The world of performance automotive seats just got more complicated. On Tuesday, German industry publication Manager Magazin reported that Recaro Automotive GmbH has filed for insolvency. We’re talking about the most famous car seat brand in the world going bust. However, the brand’s recent past has been eventful, and all around the office, we’ve been wondering the same thing — did private equity ruin Recaro?
First, a little background: Just because Recaro Automotive has filed for bankruptcy doesn’t mean Recaro as a brand is facing any threat of going away. Recaro Automotive hasn’t been part of Recaro Holding, the parent company of the Recaro Group, for more than a decade now. It was first sold to Johnson Controls in 2011, then spun off into Adient in 2016 when Johnson Controls decided to separate its automotive line branding from its other areas of business. In 2020, the biggest change happened, when Detroit-based private equity firm — you can’t make this shit up — Raven Acquisitions purchased Recaro Automotive, continuing to license the Recaro name from Recaro Holding.
Here’s how it was reported by Automotive News at the time:
At the time, Adient called Recaro a company that “served a niche market” and was “essentially breakeven.”
Considering how famous the Recaro name is in the world of automotive seating, it hasn’t been a huge fish in the recent past, with the brand reporting revenue of around $150 million in 2019. While certainly not nothing, especially with a relatively lean workforce of around 425 people at the time, revenue doesn’t equal profit, and we don’t have full details on Recaro Automotive’s recent balance sheet considering it’s been a privately held company. However, it should’ve still been a sustainable business, so what happened?
It’s easy to speculate when facts are opaque, but private equity firms generally follow similar methods of operation. They pump a bunch of money into various firms in hopes of a profitable exit. Sometimes they do well, but frequently, brands that can’t be quickly built up get stripped for their intellectual property and riches if they become a losing short-term financial game. It’s possible that part of the problem with Recaro Automotive is that performance automotive seating is a bit of a niche thing. Weirdos like us appreciate it, but most people don’t care if they’re sitting on a Recaro or a Lear or a Sabelt or an Adient, because the branding isn’t massively relevant outside of an audience of car enthusiasts.
At the same time, the end of the near-zero interest rate era has seen serious ramifications for any entity looking to lend or borrow money. Central banking overnight rates are substantially higher now than they were when Raven Acquisitions bought Recaro in January 2020, and it might not have made sense to keep pumping money into the brand.
Needless to say, Recaro Automotive declaring insolvency will take a toll on both its workforce and major car manufacturers. A report from Manager Magazin claims that employees, many of whom are based in Stuttgart, were unaware that the firm would be filing for bankruptcy, and that this event has workers and their union calling for transparency. From the report:
IG Metall was taken by surprise by the insolvency application. “It is unclear what this means for the 215 employees of Recaro Automotive GmbH in Kirchheim,” the union said.
For several years, the workforce has helped to keep the company financially stable by waiving and postponing wages. “We are disappointed and feel let down by management,” said works council chairman Frank Bokowits . “Our colleagues have made great sacrifices to support the company.”
At the same time, major OEMs who offer vehicles with Recaro seats may need to repackage vehicle options depending on if supply can be maintained. For vehicles with other seating options, it could simply be a matter of dropping the optional seats if supply gets interrupted. For vehicles where the only seating options are made by Recaro, it could get difficult and expensive, as new seats often require new crash testing.
Will the Recaro Automotive brand survive bankruptcy? While anything can happen, I reckon there’s a good chance that someone will buy the brand if it comes down to an asset sale. Recaro has a ton of brand equity in the automotive space, and even the aftermarket seating line alone holds consumer appeal to a core audience. However, the only thing we know for certain is that this saga is only beginning. Sit tight, because as events continue to unfold at the most famous car seat brand in the world, we’ll be here to keep you updated.
(Photo credits: Recaro Automotive)
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Sad, used to be a great brand. My son even had a Recaro child seat back in the day. Talk about feeling like winning as a parent!
This company was a dead man…sitting down,? as soon as it got spun off. They were happy to stack all that money from naming rights deals with car brands, but its impossible to do the R&D required to stay ahead in a category like this and look profitable on paper without looking 5-10+ years down the road.
The machine keeps grinding
Once upon a time, if you wanted to pretend to drive a racecar, you bolted a set of Recaros in your car with 4 bolts and a mount kit. Can’t really do that much anymore (unless you’re driving an actual race car) because you won’t have side airbags in most cases. That can’t help.
Recaro actually has had a seat with side airbags on it for well over a decade
Agreed. My Ford Focus XR5 Turbo (known as an ST outside of Australia) had side-airbag equipped Recaro seats in 2011, and that model had been in production for a few years by that point.
Private Equity companies ruin everything they touch. Blood sucking leeches.
Literally the scourge of the financial world – and that’s an impressively high bar.
“For several years, the workforce has helped to keep the company financially stable by waiving and postponing wages.”
Can the union really claim they didn’t see this coming?
Not that I am defending Private Equity, but a lot of assumptions are being made here without supporting evidence. Given the company has had four owners in the last 15 years raises a few red flags and the previous owner was not on good footing when it sold.
Thomas also seems to have left out a material point made by former owner when it sold the company in 2020.
(source: https://archive.ph/NibMe#selection-2343.78-2343.268)
It was in the same sentence that the writer referenced in the post.
Agree. No fan of PE at all and I’m sure they didn’t help set them up well for another buyer, but this looks like they had problems for a while and PE wouldn’t have gotten a hold of them if they were doing well. I’m sure the incompetent management will make out while the workers who put off raises will get nothing.
Private equity just swallowed up two of my favorite classic British car parts suppliers: Moss Motors and Rimmer Brothers.
Rimmer brothers sounds problematic.
I prefer mine to be unrelated.
Nonsense, the Rimmer I know is an upstanding member of the Space Corps, and is not at all emotionally unstable!
Smegging right!
Upstanding? The git doesn’t even know what gispacho is!
That Arnold Rimmer is a complete smee hee Can you believe I used to be that guy? Now smoke me a kipper, I’ll be back for breakfast. And hopefully, some sex.
Automotive seating is an absolute nightmare industry, having spent some time working adjacent to it.
Just read elsewhere that BBS is in a similar situation. I guess if you want that new ND Miata Club (BBS/Recaro package) you better act fast.
But Mitt told us that The Market would fix everything.
“You, sir, are no George Romney.”
Mittens would have done a HJ Kaiser move and sold Rambler to Argentina.
Re: story lede.
Does a bear shit in the woods?
Having spent some time in the forest in Canada, can say: absolutely
For several years, the workforce has helped to keep the company financially stable by waiving and postponing wages. “We are disappointed and feel let down by management,” said works council chairman Frank Bokowits . “Our colleagues have made great sacrifices to support the company.”
No doubt management were themselves severely weakened by even greater financial sacrifices.
1) borrow a bunch of money
2) use that borrowed money to buy a solvent company (Recaro)
3) now the debt is *Recaro’s* debt
4) whoops, the company is insolvent now because of all that debt!
5) cut costs MBA-style (mass layoffs)
6) declare bankruptcy & strip the company for parts
7) look for the next ‘opportunity’
I don’t know for sure that’s what happened but it certainly fits the paradigm.
Addendum to number 2: use the money to buy a solvent company and to give to equity holders so they get their money without needing to wait around for the purchased company to become amazingly profitable, which was never part of the plan anyway.
8) sail away on your yacht
Loot & Pillage 601 is a required course in MBA programs.
Toys R Us knows this well.
“Weirdos like us appreciate it, but most people don’t care if they’re sitting on a Recaro or a Lear or a Sabelt or an Adient, because the branding isn’t massively relevant outside of an audience of car enthusiasts.”
This is true, but look at brands like Brembo. Most people don’t know why they want them, but they love seeing those big calipers, typically painted in bright colors, with the Brembo name on it. I think that they know it means “something good”, but may not know why. The same goes with Recaro. We all know what it means and why it’s cool, but we’re the trend setters. Others see the name and know it means “something good”.
However, yes. Typical corporate bullshit and private equity once again ruined a good name with solid equity. In the end though, since they only licensed the name, I could see someone else in the enthusiast market licensing the name from the owners if the current licensee drops the ball and goes completely out of business.
Glad I bought an ND Miata with the Recaros already. Private equity gonna private equity.
The one thing to note is that Recaro isn’t just an aftermarket seating company. They are also a Tier 1 supplier for many automotive companies even if it doesn’t say Recardo on the seat.
And the airline industry.
The airline equipment is a separate entity, not owned by the private equity that bankrupted their automotive business
Mark that to til, I misread your comment.
“Sit tight”, you just couldn’t resist it, could you. The Recaros in my ’08 Mitsubishi Evo X were the best seats I ever had in a car. I would totally hate to see them die. I actually through about replacing the front seats in my ’17 Golf R with Recaros, but just couldn’t justify the cost.
The Recaros in the original MK1/Mk2 Golf GTI were incredible. The ones in my FoST and FoRS were crippling to an averagely size American bum, but I put up with em for 6 years because, damn, did they hold you in place.
Fuck venture capitalists. If a brand you care about has gone out of business in the last 20 years, chances are it was killed by venture capitalists.
I call them “Vulture capitalists” 🙁
Aw, I don’t know about all that. Tell you what…Let’s meet in person and talk about it. I’ll go get some Samsonite luggage at Sears, pick up new duds from J. Crew, get a room at the Marriott, and we can talk it out over dinner at Red Lobster…
…
Oh.
And we can toast with Anchor Steam Beer.
Too soon!! *Sob*
They’re coming back, though! Hopefully, at least, there is a new owner working with the previous employees.
Right after I finish my shift at Borders.
If anyone gets hurt, we can take them to the ER and the PE-owned hospital in town, where the doctor will spend a maximum of 92 seconds examining them and ordering expensive, pointless tests!
Hold on, I just gotta stop by Toys R US for something for the kiddo
Private equity people are different from venture capitalists. Will not comment on whether they are worse or better. In my 40+ years in Silicon Valley, I have one VC acquaintance with whom I would have a meal or a drink. I was in start-ups for all but 7 of those years.
I guess I’ve conflated the two, I should have said private equity.
On second thought, the distribution of private equity people is probably entirely skewed to the negative, whereas for VCs the distribution has a tail in the positive.
See: Red Lobster.
…while you can.
Recaro kicked the bucket… seats.
All jokes aside, I would love to see this brand end up in the hands of some enthusiasts. Maybe mass-market (or nearly mass market) performance seats isn’t the right game, and perhaps bespoke, limited production automotive seats would increase their margins and stave off another bankruptcy. I would much rather see Recaro seats in high-end performance cars than for the logo to be slapped on BYD’s next electric crossover.
Recaro folks better learn how to speak Madarin.
So the bus seats that Recaro Makes, what part of the company is that? Ive seen them on Prevost busses
Recaro also make airline seats. I assume those and bus seats are still under Recaro Holdings and/or Recaro Group. Fleet sales are probably more profitable and easier than individual aftermarket and small run OEM sales.
I wouldn’t be surprised if Recaro buys back Recaro for pennies on the dollar. The Private Equity doesn’t care what they get for the corpse since they already got their money out by loading it up with debt.
I remember hoping in an Airbus A320 with Recaro seats. I didn’t know they were in that business too, but it might have been licensed to another company
MCI buses as well. The Recaro Automotive website shows well regarded commercial vehicle, race, and OEM production auto seats.
They went with Raven Acquisitions because Vulture Acquisitions was not quite discreet enough.
Whenever a prominent brand goes bust, somewhere you can see private equity lurking, trying to steal all of their money.
“Building shareholder value” one bankruptcy at a time.
Private Equity is at the core of the massive wealth transfer from the middle class to the.05%.
Oh well, as long as the rest of us schmucks have cable tv and our phones we’re satisfied.
It’s not cable anymore, people didn’t want to pay $200/mo to watch shows on scheduled programming with ads. Now you pay 12 different companies $13.99* a month each to watch shows whenever they decide to license them without** ads.
*some movies/shows will cost another $3.99 to rent, or $11.99 to buy***.
**ads may be added next month to increase profit margins, you may pay an extra $5.99/mo to remove them.
***content you buy will disappear when the streaming company’s streaming rights contract expires, you will not get a refund..
Physical media laughs at your streaming rights, until the disc develops an unrecoverable error. I’m going to watch Columbo tonight, just received the box set on blu-ray.
Yarr harr fiddle dee dee! The high seas laugh at thee!
If all this company is doing is licensing the Recaro name couldn’t another manufacturer step up and take the license? Sounds like Recaro automotive doesn’t really need to stick around
No, it’s much more complicated than that. https://youtu.be/JZfpVIDnLvA?si=AuN7wEvHYryyxSpk
I just went out to the garage, sat in my BMW’s vintage Recaros, and poured out a cold one for the classic brand. Is nothing sacred?
Not in the current state of things. So many investment firms buying up names, squeezing out what they can and then dumping the empty husks on the fire pile.
Hooray MBAs!
For the venture capitalists, the only thing sacred is money.
Hopefully you watched where you poured it!
Into my chilled Spaten beer mug. Then into my belly.
This is the correct way to drink cold beer.