By Brian Cruickshank, AAP
Editor, Counterman magazine

ANN ARBOR, MI —

One of the biggest news stories of the year was the sale of the Dana Automotive Aftermarket Group (AAG) to New York-based buyout firm Cypress Group, which agreed to purchase the AAG unit for approximately $1 billion. That deal was announced in early July of this year, and two months later, on Sept. 8, it was announced that Dana AAG would have a new name under its new owners – AFFINIA.

aftermarketNews.com sat down with AFFINIA’s John Washbish in Las Vegas just prior to the start of the AAPEX show to update show attendees on the state of the transition. Washbish is AFFINIA president of Customer Relationship Management (CRM), a position he has held since 2003. Recently, his duties were expanded to include serving as vice president and general manager of the AFFINIA Undercar Group, which includes the Raybestos, Spicer, Aimco and McQuay-Norris brands.

Q: The initial acquisition announcement was made in early July. What is the current state of the transaction?

JW: It’s a very complicated transaction because we’ve got many locations in many countries. There are a lot of joint-venture locations that had to be sorted out. For example, in Poland we had a 75/25 joint venture in a filter company. Working out the details of those situations can get complicated. We’ve had about 15 of those deals, and we’ve had to sort through every one of them. That can take time.

The other thing is that (Cypress) is not buying a single corporation. They’re buying about three corporations and a lot of assets. So if you take something like WIX – there’s not a WIX filter corporation, it’s a lot of assets. It even gets to down to goofy things like what to do with the eight (Detroit) Red Wings season tickets. There’s all those types of things, big and small. It’s really in the details.

In the end, though, it appears as though our financing is secure and we’ve got the banks behind us. We hope in the first two weeks of November we’ll secure $300 million in bonds, and as soon as that’s complete, we’ll be able to put this deal to bed with Dana. Theoretically, we can close November 15, but from a financial perspective, closing mid-month is really hard to do. So, I expect the closing to happen on November 30. I’ve never seen in my life as willing a seller and as willing a buyer as we have here today. So this deal is going to get done for sure.

Q: Have there been any challenges you didn’t anticipate?

Not really. We had a good plan on what we wanted to do, and the Cypress people have been very supportive. They were very encouraged by the organizational changes we made last month. The other thing that will come out of all of this is that there will be some significant restructuring money to do some things that we’ve needed to get done since about 1997.

The good thing about the Cypress people is that they are ready to invest in this company, not only by buying it, but by giving us some significant restructuring money, primarily within the brake and chassis group.

We’re doing a good job with brands and customers, but it’s increasingly difficult to compete with off-shore product when everything you make is in North America. It’s tough for us to make a drum or rotor in Ontario (Canada) and then complete against product from China. So we purchase a lot of off-shore product today, but what we’d really like to do is own some of our companies in China. I think with Cypress, we’ll have the opportunity to do that.

Q: How did customers react to the announcement, and what are their general feelings about it today?

JW: The customers have been really, really good. If you walk in their shoes, it seems like we get sold every five years. It’s not that often, but it feels like it.

Customers are primarily focused on our people and our brands. As long as we can commit to our people and our brands, then our customers are comfortable about whom the “parents” are. All of our customers have been very supportive. A lot of them have been very encouraging because, with the greatest respect to Dana, Dana was viewed as an OE-focused company. Customers like the fact that we’ll be a stand-alone aftermarket entity, doing the right things that we need to be doing for the aftermarket. We’ve been really delighted with our customer support.

Q: What necessitated the organizational changes announced in mid-October?

JW: On the underhood side, we’ve had a really solid organization for some time. We decided that we needed to do the same thing on the undercar side, that we needed to change the mix a little bit.

If you look at our businesses, we have a $2 billion enterprise; $600 million is in filtration and $1.2 billion is in brake and chassis, with Beck/Arnley and Quinton Hazell accounting for the balance. So, the under vehicle side is the much larger part of the business. When you look at growth potential in the aftermarket, what’s the leading category right now? It’s brakes. The filter category is good, but brake and chassis growth potential is just tremendous. We have the number-one position in brakes in North America. We have the number-two position in chassis and we have many, many opportunities in both those areas. As I look out at the landscape moving forward, if we can just keep our noses clean on the brake side, we’ll grow 3 to 5 percent per year just showing up. If we do a few things right, we could have some really substantial growth. So, we’ve reorganized the brake group, with me moving to McHenry, IL. We think the changes we made will really put us in a great position to move forward.

Q: Are you interested in the ArvinMeritor Light Vehicle Aftermarket assets?

We’d be lying if we said there was no interest. Certainly there are some potential opportunities there. If you could put together a deal where you could keep the shocks and the filters, but give exhaust to someone else, that would be a good deal. I think knowing the Cypress people as I do, they’re on the hunt and I would look for other acquisitions going forward. To be fair, though, probably for the next 12 to 18 months, they’re going to give us a chance to ‘show them the money.’ In the new world, unlike in the old world with Dana, it’s all about cash flow.

Q: How are you, as a totally aftermarket company, going to meet the demand to fill the psychological demands for OE product?

A: First of all, we not just an aftermarket manufacturer. We have a very large OE business in filters, as well as chassis. We think it’s important to stay involved in OE so we can stay abreast of late-breaking news, design changes, etc.

There’s no doubt moving forward that cosmetically, the part has got to be OE fit, form, function and sometimes even color. That’s what we’ve got to focus on, and we’re doing that throughout the enterprise. If we’re not OE on the part ourselves, then we make sure we’re hooked up with whomever is OE so we ensure the part has the right fit, form, function and color.

Q: Acquisitions can be difficult for the employees. What is the overall spirit of the organization?

JW: It’s been good. But to be fair, people don’t like change, and for folks who have been with Dana for 30 years, they can’t believe that the change is happening. The change is really a good thing. It gives us the opportunity to change ourselves and do some new things. So, I am very excited about it.

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