Bosch Bolsters Lead as ZF Enters Driverless Car Fray

Robert Bosch GmbH gained full control over key automotive technology, positioning the world’s biggest parts supplier as an unexpected beneficiary of ZF Friedrichshafen AG’s leap into the No. 2 position.

Closely held Bosch will acquire ZF’s 50 percent stake in a joint venture that makes electronic-steering systems, critical to the development of driverless cars. The sale was prompted by ZF’s $11.7 billion bid for TRW Automotive Holdings Corp. to add electronic components as ZF’s transmission business is threatened by electric vehicles, which don’t use gearboxes.

ZF’s sale of the JV to raise money and clear potential antitrust hurdles “makes Bosch a beneficiary of the situation that ZF finds itself in,” said Juergen Pieper, a Frankfurt-based analyst for Bankhaus Metzler. Transmissions are “probably going to be a business that’s slowly dying. It’s no good for a company to be part of a declining industry.”

The combination of closely held ZF and TRW will overtake Japan’s Denso Corp. and Germany’s Continental AG. With the deal, ZF’s parts sales total about 30 billion euros ($38.8 billion), narrowly trailing Bosch’s 30.6 billion euros last year. The move parallels other deals in the industry as manufacturers of mechanical components seek knowhow in electronics to adapt to rising demand for features that prevent accidents and protect passengers and pedestrians.

Big, Powerful

Modern suppliers need to have a breadth of technology and be “big and powerful,” ZF Chief Executive Officer Stefan Sommer told journalists in a conference call yesterday. With TRW, the Friedrichshafen, Germany-based company can target “automotive mega-trends,” such as fuel efficiency, increased safety requirements and autonomous driving.

Bosch, which helped invent electronic-stability systems that keep cars from skidding off the road, is pushing into those same fields and will be helped by the steering joint venture, known as ZF Lenksysteme. The unit employs 13,000 people in eight countries including the U.S., China and Brazil, and posted sales of 4.1 billion euros last year.

“Today, the driver is steering the car, and tomorrow it’ll be the electronics of the car,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.

Still, Bosch’s preferred scenario may have been to continue to work with ZF on steering components rather than help strengthen a competitor by buying half the JV for an undisclosed sum.

“Bosch is gaining a significant competitor that they’ll have to battle,” said Dudenhoeffer. “I don’t think it was Bosch’s preferred scenario.”

The Stuttgart, Germany-based manufacturer discounted the threat posed by ZF, as it gains access to what Bosch CEO Volkmar Denner said was “core technology” for driverless vehicles.

“We like competition,” Denner said on a conference call with reporters. “We have no problem” with ZF’s ambitions.

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