Magneti, Calson enter infotainment fray in $7.1 billion deal

October 30, 2018 06:01 CET

With its $7.1 billion acquisition last week of FCA’s Magneti Marelli, Calsonic Kansei — traditionally a Japanese supplier of heaters and air conditioners — hopes to become a credible player in the fast-growing infotainment industry.

The combined company, called Magneti Marelli CK Holdings, will boast global sales of $17.3 billion and 66,000 employees, big enough to make it No. 11 on the Automotive News list of the top 100 global suppliers.

But it’s still the new kid on the block. And Magneti, led by Calsonic CEO Beda Bolzenius, will have to contend with a trio of well-entrenched rivals — Panasonic, Samsung and LG Electronics, which will account for 35 percent of infotainment systems produced this year, according to IHS Markit.

Those three companies have deep pockets, economies of scale and engineering expertise honed in the cutthroat world of consumer electronics.

Magneti Marelli CK Holdings “is not going to create anything overnight that swallows up half the industry,” said Mark Boyadjis, IHS Markit’s global technology analyst. “But the new company will be good for gathering additional business.”

At first glance, the product portfolios of the two new partners seem to mesh.

Both companies are major producers of instrument clusters, according to Boyadjis. With a combined 12 percent share of global production, they are the segment’s third-largest supplier, behind Samsung and Panasonic.

Magneti also manufactures 3 percent of the auto industry’s ECUs for telematics, enough to be a player, but trailing far behind that segment’s leader, LG Electronics.

“I think there is still opportunity for growth, but there is no shortage of powerful suppliers in this space,” Boyadjis said. Magneti and Calsonic “will be more likely to leverage their strength in displays.”

To be sure, the new company isn’t making an all-or-nothing bet on infotainment. Calsonic is a major producer of climate-control systems and exhausts, while Magneti makes engine components, exhausts, suspensions and lighting.

Connect with customers

As Fiat Chrysler Automobiles’ former in-house supplier, Magneti can help Calsonic gain new business with FCA, which accounts for nearly a third of its sales. It can also help connect Calsonic with Volkswagen Group, BMW, Daimler and others. For its part, Calsonic — once part of the Nissan keiretsu — can help Magneti find customers in Japan.

Magneti also hopes to use its expertise in vehicle lighting to establish a niche in the market for collision avoidance components.

Last year, the company introduced Smart Corner, which packages radar, cameras and lidar into a vehicle’s housings for headlights and taillamps. Magneti unveiled it in a modified Chrysler Pacifica at the 2017 CES in Las Vegas.

Since Magneti is the world’s top producer of taillights and the No. 2 manufacturer of headlights, this idea could gain some traction.

New investment

Magneti is not a major producer of cameras, radar or lidar, but it appears willing to invest in sensor technology. Last year, Magneti bought a stake in LeddarTech, a Canadian firm that is developing a solid-state lidar.

Sam Abuelsamid, an analyst with the Chicago-based consultancy Navigant, says Magneti’s Smart Corner module “is an experiment.” Magneti is trying to break into the market for collision-avoidance systems, he said.

The new Magneti — combining two top 30 suppliers — can afford to make investments that won’t pay off for a decade. Moreover, its technology was tempting enough to attract Samsung, which nearly bought Magneti in 2016.

But there’s no guarantee that Magneti will succeed in an industry that is increasingly dominated by electronics mega-suppliers.

Said Abuelsamid: “They will be more relevant. But they are not the size of Bosch, Continental or Panasonic.”

You can reach David Sedgwick at dsedgwick@crain.com.

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