Automotive Supplier Decoma Flourishes In Lackluster Market

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Decoma International Incorporated, (TSE: DEC.A; NASDAQ: DECA) (Concord, Ontario) seems to flourish in a market where many suppliers are either going out of business or are feeling a hefty pinch in a sector that's been very hard-hit by the recession-like conditions of the last couple of years. They must be doing something right.

Along with record-breaking quarterly reports for the last three or four quarters, Decoma is also expanding physically. The Concord-based exterior plastics auto specialist received approval last November to build a $77 million plastic molding, decorating, and assembly plant near Atlanta, Georgia, which will supply the Mercedes-Benz assembly plant in Vance, Alabama. Decoma expects this plant to open doors to the other large assembly plants in the southern United States, as well.

Click on image at right to view Future Automotive Spending Analysis for the Southeast Region

Decoma is also seeking opportunities for growth in Europe, since, according to Decoma CEO Alan Powers, the European supplier market is rife with takeover opportunities. A number of previously-solvent suppliers have gone under in the slack market of the last few years, and are now up for grabs, such as Peguform GbmH, the German unit of Fraser, Michigan-based Venture Holdings Company LLC. Decoma is hoping its own underperforming British plastic molding entity, Merplas, will be able to profit by rebidding the existing, unfulfilled Peguform contracts, if, indeed, Decoma doesn't decide to try to acquire Peguform outright.

The opportunity to augment existing operations comes at a good time for Decoma. Sales for the first three quarters of 2002 averaged 13 percent above the same period for 2001, a total of almost $1.53 billion. Profit was up 43 percent for 2002. Meanwhile, the prospect for sales is good - the company has six major contracts for front-end modules, and is now feeling out the market with Asian manufacturers in North America.

The new Georgia plant is strategically located to serve, potentially, Toyota, General Motors, and Ford (2) in Kentucky; Hyundai, Honda, and Mercedes-Benz in Alabama; Nissan in Tennessee and Mississippi; DaimlerChrysler/Freightliner in Georgia and South Carolina; Saturn and Peterbilt in Tennessee, and possibly even General Motors in Louisiana and Texas, and a possible new Toyota plant rumored to be built somewhere in the South. The market is definitely there for an injection molding frontrunner, who's not afraid to expand its capabilities and innovate wherever possible, and it looks as if Decoma is the right one at the right time. One might be tempted to warn Delphi, Textron, and Visteon, Decoma's major competitors, to hang on to their hats!

Decoma International Incorporated is a subsidiary of Magna International Incorporated (NYSE:MGA) (Aurora, Ontario), which also owns Intier Automotive, a maker of seats, instrument and door panels, closures, and sound insulation; Tesma International, manufacturer of engine, cooling, powertrain, and fuel components; Cosma International, a provider of stamped, hydroformed, and welded metal parts; and the Donnelly Corporation (dba Magna Donnelly),one of the world's largest makers of automotive mirrors.