Magna Donnelly No Gentex Worry

May 16, 2003
Print
Text Size:
A A
Anticipating far bigger and even better things in the future, Gentex Corp. has no fear over the creation of the world’s largest automotive mirror maker last year when Magna International Inc. bought cross-town rival Donnelly Corp.

Having the weight of Magna International, a $13 billion Canadian-auto supplier, behind the former Donnelly Corp. is something that deserves watching, although Gentex doesn’t see a significant competitive threat emerging, Gentex Chairman and CEO told shareholders last week during the corporation’s annual meeting.

Bauer is confident that Gentex will maintain a decisive global market position for electrochromic automotive mirrors that dim automatically, a product the company invented and first brought to market in 1987. Zeeland-based Gentex holds a 78 percent share of the growing global market for electrochromic mirrors. Magna Donnelly, based in Holland, holds 18.9 percent market share, Gentex estimates.

“We really are not terribly concerned,” Bauer said. “We figure if we innovate and move faster and leave enough smoke and dust in the trail, the other guy is going to have a pretty hard time catching up.”

And making the kind of investment it would take to catch up, Bauer believes, is something that Magna Donnelly and its parent corporation are probably unwilling to do. Magna International, which secured most of its existing mirror capacity through the Donnelly acquisition, is a bottom line-driven corporation that’s highly diversified in the automotive supply industry and may prefer to put its capital resources into other product groups that have a greater promise of return, Bauer said.

“Profit-driven people don’t waste money and throw a lot of money at lost causes,” he said.

Still, he said, Gentex is keeping a close eye on Magna Donnelly, which Magna International heralded at the time of the acquisition as having annual sales of $1.2 billion, although there’s no data available on how much of that volume comes from electrochromic mirrors. Magna Donnelly also makes standard mirrors, door handles, window systems and electronic components.

Gentex, by comparison, posted 2002 revenues of $395 million, selling a record 8.8 million electrochromic mirrors.

“We certainly don’t take them for granted. We are watching them closely,” Bauer said in response to a shareholder’s question abut the potential competitive threat Magna Donnelly represents. “The worst thing we can do is get arrogant and get lax. The minute we start feeling like that we’re in trouble.”

Looking ahead, the biggest threat to Gentex and other automotive suppliers is the constant squeeze and price-cut demands of automakers that are trying to reduce their own cost structures as vehicle sales slow, Bauer said. The challenge, he said, is to help the automakers grapple with the cost issues.

Gentex anticipates continued strong growth in the sale of electrochromic mirrors that are now penetrating lower-cost vehicle models, particular those equipped with electronic features and controls to operate various systems in the vehicle. The company is also steadily increasing investments in new product development, Bauer said.

One of the most important is the SmartBeam system that automatically switches a vehicle’s headlamps from low to high beam and back. SmartBeam is expected to begin shipping “in volume” to two U.S. automakers during 2004 and could become as large of a product for the company as electrochromic mirrors, Executive Vice President Garth Deur said.

“We are trying to keep the pipeline full,” Deur said. “Nobody at Gentex is bored from lack of opportunity or lack of things to work on.”

Deur and Bauer are looking at new product innovations and further growth in sales of electrochromic mirrors, a potential global market that Gentex estimates at more than $2 billion, to propel the company’s growth well into the future.

Gentex, which has enjoyed a compounded annual sales growth of 25 percent since 1987, “has dreams of being really, really big.”

“We’ve got big ideas. We’re not content to be this sleepy little Midwest company,” he said.   

Recent Articles by Mark Sanchez

Editor's Picks

Comments powered by Disqus