China comes on strong for Cooper Standard

DETROIT — Cooper Standard Automotive, a major supplier of sealants, brake and fuel lines, has benefited from two overlapping trends: the resilience of China’s auto market and rising global demand for SUVs. Over the last five years, the suburban Detroit company has built a network of 17 factories in China, plus a profitable global product portfolio for SUVs, crossovers and pickups. CEO Jeff Edwards, 55, discussed his expansion strategy Sept. 7 with Staff Correspondent David Sedgwick.

Q: After you were named CEO in 2012, what goals did you set?

A: We set an objective to become one of the top 30 global suppliers. In addition, we wanted to be in the top 5 percent for return on investment.

Cooper Standard is 61st on Automotive News‘ list of the top 100 suppliers, based on global automotive parts sales in 2016. Are you satisfied with your progress?

We’ve grown from $2.9 billion in revenue to $3.5 billion. Most of our expansion has come from organic growth, and the majority of that has been China. Over the last five years, our China sales have grown 49 percent annually.

When you started, Cooper Standard had almost no presence in China, correct?

That’s correct. We had $100 million in annual revenue in China in 2013, and this year, we’ll have sales of $500 million. By 2021, we expect that our revenue in China will be $1.2 billion.

How do China sales compare with those in Europe and the U.S.?

China is our third-largest business. The U.S. is No. 1, with $1.8 billion sales, and Europe is No. 2, with just over $1 billion.

A new r&d center just opened in China.

Yes, we put in a new r&d center near Shanghai, and we opened one in southeast Michigan as well. That allows us to consolidate our engineering and r&d.

Cooper Standard has 17 plants in China. Are any new investments planned?

We announced this year that we are building a new tube plant for our fuel- and brake-line business. That will launch at the end of this year. That will be the final significant investment that we need in China until 2021.

Where is that plant?

It’s in Kunshan, about 45 minutes from Shanghai.

At what percent of capacity are the Chinese plants operating?

Right now, our plants are at 55 percent of capacity. Over the next four years, those plants will ramp up to 90 percent of capacity.

Cooper Standard’s second-quarter sales showed good growth in China, modest growth in the U.S. and a downturn in Europe. What’s going on?

In Europe, it was simply a program that went someplace else. That decision was made several years ago. Going forward, we expect Europe to grow nicely through 2021.

And what about the U.S.?

There were some larger customers that were taking inventory out of the system, so we had some short-term inventory adjustments that affected our North American business.

Do you believe light-vehicle production in North America has hit a plateau?

In North America, we see a 0.9 percent annual increase in production over the next four years.

So that market has plateaued. But when you look at crossovers, SUVs and pickups, it will grow 3.7 percent.

How much revenue does Cooper Standard generate from light trucks?

Last year, 62 percent of our global revenue came from light trucks and crossovers. That’s important because our content per vehicle is 26 percent higher on crossovers than on passenger cars and 120 percent higher on pickups.

So you’ve got a nice product mix?

Yes. These are strong growth contributors.

With that in mind, do you have any expansion plans in North America?

Our production capacity is at 90 percent; we don’t see the need to add additional capacity at this time. We are continuing to invest in r&d. But with our manufacturing plants, we don’t see any need to expand over the next four or five years.

What are your biggest customers?

Our largest customers in North America are Ford and General Motors, and in Europe, it’s PSA and Daimler. Those would be our top four global customers.

How about in China?

In China, most of our business is with the joint ventures. SAIC-GM is our largest customer.

Cooper Standard is the world’s second-largest producer of fuel lines and brake lines. Will the move to electric cars kill that portion of the business?

Actually, our product portfolio is extremely sustainable. The only thing we wouldn’t be selling is fuel lines for electric vehicles. Our other products wouldn’t be affected. For hybrid vehicles, our sales of fluid transfer systems would double because you are cooling two different systems. So electric cars would have a minimal impact.

Your new sealant, Fortrex, is 30 percent lighter than rubber seals, right?

Yeah, it’s something we just brought to the market. If you replace the rubber seals, we can save 7.7 pounds on a typical midsize SUV. When you think about our customers’ goals, weight reduction is at the top of the list.

The auto industry is watching the North American Free Trade Agreement negotiations with great interest. How important is NAFTA to you?

We are a big supporter of it; it’s important for the industry. Obviously, our customers will decide where they will build vehicles, and we will support our customers. We will be flexible as the market changes.

How much production does Cooper Standard have in Mexico?

We have eight plants in Mexico. Five are leased. So we are very flexible with our manufacturing process there. We can build them and move them. If we have to do it, we will.