Novares prepares for the long term with innovation strategy

Howell, Mich. — A lot can happen in three years.

For French automotive supplier Novares Group SA, the changes are not only evident in the company's name, but also in its swift short-term and steady long-term strategies.

That includes a change in ownership, acquisition activity, a companywide rebranding, a canceled initial public offering and the launch of a new investment fund.

In 2016, Novares — then called Mecaplast Group — sold its majority stake to private investment firm Equistone Partners Europe. Later that year, Mecaplast purchased Key Plastics LLC, a U.S. auto parts supplier. The move opened the door to Key Plastics' 12 manufacturing facilities worldwide, where it produced interior, exterior and under-the-hood plastic components.

Nearly a year later, in September 2017, Mecaplast-Key Plastics rebranded as Novares — a name derived from Latin's "nova" and "res," representing the company's straight-shot path to innovation and pragmatic, proactive responses to customers' needs.

"Today, we have achieved a lot," Novares CEO Pierre Boulet said during a sit-down interview Sept. 3 at the company's manufacturing facility in Howell.

Boulet attributed a big portion of Novares' more recent accomplishments first to its merger with Key Plastics — a catalyst for the big-picture strategy, which includes diversifying the product portfolio and customer base, and rebalancing the group's geographical footprint.

That move also gave momentum to another acquisition in the United States: this time, Miniature Precision Components Inc. in Walworth, Wis. MPC is a major automotive plastics supplier of injection and blow molded under-the-hood parts and assemblies for vehicle powertrains.

"We benefit from them. They benefit from us," Boulet said. "It's a win-win deal."

The acquisition of MPC, which was announced earlier this year in February, nearly doubles the size of Novares' powertrain business and extends its supply to all of the main OEMs globally. Boulet said he is "very pleased" with the acquisition so far, comparing MPC to about the size of one business unit for Novares.

"We just acquired MPC in the U.S., and we just bought the two [joint ventures] that we had in China," Boulet said. "Today, 100 percent of what we operate, it's 100 percent owned by Novares. We have about 40 percent of our activity in the U.S., about the same in Europe. We have a decent market share in China."

He added: "The footprint is rebalanced."

Now, Novares develops products in seven key areas for automakers and suppliers: engine components, bezels and clusters, air vents and decorative trims, interior and car body trims, handles, exterior paint and surfaces, and electric powertrain components.

The group has headquarters in Clamart, France, and has expanded into a global powerhouse, with 12,000 employees and operations in 22 countries. The company projects sales for 2019 to reach 1.4 billion euros ($1.5 billion), as it inches closer to another strategic goal: making 2 billion euros ($2.2 billion) in sales by 2020.

Acquisitions have been a "quick way to get to it," Boulet said of the company's growth strategy. But "it's not the only way," he added.

In 2018, Novares launched and then pulled its IPO on the Euronext Paris stock index, citing market volatility and big headwinds in Wall Street.

"We were looking for 300 million euros ($332 million) to refinance the group and invest in innovation. We found the exact same amount of money through bank loans," Boulet said, adding that if the company decides to go public again in the future, it would be a different scenario.

But investing in innovation is another key ingredient in the group's strategy, he said.

To do so, the group launched its investment arm Novares Venture Capital in 2018 with 50 million euros ($55 million) to support new businesses and startups that can add value to its product portfolio. So far, Novares has invested 12 million euros ($13.2 million) in four startups: FlexEnable Ltd., Actronika SAS, APAGCoSyst and Quad Industries.

"We are producing millions of buttons — millions and millions of buttons — and these buttons are going to decline, so we started to question ourselves," Boulet said. "What is going to be next? Smart surfaces."

Smart surfaces, especially, have been an important area for Novares within its investments. Companies like Belgium's Quad Industries, for example, have enabled Novares to further collaborate on its advanced user experience projects such as 2018's Nova Car No. 1 and this year's Nova Car No. 2.

The demo vehicles contain more than a dozen innovations Novares has co-developed with various startups and other companies. Nova Car No. 2 — unveiled in June in Paris before making a stop at the Novares North American headquarters in Livonia, Mich., in September — features 25 innovations, including Quad's Touch'N Play concept that uses a tactile screen with integrated shortcuts for easy and quick user access.

Other highlights include the FlexView Max, a massive flexible organic liquid-crystal-display screen with haptic feedback; and Squeeze Command, which uses gesture recognition for door control, opening the possibility of additional functionality without the need for more buttons.

"Today more than half of our innovations are in interiors. When three years ago, it was nearly nothing," Boulet said. "[In Nova Car No. 2], you will see in that car things you would not even think could exist."

But with investment comes risk.

And in the automotive industry, especially as a supplier, the market is still open for a lot of consolidation, Boulet said — not to mention high-tech changes and shifting customer needs.

Areas like connectivity and driver assistance will become more important for companies that are trying to carve out more opportunities in automotive and the larger mobility landscape.

"In the near future, there will be people buying cars not for their engines … but for the devices you will find in the car and for the ability to communicate with the outside world," Boulet said.

For Novares, determining whether a startup or specific technology is worth investing in comes down to defining the overall strategy, identifying the products or services it is capable of offering now, and then figuring out where the company's products will be in the future.

"I don't have a crystal ball to [determine] if it's going to work out or not," Boulet said. "What is sure, is that when we invest in a startup we do a double investment."

That means, when Novares makes an investment, it has two ways to get a payback: through the new product and also financially, if the startup does well.

"There will be investments that fail, that's for sure, so we try to be cautious in the money we put in," he said. "And if one or two of these is really booming, then we will benefit from there. … If you don't take risks, you don't get benefits."