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September 17, 2018 02:00 AM

Adient's next CEO gets head start on turnaround

David Sedgwick
Automotive News
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    DelGrosso

    When Doug DelGrosso becomes automotive seating supplier Adient's CEO on Oct. 1, he won't have to start his turnaround of the struggling seat maker from scratch.

    Interim CEO Fritz Henderson — who will become nonexecutive chairman in the transition — has already announced a back-to-basics plan to cut costs, improve quality and focus on traditional seating customers.

    DelGrosso, 56, is a savvy choice to execute that strategy. During 23 years at Lear Corp., DelGrosso rose to chief operatng officer before leaving in 2007. More recently, he led the turnaround of the bankrupt chassis component supplier Chassix.

    "He did a good job" at Chassix, said Steve Wybo, a senior managing director at consulting firm Conway MacKenzie Inc. "He has a seating background and a turnaround under his belt."

    Adient — once the seating unit of Johnson Controls Inc. — is the world's largest automotive seat maker, but it is struggling to make money despite still-strong North American car sales. The company lost $1.5 billion in 2016, recovered with a net income of $877 million last year, then plunged again. CEO Bruce McDonald stepped down on June 11 after Adient announced a quarterly loss of $168 million.

    Henderson, a former CEO of General Motors with a reputation for cost control, wasted little time identifying Adient's missteps. One week after McDonald departed, Adient scrapped a $100 million plan to move its corporate headquarters from Plymouth, Mich., to Detroit.

    Company executives also have questioned Adient's $360 million purchase of seat maker Futuris Group in 2017. Futuris was founded in Australia in 1967, and it produces seats and other components for several Chinese automakers.

    It also supplied Tesla, Ford Motor Co. and General Motors Co. in North America, and Adient was counting on it to target new-age West Coast electric vehicle startups. That turned out to be a bad bet after Tesla decided to make its seats internally.

    "We've been a little distracted," said Adient's Chief Technology Officer, Detlef Juerss, during a July 30 industry presentation in Traverse City, Mich. "We're now transitioning to a focus on the day-to-day business ... not just the finer things in life."

    Those day-to-day problems include high scrappage rates, rising steel costs and glitchy product launches. Adient's seat structures and mechanisms division has suffered chronic losses.

    "There has been a ton of distress in the segment," Wybo said. "The suppliers have been beating each other up on price. It's just one of those product lines with too much competition."

    Adient has some strengths. The company is profitable in China, and its 33 percent share of the global seat industry gives it access to virtually every major automaker.

    But Adient has struggled to regain momentum since it was spun off from Johnson Controls Inc. in 2016. And as auto sales in the U.S. and China are starting to stagnate, Adient's turnaround may prove difficult.

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