Doug DelGrosso will become the new CEO of struggling automotive seat maker Adient. David Sedgwick of Automotive News looks at the challenges he faces.
Plymouth, Michigan — When Doug DelGrosso becomes Adient’s CEO on 1 October, he won’t have to start his turnaround of the struggling seat maker from scratch.
Interim CEO Fritz Henderson — who will become non-executive chairman in the transition — has already announced a back-to-basics plan to cut costs, improve quality and focus on traditional seating customers.
DelGrosso, 56, is a savvy choice to execute that strategy. During 23 years at Lear Corp., DelGrosso rose to COO before leaving in 2007. More recently, he led the turnaround of the bankrupt chassis component supplier Chassix.
‘He did a good job’ at Chassix, said Steve Wybo, a senior managing director at consulting firm Conway MacKenzie. ‘He has a seating background and a turnaround under his belt.’
Adient is the world’s largest automotive seat maker, but it is struggling to make money despite strong North American car sales. The company lost $1.5 bn in 2016, recovered with a net income of $877 m last year, then plunged again. CEO Bruce McDonald stepped down on 11 June 2018 after the company announced a quarterly loss of $168 m.
The misstep two-step
Henderson, a former CEO of General Motors with a reputation for cost control, wasted little time identifying Adient’s missteps. One week after McDonald departed, the company scrapped a $100 m plan to move its corporate headquarters from Plymouth to Detroit.
Company executives also have questioned Adient’s $360 m purchase of seat maker Futuris Group in 2017. Futuris was founded in Australia in 1967. It produces seats and other components for several Chinese automakers.
It also supplied Tesla, Ford and GM in North America, and Adient was counting on it to target new-age West Coast EV start-ups. That turned out to be a bad bet after Tesla decided to make its seats internally.
‘We’ve been a little distracted,’ said Adient’s chief technology officer, Detlef Juerss, during a 30 July industry presentation in Traverse City, Michigan. ‘We’re now transitioning to a focus on the day-to-day business … not just the finer things in life.’
Those day-to-day problems include high scrappage rates, rising steel costs and glitchy product launches. Adient’s seat structures and mechanisms division has suffered chronic losses.
Distress in the Segment
‘There has been a ton of distress in the segment,’ Wybo said. ‘The suppliers have been beating each other up on price. It’s just one of those product lines with too much competition.’
The seatmaker has some strengths. The company is profitable in China, and its 33% share of the global seat industry gives it access to virtually every major automaker.
But Adient has struggled to regain momentum since it was spun off from Johnson Controls in 2016. And as auto sales in the US and China are starting to stagnate, Adient’s turnaround may prove difficult.
You can reach David Sedgwick at email@example.com
This story first appeared in Automotive News.