When Jennifer Slater considered joining Strattec Security Corp. as chief executive officer, she saw a company with untapped potential, a recently refreshed board of directors that saw the same opportunity, and a strong balance sheet and financial flexibility needed to execute on that vision. Slater took over as president and CEO of the Glendale-based maker
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“We have opportunities to raise the sophistication of the business and modernize how this company operates,” Slater said at the Sidoti Small Cap Virtual Conference in mid-September. “There is a lot of change to be made to extract this value. In fact, I see this as a self-help story.”
Strattec has already seen a number of changes over the past 18 months. In addition to Krejci’s retirement, F. Jack Liebau Jr., an investment management professional who also serves as chairman of Ohio-based plastics manufacturer Myers Industries, took over in January as chairman of the board for Harold M. Stratton II, who had held the position since 1999.
Liebau joined the board in October 2023 along with Bruce Lisman, a private investor and the retired chairman of JPMorgan’s global equity division.
Stratton and David Zimmer, who served on the board since 2006, are set to leave at the company’s annual meeting in October. Matteo Anversa, chief financial officer of Logitech, has been nominated to join the board. Anversa was previously CFO of automotive supplier Gentherm and held financial roles at Fiat-Chrysler, Ferrari and General Electric.
If the board nominations are approved by shareholders, the average tenure of Strattec’s directors will go from more than 19 years to less than three years in just one year. The board is also establishing stock ownership guidelines for directors, making changes to its compensation programs and conducting ongoing director education on cybersecurity and IT governance requirements.
The company is also seeking to change its articles of incorporation so that directors are elected annually instead of on staggered three-year terms.
Even with all the changes taking place, Strattec reported nearly $538 million in sales in its 2024 fiscal year, which ended in June. The figure represented an increase of 9.1% from fiscal 2023. However, $32.7 million of the $44.9 million improvement was the result of net price increases to major customers, including $9.7 million in retroactive increases that likely will not repeat.
Major automakers make up the bulk of Strattec’s customer base. General Motors accounted for the largest portion of sales in the 2024 fiscal year, at 30%. Ford Motor Co. accounted for another 21% and has become a bigger customer in recent years, climbing from around 13% of sales in 2019.
Stellantis was responsible for another 15%, down from almost 24% in 2019 when it was Fiat-Chrysler.
Hyundai and Kia, commercial and Tier 1 customers, and other OEMs, including Tesla, accounted for the remainder.
As for product mix, door handles and exterior trim account for around 25% of sales followed by power access at 24%. Keys and locksets account for 20%, latches represent 13%, and user interface controls, aftermarket products, original equipment service and other products account for the remainder.
Slater noted a “great feature” of Strattec’s products is “they’re agnostic to the powertrain” and are found on electric, hybrid and internal combustion engine vehicles.
While the company has seen sales growth the past two years, exceeding pre-pandemic levels in both, bottom line results have been a bit more mixed. Net income for fiscal 2024 was $16.3 million, but the company had a loss of $6.7 million in 2023 and income of $7 million.
Potential changes Slater sees include implementing a management operating system to break down silos, updating IT systems, improving access to data, and developing a strategy to support sustainable growth, she said.
In addition to developing a robust strategy, Slater said near-term priorities for the business will include making sure the company has the right organizational capability and stabilizing the business to provide predictable results.
“The key focus items to enable this are making sure we have a culture for the organization around accountability and delivering results to drive predictable performance,” Slater said. “We also will look across our product portfolio to ensure we have the right resources focused on high-value sustainable products while de-emphasizing those that are not contributing as profitably.”
Slater said Strattec did “a nice job last year” securing pricing increases from customers, but when asked by an analyst if there was more work to do on pricing, she pointed to the company’s need to improve its data systems to have a better view of how it makes money.
“One of the things that I talked about is instilling a management operating system and really getting more access to data,” Slater said. “The technology systems right now are pretty disparate and antiquated, and so when you have a starting point that way, this business hasn’t historically looked at profitability at a granular enough level, so step one is getting at the data to determine how we look at that at a product level.”