Changes that Affect Other Areas of the Business

Often we discuss a specific vehicle or classification of vehicles while considering what the manufacturer that has their name on the car is planning. We don’t often look at some of the other businesses that can be affected by changes in the automotive world, especially those that make various parts for the vehicles. There is typically a handful or more of different manufacturing names involved in the build of a vehicle at any time. Different companies make different components that we enjoy using on a daily basis and as the automotive market goes, so does the profits of these businesses.

One such company is Strattec Security Corporation which is a Glendale based company that is a lock and part maker for the automobile industry. Currently they are starting to build a new facility in Leon, Mexico and are one of the most often used companies for the parts they created across a majority of the mainstream models. Their reported net income was down significantly but they are able to show two reasons why that is and expects a quick turnaround in the future. One of the two reasons was the number of FCA vehicles that aren’t being built any longer, namely the Chrysler 200 and Dodge Dart.

While Strattec was able to secure a record amount of new business in the past year, which warranted the need for the Leon plant, the movement by FCA has caused some of the parts they were supplying to no longer be needed. The drop for them was nearly thirty percent to FCA while GM showed a higher volume of production and use of the Strattec parts and Ford, Hyundai and Kia were all flat in their continued usage. Other brands showed similar trends to being flat and the strength of these sales and usage is mostly in the latches, fobs and driver controls that Strattec provides.

The additional money used to build the new facility certainly has a huge impact upon the success and profits of the company, but the company stands strong in its confidence that a new facility is needed. With several of the automakers changing some of their lines and bringing production back into the US, the team at Strattec feels it will have plenty of business coming in and this is simply a temporary setback that’s coupled with the need to build a new facility, which is a serious cost to the company.

We don’t discuss that parts manufacturers very often at all. There are many businesses that rely on the continued success of the automotive industry in order to have their own success. The confidence Strattec has is based in the fact the automotive industry is as strong as it’s ever been and the parts they make are necessary on nearly every vehicle produced. The fact that you have to spend money to make money is never as evident as it is right now for this auto parts manufacturer that will see more business come their way in the near future.