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Executives at Rockwell International Corp. are learning that it isn't easy to build a high-profit automotive-parts supplier.
Flush with profits from the company's fast-growing electronics and automations units, a top Rockwell International (NYSE: ROK) executive ordered his Troy-based automotive unit in 1994 to pick up the pace, telling one official to improve margins."
Shortly after, Donald Beall, chairman and CEO of the Seal Beach, Calif.-based conglomerate, installed a new management team at Rockwell Automotive, co-managed by Larry Yost. Last week, after two years of single-digit operating profit margins, Rockwell said it would spin off the $3.1 billion business with Yost as president and chief executive.
The new, as yet unnamed company with 16,000 employees will become a publicly traded automotive parts-maker. The move was hailed as strategic transformation that will allow both companies "a sharper focus," said Don Davis Jr., Rockwell International's president and COO.
Davis said automotive parts and high technology have "different market dynamics, different inventory requirements, different customers and different strategies."
The disparities that prompted Rockwell International to spin off its less profitable automotive unit, say analysts, may push other conglomerates to follow suit. I Corp. spun off its manufacturing/automotive group...