Aptiv’s Technological Metamorphosis Is Tested By Silicon Valley’s Automotive Push

The brain of the car

Aptiv has two main lines of business: one focused on hardware and electronics, the other on software. The first is something like the nervous system in the car – wires that carry energy and signals through the vehicle like impulse-emitting synapses. The latter is like his brain, allowing semi-autonomous driving or creating a digital interface for the drivers.

CEO Kevin Clark, who returned to the auto industry after stints in healthcare and private equity, has rebuilt the company since taking the top job in 2015. He shut down growth companies slow and made a series of acquisitions at the right time: telematics to analyze data, software to allow live updates and automated driving starts. This culminated with the split of its engines and transmissions business in 2017 and a new name for the remaining company, which was previously known as Delphi Automotive Plc.

Clark’s agreements proved prescient, setting Aptiv apart from its peers still debating the future of the combustion engine. He and CFO Joe Massaro reorganized the company in Wall Street’s eyes, causing the stock price to skyrocket.

Aptiv stock closed at $ 162 on Thursday, roughly seven times its IPO price in 2011. It trades at 36 times mixed futures earnings, a multiple that rivals some of the most spectacular tech companies and companies. is nearly three times the average of its industry peers. Its rebirth as a catalyst for electric and self-driving cars has allowed it to achieve this rich valuation even though sales and profits are only slightly better than when it went public. Although Aptiv’s software revenue has grown, it has yet to close the gap from the slow-growing companies it has sold.

The company’s reputation for skillful execution has been matched by a culture of hard work, according to half a dozen former employees, more reminiscent of the private equity roots of the leadership team than their laid-back Silicon Valley competitors in autonomous driving.

Under Clark’s tenure, when a division risked missing its growth targets, executives armed themselves with cost-cutting proposals and braced for a disguise, according to three former executives. Several people who failed to appease Clark and Massaro at such meetings have been fired, the former executives said. A staff member kept a blood pressure monitor in his office for medical reasons that have become a common workplace stress joke, according to two former employees.

“They were just really good at putting pressure” on people to get results, a former executive said of Clark and Massaro. The goal was to eliminate anyone from the inherited culture of the company, where “everyone was nice to everyone and not always focused on the bottom line.”

Descriptions of former Clark and Massaro employees are “not an accurate description of our leadership or the corporate culture,” said Sarah McKinney, spokesperson for Aptiv.

Even their sharpest critics concede that the two executives have been brilliant at shaping Aptiv to respond to emerging trends. And as vehicles become more complex, only a privileged few will be able to provide the software and hardware that automakers need, Clark said.

“The reality is that there are very few vendors who have the capacity to do this today,” Clark said in an interview this month.

Clark said his recent refresh of Aptiv was only possible thanks to the groundwork done by his predecessor, Rodney O’Neal. Delphi, derived from GM in 1999 as a maker of flywheels and brakes, was trying to come out of bankruptcy in 2009 when its main customer collapsed under the weight of the financial crisis. It could have been liquidated without O’Neal, who convinced the federal government, GM and creditors that he had a future in connected electric cars.

To make this possible, O’Neal had implemented painful cuts: he cut Delphi’s product lines from 119 to 33, closed more than 70 sites, replaced his unionized US workforce with one. foreign work cheaper and gutted white collar pensions. It also moved its overseas headquarters to Troy, Michigan in a tax reversal that saved the company hundreds of millions of dollars.