Clearlake backs Futuris to buck downturn

Ford Motor Company said it will stop making cars in Australia in 2016 as it is no longer viable to manufacture in the country. 

Ford Australia sales account for about 25% of global sales for Futuris Automotive, the automotive components supplier Clearlake Capital Group bought from Elders last week. The company makes car seating and interior systems - including pedals, steering systems and interior trims - for Ford, GM, Tesla and Toyota, as well as for several Chinese carmakers.

But Futuris has managed to beat the downward trend. One reason for this is its drive into Asia. The company has manufacturing facilities in Thailand, China, Australia and the US, as well as design and engineering centers in the latter three countries. "We are one of the few companies that actually has all the intellectual property, advanced engineering and advanced manufacturing to be what is called a fully sequenced, just in time manufacturer," says Malcolm Jackman, CEO of Elders.

In the first half of 2013, automotive unit EBIT was A$5 million compared to A$5.4 million a year ago. Sales were up 3%, reflecting increased sales overseas offset by lower domestic vehicle build volumes.

Clearlake bought Futuris for A$69 million ($62 million), including debt, and will provide fresh capital to pursue growth opportunities overseas. The car parts business has little in common with the rest of Elders' agribusiness. "On this transaction, all the cash proceeds will be used to pay down corporate debt. The value was constructed on a cash-free, debt-free basis," Jackman explains.

Just as car manufacturers have been moving their facilities into China, India and Thailand, Futuris has been expanding its presence in the region. The company's headcount in Thailand - where it based close to a new Ford plant - grew to 700 in 2013, up from 200 the previous year. A second plant opened next door to cope with the business. There are also five plants in China, two in Australia and one in the USA.

"The Thailand and Australia facilities are predominantly supporting GM and Ford, and to a lesser extent Toyota. The US is around supporting Tesla," says Jackman. China is more of a case doing everything in country - primary design work is out of Australia, but the secondary design work is in China itself.

The opportunities and volumes in Asia are there, but the region does present challenges in pricing. A lot of the work done in China, for example, is for budget vehicles whereas what Futuris makes in the US is for high-end cars. Earlier this year the company announced it plans to launch in India through a joint venture.

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• Topics
• Australasia
• Buyouts
• Industrials
• Clearwater Capital Partners
• manufacturing
• Australia
• buyout