Lynn Tilton, who favors wearing diamonds and buying diamonds in the rough, is charging into the auto industry — at a time when most of her private equity predecessors are happy to be out.
David Stockman's Heartland Industrial Partners' automotive acquisitions failed. So did Stephen Feinberg's Cerberus Capital Management's buyout of Chrysler. Several of Tony Johnson's Hidden Creek Industries' roll-ups ended in bankruptcy, including Dura Automotive Systems Inc.
Now Dura is the crown jewel of an automotive portfolio being assembled by Tilton, CEO of investment firm Patriarch Partners LLC of New York. Her portfolio represents the latest large-scale private-equity foray into automotive markets, where prices appear cheap. But as the others learned, price volatility can burn.
Tilton told Automotive News, a sister publication of Plastics News, that she's willing to take risks that have staggered rivals because “we're value investors.”
“We go where no one else is walking. In order to be involved in the changing industry, you need to be there during the most difficult times,” she said.
Tilton has agreed to invest up to $125 million, assume most of Dura's debt and take a controlling stake in the maker of shifter, cable, structural and safety systems, plus glass and exterior trim. Dura emerged from Chapter 11 bankruptcy reorganization in June 2008, just before the auto market collapsed.
The company has mostly metal operations, but has some plastics for functional parts in window regulators and other systems. It sold off some of its plastics facilities while it was in Chapter 11.
Tilton plans to combine Dura with her Global Automotive Systems, which operates seven parts makers. The new company, which will keep the Dura name, is expected to have annual sales of about $2 billion.
“Additional acquisitions are not necessary to make Dura successful,” she said, but the company will look at opportunities.
Stiletto heels
With her blond tresses and penchant for stiletto heels and diamonds, Tilton, 50, stands out among gray-suited Wall Street deal makers.
She made a different kind of impression on Dura CEO Tim Leuliette.
Arriving at Dura headquarters in Rochester Hills, Mich., Tilton said frenetic travel had kept her from obtaining the company's financials, and she asked for a minute to review them. “After 60 seconds, she knew the bottom line as well as anyone,” he said.
Tilton described her strategy for Dura: “It's about increasing cash flow and eventually selling the company as the economy builds and people come back to the auto market.” She said she holds firms three to five years.
Tilton's private equity firm oversees $7 billion in assets. She has led turnarounds at companies as diverse as mapmaker Rand McNally; MD Helicopters Inc., a company founded by Howard Hughes; and filter company Natura Water.
Not all her deals have been successful. Emergency-vehicle maker American LaFrance, acquired from DaimlerChrysler in 2005, later filed for bankruptcy; it since has emerged.
Tilton's strong views have landed her on TV talk shows; the liberal Huffington Post Web site; the Financial Times; and her own blog, “From Dust to Diamonds.”
In one blog entry, she blasted General Motors Co. “In the end, GM paved its path to bankruptcy with the arrogance inherent to great empires,” she wrote.
In 2008, GM was Dura's fourth-largest customer, accounting for 10 percent of Dura's sales.
Single mother
Tilton is one of four children of a university professor father and a newspaper publisher mother. Her life was disrupted by the death of her father — the Patriarch fund is named after him — while she was attending Yale University.
Tilton became a single mother soon after, at age 23. She told the trade publication the Daily Deal that she worked 100 hours a week on Wall Street to support herself and her daughter. Her daughter literally grew up on the floors of some of her former Wall Street employers. They include Morgan Stanley, Goldman Sachs & Co. and Merrill Lynch & Co.
After two decades of investment banking, sales, research and trading, Tilton moved into distressed investing and quickly built a reputation as a star.
She learned that buying up the debt of a distressed company involves many buyers with their own ideas on how to fix the problems. So she switched tactics, according to Investment Dealers' Digest.
“Instead of buying bad debt and taking control of companies to improve their operations, she buys the businesses outright,” the trade publication wrote. Fortune magazine dubbed her the “Damsel of Distressed.”
Tilton prides herself on being an advocate for rebuilding America's manufacturing base and a voice for small and middle-market companies and their employees. Since 2001, she told the Huffington Post, Patriarch has saved more than 150 companies and 250,000 jobs from liquidation.
“The greatest risk to our economy is the rapid loss of our industrial base,” Tilton told the Huffington Post. “Every great empire has been built upon a manufacturing economy.”
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