Plans for Brazilian production by global automakers such as BMW and Audi are spurring the country’s best-selling parts supplier, Autometal SA, to hunt for acquisitions in a market poised for consolidation.
Brazilian suppliers are being strained as companies such as Mercedes-Benz and Chinese small-car producer Chery Automobile Co. rush to the world’s seventh-largest economy. While domestic sales have slowed in 2013, the market grew at an average annual pace of about 10 % from 2002 through 2012.
This is why Autometal is eyeing takeovers from among eight to 10 midsize rivals that lack the expertise to work with premium brands and that haven’t been able to profitably meet demand as domestic auto output rises to a record this year, Chief Financial Officer Fernando Mearim said.
“Not all companies will continue operating in this market,” Mearim said at a seminar with automaker and partsmaker executives in Sao Paulo. “The pie is staying the same size, it’s just going to be divided into smaller pieces.”
There are almost 700 auto-parts companies in Brazil. Mearim wouldn’t identify any potential targets for Diadema, Brazil-based Autometal, only saying he wasn’t interested in “anything less than 20 million reais ($9 million).”
By 2016, the number of factories will grow to 42 from 29, including plants built by BMW and Jaguar Land Rover Automotive Plc. Audi said in September it would resume making cars in Brazil next year.
Those factories will make some models that can be exported, Autometal’s Mearim said, and will require a higher level of technological skill that many auto-parts companies won’t have.