The car’s brain
Aptiv has two major business segments: one focused on hardware and electronics, another on software. The former is something like the nervous system of the car — wires that transmit power and signals through the vehicle like synapses firing off impulses. The latter is like its brain, enabling semi-autonomous driving or creating a digital interface for drivers.
CEO Kevin Clark, who returned to the automotive industry after stints in health care and private equity, has remade the company since he took the top job in 2015. He sheared off slow-growth businesses and completed a string of well-timed acquisitions: telematics to analyze car data, software to enable over-the-air updates and automated-driving startups. This culminated with the spinoff of its engine and transmission business in 2017 and a new name for the remaining company, which was previously known as Delphi Automotive Plc.
Clark’s deals proved prescient, setting Aptiv apart from peers still debating the future of the combustion engine. He and CFO Joe Massaro revamped the company in the eyes of Wall Street, sending the stock price soaring.
Aptiv shares closed at $162 on Thursday, roughly seven times its 2011 IPO price. It trades at 36 times blended forward earnings, a multiple that rivals some of the splashiest tech companies and is nearly triple the average of its industry peers. Its rebirth as an enabler of electric, autonomous cars helped it achieved this rich valuation even as sales and profit are only modestly better than when it went public. While Aptiv’s software revenue has grown, it has yet to close the gap from slow-growing businesses it sold off.
The company’s reputation for deft execution has been accompanied by a cutthroat workplace culture, half a dozen former employees say, more reminiscent of the management team’s private equity roots than of their laid-back Silicon Valley competitors in autonomous driving.
Under Clark’s tenure, when a division was at risk of missing growth targets, executives armed themselves with proposals for cost cuts, and braced for a dressing down, according to three former executives. Several people who failed to appease Clark and Massaro in such meetings were terminated, the former executives said. One staffer kept a blood-pressure machine in his office for medical reasons that became a running joke about workplace stress, according to two former employees.
“They were just very good at applying pressure” to people to deliver results, one former executive said of Clark and Massaro. The point was to weed out anyone from the company’s legacy culture, where “everybody was nice to everybody, and not always focused on the bottom line.’’
Former employees’ descriptions of Clark and Massaro are “not an accurate depiction of our leadership or company culture,” said Sarah McKinney, an Aptiv spokeswoman.
Even their sharpest critics concede the two executives have been brilliant at molding Aptiv to meet emerging trends. And as vehicles become more complex, only a select few will be able to deliver the software and hardware car companies need, Clark said.
“The reality is, there are very few suppliers who have the capability to do that today,” Clark said in an interview this month.
Clark said his recent spruce-up of Aptiv was only possible because of groundwork laid by his predecessor, Rodney O’Neal. Delphi, spun off from GM in 1999 as a maker of steering wheels and brakes, was trying to emerge from bankruptcy in 2009 when its key customer collapsed under the weight of the financial crisis. It might have been liquidated were it not for O’Neal, who convinced the federal government, GM, and creditors that it had a future in electric, connected cars.
To make this feasible, O’Neal had implemented painful cuts: He culled Delphi’s product lines from 119 to 33, closed more than 70 sites, replaced its unionized U.S. workforce with cheaper overseas labor and gutted the pensions of white-collar employees. He also moved its headquarters abroad from Troy, Michigan, in a tax-inversion that saved the company hundreds of millions of dollars.