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Icahn’s Automotive Segment: Acquisitions Led Growth

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About Icahn’s automotive segment

Icahn Enterprises (IEP) owns 100% outstanding stock of IEH Auto Holding through Icahn Enterprises Holdings (IEH). IEP has 99% limited partnership interest in IEH.

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Background of Icahn’s automotive segment

IEH’s automotive segment includes Federal-Mogul (FDML) and IEH Auto Parts. Federal-Mogul is a global supplier of a broad range of components, accessories, and systems. It serves the automotive, heavy duty truck, aerospace, energy, marine, railroad, industrials, and auto aftermarket industries.

Federal-Mogul’s customers include the world’s largest original equipment manufacturers and retailers in the replacement market.

IEH Auto Parts is a leading automotive parts distributor in the United States. It sells predominantly to commercial aftermarket customers and retail customers. A few of its known brands are Wagner, Abex, Ferodo, Jurid, QuickStop, and ThermoQuiet.

Automotive operating segments

FDML’s two key operating segments are Powertrain and Motorparts. They contributed approximately 58% and 42%, respectively, to its total revenue in 2015, with gross margins of 9.6% and 6.6%, respectively.

The global vehicular parts (or auto ancillary) industry in the United States is highly competitive. Competition is based on price, product quality, technology, delivery, customer service, and breadth of products. IEP’s competitors include general, full-range and discount department store, and online retailers.

IEP’s automotive competitors can be categorized on the basis of powertrain and motor parts. Some of these players are Delphi Automotive (DLPH), Auto Liv (ALV), and Wabco (WBC). From April 2015 to April 2016, the stock prices of these companies fell 7%, 4%, and 10%, respectively.

In the above diagram, we can see that Wabco enjoys a dominant market position in this technology-intensive product industry. Its critical component ensures strong pricing power.

On a yearly basis, IEP’s stock fell 33% compared to the 1% fall of the SPDR S&P 500 ETF (SPY).

Keep reading for a discussion on Icahn’s automotive segment’s performance.

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