Foundation Brakes Still Unprofitable for Bosch

Robert Bosch GmbH Continues to lose money on its foundation brake business, but automotive Chairman Bernd Bohr says the supplier is taking action to shore up the division and is not interested in selling it.

Two years ago, Bohr told Ward's Bosch was losing money on foundation brakes — rotors, calipers and other mechanical parts dedicated to deceleration. These are highly commoditized parts with low profit margins that could be purchased from numerous sources.

Today, Bohr says the unit “is still in a difficult situation,” despite moving some production to low-cost countries and consolidating certain manufacturing facilities, including some in the U.S.

“The economic slump has now basically pushed us back to where we were,” Bohr tells Ward's recently at the supplier's 59th automotive press briefing at its test track in Boxberg, Germany.

“We are considering several strategic options at this time,” he says. “I don't see Bosch exiting this business.”

Bosch must maintain foundation-brake competency because of technological developments in the works, such as brake-by-wire, which entails electric rather than hydraulic actuation of the caliper.

Bohr does not see any near-term migration to such technologies. “But if they would happen, they would have quite an impact,” he says.

In the U.S., Bosch has been downsizing the brake business, with cuts in support staff at engineering centers in Farmington Hills, MI, and South Bend, IN. Workers also have been eliminated at Bosch's five U.S. brake manufacturing facilities.

One of the five plants is in Johnson City, TN, which makes rotors, hubs and drums. In late June, Bosch issued a letter to United Auto Workers Local 2155, signaling the supplier's intent to negotiate with the union for potential closure of the plant, which has been unprofitable for years.

Bosch is a pioneer and top player in today's antilock brake and electronic stability control market, which offers higher margins and considerably more value-added content for Bosch and its rivals.

“Everything we have today in actuation, foundation and modulation goes down to the wheel,” Bohr says. “To be active in that market is only possible if you have an ongoing business in the caliper. It's not possible to get in from the outside.”

Meanwhile, he says, Bosch will continue restructuring its brake business, “and we will focus on some areas where we see good differentiation potential.”

Also in June, Bosch solidified its commitment to foundation brakes by acquiring the remainder of Pacifica Group Ltd., an Australian brake producer. In 2007, Bosch acquired more than 50% of Pacifica. Previously, Bosch held 76.6%.

Like its rivals, Bosch will continue research and development of concepts such as disc brakes that last the life of the vehicle.

“All these are interesting developments where we think some of the Bosch core competencies are important so we can differentiate ourselves,” Bohr says.

At this year's Boxberg event, Bosch offers test drives in 40-some vehicles, including 12 with advanced braking concepts. Among them: