Schrader in the right place at the right time Thanks to good timing, forward thinking and a little legislative intervention, Schrader Electronics is about to hit it big - real big.
The Northern Ireland-based company makes tire-pressure sensors, which detect deflation and can transmit that information to the driver by way of a radio-frequency (RF) signal. Even before air pressure became a prominent safety issue with this past summer's Firestone tire recall, Schrader Electronics had a healthy book of new business.
The Northern Ireland-based company pioneered pressure sensors for run-flat tires on the Chevrolet Corvette and Plymouth Prowler in the 1997 model year. But in all, fewer than 35,000 vehicles were so equipped.
For the '01 model year, Schrader's Tire Pressure Monitoring (TPM) system, also known as the Schrader Smart Valve, is on the Cadillac Seville and DeVille, and in Europe it's on the upscale Peugeot 607 andLaguna. In mid-model year, a Japanese automaker will install the system as standard on a luxury car in the U.S.
If Schrader's '01 sounds hot, then '02 sizzles. DaimlerChrysler AG will offer the system on six car lines (either Mercedes-Benz or). Peugeot Citroen offers it on three more lines, on four more.
Carl Wacker bubbles with enthusiasm as he talks about these contracts, and he says more are in the works. He's the worldwide manager of sales and marketing at Schrader Electronics in County Antrim, Northern Ireland.
In 2001, the relatively new market for tire-pressure sensing reaches about 1.5 million units worldwide, about 50% of it in North America. That figure will balloon to 4 million in 2002, Mr. Wacker says.
For the first few years, Schrader owned 100% of the original equipment market, but other players have arrived. Beru AG of Ludwidgsburg, Germany, supplies an optional tire-sensing system in Europe for Mercedes-Benz, Audi andvehicles. In the aftermarket, SmarTire of British Columbia is a top player.
Automotive Electronics is leveraging its expertise in RF technology in a new relationship with tiremaker Michelin to jointly develop tire-pressure monitoring systems for Michelin tires in OE applications. TRW sees potential synergies by integrating its RF-based remote-keyless entry technology with tire-pressure sensing.
Despite the new competition, Schrader expects to have close to 90% of the OE market for TPM in 2002, Mr. Wacker says. It doesn't hurt that interiors megasupplier Johnson Controls Inc. sells the Schrader system as part of its PSI Mirror driver information system, which will debut as a dealer-installed accessory in January.
Schrader's prospects were already bright earlier this year when congressional investigators grilledMotor Co. and Bridgestone/Firestone Inc. executives about fatal Ford Explorer rollovers. Tires had lost their treads, and underinflation is one possible cause.
In this election year, action seemed imminent. But even Mr. Wacker was surprised when President Clinton signed the TREAD Act, which includes a mandate for tire-pressure warning systems on new vehicles. Compliance could be required as early as 2003.
There's no time to celebrate. "None of us anticipated it being mandatory at this soon a date," he says. "This was something we didn't expect."
Schrader has expanded its Northern Ireland TPM plant twice in the past year and is about to break ground on yet another expansion. Plans are in the works for a U.S. plant within a year to meet skyrocketing demand.
"We plan to have enough capacity to meet the upsurge," he says. "I've read that some of the analysts say there's not enough capacity today. Can we get there within that timeframe? Our competitors are saying `no.' We are happy to take that business from them."
The legislative mandate actually could be a detriment by driving down price and turning the technology into a commodity.
Still, Mr. Wacker says the Schrader Smart Valve is the natural evolution for the company's founding product: the tire valve. Schrader's parent company, Schrader-Bridgeport, produces 60% of the world's tire valves. "And we want to convert all those snap-in valves into Smart Valves. This is the right product, in the right place at the right time."
The Smart Valve is a simple RF-based device that senses changes in tire pressure as slight as 1%. A rudimentary system consisting of a warning light could be soon available to consumers for as little as $150. High-end systems display the exact pressure in any of the four tires.
A competing approach employs a vehicle's antilock brake system, which uses wheel-speed sensors and can detect a deflated tire because it rotates more slowly.Corp. has 1.6 million vehicles on the road equipped with such systems.
Mr. Wacker questions that technology because 25% of vehicles don't have ABS, and even fewer have 4-wheel ABS. Plus, he says the systems are unable to accurately detect tire pressure losses under 19 mph (30 km/h), and they don't work if the vehicle is not moving. And Smart Valve is more affordable. Mr. Wacker says it's unclear if the ABS systems for tire-pressure sensing will pass muster with U.S. regulators.