There surely was snickering in some automotive circles four years ago when Michelin told the world it had created a new product that would revolutionize the tire industry. The PAX System, the French tiremaker said, could replace the radial - another Michelin invention - because it lasts longer, performs better and it's a run-flat, to boot.

The catch is that PAX is such a radical new design that it requires a whole new wheel architecture to accommodate a revised bead design. The tire is mechanically locked to the wheel and can't come off, even in a blowout. Conventional wheels already can cost three times more than tires. Won't PAX come with hefty premiums?

Doubters may have questioned the need for such an architecture and asked, "Who would be willing to adopt a whole new standard?"

The answer they got a month ago must have left them stunned: Goodyear. Yes, the world's largest tire maker has a keen interest in the No. 3 competitor's technology.

So much so that Goodyear signed an agreement to license PAX technology in exchange for Michelin licensing Goodyear's extended mobility technology and pressure monitoring systems. The companies will then jointly develop future run-flat systems. The relationship is not exclusive.

Goodyear and Michelin also will jointly promote PAX to automakers and, through an "information campaign," to consumers worldwide. Goodyear even signs off on a press release declaring PAX as the "best platform for incorporation of future tire concepts into new vehicle designs."

Whatever happened to the never-praise-your-competitor credo? Somehow, these rubber giants plan to maintain "vigorous competition." Huh?

If the disbelievers need more evidence that PAX is for real, Michelin has contracts to put PAX on the road on new vehicles within a year in Europe and in the U.S. in 2002, according to Don Baldwin, manager for new business development for Michelin's automotive division.

He doesn't identify the customers. But the Cadillac Evoq roadster rolled onto the 1999 Detroit auto show stage on PAX wheels. Evoq, incidentally, is scheduled to arrive in U.S. showrooms in 2002.

What's so great about PAX? Most run-flats today are good for about 50 miles (80 km) at 55 mph (89 km/h) with zero air pressure. PAX can run 125 miles (201 km) or longer.

PAX frees up an extra 1.5 ins. (3.8cm) of space inside the wheel for larger brakes. PAX also provides an estimated 20% more cornering power because the sidewall is part of the tread and is much closer to the hub. As a result, tires don't have to be as wide.

PAX has lower rolling resistance, an estimated 8% to 10% less than a conventional radial, which improves fuel economy. Energy losses (about 10% in conventional tires) are virtually eliminated because the sidewall is so rigid that it minimizes flex.

But are the wheel makers willing to re-configure their processes? "They wouldn't have to," Mr. Baldwin says. "It just requires a new mold, not a complete tooling change. The radial required a big change, but PAX doesn't."

The same goes for tiremakers. Goodyear Chairman Sam Gibara says it would not require significant investment to make PAX in one of his company's plants.

The auto industry's newest supplier has targeted the vehicle undercarriage as its initial strategy in helping double annual sales from $7.5 billion this year to $15 billion within five years.

ArvinMeritor Inc. completes its merger as new shares in the company (symbol: ARM) begin a week of uninspired trading on the New York Stock Exchange in mid-July. Shares began trading at $16.69 July 10 and rose to $18 in the first day but finished the week slightly below the initial offering price.

The dismal stock performance is probably no surprise for Chairman and Chief Executive Larry Yost, who has long complained as the Meritor chief that his company's stock has been "terribly undervalued." A stock buyback, Mr. Yost says, is a high priority - perhaps even higher now given the first week of trading.

The Troy, MI, company's first product target is the undercarriage, which has been a key part of Meritor's sales in the heavy vehicle drivetrain market. And with Arvin's expertise in ride-control and exhaust systems, the new company is gearing up to provide significant modular capabilities.

ArvinMeritor wants to supply front-corner modules to OEM customers. The company says it will be able to supply more than 60% of the content for such modules. Mr. Yost pegs the global corner module market at about $2 billion.

"The corner module is a slam dunk for North American car companies," says Bill Hunt, ArvinMeritor's vice chairman and president, who had been chairman and CEO of Arvin. "It's a no-brainer. We are the premier expert in shocks."

The corner module could consist of Arvin's shock absorbers and struts and Meritor's sway bars, springs and wheels. Outsourcing is necessary for brake and knuckle components, which perhaps could figure into acquisitions the company intends to make. ArvinMeritor also is considering getting into the light axle business, a company source says.

Carrying the undercarriage strategy to an extreme, the source says ArvinMeritor could include hydroformed underfloor panels, corner modules, exhaust systems and even wheels. "It could be like a rolling chassis," he says.

By way of innovation, ArvinMeritor introduces the dual exhaust system made of titanium for the high-performance Corvette Z06. The superlight system is 44% (18 lbs.) lighter than stainless steel. The company will supply a low-volume titanium exhaust system for a customer in Europe within three years, the source says.