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Nearly a century has passed since Henry Ford established the original River Rouge manufacturing complex in Dearborn, Michigan. The plant forged its own steel, produced its own glass, and manufactured tires on-site using rubber from a Ford plantation in Brazil. It even had its own power plant.
We have come a long way since the 1920s, when Ford built the largest integrated factory in the world. Now, as automakers move full speed into the age of electric and autonomous transportation, it is arguable that the most significant transformation yet is taking shape within the supply chain.
Many factors have fueled this supply chain transformation. From a rapid shift of consumer trends to an increase in specialized components, coupled with competitive pressures and disruptive innovations – the path from the design table to the showroom floor has become more complex than ever.
The challenge for automobile manufacturers is clear: Stay ahead or risk market share.
As a result, automakers are increasing their focus on their supply chain. Supply chain management is becoming less about reducing costs and more about driving profitability and market differentiation. To that end, automakers are re-examining the roles that original equipment manufacturers (OEMs) and suppliers play within their networks.
Technology plays a more critical part than ever before in this revolution. According to KPMG International’s The road to everywhere report, a majority of auto sector
manufacturers are planning to augment their supply chains with artificial intelligence (AI), automation, Internet of Things (IoT) capabilities, and data analytics tools. They’re also embedding real-time monitoring, “smart” equipment, and drones within their manufacturing, warehousing, and distribution facilities to perform maintenance, manage inventory, move stock, and generate data-driven insights.
But to what end? A majority of KPMG’s survey respondents tell us that their supply chain investments are being made to improve visibility into product journeys (manufacturing, shipping, storage, distribution, etc.). In other words, they strive to enhance visibility and flexibility across all processes, including but not limited to: the forecast and predictive analytics, the supply and replenishment plans, the production plan, the distribution, and the delivery. Meanwhile, one third are making upgrades to enhance planning thereby lowering their cost-to-serve, and nearly 40% are doing so to fuel faster innovation.
With the latest technology advancements it is now possible for companies to create a “digital twin” – a real-time digital supply chain model of the physical supply chain process, thereby providing real-time visibility across the end to end supply chain. Control Tower technologies, for example, can ingest information from all relevant planning and execution systems. These include, but are not limited to multiple ERP, TMS, and WMS applications – as well as external data sources from customers, suppliers and digital data sources, such as RFID, FourKites or project44, to provide the real-time visibility. AI and machine learning can then be leveraged
Taking control of supply chain transformations
Deals Driver
Q4
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1
to analyze this vast amount of data. The analysis helps sense disruptions, predict events before they happen, analyze correlations between patterns, spot trends, understand the consequences of different options, and provide prescriptive recommendations. The sooner an organization can sense disruption, the more options it will have to find solutions and lower costs – leading to more profitable decisions.
The journey to digitalize the supply chain is not without risks. While the adoption of AI, automation, IoT, cloud-based computing, and advanced data analytics comes with clear strategic and operational advantages, these technologies also expose supply chains to greater risks of cyber-attacks, data mismanagement, and third-party threats. Therefore, as organizations continue to digitize and upgrade their supply chain, they require the means – including people – to unlock full value from their investments. As such, organizations are restructuring their supply chain management capabilities to optimize functional skillsets and replace traditional job descriptions with new and hybrid roles, typically not seen before. These new positions combine supply chain expertise with proficiencies in cyber security, data science, and AI engineering, amongst other future-ready skills.
A case study
A global tier 1 manufacturer was looking to improve its overall supply chain efficiency and business performance. The company had a complex, vertically integrated supply chain with end products sold to demanding OEMs, requiring strict service-levels and standards. They faced several core challenges, namely:
– Additional costs and upstream supply challenges: Though the first production tier received consistent and reliable OEM demand signals, the extended horizon demand signal required by subsequent tiers, failed to pass consistently. This resulted in added costs and upstream supply issues.
– Lack of efficiency trying to meet service level standards and targets
– Decentralized processes, tools, and supply planning skills were spotty and inefficient, rendering costly service levels.
After completing KPMG’s operating model design engagement, the company gained knowledge on the benefits and the value of institutionalizing and centralizing their supply chain planning, and with KPMG’s guidance and help, began the transformation journey. The team conducted a successful pilot using proprietary planning tools, developed and socialized an approved business case, conducted a technology solution selection process, and conceived the design using BlueYonder software solutions.
Ultimately, the BlueYonder and KPMG strategic alliance led to the creation of a centralized operating model and the implementation of BlueYonder supply chain management state-of-the-art software technology that has since unlocked numerous financially measurable benefits, including:
– Working capital reduction
– Premium freight reduction
– Planner productivity improvement
– Overtime reduction
Tangible benefits include:
– An annual inbound freight cost decrease of over 75%
– A planner efficiency increase of over 30%
– An inventory reduction of 10%
Re-making the chain
The auto-sector is constantly evolving and its supply chains are no different. As automakers and OEMs seek improved tools, technologies, and talent to remain competitive and profitable, it is important to remember that this is not a solo race.
KPMG in Canada professionals have worked with a variety of auto industry stakeholders to build capabilities and add value to supply chain transformations. We do so by combining deep industry experience, methodologies, and an agile approach to make the most of supply chain investments, and more importantly, drive sustainable growth for the road ahead.
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2
Source: Capital IQ as at December 31st, 2019.
Automotive EV/LTM EBITDA Last 3 years
Daimler
Toyota
BMW
Ford
Johnson Controls
Magna
GM
Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-190
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4
Public Comparable Companies (C$M)
Source: Capital IQ as at December 31st, 2019.
Capitalization LTM Multiples NTM Multiples
Company CountryMarketCapitalization
Enterprise Value ("EV")
EV/Revenue
EV/EBITDA P/E
EV/EBITDA EV / EBIT P/E
American Axle & Manufacturing Holdings, Inc. United States 1,570 6,115 0.7x 4.5x n.m. 4.9x 10.0x 6.2x
BorgWarner Inc. United States 11,618 13,403 1.0x 6.3x 11.6x 6.3x 8.6x 10.8x
Cooper Tire & Rubber Company United States 1,871 2,259 0.6x 5.0x n.m. 4.7x 7.8x 11.1x
Cooper-Standard Holdings Inc. United States 724 1,471 0.3x 4.9x 5.4x 5.2x 19.0x n.m.
Dana Incorporated United States 3,398 6,687 0.6x 5.4x 10.7x 5.1x 7.7x 6.0x
Dorman Products, Inc. United States 3,201 3,171 2.4x 13.3x 24.1x 13.9x 17.2x 21.9x
Ford Motor Company United States 47,826 37,999 0.2x 2.5x 22.6x 2.8x 5.7x 7.4x
General Motors Company United States 67,826 64,336 0.3x 3.6x 5.8x 2.3x 5.3x 7.1x
Gentex Corporation United States 9,509 8,890 3.6x 11.1x 16.9x 11.1x 13.8x 17.0x
Gentherm Incorporated United States 1,885 1,967 1.5x 10.5x n.m. 10.4x 15.6x 19.8x
Harley-Davidson, Inc. United States 7,351 7,763 1.1x 7.0x 14.1x 6.1x 8.3x 10.7x
Johnson Controls International plc Ireland 40,733 47,983 1.5x 13.6x 6.1x 10.2x 13.6x 16.0x
LCI Industries United States 3,478 3,879 1.3x 11.0x 19.0x 9.8x 13.4x 16.8x
Lear Corporation United States 10,761 13,086 0.5x 5.0x 9.8x 5.6x 7.7x 9.9x
Linamar Corporation Canada 3,205 5,148 0.7x 4.8x 6.3x 5.0x 7.8x 7.1x
Magna International Inc. Canada 21,781 27,893 0.5x 5.2x 9.7x 5.5x 8.2x 8.6x
Martinrea International Inc. Canada 1,185 2,059 0.5x 4.4x 7.1x 3.9x 7.1x 6.2x
Nexteer Automotive Group Limited United States 2,948 2,747 0.6x 4.6x 7.2x 3.7x 6.1x 8.0x
Tenneco Inc. United States 1,374 8,989 0.4x 4.8x n.m. 4.9x 9.3x 4.0x
Tesla, Inc. United States 97,799 111,209 3.4x n.m. n.m. 20.7x n.m. n.m.
The Goodyear Tire & Rubber Company United States 4,692 13,486 0.7x 6.5x 18.6x 5.4x 8.9x 6.8x
Thor Industries, Inc. United States 5,319 7,439 0.7x 9.4x 23.4x 8.5x 11.7x 13.5x
Visteon Corporation United States 3,141 3,398 0.9x 13.4x n.m. 9.0x 14.8x 18.4x
Valuation Multiples Summary
Group Average 1.0x 7.1x 12.9x 7.2x 10.4x 11.1x
Group Median 0.7x 5.3x 10.7x 5.5x 8.7x 9.9x
Group Maximum 3.6x 13.6x 24.1x 20.7x 19.0x 21.9x
Group Minimum 0.2x 2.5x 5.4x 2.3x 5.3x 4.0x
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5
Precedent transactions (C$M)
Source: Capital IQ
Valuation Multiples Country of Target
Closed Date
Enterprise Value
EV / LTM Sales
EV / LTM EBITDA Target Acquirer
2019: Top 10 Transactions
Johnson Controls Power Solutions (nka:Clarios, LLC)
Caisse de dépôt et placement du Québec; Brookfield Business Partners L.P.
United States 30-Apr-19 15,344 1.5x 6.9x
Magneti Marelli S.p.A. (nka:MARELLI Europe S.p.A.)
Ck Holdings Co. Ltd. nka:Magneti Marelli CK Holdings Co., Ltd.) Italy 2-May-19 8,715 n.a n.a
BCA Marketplace plc TDR Capital LLP United Kingdom 6-Nov-19 3,759 0.7x 14.5x
Erwin Hymer Group SE Thor Industries, Inc. Germany 1-Feb-19 2,928 n.a n.a
Clarion Co., Ltd. Faurecia S.A. (nka:Faurecia S.E.) Japan 1-Mar-19 1,799 0.9x 9.7x
Global Auto Care Business of Spectrum Brands Holdings, Inc. Energizer Holdings, Inc. United States 28-Jan-19 1,631 2.7x 10.5x
Tower International, Inc. Autokiniton US Holdings, Inc. United States 30-Sep-19 1,370 0.7x 7.7x
Roof Systems Business of Inteva Products Inc. CIE Automotive, S.A. United States 6-May-19 990 n.a n.a
China Automotive Industry Engineering Co., Ltd. Sinomach Automobile Co., Ltd. China 4-Apr-19 513 n.a n.a
Newmar Corporation/Dutch Real Estate Corp./New-Way Transport Corp./ New-Serv, Inc.
Octavius Corporation United States 8-Nov-19 455 n.a n.a
2018: Top 10 Transactions
GKN Limited Melrose Industries PLC United Kingdom 26-Apr-18 15,830 0.9x 9.3x
Federal-Mogul LLC Tenneco Inc. United States 1-Oct-18 6,816 0.7x 7.2x
Stevens Holding Company, Inc. Altra Industrial Motion Corp. United States 1-Oct-18 3,650 3.1x 13.4x
Camso Inc. Compagnie Générale des Établissements Michelin Canada 18-Dec-18 2,170 1.7x 11.8x
Substantially All Assets of Takata Corporation Key Safety Systems, Inc. Japan 10-Apr-18 2,087 n.a n.a
ZKW Holding GmbH LG Electronics Inc.; LG Corp. Austria 31-Aug-18 1,622 0.9x n.a
Sage Automotive Interiors, Inc. Asahi Kasei Corporation United States 27-Sep-18 1,407 2.2x n.a
L'Orange GmbH (nka:Woodward L'Orange) Woodward Aken GmbH Germany 1-Jun-18 1,054 n.a n.a
Aventics GmbH Emerson Automation Solutions Germany 17-Jul-18 796 1.5x n.a
INA Bearings India Pvt Ltd. Schaeffler India Limited India 22-Oct-18 709 3.4x 24.6x
2017: Top 10 Transactions
Mobileye N.V. Intel Corporation Netherlands 21-Aug-17 20,195 42.0x 120.2x
Harman International Industries, Incorporated
Samsung Electronics America, Inc. United States 10-Mar-17 12,036 1.3x 10.4x
CLARCOR Inc. Parker-Hannifin Corporation United States 28-Feb-17 5,753 3.1x 17.2x
Metaldyne Performance Group Inc. American Axle & Manufacturing Holdings, Inc. United States 6-Apr-17 4,376 1.1x 6.9x
Calsonic Kansei Corporation (nka:Marelli Corporation)
KKR & Co. L.P. (nka:KKR & Co. Inc.); KKR Asian Fund II L.P. Japan 23-Mar-17 4,050 0.3x 5.2x
Adam Opel GmbH Peugeot S.A. Germany 1-Aug-17 1,618 0.1x n.a
FTE automotive GmbH Valeo SA Germany 31-Oct-17 1,196 1.6x n.m
Ahlstrom Oyj Munksjö Oyj (nka:Ahlstrom-Munksjö Oyj) Finland 31-Mar-17 1,052 0.7x 6.2x
Robert Bosch Starter Motors Generators Holding GmbH (nka:SEG Automotive Germany GmbH)
China Renaissance Capital Investment; Zhengzhou Coal Mining Machinery Group Company Limited; Chizhou Zhongan Zhaoshang Equity Investment LLP
Germany 31-Dec-17 817 0.4x 7.6x
AutoChips Inc. NavInfo Co., Ltd. China 2-Mar-17 775 n.a n.a
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2020 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 26250
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Contact usFor more information on how our automotive industry practice can help you or how we can support your supply chain transformation journey, please contact:
AutomotivePeter HatgesPartner, Corporate FinanceNational Automotive Sector [email protected]
Tammy BrownNational Industry LeaderIndustrial Markets416-777-8344 [email protected]
BlueYonderSalim ShaikhSr. Director, Industry [email protected]
Supply Chain Jérôme ThirionNational Leader,Supply Chain & [email protected]
Alain SawayaPartner, Supply Chain & [email protected]
Recent transactionsKPMG advised on the following recent transactions:
Announced December 2019
KPMG Corporate Finance
acted as the financial advisor to Discount Car and Truck Rentals
on the sale of its business to Enterprise Holdings’
Canadian subsidiary
