Meritor, Tenneco takeovers will have big impact on Metro Detroit
“We absolutely see SG&A (sales, general and administrative) synergies between the two businesses, so the combined business will be smaller than the two as they are today – but how, what combination of those? , it’s too soon,” Davis said. “We haven’t even fully started this work yet.”
Meritor declined to make executives available for interview.
“While this transaction will provide greater opportunities for most employees, Cummins expects there will be synergies and will communicate this openly and transparently with affected employees and stakeholders when the time comes.” Meritor CEO Chris Villavarayan said in a letter to employees obtained by Crain’s.
Meritor has “not discussed or made any decision regarding the Troy seat,” according to a document it filed with the Securities and Exchange Commission after Tuesday’s announcement. The acquisition “will not affect the vast majority of employees” but there will be “overlapping functions and positions”.
Davis said it has not been decided what will happen to Meritor executives.
The supplier has roots dating back more than a century, but its automotive headquarters in Troy was established in 1975. The company became Meritor in 1997 when Rockwell International spun off its automotive business.
In 2000 it became ArvinMeritor after a merger with Arvin Industries, only to revert to the Meritor moniker after divesting its light vehicle business in 2011.
The supplier has regained strength since being crippled by the Great Recession, although the COVID-19 pandemic has also dealt financial blows. The company also appears to be recovering from recent volatility in truck production, posting adjusted earnings of $113 million in the first quarter of fiscal 2022 on sales of $984 million, an increase of 11% from year after year in both cases.
Meritor Shares climbed 45% after the announcement of the acquisition to $35.72 as markets closed on Thursday.
“I don’t mean easily predictable, but you see some really good companies coming together out of necessity for capital to invest in new technology,” said Steven Wybo, senior restructuring and management consultant at Birmingham-based Riveron. “One plus one equals three when you bring good companies together.”
The product of multiple mergers and acquisitions and investment deals, Cummins’ growing electrification footprint is spread across North America. Davis said she recognizes the benefits of establishing Cummins’ potential electrical business base in Metro Detroit.
“I’m very willing to consider Troy purely because of the amount of vehicle innovation happening there and the talent available,” she said.