Visteon Corp. (VC:US)’s South Korean unit, the world’s second-largest maker of car heaters and air conditioners, forecast its growth will be driven by customers in Europe and U.S. as it cuts its reliance on Hyundai Motor Co. (005380)
Halla Visteon Climate Control Corp. (018880), which counts on Hyundai Motor and its affiliates for half its revenue, has clinched enough non-Hyundai orders to keep sales rising at a compound average growth rate of at least 7 percent for the next three years, Chief Executive Officer Park Yong Hwan said in an interview in Seoul this week. He declined to identify the customers.
“The market had been concerned about our high dependency on Hyundai Motor,” Park, 56, said. “We felt the need to secure more customers and expand in other markets such as Europe and the U.S.”
Halla Visteon shares have gained 43 percent this year -- they climbed to a record this week -- after the $410 million purchase of its parent’s climate business reduced its reliance on Seoul-based Hyundai Motor, which is predicting its slowest vehicle-sales growth in six years. Analysts estimate profit at the auto-parts maker will climb 22 percent to a record this year and increase 17 percent in 2014.
The Daejeon, South Korea-based company last month completed the purchase of Visteon’s automotive climate business, raising the portion of non-Hyundai-related revenue to 50 percent of the total from 30 percent. The deal expanded Halla Visteon’s business to 17 countries from 9 and the recent surge in the stock price reflects investors’ views of the company’s enhanced prospects since the acquisition, Park said.
Aside from Hyundai Motor and affiliates, Halla Visteon counts Ford Motor Co. (F:US) as its second-largest customer, accounting for more than 20 percent of sales, with the rest coming from a “very good customer mix,” Park said.
Halla Visteon’s ties with Hyundai Motor run deep. The parts maker used to be part of the Halla Group, which went bankrupt in 1997 after years of over expansion. Halla Group Chairman Chung Mong Won is a cousin of Hyundai Motor Chairman Chung Mong Koo.
Halla’s Chung has recently been seeking to rebuild the group through flagship unit Mando Corp. (060980), Korea’s third-largest auto-parts maker. Mando said last year it may seek to buy back Halla Visteon, then called Halla Climate Control Corp. In April, Tim Leuliette, CEO of Van Buren Township, Michigan-based Visteon, ruled out such a sale.
Beyond Hyundai, Halla Visteon plans to increase sales to European carmakers including Bayerische Motoren Werke AG, Volkswagen AG (VOW), Daimler AG (DAI) and Audi, Park said.
The parts maker is expanding production plants in China, Russia, India, Slovakia, and the Czech Republic, he said. It’s also considering entering Brazil, he said.
“In the long run, expanding in Europe and the U.S. will help us,” Park said.
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