5row sidecushion airbag About 20 of TRW revenue comes from airbags and seatbelts and about 60 of its sales revenue comes from chassis and steering systems suspensions and foundation brakes

5-row side-cushion airbag. About 20% of TRW revenue comes from airbags and seatbelts and about 60% of its sales revenue comes from chassis and steering systems, suspensions and foundation brakes.

EC Ruling Leaves Key TRW Assets Ripe for Taking

Acquisition of major elements of TRW following its merger with ZF, including design, manufacturing and intellectual property, could offer the buyer “a once-in-a-lifetime opportunity” to expand globally, industry analyst Peter Cooke says.

LONDON – The European Commission uses its competition-law powers to open up a multibillion-dollar race for the huge global market for intelligent chassis systems and advanced collision-avoidance technology.

Its regulatory starter’s pistol is the terms it has imposed on German firm ZF, of Friedrichshafen, for its planned acquisition of TRW, based in Detroit. ZF and TRW are the two largest suppliers of chassis components – which include suspension ball joints, control arms, tie rods, stabilizer links, torque rods, v-links and drag links – for cars and trucks in Europe.

The Commission, the executive branch of the European Union, argues a full takeover could lead to price increases for chassis components because of the size of the merged company. So, as a condition of the sale, it has ordered the divestment of TRW’s businesses in the design, manufacturing and sale of chassis components.

A Commission note says it is difficult for new players to enter the market, “due to the high technical requirements and investments needed.”

TRW is a leader in this field and acquisition of its assets (which cover manufacturing and R&D capabilities, including plants, intellectual-property rights, current customer and supply contracts, transitional services, licenses and permits) will give the purchaser instant presence in a major market for components including, for instance, those used in driverless vehicles.

“Acquisition of a significant element of TRW, including design, manufacture and the intellectual property – plus its current OEM and aftermarket clients – could offer an ambitious player a once-in-a-lifetime opportunity,” says Peter Cooke, emeritus professor of automotive management at Buckingham University and one of the U.K.’s leading experts on the global motor industry. Which organizations have the resources and reach to acquire this specialized division?

“To be viable economically a player needs to operate globally,” Cooke says. “Such market realities mean likely buyers for part of TRW would be from North America or (Asia) – notably China or India.”

But the automotive sector is global and the challenge for the Commission is “whether it is in the best longer-term interest of the EU deliberately to introduce constraints on leading players at the risk of elements of the supply chain moving to non-European competitors?”

EU competition rules are a mix of poker and unintended consequences, Cooke notes. “The rules are laudable in that they are designed to stop market dominance by a small number of players – in this case chassis components. On the other hand, they have little influence on the rest of the world.

“Given the small number of truck and car assemblers in Europe, one might argue that they were capable of looking after themselves, or – if the concern is with new players – surely a monitoring/appeals process could be created to discourage monopoly power.”

Wolfgang Bernhart, a partner in Roland Berger Strategy Consultants Automotive, a leading German global business consultancy, tells WardsAuto four major companies active in this automotive segment could be considered potential bidders for, or investors in, these divested TRW assets: Mando, a South Korean company with interests in steering, brake, and suspension components; ThyssenKrupp of Germany, a giant global engineering group; and two Japanese companies, NSK and JTEKT, both active in the international vehicle-components segment.

An EC spokesman confirms sale of the TRW chassis component assets would satisfy its concerns, but was unable to say what time limit has been set on such a sale. Once Brussels has been satisfied the terms are “viable and sufficient to eliminate competition concerns,” it will appoint an independent trustee to monitor the divestment proceeding, the spokesman says.

ZF’s main shareholder is the Zeppelin Foundation, heir to the industrial giant founded by Ferdinand von Zeppelin in 1915 to produce gears for German airships. Today the company specializes in transmissions and steering systems, along with other critical parts.

TRW also specializes in transmissions and steering systems and has a strong reputation for its software developments in radar and electronic control systems.

No estimate of the price for which the TRW assets would be sold has been made. Prior to the EC’s decision, the merger was valued at $13.5 billion, the largest ever in the chassis-systems sector. The merged company has been projected to have global revenues of $40 billion, second only to German company Bosch in the overall vehicle-components sector.


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