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Thursday, Nov 30, 2023

Wheel Maker Grabs Greater Market Share

Wheel Maker Grabs Greater Market Share By CARLOS MARTINEZ Staff Reporter Despite a sluggish economy and rising energy costs, Van Nuys-based auto wheel maker Superior Industries International is increasing its market share and improving its revenue. “We’ve been very fortunate, but at the same time we’ve stuck to our strategy of continuing to market and develop great products,” said Chief Financial Officer Jeff Ornstein. The company, which makes cast aluminum wheels for General Motors and most of the major automobile companies in the world, has received the Best Product Made in the Valley honor. Currently, it is taking advantage of a market where its top competitors are facing financial trouble. “They’re stomping all over Hayes Lemmerz,” said Bret Hoselton, senior automotive analyst for McDonald Investment Inc., of the Michigan-based No. 2 wheel maker which tried to take a corner of the market in the late 1990s by buying a lot of competitors only to be saddled with a huge debt in a down economy. “Its other competitors like Amcast and Alcoa are facing a lot of trouble too because of the economy and it’s benefiting Superior,” he said. Hayes Lemmerz, which filed for bankruptcy protection in 2002, is only now coming out of bankruptcy, but Superior has continued to improve its overall revenue by gaining new contracts and taking on more clients weary of financially-troubled wheel suppliers, Hoselton said. Superior, an industry leader with 35 percent of the market, employs 6,000 people at 12 manufacturing plants in the U.S. with two plants built in Mexico two years ago. Although it serves all major automakers, the company’s main customers are General Motors, with 45 percent of all sales, and Ford, with 42 percent. The company’s most recent numbers show a decided upward sales trend. For the quarter ending March 31, the company reported $22.3 million in net income or $0.83 per share on revenue of $208 million, compared to a year earlier when it reported net income of $17.5 million or $0.65 per share on revenue of $186.5 million. Much of the quarter’s increase is due to the company’s two new Mexican plants reaching manufacturing capacity for the first time, Hoselton said. “They had been a drag on earnings in the past year, but now the operations there are nice and healthy,” he added. Increased demand Superior’s improved numbers are also the result of increasing demand for aluminum wheels in the industry as a whole. More car makers are switching to aluminum wheels in many of their newer models, Hoselton said. “It’s one way make cars look sportier without an expensive design change,” he added. But improved gas mileage is also a factor in the increasing market for aluminum wheels. “Aluminum makes wheels lighter so that improves gas mileage so if you’re a company that has to meet gas mileage requirements, that’s one place you look,” Ornstein said, noting that the aluminum wheels are on the average, about 30 percent lighter than steel wheels. Slowed by high electricity and natural gas costs in 2001, the company rebounded last year with record net income of $78.3 million profit on $782.6 million in revenue. The company’s annual revenue had been steadily climbing starting in 1998 when it made $539.4 million, followed by $571.8 in 1999, then $644.9 million in 2000 before flattening out to $643.4 million in 2001. Superior’s growth is expected to continue this year, thanks to a slew of new contracts and continued troubles by its competitors, Hoselton said. “They’re gaining new contracts and market share and that’s really driving their business,” he said. The company’s stock was hovering around $40 a share last week. Its 52-week high was $51, reached on Sept. 10, and its 52-week low was $33.62, reached on March 12. Hoselton’s price target for the stock is $55 per share with earnings at $3.14 for the year. The company was founded in 1957 by Louis Borick as a supplier of aluminum wheels to the automotive aftermarket and in particular, to car enthusiasts who sought a sportier look for their cars. Although the aluminum wheel market was a tiny niche in the overall wheel industry, Borick, and later his son Steven J. Borick (photo), who is now president of the company, helped build the company into an industry leader. Today, aluminum wheels are about 60 percent of the overall wheel market and continuing to grow a far cry from 1980 when aluminum wheels made up just 4 percent of the overall market. “Back in the 80s, the Ford Taurus is what really put us on the map,” Ornstein said. “It was a family car that had aluminum wheels and after that we weren’t just in Camaros, Cadillacs or Mustangs anymore.” Last year, the company churned out 14.7 million wheels or about 300,000 wheels a week while at the same time manufacturing aluminum suspension and related components for the automotive industry. Did You Know? Diamonds Aren’t Forever Herb Boeckmann, the president of Galpin Motors (Best Large Company), invested in a gold and diamond mining venture in Sierra Leone in the 1980s. Although such ventures were fairly common in rural African areas at the time, they required the permission and approval of the local townspeople. Boeckmann gave the townspeople 10 percent of the gross profits of the venture, which, he says, helped to win their support. The typical arrangement at the time was to offer a percentage of the net proceeds of the venture, a deal that was not unlike some Hollywood is known for after expenses there were never any profits left for the local residents to share. Boeckmann abandoned the venture when the political leadership in the country changed hands.

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