Sep 082009
 

DETROIT — Rising from the ashes of three bankrupt auto parts manufacturers in the stamped- and cast-metal component sector is Cerion LLC, a new manufacturer coming to life through acquisitions that could be capable of generating nearly $1 billion in revenue.

Suburban Detroit-based Cerion and parent company Revstone Industries LLC of Paris, Ky., have since December acquired the die-cast metal component business of Contech LLC, almost all the assets and operations of fine blanking and metal stamping firm Precision Parts International Inc. and, on July 14, the assets of castings producer Intermet Corp.

Revstone is headed by George Hofmeister, a Kentucky industrialist with a track record of executing automotive deals in Detroit and the Midwest.

Contech’s castings business generated revenue of $156.7 million in 2008. PPI posted revenue of $141 million from January to October last year, and Intermet posted revenue of about $310 million in the 12 months ending July 31, 2008, according to records from the companies’ bankruptcy cases.

Each of the metal stampings and castings suppliers filed for Chapter 11 bankruptcy between August 2008 and January 2009 and failed to reorganize and emerge intact.

For about $43 million, Revstone and Cerion were able to pick up at least 20 manufacturing operations throughout the U.S. and Mexico and assume supply contracts with General Motors, Ford Motor Co., Chrysler Group LLC, Toyota, Honda and BMW.

The companies also landed work with large tier-one suppliers such as American Axle & Manufacturing Holdings Inc., Delphi Corp., Continental Automotive Systems Inc., Dana Corp., TRW Automotive Holdings Inc., BorgWarner Inc. and many others, according to bankruptcy court documents.

Cerion also gained four plants in Michigan and one in Mexico when it acquired Hillsdale Automotive from EaglePicher Corp. in December, renaming the company Metavation. Hillsdale posted revenue of about $100 million in 2007, according to a press release about the deal.

According to a June press release announcing Cerion’s selection of P2R Associates as the company’s public relations firm, Cerion was officially formed following the Hillsdale acquisition.

In the release, Cerion was described as a “privately held American manufacturing company focused on acquiring and operating small and medium-sized precision component manufacturing operations to serve automotive and other manufacturing industries in the U.S.”

Cerion CEO Dave Doster declined to comment for this story through spokesman Gordon Cole, president of P2R Associates.

While details about the company are sketchy, one thing is clear: the market the company is entering is rough-and-tumble.

“The casting sector has experienced a large number of failures over the last five years,” said Craig Fitzgerald, a partner and automotive supplier consultant at Plante & Moran PLLC in suburban Detroit. “That’s been the rule, rather than the exception.”

High, often volatile prices for raw materials such as steel, excess capacity, low volumes, price pressures and sourcing from low-cost countries such as India and China have squeezed the sector for much of the decade, Fitzgerald said.

Buying the firms out of bankruptcy may give the new owners an edge their predecessors lacked.

“They’re bargains, and that means continuity of the operations. There will be some consolidation, and certainly these guys can afford to close operations and consolidate and keep the good parts running and run them at a higher efficiency,” said Neil De Koker, president of the Original Equipment Suppliers Association.

Cerion and Revstone were able to acquire the desirable assets of Contech, Intermet and PPI without the burden of excessive liabilities and debts. The acquisitions also were a fraction of the likely cost a few years ago.

For instance, Contech was sold by its former parent SPX Corp. in 2007 to Marathon Automotive Group LLC for $147 million. Cerion picked up Contech’s castings division, roughly half the business, for $13.5 million.

The potential fate of a company growing rapidly through acquisition can be seen with such companies as Noble International Ltd. and Lear Corp.

Both used acquisitions to vault themselves up in the auto supplier hierarchies but took on significant debt in the process. When revenue plummeted along with car and truck production volumes, the companies could not service their debt, went into default and eventually filed for bankruptcy.

Source: Crain’s Detroit Business
http://www.mema.org/publications/articledetail.php?articleId=17795

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