Continental AG's pending purchase of ITT Automotive's Brake and Chassis operations for $1.9 billion represents the latest shake-up in the volatile brake component market.
Robert Bosch Corp. acquired AlliedSignal's foundation brake business in 1996. The former braking business of VarityKelsey-Hayes became LucasVarity in a 1996 merger and will now become part of LucasVarity Automotive. LucasVarity also wants to sell its heavy brake business. Delphi Automotive Systems' Chassis Systems division is being consolidated with its Energy and Engine Management division as General Motors Corp. prepares to spin off Delphi as a separate company.
In addition, Dana Corp. and Federal-Mogul Corp. each want into the brake market through their respective acquisitions of Echlin Inc. and Cooper Automotive. Federal-Mogul's purchase of Cooper is pending.
The Continental deal adds an interesting twist. The German company is principally a tire maker - the fourth largest in the world - and now it will have the unique ability to integrate brakes with the tire and wheel assemblies it already supplies to automakers.
"We're just trying to change the playing field. There is no combination out there of tire and brake components like this one," says Bernd Frangenberg, president and CEO of U.S.-based Continental General Tire, a division of Continental AG.
"This is a golden opportunity that happens once in a lifetime," Mr. Frangenberg says. "Our OEM customers really can relate to our vision and relate to what we are doing. They are very receptive to our ambitious and audacious strategy. The work only starts now."
That work will focus on development of an "intelligent tire," with sidewall sensors - from ITTA - to transmit messages about side-loading and traction more quickly to chassis control systems such as antilock brakes, traction control and vehicle stability management.
Traditional ABS systems require expensive yaw sensors fitted underbody, but Mr. Frangenberg suggests the sensors could be unnecessary if the information is gathered "where the rubber meets the road."
"We believe we can come up with a better system in terms of quality and reaction time and a system that is at least cheaper than what is offered today," he says.
Other potential joint developments include automatic ride height control, tire pressure monitoring and electromechanical brake systems. Electronics and sensors from ITTA also will play a role in Continental's development of run-flat tires and electronically controlled engine mounts.
ITTA's Brake and Chassis business employs 11,000 people worldwide and recorded sales of $2.2 billion in 1997. Parent company ITT Industries Inc. is unloading the division, as well as the Automotive Electrical Systems unit, to focus on higher-margin businesses of fluid technology, defense and electrical connectors. Its remaining automotive components business - fluid handling, brake pads and shock absorbers - will have annual sales of about $540 million.
ITTA's ABS is the most popular with Chrysler Corp., Ford Motor Co. and General Motors Corp., installed on nearly a third of the Big Three's '98 model year cars and light trucks, according to WAW sister publication Ward's Automotive Reports.
Despite this, the parent company was tired of waiting for the antilock brake market to improve. For the past four years, about 60% of the new cars in the United States have been equipped with four-wheel ABS, but that figure was expected to be much higher by now.
One issue could be price. ABS as an option on some vehicles is as much as $995. Meanwhile, suppliers sell many antilock brake systems to OEMs for less than $200.
The ABS market, however, is growing in Europe. In the U.S., halfway through the '98 model year, ABS penetration was running 4.6 points ahead of '97 model year car totals.
The option price for ABS appears to be falling on at least some U.S. vehicles. On the '99 Ford F-150, ABS is a $300 option, plus a $300 option discount, making it free. Optional four-wheel ABS on the '98 F-150 was $500.
