Caso di Studio
An Auto Parts Company Revs Up Its Competitive Position
A combination of resetting the cost base, pruning the portfolio, and strategic M&A created a new global contender.
Prompted by activist shareholders, a multinational conglomerate took a hard look at its portfolio and concluded that its automotive business was underperforming. Its various subsidiaries tended to be fifth, sixth, or worse in their respective markets, a situation that the new CEO vowed to change. The company developed a new portfolio strategy, divesting some of its auto parts units and investing in the remaining ones, with the goal to make each a top-three players in its market.
We worked with AutoPartsCo to, initially, create a cost structure that would enhance its competitive position, applying our Accelerated Performance Transformation approach to its product portfolio and operations across six global regions. This effort began with a six-week due diligence phase that identified key sources of value, including commercial excellence, procurement, SG&A, quality, and plant operations. Over the next 12 months, we worked alongside AutoPartsCo to design more than 250 initiatives that would deliver nearly $150 million in year-one value and expected to reach five times that figure in year-four run rate.
A New Company Is Born
These efforts enabled the company to adjust to rapidly changing market dynamics, and overcome some internal resistance to change, restoring it to a solid footing. That laid the groundwork for an even bolder transformation. Working closely with our M&A teams, AutoPartsCo embarked on a journey to divest certain units, acquire other companies, and essentially create an entirely new entity optimized for the rapidly evolving realities of the automotive market.
We helped the company conduct a rigorous portfolio strategy exercise to determine which non-core businesses to divest in order to fund investment in its core business. We also helped identify four companies that it could acquire within key sub-verticals, to bolster core segments and transform its competitive position.
Covid-19 and the resulting impact on supply chains posed some challenges, as did creating a new company comprising businesses from various global regions, with different corporate cultures and styles of working. We deployed micro-battles in the first year, to make demonstrable progress and show that change was possible. In years two and three, we applied our post-merger integration approach to help teams align, communicate, and find common ground. The end result proved transformative, as the new company became a significant competitor to the two established leaders in its industry. It is now well positioned to push further into electric powertrains, autonomous driving, and related next-generation technologies core to its strategic vision.