Federal-Mogul Corp. has begun a "prioritization process" that could include the sale of its lighting business.
The Southfield, Mich.-based auto supplier has hired an outside consultant to work with potential buyers for the unit, which includes headlights, taillights, fog lamps and other systems made from a range of plastic components.
Company officials had no comment on any potential sale, but sources said they have been contacted by representatives for Federal-Mogul seeking buyers for the lighting unit and other divisions.
"From our standpoint, we are not talking about any prospective divestitures or acquisitions," said Federal-Mogul spokesman Jim Fisher.
Chief Executive Officer Frank Macher, however, has said the company does not intend to spend significant cash on lighting. It is one of six business units Federal-Mogul has listed as "core maintain" in the corporation's long-term strategy.
"We will maintain and continue to support our customers' needs in those areas that we classify as noncore, or core maintain, but we will not invest significant additional capital for new business," Macher said during Federal-Mogul's annual shareholders meeting May 16.
"We are allocating scarce resources to the core product lines," he said.
Those core products take in seals and gaskets, sintered products, systems protection, power cylinders and aftermarket chassis, wipers and ignition. The core maintain list also includes fuel systems, large bearings, camshafts, connecting rods and original equipment ignition. The company has four units on its list for "further review": friction products, brake parts, European wipers and European ignition systems.
The company already has sold one business unit previously on the core maintain list. Federal-Mogul included its aviation ignition division on an April 23 list of business priorities under the maintain heading. On May 1, it announced its sale to TransDigm Inc. for undisclosed terms.
"We have begun an extensive prioritization process to understand our product line strengths and advantages," Macher said. "Through this process, we will develop strategies to focus our scarce resources, people and capital on product lines where we have a competitive advantage and can grow at significantly acceptable margins."
Federal-Mogul purchased the lighting unit, with 10 plants and sales of $400 million, in 1998 as part of its acquisition of Cooper Automotive.
The division has spent time on the auction block previously. In September 1999, Federal-Mogul announced its plan to sell the lighting, wiper blade and fuel businesses and hired investment bankers to advise it in a transaction.
By February 2000, though, the company rescinded that action, deciding that holding onto the businesses was "in the best interest" of shareholders, while also noting that the company was unable to get the prices it wanted for the units.
Since then, though, the company has suffered a series of setbacks. Its stock, which hit an all-time high of nearly $70 per share in 1998, was selling at a little less than $17 in early 2000 and dropped to a low of $1.68 before the end of last year. It now hovers at a little less than $4 per share.
Richard Snell, who led the company through its acquisition growth phase, left the company by "mutual agreement" in September, replaced first by Chairman Robert Miller on an interim basis, then Macher.
Federal-Mogul is facing increased costs from asbestos liability linked to its purchase of gasket maker T&N plc in 1998. Federal-Mogul paid out $351 million last year, compared with $178 million in 1999. Macher chairs an internal Asbestos Strategy Review Board, created in February, to "understand and strive for better management" of asbestos claims.
The company also has become the subject of various takeover rumors, ranging from potential action by shareholder Carl Icahn, who owns more than 5 percent of Federal-Mogul's stock, to speculation that British engineering group GKN plc could try to buy the corporation. Federal-Mogul quickly issued a denial of any acquisition plans by GKN.
"Federal-Mogul has not had any discussions with GKN on the acquisition of the company, nor does Federal-Mogul anticipate such discussions," the company noted in a May 29 news release.