Most automotive suppliers in West Michigan remain privately-held, meaning that information about their financial health stays tightly under wraps.
The public can get some idea of how they fared last year, though, by using the context of public companies, which are starting to report their results for 2015.
Gentex is a rarity in being a publicly-held automotive supplier in West Michigan. It just announced quarterly and full-year financial results that herald good news about the automotive industry overall.
Gentex generated $1.54 billion in sales for the year, up 12 percent over 2014, as a result of a 14-percent increase in unit shipments of auto-dimming interior and exterior mirrors. The company reported net income of $318.5 million in 2015, up 10 percent over the prior year.
We expect that most publicly-owned suppliers releasing calendar-year results over the month will be reporting gains over prior year results by virtue of healthy auto sales in 2015.
It is also interesting to see whether suppliers can distinguish themselves further, by doing more than just riding the rising tide, and how they plan to deal with change driven by long-term regulatory shifts in fuel economy and emissions reduction, advancements in technology, consumer tastes and more.
Gentex has handled change well and maximized its performance, notwithstanding the evolving market.
Ideally, companies will succeed — as Gentex did — in outperforming the overall automotive market. Light vehicle production on a global basis was up 2 percent in 2015, and in North America it was up 3 percent.
To beat the market, suppliers have to have previously won contracts on models that turned out to be strong sellers because they were well designed for their target market.
They also need to be winning business on additional models to increase their penetration with each customer.
It helps if suppliers can increase their dollar content per vehicle, whether by adding value to the modules they produce, or by increasing the number of their components per vehicle. Expanding into new customers or new geographic regions are also methods of layering on new opportunities for growth.
Gentex has a relatively narrow product line (rearview mirrors) compared to many other companies. Through a strong culture of innovation and a focus on its core competencies, however, Gentex has been able to excel for many years at extending that product line with new features and applications.
Most recently, these include aesthetic changes like new frameless designs for inside mirrors, and functional ones, such as new driver-assist technology. That technology is enabled by a miniature camera-on-a-chip integrated into a Gentex auto-dimming mirror combined with algorithmic decision-making for advanced headlamp control (SmartBeam), lane detection and more.
By incorporating cameras, Gentex embraced what might otherwise be a competitive threat to its core product area. Investors sometimes question whether there will be a need for mirrors on the car of the future, but Gentex maintains that they are continuing to grow.
The company makes a strong case that locating electronic devices in the mirror remains more cost-effective than designing them into the instrument panel or console. The sensors, circuit boards, and other electronic components used for auto-dimming mirrors can be shared with other advanced features to save cost and space.
The location of the mirror in the vehicle makes it ideal for the operation of cameras, antennas, receivers, etc., and the familiarity and consistency of the location makes it safe and user-friendly for drivers.
Gentex marshals many such arguments to fend off the threat of display-only systems in the vehicles of the future.
One of the differentiating factors the company cites in its work related to the hot topic of advanced driver assistance systems (ADAS) is the willingness to design for middle and low trim packages, in contrast to competitors that are exclusively offering top-end fully-loaded ADAS systems.
At the same time, the company also notes in presentations that it has kept its average selling price up through content growth to avoid significant erosion from the annual price reductions that it must grant customers.
Knowing how to co-opt a potential threat, when to design for a different price point, and other survival skills will ensure that an automotive supplier is not only enjoying the rising tide, but that it is also preparing for the eventuality of radical change in transportation technology and consumer demand.
While we may not see their stories in press releases, annual reports and SEC filings, we hope that other West Michigan suppliers are doing as well as the public company in their midst.