Tower Automotive Seeks Stock Sale Approval

April 22, 2002
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GRAND RAPIDS — The Securities and Exchange Commission is processing a proposal by a major auto industry supplier, Tower Automotive Inc., (TWR) to offer 15 million shares of its common stock for sale.

Presuming the commission grants approval for the offer, the sale would raise the number of shares stock in the international automotive supplier by just over 30 percent — from 48.25 million to 63.25 million.

According to a spokesman for Tower, David Tuit, the firm intends to sell the shares in order to reduce its debt levels.

On April 3, the firm announced that it had filed a registration statement with the SEC which was “relating to an underwritten primary offering of 15 million shares of its common stock.”

In the same announcement, Tower announced it would grant underwriters an option to buy an additional 2.25 million shares to cover over-allotments, if any.

Tower, headquartered in this community since it was founded in 1993, is a designer and manufacturer of components and assemblies used by every major automotive original equipment manufacturer.

Tower Automotive was founded nine years ago this month when the old R. J. Tower Corp. in Greenville and Auburn, Ind., was acquired by the Tower Holding Corp.

One of Tower’s many manufacturing operations remains in Greenville.

At the time of the acquisition, the original corporation had annual revenues in the $1 million range.

Tower Automotive went public in August 1994.

It is traded on the NYSE and, in mid-week last week, its share price was running in the $15 range, a strong recovery from a mid-recession skid to about $6 during the market’s plunge late last year.

In 1998 and again in 1999, the firm’s stock peaked at about $26 a share, but that value went into a long, steady decline as the outgoing economic tide lowered almost all the boats in the ocean.

Today, in the wake of a long series of acquisitions from Kalamazoo to Sao Paolo, Brazil, and from Italy to Korea, the firm does business all over the world and currently has annual revenues of $2.5 billion.

The company employs more than 13,000 workers at 70 sites in more than 15 countries.

“Locally,” said Tuit, “we’re known as the quiet giant.” The firm’s offices are at 5211 Cascade Road, SE.

Tower’s acquisitions have included stamping plants, manufacturers of control arms, subframe makers, specialty aluminum producers and prototyping companies.

Tower’s customer list reads like the Who’s Who of auto-making, including the Detroit Big Three, the Volkswagen Group, the Japanese and Korean automakers, and BMW. Its biggest single customer is Ford, which accounts for 35 percent of its sales.

Its next-largest customers are DaimlerChrysler (25 percent) and Hyundai-Kia (12 percent).

Tower owns 40% of Metalsa, one of Mexico's largest suppliers of auto frames and structures, and all of Brazil's Metalurgica Caterina, a supplier of structural assemblies and stampings. Tower Automotive's SIMES plant in Italy makes parts for Fiat.

All told, Tower produces and sells an immense number of major components and subassemblies to the world’s auto manufacturers.

None of this is to say that the firm has been immune to the modest slowdown during the past year in auto sales. It has slumped, if one can call it that, in the Fortune ratings from 582 to 589.

Last year, Tower had to close its Kalamazoo stamping plant, putting more than 300 people out of work.

Nonetheless, just as auto sales stayed surprisingly high for a recession year complicated by the Sept. 11 terror attacks, Tower’s sales stayed relatively healthy, if for no other reason than the breadth of the firm’s product line. Much of the automotive industry, according to Hoover’s, seems to lean on Tower, one of the industry’s key first-tier suppliers .

Many of the company’s stamped, formed and welded components and assemblies are attached directly to the frame of automobiles coming together on the manufacturers’ assembly lines and comprise the major structure of a those vehicles.

Tower products generally fall into one of four categories illustrated on the company’s Web site, www.towerautomotive.com/.

  • Lower vehicle structures — engine cradles, floor pans and cross members

  • Body structures and assemblies — roof rails, intrusion beams, plus brake components and fueling assemblies

  • Suspension components — control arms, suspension links, spring and shock towers and trailing axle modules

  • Class A surfaces and modules — exposed sheet metal components such as body sides, pick-up truck box sides, door panels and fenders

For the first quarter of this year, Tower reported that its revenues were $668 million, compared with $628 million in the 2001 period.

Its net income for the first quarter of 2002 was $12 million, or 25 cents per diluted share.

But after including the one-time restructuring and impairment charges, the firm reported a net loss of $35 million for the first quarter of 2002, or a loss of 72 cents per diluted share.

This compares with reported net income of $13 million, or earnings of 28 cents per diluted share, in the first quarter of 2001.

Tower’s major competitors are The Budd Company, a subsidiary of Krupp-Thyssen AG; Dana Corp.; Magna International, Midway Products Corp.; Modern Tool & Die Co.; Midland Corp., and divisions of original equipment manufacturers that possess their own stamping and assembly operations.

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