Gentex Uses Foreign Sales To Boost U.S. Market

At a time when so much focus is on job losses to overseas markets, Gentex Corp. is growing business and jobs at home on the strength of sales to foreign automakers in Asia and Europe. Gentex's sale of auto-dimming automotive mirrors to foreign-based automakers has surpassed sales to customers in North America during 2004. Overseas shipments accounted for slightly more than half of mirror sales during the first six months of the year and 51.6 percent of the 3 million mirrors shipped during the second quarter alone.

From Grand Rapids Business Journal

ZEELAND, MI — At a time when so much focus is on job losses to overseas markets, Gentex Corp. is growing business and jobs at home on the strength of sales to foreign automakers in Asia and Europe.

Gentex’s sale of auto-dimming automotive mirrors to foreign-based automakers has surpassed sales to customers in North America during 2004. Overseas shipments accounted for slightly more than half of mirror sales during the first six months of the year and 51.6 percent of the 3 million mirrors shipped during the second quarter alone.

An increasingly larger share of sales are for vehicles that are then imported into the North American market or to Asian-based automakers that produce cars and light trucks in the U.S.

Sales growth in North America during the second quarter largely came from foreign “transplants” that produce vehicles here for sale in the U.S., said Gentex Executive Vice President Garth Deur. The trend solidly positions Gentex to continue strong sales growth as domestic automakers see further erosion of their U.S. market share to foreign-based competitors.

“Just based on what’s going on with market share in the overall market, our best look going forward is that our opportunity to continue to grow our business here in North America is with the newer players in the North American production market,” Deur said during a conference call last week with brokerage analysts to discuss second quarter financial results.

The sale of Gentex’s auto-dimming mirrors to foreign automakers grew 37 percent during the second quarter over the same period a year ago, while sales to domestic vehicle manufacturers in North America grew just 4 percent.

A “pretty high” number of sales to Japanese automakers are for vehicles imported into North America and about half of the mirrors shipped to South Korea come back on vehicle imports, Deur said.

Through the first half of 2004, Gentex’s minor shipments to foreign automakers were up 31 percent, compared to 18 percent to domestic producers.

A focus for Gentex now is to increase the electronic features and content built into the mirrors that are sold to foreign automakers.

“It’s just a journey we’ve been on for many years and we hope to continue that journey as we increase our business outside of North America,” Deur said.

The success Gentex has had in penetrating foreign markets reflects the company’s strategy to diversify its customer base so as not to become beholden to a single large customer or handful of customers, said auto industry analyst Erich Merkle of IRN Inc. in Grand Rapids.

Merkle views the Zeeland-based Gentex as the “poster boy” for diversification in the automotive supplier industry and a company “that has done everything right.”

“Of all the suppliers that are out there, I can’t think of a supplier that has as diversified of a customer base as Gentex,” Merkle said.

“They take diversification to the next level. They are not wedded or tied to one automaker, and as a supplier that’s where you want to be.”

That position for years, as well as the growing popularity of the company’s autodimming interior and exterior mirrors, has translated into strong sales and earnings growth for Gentex, which employs more than 2,000 people at facilities in Zeeland and is planning to break ground soon on a new factory that’s scheduled for completion in early 2006.

Financially, Gentex posted another record quarter for sales and earnings in the April-to-June period.

The company reported quarterly sales of $129.6 million, up 10.8 percent for the same period a year earlier. Mid-year sales increased 11.5 percent, from $232.2 million to $258.9 million.

Quarterly net income totaled $28.9 million, or 38 cents per share, up 11.1 percent from $26 million in the second quarter of 2003. Net income halfway through 2004 was $58.8 million, or 76 cents per share, up 13.2 percent from the $51.9 million, or 68 cents per share, through the first six months of last year.

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