Give 'Em What They Want Breed, Siemens sign deal for restraint systems

Barely a month after announcing its purchase of AlliedSignal's Safety Restraints business, Breed Technologies inks yet another major deal to help plant its feet squarely in the market of complete occupant restraint systems.

The Lakeland, FL, company had been a relatively small supplier of sensors, air bag modules and inflators when it stepped to the head of the North American seat belt market in September with the purchase of the AlliedSignal unit for $710 million (see WAW - Oct. '97, p.92).

But at the time, Breed CEO Johnnie Cordell Breed hinted that another deal was in the works, one that would expand the company's electronic sensor capabilities. "We are not done with our electronics strategy," she said then. Breed was a pioneer in the area of mechanical sensors, but other, larger companies elbowed Breed out of the market as electronic sensors took over. Five years ago, some observers doubted Breed could survive.

Now, Breed is elbowing its way back from the brink. On Oct. 15, Breed and electronics giant Siemens Automotive announced a joint venture to sell complete safety systems including air bags, inflators, steering wheels, seat belts, pretensioners and now Siemens' extensive line of electronic crash sensors. The venture takes effect immediately.

Bumper to bumper, systems capability is just what automakers want from suppliers these days, whether it be in restraints, axles or interiors - anything to simplify assembly and reduce costs.

Both companies say it's a perfect match for a lot of reasons: The two companies were in the restraints business but weren't competing on the same products and Breed's experience has largely been in North America, while Siemens is strongest in Europe. Negotiations on the deal began in earnest in the spring.

Based in Regensburg, Germany, Siemens Automotive recorded 1996 sales of $2.7 billion and is the world's largest independent supplier of single-point air bag electronic control units. It's among the companies developing adaptive or "smart" restraints allowing air bags to be depowered or deactivated depending on the size of an occupant.

Breed is the smaller of the two companies, reporting 1997 sales of about $795 million. The AlliedSignal business tacks on annual sales of about $940 million. Despite their accumulated mass, the Breed-Siemens venture still faces considerable competition from TRW, Takata and Autoliv, the top players in the restraint systems market.

Siemens and Breed have had dealings before. In the late 1980s, before the arrival of electronic sensors, Breed licensed Siemens to manufacture mechanical ball-and-tube sensors at its plant in Chatham, Ontario.

As part of the latest deal, Breed and Siemens signed a memorandum of understanding to create a holding company in Germany, with subsidiaries in Germany and North America. The North American headquarters will be set up in metro Detroit by Breed. The companies also are exploring future joint projects in Latin America and Asia-Pacific.

The agreement calls for Siemens to invest more than $100 million in newly issued shares of Breed stock, giving Siemens a 10% stake in the company, second only to the Breed family itself.

The arrangement could quiet the persistent rumors that Breed lacked the financing to close the AlliedSignal purchase. That deal was expected to close in late October. Breed says in a statement that it will use the money toward the AlliedSignal acquisition and as working capital.

Also as part of the alliance, Siemens will devote to the joint venture its German-based Passive Restraints Systems (PARS) GmbH, an advanced crash test facility and development center for safety systems. The facility will serve as a center for the design, engineering, simulation and marketing of the Breed-Siemens products.

New technology and systems capability are crucial to any companies involved in the automotive safety business, says Franz Wressnigg, chairman of Siemens Automotive.

"When we analyzed the global strengths, complementary product mix and safety systems expertise of Siemens Automotive and Breed Technologies, it was clear that, combined, we could form just such a company," he says in a statement.

Mrs. Cordell Breed says the alliance represents significant growth opportunities for Breed and access to new markets and technologies. She says the Siemens and AlliedSignal deals demonstrate "our commitment to strengthening our market position in all areas of automotive safety. Siemens Automotive's strategy is to have a systems partner. Our strategy is to have an electronics partner. It's a perfect match."

Ah, true love.