Situation
A Tier 1, vertically integrated OEM automotive supplier with $65 million in sales needed to reposition itself after failing to land any new OEM business in a decade. The facility was more than 40 years old, with little investment in the last 15 years, and equipment that was dedicated, fully depreciated and outdated. The product line was high-precision and sophisticated – machined castings and components at very high volumes. Supporting existing products alone would require an estimated $7 million in capitalization, plus $1.5 million in capital for every $5 million of new business won.
Action
The client concluded that its best strategy was establishing a presence in China, and requested FTI’s assistance. We recommended developing alliance partners in China instead of owning or joint-venturing facilities directly – gaining the benefits of dedicated equipment and long-term manufacturing agreements while avoiding extensive capital investment.
FTI identified alliance partners and brought them into relationships with the client, helping negotiate long-term manufacturing agreements that worked for both sides. Fortus now serves as the U.S.-based representative for the supply partners, and as a trusted representative for the client – which went on to source 50 million components from China.