Latest auto supplier deal could pave way for more tie-ups image

Last week, German auto parts supplier ZF Friedrichshafen issued a take over bid for US rival TRW Automotive Holdings – in a move that could see the creation of the second-largest auto-parts maker in the world.

ZF is a powertrain and chassis focused company, while TRW is the world’s leading producer of car-safety equipment. The proposed deal could usher a component maker with total revenue of around $40 billion.

“Suppliers that depend on the combustion engine need to look for new business opportunities, and autonomous driving implies great future potential,” said Bjoern Voss of M.M. Warburg. “A shake-up of the industry is possible.”

“It’s too soon to know if this deal will come to fruition, but the two companies have complementary product lines,” said IHS Automotive Analysts Tim Urquhart and Stephanie Brinley. “Given the drive towards electric assistance for driving systems and self-driving cars, the combination of expertise could make for a powerful automotive supplier.”

While details of the proposed take over were not released to the public, analysts and industry observers said a rival bid from groups like Continental, Delphi or Magna is actually very unlikely – because of the forecasted size. That would leave the rivals mulling for their own tie-ups and mergers, as the industry sees an abundance of potential investors and cash, thanks to decreasing interest rates from banks.