GM's ACDelco for Sale, but Valuation a Guess
October 23, 2008
By Bill Visnic
General Motors Corp., seeking alternative revenue sources, said today its longstanding ACDelco parts unit is for sale.
Several sources contacted by AutoObserver said, however, that for many reasons it is difficult to determine a valuation for ACDelco.
The current turmoil in the auto industry - strife from which parts suppliers like ACDelco have been anything but immune - and other considerations make it difficult to determine what GM might be offered for the parts-making unit.
One analyst supposes that ACDelco might be most attractive to an Asia-based supplier "who wishes to use the brand to expand parts exported from that region."
Placing ACDelco on the block is part of a broader GM cash-raising initiative, announced in May, causing GM to also shop its Hummer division and its entire medium-duty truck business, not to mention a tech center in France. GM has said it hopes to raise $2 billion to $4 billion from the effort.
In 1974, GM combined its AC Sparkplug and United Delco divisions to form ACDelco, a division now with a presence in 100 countries. While some hold the perception it is the parts business for GM vehicles, the company in fact now is GM's aftermarket-component supply channel for a variety of domestic and import brands, as well as the maker of certain OE parts.
More important in terms of its ultimate value, AC Delco is not the company responsible for supplying GM's lucrative direct-to-dealer parts channel: that role now rests with GM Parts, which, along with ACDelco, is part of GM Service and Parts Operations, or SPO.
Around 2002, GM rededicated ACDelco to a role that would supply aftermarket parts to parts stores, service stations and independent auto-service garages. The ACDelco parts are marketed through independent distributors. This new strategy - along with a trend towards more-complex vehicles that increasingly has persuaded customers to seek service from OEM dealers (that now almost exclusively use parts supplied by GM Parts unit) - likely has markedly diminished the value of ACDelco.
Meanwhile, the tightening of access to credit has helped assure other portions of the GM fire sale have yet to produce results.
The company announced in August it had broken off talks with Navistar International, which had entered a memorandum of understanding agreement to purchase the GM medium-truck business.
And although GM reputedly was hoping for a quick offload for Hummer, a deal for the uber-SUV maker hasn't materialized. The company earlier this month placed Jim Taylor, former general manager of Cadillac, as Hummer CEO - a move interpreted as a means to accelerate a sale.
At the most generous of expectations, however, it seems GM realistically seeks to reap a maximum of $4 billion from the combined sales of ACDelco, Hummer, the medium-truck operations and potentially the France-based technical center.
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