We received shares of Adient (ADNT, Financial) upon its spin-off from JCI at the end of October. Adient is the market leading provider of automotive seating in North America, Europe and China. It has longstanding relationships with all of the major global Original Equipment Manufacturers as well as growing regionals such as Brilliance, Great Wall Motors, SAIC Motor, Tata Motor, and newer manufacturers such as Tesla. It also has an equity JV with Yanfeng Automotive in China for interior trim systems such as door panels, instrument panels and consoles. The company is geographically diversified, providing some balance with regard to regional economic cycles. Seating, while it sounds fairly mundane, is actually benefiting from enhanced features to increase passenger comfort such as heating/cooling, massage, lumbar support and advanced seat adjustability as well as an increasing shift globally to SUVs, which have higher seating content. For luxury vehicles, the second row bench seat of yesteryear is a thing of the past, having been largely replaced by captain's chairs with all of the passenger comfort amenities. This trend is also moving toward mass market vehicles, increasing the percentage of higher margin seating solutions. Longer term, the opportunity for further enhanced seating exists with conversion of the third row of seats, autonomous driving as well as opportunities to expand into adjacent areas for seating, e.g., commercial vehicles, railway and aircraft seating. Now a standalone entity, Adient has greater ability to focus on growing its core business, along with opportunities for self-help. We believe the company has been under earning as the business has been somewhat capital constrained under its former parent. Also, there are opportunities for margin improvement driven by operating efficiencies and cost reduction initiatives.
From Third Avenue Management (Trades, Portfolio)'s Value Fund fourth quarter commentary.
