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Magneti Marelli Holding SpA

Magneti Marelli Holding SpA


Viale Aldo Borletti 61/63
Corbetta
Milan, 20011
Italy
Telephone: (39 02) 9722 7111
Fax: (39 02) 9722 7355
Web site: http://www.magnetimarelli.com

Private Company
Incorporated:
1919 as Fabbrica Italiana Magneti Marelli
Employees: 25,195
Sales: EUR 4.5 billion (2006 est.)
NAIC: 334419 Other Electronic Component Manufacturing; 336321 Vehicular Lighting Equipment Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing

Magneti Marelli Holding SpA is a leading producer of automotive components based in Italy. Connected to Fiat S.p.A. throughout its history, Magneti Marelli also supplies other leading carmakers on a global scale. The company has 49 factories and 30 research and development centers located in more than a dozen countries. Marelli's Automotive Lighting unit is the world's second largest manufacturer of automobile headlights. Though a public traded company, Fiat owns 100 percent of Magneti Marelli through Fiat Netherlands Holding NV.

ORIGINS

A critical piece of technology in the development of motor vehicles was the magneto. This device provided the necessary voltage to keep spark plugs firing smoothly. For the first few decades of the 20th century, Robert Bosch's company based in Germany dominated the market for magnetos.

Italian automaker Fabbrica Italiana Automobili Torino, or Fiat, was attempting to establish an international profile in spite of the relatively small size of its home market. With few local automotive suppliers, and the threat of wartime embargo from foreign companies, Fiat took over the production of many components, including magnetos, which were also used in industrial and motorcycle engines and were strategically important to the aviation industry.

In October 1919, as Italy was recovering from World War I, Fiat and Ercole Marelli & Co. formed a joint venture called Fabbrica Italiana Magneti Marelli (Fimm). E. Marelli, established in 1891, was Italy's largest domestic electrical engineering firm.

Included in the seven million lire worth of start-up capital for the new firm was the existing Ercole Marelli factory near Milan at Sesto San Giovanni. The plant reached full production within a couple of years. In 1922, a French subsidiary was formed in Paris and a London-based venture followed a year later. By this time, Marelli was making other electrical equipment such as lights and dynamos. It had in 1920 started its long-running involvement in automotive racing; several decades later, it was supplying Formula One and motorcycle racing teams.

The company underwent a restructuring in 1924, and soon established an aviation division. Marelli added a number of significant new products by the end of the decade, including aircraft spark plugs; automotive distributors, windshield wipers, batteries, and horns; and a lighting and ignition controller for motorcycles called the Magluce ("Maglight"). Some of these were produced under license from foreign manufacturers. The company's business adapted to the replacement of magnetos with distributors, which were much less expensive to produce; some of the new product lines were meant to replace a shortfall in revenues from the switch to a cheaper product.

A BIG NAME IN WIRELESS

A second factory had opened in 1929 as the company prepared to produce gramophones and radios for the Italian market. The company entered a significant new consumer business when it started manufacturing radios via its Radiomarelli unit. Originally these were designs licensed from Bosch USA. A couple of years later, Radiomarelli began a longstanding arrangement with the Radio Corporation of America (RCA) to produce both radios and movie production equipment. Fimm also licensed a number of other brands such as Westinghouse and Marconi.

Magneti Marelli exited the professional telecommunications equipment business in 1963 when it sold its stake in Marelli Lenkurt S.p.A., a joint venture set up just three years earlier with a unit of General Telephone and Electronics International. Magneti Marelli stopped making radio and TV equipment in 1972, though its Radiomarelli unit continued to sell such items. Radiomarelli's consumer sales business was sold to Seimart in 1975.

Another venture, Fabbrica Italiana Valvole Radio Elettriche, or Fivre, was established in 1932 in the town of Pavia, a short drive south of Milan. It made radio valves. Within a few years, Fivre added a second plant in Florence. Magneti Marelli sold a half interest in Fivre to Sylvania Electric Products, Inc., a unit of General Telephone and Electronics International, in 1958, but bought back this interest several years later. Marelli ultimately divested Fivre in 1980.

EARLY PARTNERSHIPS

Fimm entered a couple of partnerships with Germany's Bosch. In 1935 the two launched an electrical equipment distributor called Mabo. Another partnership was with Iniex, an injection pump manufacturer previously established by Ercole Marelli and Bosch. Fimm acquired E. Marelli's half share in 1941, and bought out Bosch's interest in both Iniex and Mabo in 1953.

Fimm made a number of acquisitions to extend the breadth of its operations or merely to grow in size. Pavia-area lightbulb manufacturer Vetrerie Pavesi was acquired in 1938. In 1963, the company bought a 51 percent holding in Prestolite Italiana, one of a number of spark plug companies it acquired.

WORLD WAR II AND POSTWAR

Some of Fimm's plants suffered damage due to Allied bombing during World War II, when the company was producing certain parts of strategic importance to Italian aircraft manufacturers. The company's shares were listed on several Italian stock exchanges after the war. In 1949, the company began producing its first television sets. It signed a technical cooperation agreement with General Electric that same year.

While its Radiomarelli brand was becoming a household name across Italy, Magneti Marelli was also participating in custom engineering work. In 1956, the European Council for Nuclear Research contracted the company to build parts of the world's largest particle accelerator in Geneva.

Labor unrest in the early 1960s depressed revenues for a few years. There was a major restructuring in 1967, as Fiat bought out its partner in the company, Ercole Marelli. Fimm was restructured during the year, as Fivre became one of the company's design units.

COMPANY PERSPECTIVES


Magneti Marelli. A long-standing experience. The company started in 1919 but the origin of some product lines, such as lighting and instrumentation, dates back to the last century. Having always been linked with the automobile, Magneti Marelli took part in its birth, development and evolution. Once producing single components, ranging from electrical equipment to electromechanical components, Magneti Marelli is today a fully fledged partner for car manufacturers for whom it takes on responsibility for complete systems and modules development.

TRANSNATIONAL FACTORIES

Marelli set up a number of plants outside Italy over the years, in addition to its transnational joint ventures with the likes of Bosch and Denso. It started a company called Mako in 1969 to build and run an electrical and pneumatic equipment factory in Turkey. Marelli launched a spark plug factory in Iraq in 1981.

Marelli set up subsidiaries in Germany, France, Nigeria, and Portugal in the late 1970s. In 1978, Magneti Marelli Holding S.A. was formed to supervise Marelli's international operations. The company continued to form new foreign subsidiaries, such as Magneti Marelli Poland in 1992.

MAJOR RESTRUCTURING IN 1986

The name of Fimm, Fabbrica Italiana Magneti Marelli, was shortened to Magneti Marelli in 1985. More profound changes ensued. The firm became a holding company with a number of subsidiaries, including Fabbrica Batterie York, a manufacturer the company had acquired control of in 1977. This was augmented with the purchase of French battery manufacturer Cfec in 1990. A couple of years later, the battery operations were spun off into a new company called Sinac s.r.l. and folded into Fiat's French subsidiary CEAc.

In 1986, the French conglomerate Matra put some auto components units up for sale in order to focus on other businesses. Marelli emerged as a politically sympathetic buyer as French automakers were not keen to see the giant suppliers in the United States, Japan, and Germany become even larger. After the Matra acquisition, Marelli's workforce swelled to more than 29,000 people.

EARLY ENTRY INTO ELECTRONICS

At the same time as the major corporate restructuring, the design of automobiles was changing significantly. Marelli transferred carburetor production from France to Spain as most of the industry shifted to electronic fuel injection.

Magneti Marelli had been researching electronic systems for cars since the 1960s. It had introduced an electronic ignition system called Dinoplex in 1968. In 1983, Fiat made the Digiplex electronic ignition standard on all its automobiles.

NEW VENTURES

The company's restructuring took about three years, according to its chroniclers in Magneti Marelli: Its History and Business Transformation. By the beginning of the 1990s, it was ready to strike out into new areas in order to define its role in the future marketplace. Some of these initiatives were conducted in partnership with other suppliers, such as a fuel injection venture with Motorola Aieg and an HVAC development deal with Nippondenso. The relationship with Nippondenso blossomed into a global partnership with factories in Italy, the United Kingdom, and Argentina. Another key partner was Walbro of the United States, with which Marelli had fuel-delivery ventures in France and Brazil.

Marelli subsequently landed contracts with a number of German auto manufacturers. By the middle of the decade, it was the fifth largest automotive supplier in Europe (apart from tire manufacturers), according to Automotive News. Total revenues were nearly $4 billion in 1995, when the group had almost 24,000 employees.

In 1997 Marelli acquired leading South American parts supplier Cofap. Another major purchase followed the next year, when the company bought Midas Mufflers' 438 repair centers in Europe. The Midas business was sold to Norauto Group of France in 2004.

KEY DATES


1919:
Magneti Marelli (Fimm) formed by Fiat and Ercole Marelli.
1927:
Distributors replace magnetos in automotive products lineup.
1930:
Radiomarelli radio (and later TV) business launched.
1947:
Shares listed publicly.
1967:
Fiat buys Ercole Marelli's stake in Fimm.
1968:
Marelli's first electronic ignition system, Dinoplex, introduced.
1986:
Takeover of Matra component businesses sparks reorganization with aim of becoming a global conglomerate.
1997:
Leading South American parts supplier Cofap acquired.
1999:
Automotive Lighting formed in joint venture with Bosch of Germany.
2000:
Air conditioning, instrument panel, and after-market operations sold; suspension business acquired from Fiat.
2003:
SFS "flex fuel" systems launched in Brazil.

In 1999 Magneti Marelli formed the Automotive Lighting joint venture with Germany's Robert Bosch. A few years later it increased its stake from 50 percent to a controlling 74.9 percent interest. Automotive Lighting quickly became one of the largest producers of headlights and taillights.

CHANGING PRODUCT LINEUP IN 2000

Marelli had sales of EUR 4.1 billion ($3.4 billion) in 1999; 83 percent was from Europe. Fiat was still by far the largest customer, accounting for more than half of revenues. Fiat S.p.A. owned 70 percent of Marelli until May 2000, when it acquired the remaining shares. It had plans to sell the company. Visteon Corp., a spinoff of Ford Motor Company, emerged as a likely suitor in late 2000, but the deal failed and Marelli was taken off the block within a couple of years.

Instead of selling the whole company, Marelli was parted out. The air conditioning business went to Japanese rival Denso Corp. in a deal worth $430 million. Marelli also divested its instrument panel, lubricant, and after-market businesses. Among business lines added in 2000 was Fiat's suspension operation.

Fiat continued to account for a large share of Magneti Marelli's revenues, about 44 percent in 2005. Its next largest clients were PSA Peugeot-Citroen, VW Group, and DaimlerChrysler. Fiat transferred Marelli's power train operations to another division within Fiat, but returned them to Marelli within a year.

For all its global reach, Marelli still had only a small share in two of the world's largest auto markets: China and the United States. It was expanding its presence on both fronts. After establishing an instrument cluster factory at the southern port of Guangzhou, it started making lights at a plant in central China around 2005. Marelli was also investing in the U.S. market, where it had been active since the 1970s. In 2003 Marelli's U.S. headquarters was moved from North Carolina to the Detroit area in order to be closer to customers.

FLEXIBLE FUELS FOR THE FUTURE

Magneti Marelli was one of the leading fuel management system producers in Brazil, where it supplied several different automakers. Its "flex fuel" systems were of particular interest to the country, which had embraced renewable fuels as a means of reducing carbon dioxide emissions.

The SFS (software flex-fuel sensor) technology, launched in Brazil in 2003, allowed cars to run on any combination of gasoline or ethanol alcohol. Developed in Brazil, the system used data from existing engine sensors to determine the correct spark plug timing for the fuel. A few years later, Marelli introduced TetraFuel technology, which could also burn compressed natural gas through the use of a specialized injector. There was also interest for the technology in China, which was looking for ways to cut down on pollution and gasoline consumption.

Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Denso Manufacturing Italia S.p.A. (50%); Magneti Marelli Brasil Industria e Comercio Ltda.; Magneti Marelli Cofap Companhia Fabricadora de Pecas (Brazil); Magneti Marelli France S.A.S.; Magneti Marelli Moto-propulsion France S.A.S.; Magneti Marelli Powertrain USA Inc.; Magneti-Marelli Sistemas Electronicos Mexico S.A. de C.V.

PRINCIPAL DIVISIONS

Cofap Automotive Suspension; Electronic Systems; Exhaust Systems; Lighting; Powertrain.

PRINCIPAL COMPETITORS

Delphi Automotive Systems Corp.; Denso Corp.; Robert Bosch GmbH; Valeo S.A.; Visteon Corporation.

FURTHER READING

"Bordone Aims to Make Marelli Profitable Again," Automotive News Europe, May 17, 2004.

Cenciarini, Renzo A., and Stefania Licini, Magneti Marelli: Its History and Business Transformation, with an introduction by Giuseppe Volpato, Milan: Giuffre Editore, 1996.

Chew, Edmund, "F1 Racing: Components Companies Race to Show Off Technology," Automotive News Europe, April 19, 2004.

Ciferri, Luca, "CEO: Marelli Is 'No Longer for Sale,'" Automotive News Europe, January 27, 2003, p. 4.

, "Magneti Evolves into Global Supplier," Automotive News, July 22, 1996, p. 18.

, "Magneti Marelli CEO Expects 45% Growth," Automotive News, April 24, 2006, p. 30F.

Ciferri, Luca, and Edmund Chew, "Visteon Near Deal for Marelli; Supplier Eager to Grow in Europe," Crain's Detroit Business, December 4, 2000, p. 3.

Kosdrosky, Terry, "Sensing a Profit," Crain's Detroit Business, September 20, 2004, p. 11.

"Marelli Recovers Its Powertrain Unit," Automotive News Europe, April 17, 2006, p. 18.

Miel, Rhoda, "Magneti Marelli Expands in N. America," Automotive News Europe, October 4, 2004.

Raineiri, Ruggero, "Review of Magneti Marelli, " Business History, January 1999, p. 138.

Webb, Alysha, "Magneti Plans to Double Its Investment in China," Automotive News, December 19, 2005, p. 16H.

"Zurück am Markt," Automobil Produktion, January 2005.

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