A Linamar employee loads camshafts into racks in the firm’s Guelph, Ont., plant. Linamar is looking to grow as auto makers shed the engine and transmission work they now take care of in-house.Norm Betts
Hybrid and electric vehicles should generate billions of dollars in revenue for Linamar Corp., chief executive officer Linda Hasenfratz says.
The maker of engine and transmission parts is well represented in internal combustion engines globally, but envisions 60 per cent of vehicles containing battery electric propulsion systems, hybrid engines and fuel-cell powered engines by 2030, Ms. Hasenfratz told Linamar's annual meeting Tuesday in Guelph, Ont. Vehicles powered by anything other than internal combustion engines have just a fraction of the market now.
"These are huge, huge markets," she said. "We only want a small slice of these markets."
Linamar has enough new business on its order books to generate sales of between $7.5-billion and $8-billion in 2021, she said. A slide posted during her presentation at the meeting showed that the auto parts company is targeting sales in excess of $9.5-billion by then.
The company posted revenue of $6-billion in 2016.
The key to the company's growth is outsourcing as auto makers shed more of the engine and transmission work they have been doing themselves and push it out to suppliers.
About 70 per cent of engine and transmission components are made in-house now by auto makers, she said, but the level of outsourcing is growing every year. The total market for powertrain parts is about $600-billion annually, she said, and opportunities for suppliers will grow as hybrids, battery electric vehicles and fuel-cell-powered automobiles chip away at the market share held by internal combustion engines.
"To us, it doesn't matter what comes when, if we have a strong portfolio for each," she said.
She expects parts makers to supply complete engines to auto makers by 2030.
Linamar, Canada's second-largest auto parts company by revenue, has expanded globally in recent years, in part through the key acquisition in 2016 of Montupet SA of France, a maker of cast aluminum cylinder heads and other engine and transmission parts.
Magna International Inc., the largest auto parts maker in Canada, made a similar bet on powertrain components by purchasing Germany-based transmission maker Getrag.
Linamar paid $1.2-billion for Montupet, an acquisition that was larger than the smaller purchases it has typically made.
There may be more acquisitions, Ms. Hasenfratz said after the meeting.
"What we're looking for is technology opportunities, opportunities to grow in new markets, new processes, getting deeper with new customers, those are the kinds of things we're looking for."
She said Linamar possesses key attributes being demanded by auto makers amid fierce competition – the scale and financial capacity to invest in technology and new products, and a global footprint.