their lowest in a decade, could drop to their lowest level since the early 1990s.
As the auto industry struggles with high gas prices, a faltering housing market and tight credit conditions, the most immediate victims are parts suppliers, who are squeezed by automakers' demands to lower their prices and rising commodity bills.
Many of the U.S. auto suppliers have either been in bankruptcy or have restructured. And tighter credit markets have made Chapter 11 exits harder.
"I think you'll see more supplier-to-supplier combinations going forward," Stallkamp said, adding that the deals would likely include private equity players even though markets remain tough.
A credit crunch that began last summer has severely limited access to borrowing money, especially for private equity players, making large deals very difficult.
"From a private equity standpoint we have to change our model right now because there isn't any financing, especially for automotive," Stallkamp said.
"The main thing for us is it is very hard to raise capital right now. And most suppliers particularly will be going through some hard times in the fourth quarter," he added.
Stallkamp said we could expect more deals in which Chinese and Indian auto suppliers acquire U.S. operations as they look to gain a foothold in the U.S. market.
Asian suppliers are looking for U.S. or European companies 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.
Stallkamp said Ripplewood, like the auto manufacturers, is looking for global growth and trying to reduce its exposure to the struggling and overcrowded U.S. market.
In an indication of how difficult things have been: Lear Corp (LEA.N), ArvinMeritor (ARM.N) and Visteon Corp VC.N have all been through significant restructuring of their operations. Federal Mogul (FDML.O), Dana Holding Corp (DAN.N) and Dura Automotive Systems 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 and Plastech is being liquidated.
"We keep looking at everything, nothing's stabilized enough to make a big move," Stallkamp said. "In general, I think things will continue to churn for the next six months so there will be assets available."
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Jui Chakravorty, 646-842-0854; editing by Carol Bishopric)
