A New York investment company is poised to acquire four General Motors Corp. parts plants as part of a plan to build a $1 billion independent parts supplier. Buyout-fund manager Joseph Littlejohn & Levy has emerged as the leading contender for the four automotive interior-parts factories with 5,700 employees, industry sources said.
The creation by JL&L of the fourth independent interior-systems company in North America is expected to heighten the already-intense competition in that $22 billion sector.
``I'm looking for the announcement of [the JL&L sale] to come pretty soon,'' said Whitey Hale, president of Local 326 of the United Auto Workers, which represents 1,000 workers at one of the plants in Flint, Mich.
Hale said company officials told him JL&L is the prospective buyer of the plants, which are part of GM's far-flung Delphi Automotive Systems. The plants are in Livonia, Mich.; Flint; and Windsor and Oshawa, Ontario.
Three of the four are involved to some extent in plastics processing: interior door panels are made in Livonia; bumper covers, consoles and other plastics components in Oshawa; seats and door panel trim in Windsor.
A JL&L spokesman declined to comment. Delphi spokeswoman Cheryl Kilborn said negotiations will be completed by year's end but declined to identify the buyer.
In a statement, she stressed the ``ongoing job opportunities'' that would be preserved by a change in ownership.
``In those cases where we have identified a business being for sale, we have found buyers who have dedicated substantial resources to the business, provided a secure livelihood for the employees and contributed significantly to the respective communities,'' she said.
Industry sources say JL&L, which raised more than $400 million in capital in recent years for its acquisition moves, already has tapped a prominent turnaround specialist to operate the new company. He is Edward Gulda, who last served as group chief executive officer of Kelsey-Hayes, industry sources said. Kelsey-Hayes since has become a unit of Varity Corp.
Gulda and JL&L are expected to obtain GM contracts while they seek new business from Ford Motor Co., Chrysler Corp. and Japanese automakers operating in this country. The Delphi plants build door hardware, instrument panels, seat assemblies and interior door panels.
Cliff Roesler, a vice president of investment banker W.Y. Campbell & Co. in Detroit, said he was not surprised by JL&L's reported involvement. The firm is an accomplished turnaround specialist with unusual efforts because the auto industry is relatively closed to nonautomotive buyers.
But JL&L executives face a challenge. The Delphi plants are among those known as the ``12 uglies'' around GM. Because of their marginal profitability, they were operating under the threat of closure or sale. When GM-UAW efforts to improve productivity failed, they were put up for sale earlier this year.
Despite the plants' high costs -UAW wages and benefits that analysts say cost the Big Three an estimated $43 an hour - JL&L still must meet the automaker's production, quality and price demands.
JL&L is expected to retain most of the Delphi workers and the GM-UAW national contract, industry and union sources said. Surplus Delphi workers would be absorbed by GM, the sources said. Such a move is designed to lessen UAW resistance. Reg McGhee, a UAW international representative, declined comment.
The investment company is counting on its track record to persuade GM. Private JL&L quietly has become a major automotive-industry player.
In 1986, JL&L acquired and turned around the troubled Okemos, Mich.-based Motor Wheel Corp. and invested $40 million in equity to pay down debt. Earlier this year, Motor Wheel merged with Hayes Wheels International Inc. of Romulus, Mich., with JL&L retaining a 43 percent stake.
The merger created a major supplier of wheel and brake components, with estimated sales this year of $1 billion.
JL&L is expected to keep the Delphi plants separate from Hayes Wheels, said industry sources. This newest venture will face ferocious competition, analysts say.
Lear Corp., the automotive group of Johnson Controls Inc., and to a lesser extent Magna International Inc., dominate the automotive-interiors industry, known for its massive investments and thin profit margins.
Analyst Jesse Levine said JL&L's venture will require GM help.
``We would infer that they have a supply arrangement with GM so they can count on GM for revenue while they try to diversify their customer base faster than Delphi aimed,'' said Levine, with the Ann Arbor, Mich., office of Seidman & Co. Inc.
Roesler said JL&L also avoids stepping into operating roles at its companies. The company instead looks to experienced industry insiders to make operating decisions, as it has at Hayes Wheels.
Roesler said JL&L maintains ``a stable of auto executives to put into their deals ... and Gulda is a first-class operator.''