Auto Parts

Shop Till You Drop

Mahle's big-spending boss Heinz K. Junker. Source: DPA
Mahle's big-spending boss Heinz K. Junker.
  • Why it matters

    Why it matters

    To solidify his legacy, company chief Heinz K. Junker might continue his decade-long shopping spree with purchases in the U.S.

  • Facts

    Facts

    • In the 19 years under Mr. Junker, Mahle has grown from 10,000 to 65,000 employees.
    • The supplier is eyeing the thermal division of U.S. rival Delphi, with $1.5 billion in sales.
    • Mahle has bought at least 20 companies with sales worth €5.6 billion over the past 10 years.
  • Audio

    Audio

  • Pdf

The problems of a business worth billions are hidden in the German countryside.

The automotive parts manufacturer Mahle produces cylinder pistons, valve components and camshafts for gas and diesel engines in the towns of Rottweil, on the edge of the Black Forest, in Gaildorf in Baden-Württemberg and in Wustermark, in the eastern state of Brandenburg. Mahle the fourth largest car parts supplier in Germany with €10 billion, or $11.3 billion, in sales.

But many of its German operations are not covering their costs. About half of the two-dozen German Mahle production sites produced negative operating results in 2014, Handelsblatt has learned. In the worst-case scenario, the factories operating at a deficit could push the overall results for Mahle in Germany into the red.

Long-time Mahle boss Heinz K. Junker let it be known that the “locations in west and central Europe are under significant competitive and cost pressure.” Mahle did not provide details about the operating results on the factory and state levels.

The losses show how difficult it has become for suppliers to still make money producing in Germany. “The car companies pay too little,” said a Mahle insider.

And the automakers continue to put the squeeze on. Volkswagen wants to save €5 billion by 2007 with the VW brand alone. Audi is striving to have €2 billion fewer costs annually. At Daimler, it is supposed to be €3.5 billion annually until 2020. BMW wants to save several hundred millions per year.

If Mahle were to secure Delphi’s thermal division, it would be a nice success for Mr. Junker before his departure.

Therefore, the supplier Mahle desperately needs a second pillar for its business beyond the combustion engine. The fact that the group will again show earnings in the hundreds of millions is thanks primarily to the factories abroad and to the air conditioning subsidiary Behr, which Mahle took over in 2013.

The company, which has had patriarchic leadership for 19 years under the engineer Mr. Junker, is considered secretive. Its boss, who also lectures on vehicle dynamics at the University of Bochum, is referred to internally with reverence as “The Professor.”

Mr. Junker will retire this summer. But before he goes he still has one plan: to build up the air conditioning business.

According to information obtained by Handelsblatt, the company is making an offer on the thermal systems division of the U.S. automotive parts supplier Delphi Automotive, which in 2013 had $1.5 billion in sales. Mahle is interested in a good dozen production sites with about 10,000 employees, according to sources close to the firm.

Mahle's Shopping Spree-01

Bloomberg News reported that Delphi wants $1 billion for its heating and cooling technology division. The U.S. company did not comment on the matter. Mr. Junker merely let it be known that his company was investigating different possibilities for growth in the area of thermal management, but did not publicly provide details.

Delphi, which is listed on the New York Stock Exchange and is a spin-off of the American car manufacturer General Motors, most recently had $16 billion in sales. But the firm needs money. The fourth-largest supplier in the United States wants to buy back some of its shares for $1.5 billion.

The fact that the Americans want to shed their heating and cooling division is known. In addition to Mahle, there has been interest from the French supplier Valeo and the Japanese car electronics specialist Denso.

If Mahle were to secure Delphi’s thermal division, it would be a nice success for Mr. Junker before his departure. When took the helm in 1996, Mahle was a mid-sized business with 10,000 employees. Mr. Junker now leads a global corporation with 65,000 employees.

Employees have had to work more for the same money and go without vacation and Christmas bonuses.

Under his leadership, Mahle went on a massive buying spree. In the last 10 years alone, it took over at least 20 companies with more than €5.6 billion in sales and more than 32,000 employees.

At the end of June, the 65-year-old patriarch will move to the supervisory board. His successor, Bosch executive Wolf-Henning Scheider, may continue pushing with the expansion, and in the direction of electronics.

With the takeover of thermal unit Behr, Mahle succeeded in moving into a new dimension. But the new corporation is still weak when it comes to trends such as assistance systems, self-driving and electric mobility. Mr. Scheider was brought on board to use his Bosch expertise to make smart additional purchases.

Mahle would appear to have the financial wiggle room. The supplier had more than €700 million in cash on its balance sheet by June 30, 2014. In the company’s factory halls, the acquisition tour has produced mixed feelings. While the corporation has been taking over one company after another – Delphi would be the third purchase within a year-and-a-half – the employees have had to work more for the same money and go without vacation and Christmas bonuses. According to major trade union IG Metall, Mahle wants to reduce its personnel costs by 15 percent.

That could rip open recently healed wounds between Mahle and Behr. According to the savings plans, Behr factories are expected to make contributions similar to the Mahle sites. But the Behr factories have already widely made cutbacks. “There is no more meat on the bones,” said a former manager. At most, the manager said, there remains the possibility of relocating abroad.

 

Martin Buchenau and Andreas Dörnfelder are reporters for Handelsblatt. To contact them: Buchenau@handelsblatt.com and A.Doernfelder@vhb.de

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!