SPX open to sale of auto parts business

By Kevin Krolicki

NEW YORK (Reuters) - Diversified manufacturer SPX Corp. (SPW.N: Quote, Profile, Research, Stock Buzz) is open to an eventual sale of its low-margin auto parts unit even as it invests in its faster-growing auto service business targeting dealer networks, the company's chief executive said on Monday.

SPX has niche operations supplying aluminum die-cast components and filters to automakers, an industry that has faced declining margins and intense pressure to shed costs, particularly in North America.

"That business is about the only part of our portfolio that is not experiencing moderate to strong growth," SPX President and Chief Executive Chris Kearney said at the Reuters Manufacturing and Transportation Summit in New York.

Kearney said SPX had outperformed the distressed auto parts sector and makes a "high single-digit return" on its component business because of a management focus on containing costs.

But he said the Charlotte, North Carolina,-based company was open to an eventual sale of its auto parts supply operations, which represent less than 10 percent of sales.

Under Kearney, who took over as CEO in 2004, SPX has focused on shedding assets outside its major manufacturing areas to fund a a reduction in debt and a share buyback program.

"It's not a strategic fit," Kearney said of the SPX auto component business. "It is a business that we have not characterized as core to the company's growth."

He added: "We're certainly in no hurry to do anything, but opportunistically we will look to move some of those assets over time because they are not core to the strategic growth of the company."

By contrast, Kearney said SPX expected its $900-million auto service business could outperform much of the auto industry in part because of the introduction of new vehicle models and the explosive growth of car sales in China.

That business targets sales to auto dealer networks, where consumers bring increasingly electronics-rich vehicles for repairs and regular service calls, Kearney said.

The reliance on sales to dealers shields that area of SPX's auto business from the financial problems that have dogged the U.S. auto industry amid flat vehicle sales, he said.

"The growth of that business is not contingent on unit sales. It is related to new platform introductions. So even with North American manufacturers that have struggled to fend off foreign imports and lost market share, they have fought that battle by introducing new (models)," he said.

SPX's auto service business is pushing into dealer management services beyond its initial focus on providing physical repair tools. It drew 13 percent of its revenue from new products last year, he said.

"When you rank it on a vitality scale, it's a very vital business," Kearney said.

In November, SPX bought privately held CarTool GmbH, a privately held German manufacturer of dealer tools to service vehicles, with $70 million in revenue, primarily from Europe.