Bosch Changes Direction on Brake Operations

A month after telling Ward’s it will stay in the money-losing foundation-brake business, Bosch now says it is negotiating the potential sale of certain U.S. assets.

Tom Murphy, Managing Editor

July 30, 2009

4 Min Read
WardsAuto logo


Executives at Robert Bosch GmbH appear to have changed their minds about the German supplier’s future in foundation brakes, at least in North America.

“Bosch has begun reviewing alternatives for its North American foundation-brake business, including discussions with a prospective buyer,” spokeswoman Becky MacDonald says. “Included among these alternatives is the possible sale of certain U.S. assets.”

Barely a month ago, Bosch Automotive Chairman Bernd Bohr told Ward’s in an interview the supplier continues to lose money on calipers, rotors and drums – the primary components of foundation brakes – but that Bosch had no interest in selling the operations.

“I don’t see Bosch exiting this business,” Bohr told Ward’s, but did say the supplier is “considering several strategic options at this time.”

Bohr said Bosch didn’t want to unload the brake business because it remains a fundamental building block for antilock braking and electronic stability control, two core technologies Bosch helped pioneer.

Bosch is one of the world’s largest brake producers and wants to remain entrenched in ABS and ESC as those technologies morph into more advanced active safety and collision avoidance, which promise better profitability.

The negotiations center on the potential sale of foundation-brake operations only in North America. Bosch has five brake plants in the U.S. and two in Mexico. A key unanswered question is whether Bosch simply has too many brake plants and wants to sell a few.

Its rivals in the brake business, such as TRW Automotive, Continental Automotive and Delphi Corp., are struggling with their own operations and would seem unlikely suitors.

Steady losses for foundation brake business have frustrated Bosch Automotive Chairman Bernd Bohr.

Sources say private-equity funds are showing more interest in part suppliers, but that Bosch should expect low-ball offers for the commodity-driven, low-margin brake business.

As another option, perhaps Bosch is seeking a purchaser of the operations to serve as a contract assembler of its brake components.

“No decision has been made at this time, and there can be no assurances that any decisions will result in an agreement between the companies,” MacDonald says.

Part suppliers across North America are selling assets, consolidating operations, filing for bankruptcy protection and seeking new partnerships in an effort to stay afloat during a historic drop in vehicle sales. But the supplier is not saying whether a specific event forced it to suddenly change course with the North American operations.

In addition to calipers, rotors and drums, Bosch classifies actuation components such as vacuum boosters and master cylinders as part of the foundation-brake business.

The unit employs 2,500 people in North America, including hourly workers and engineers. Headquarters are in South Bend, IN, and Farmington Hills, MI, and a proving ground focused on heavy-truck applications is located in New Carlisle, IN.

Bosch has attempted to add value to commodity calipers by integrated automatic parking-brake functionality.

The U.S. plants are in St. Joseph, MI; Johnson City, Clarksville and Knoxville, TN; and Columbia, SC. Last month, Bosch notified United Auto Workers Local 2155 that it wants to negotiate the potential closure of the Johnson City plant, which makes rotors, hubs and drums. Negotiations with the union started this month and are ongoing.

The Clarksville plant has assembled brake corner modules for General Motors Co.’s midsize cross/utility vehicles, the Saturn Outlook, GMC Acadia, Buick Enclave and Chevrolet Traverse.

Indiana’s South Bend Tribune reports the plant there and the nearby New Carlisle proving ground have laid off about 100 workers in the past year.

In March, the company announced it would have 20 furlough days throughout the year, some lasting a full week, the newspaper reports.

The St. Joseph plant across the border in Michigan employs 190 people and produces calipers, rotors and hardware primarily for medium- and heavy-duty trucks.

Bosch has closed two brake plants since 2007 in Gallatin, TN, and Sumter, SC.

The supplier derives 13% of its global sales in North America, and most of its 2008 revenue ($5.3 billion) came from the automotive sector.

Elsewhere in the world, Bosch is attempting to acquire the remainder of Pacifica Group Ltd., an Australian brake producer. In 2007, Bosch acquired more than 50% of Pacifica and held 77% of the company as of spring.

Bosch has raised its offer from $0.16 per share in June to $0.23 per share, valid through Aug. 17.

[email protected]

Read more about:


About the Author(s)

Tom Murphy

Managing Editor, Informa/WardsAuto

Tom Murphy test drives cars throughout the year and focuses on powertrain and interior technology. He leads selection of the Wards 10 Best Engines, Wards 10 Best Interiors and Wards 10 Best UX competitions. Tom grills year-round, never leaves home without a guitar pick and aspires to own a Jaguar E-Type someday.

Subscribe to a WardsAuto newsletter today!
Get the latest automotive news delivered daily or weekly. With 5 newsletters to choose from, each curated by our Editors, you can decide what matters to you most.

You May Also Like