DETROIT (May 3, 11:50 a.m. ET) — Faurecia SA has signed a deal to acquire the massive Saline, Mich., auto parts operation of Automotive Components Holdings LLC in a move Faurecia said will make it North America's largest auto interiors supplier. Faurecia also plans to spin off some operations into a newly created joint venture employing up to 500 people.
Faurecia, with global headquarters in Nanterre, France, and North American operations based in Auburn Hills, Mich., announced the deal along with ACH, which is owned by Ford Motor Co., and new joint venture partner Rush Group Ltd. on May 3 and discussed the deal during the Michigan Minority Procurement Conference and Trade Fair in Detroit.
Full terms of the deal were not disclosed, although Faurecia said it will have “no significant impact” on its debt and cash.
The Saline plant covers more than 1 million square feet and does $1.1 billion worth of business, with injection molding, cast and slush molding of interior skins and foaming for instrument panels, door panels and other interior trim. It currently produces parts for 12 different Ford vehicles assembled at eight Ford plants.
The three-way deal, expected for completion by June 1, calls for Faurecia to acquire the Saline operations and book of business. Dearborn, Mich.-based Ford will retain the property and rent it to Faurecia.
Faurecia will then spin off the bulk of the assembly, sequencing and some injection molding to the new Detroit Manufacturing Systems, its joint venture with Detroit-based Rush Group. DMS will build a new facility in Detroit, where it expects to employ up to 500 people.
Faurecia will employ about 1,100 of the 2,000 employees now at Saline, while others will move over to DMS or be hired at Ford. The Saline site will still have an estimated $400 million in business once assembly is handed off to DMS.
Rush Group, based in Wayne, Mich., will own 55 percent of DMS. Rush, run by Andra Rush, who is Native American from the Mohawk tribe, is a certified minority-owned company and DMS is in the process of obtaining certification as a Native American and woman-owned business.
Faurecia will retain the majority of molding operations, including high-end processing systems such as skin. ACH invested $32 million in new equipment at Saline during the past year, and Faurecia North America – which was already in negotiations for the purchase – consulted with ACH on which equipment to buy, said Mike Heneka, president Faurecia North America.
“We're going to move some things around because we have different processing systems than (ACH),” Heneka said.
The floor space cleared up as assembly operations move to DMS will be occupied by new molding operations for Faurecia's other North American customers, with Saline becoming a molding technical center for the company in the region.
“We needed capacity,” Heneka said, noting that there are other automakers within the city of Detroit as well as multiple assembly plants within a few hours drive from its location just off Interstate 94.
North America and auto interiors have become an increasingly important market for Faurecia since it obtained its first foothold through the purchase of Sommer Allibert SA in 2000. In 2003, it boosted its presence with a deal to supply more than $1 billion in parts to Chrysler and it has steadily increased its capacity through new facilities since then, including a $20 million investment at its Fraser, Mich., plant last year.
Faurecia saw its North American sales climb 32.6 percent in 2011, according to its annual report – during a time when total auto production grew by 11 percent. The company also produces seats and exhaust systems.
Ford was a key player in the deal, not only because it owns the Saline plant through ACH but through an interest in continuing its support of minority-owned businesses. Ford does $17 billion in business each year with minority suppliers, said Tony Brown, group vice president, Ford global purchasing.
“With this announcement, Faurecia is not only serving a critical business need for Ford, they are helping to provide leadership in our effort to build a financially healthy, diverse supply base.”
Ford originally opened the Saline facility under its own name, then spun it off into the Visteon Corp. supplier company in 2000. It took it back over through in 2005 when it created ACH to oversee 17 former Visteon plants.
Once the deal is completed for Saline, ACH will still operate two companies – a climate control business in metro Detroit and a lighting operation in Sandusky, Ohio. Ford is working out final negotiations to sell the Sandusky plant – which includes injection molding — under a memorandum of understanding signed with an unidentified company last year.