Local parts plant under the hammer

THE downsizing of the Australian automotive parts industry will take a significant step forward with the sale of machinery used by Chassis Brakes International to make steering knuckles and other parts for Ford and Toyota in Melbourne.

Auction house GraysOnline has been commissioned to sell two knuckle machining cells and a host of other machining and manufacturing equipment, for delivery after Ford stops production in 2016 and Toyota closes its local operation in 2017.

It is expected that the disc brake manufacturing operations at the East Bentleigh site, which supplies all three local car-makers, will be relocated within CBI’s manufacturing world when local car production ceases. CBI’s network spans Europe, Latin America and Asia.

GraysOnline will partner with Hilco Industrial LLC, a prominent overseas machinery and equipment auctioneer, to manage the sale. The equipment is expected to attract attention throughout the automotive world.

CBI is the third-largest brake system supplier in the world behind TRW and Continental. It had revenue of €812 million ($A1.2b) in 2014, with 40 per cent of the business located in Europe and 60 per cent in Asia-Pacific, including Australia, and South America.

The private equity owner of CBI, KPS Capital, decided to go to market early, two years before the end of production, after discussions with the auctioneers, according to GraysOnline national automotive manufacturing category manager Paul Rittman.

“If someone was to be setting up to take on (production) lines such as these, they would need time for planning and chasing a contract to make those parts,” he said.

“Hence the reason why CBI, on our advice, has decided to advertise those assets early. By putting them to market early, they will potentially find a buyer that is prepared to venture into that industry and take on the lines, land a contract, relocate them, set them up and be ready to go.”

Mr Rittman said he expects the equipment to generate interest around the world, which is why GraysOnline has enlisted the assistance of Hilco Industrial.

“I think the major lines being offered will be attractive to the global market, especially anyone in the automotive manufacturing space, certainly in the greater Asian region.”

Mr Rittman said the scheduled closure of the three local car assembly plants would see a number of component manufacturers experience some changes to their businesses in the near future.

“CBI has made the wise decision of appointing an agent early, to ensure their assets are afforded suitable exposure to maximise realisation and assist with exit planning,” he said.

The reaction in the industry was one of disappointment as the CBI operation in East Bentleigh – previously known as Pacifica International – had been one of the best-performing parts-makers in the industry up until the global financial crisis in 2008.

“It’s such a crying shame. They’re a model company, a first-class organisation,” one industry veteran said yesterday, asking not to be named.

“It’s a terrible shame, for them and the country. It’s a loss to the bloody country,” the veteran said.

“It’s one of those iconic Australian organisations that floated, we lost control of it and it went overseas.”

Through the 1990s and into the new century, Pacifica International built up an extensive offshore business, based mainly around two big plants in the US, but including a drum brake operation in Europe, AP Italia, and a foundry operation in China.

The giant Bosch group made a takeover offer in 2006 and obtained a 75 per cent stake, later moving to 100 per cent.

However, the US operations, which were major suppliers of parts for General Motors’ pick-up trucks, were adversely affected by a heavy recession in 2006 and 2007, which saw pick-up sales plunge.

There were other factors, too, not least competition and very thin profit margins, and the Bosch group soon decided to reverse direction and quit brake manufacturing altogether. In 2009, during the GFC, it closed one of the US plants and sold the other to Akebono of Japan.

AP Italia was sold to the Continental group in Europe. Bosch sold the remaining assets in Australia, Europe, Asia and South America operations to private equity group KPS Capital, which renamed them Chassis Brakes International.

Earnings in Australia declined during the aftermath of the GFC as demand for locally made cars plunged, sealing the fate of the East Bentleigh operations, which had once been at the centre of an international production network.