THE HANSEN REPORT ON AUTOMOTIVE ELECTRONICS. A Business and Technology Newsletter

VOL. 19, NO. 4◆◆ PORTSMOUTH, NH USA MAY 2006 More Parts Branding Continental Purchases Could Pay Off Motorola’s Automotive Unit ’s Growing Influence would make a major acquisition, finds Last month the center of gravity of the much to like about Motorola Automotive. Saddled with high fixed costs, Ford, automotive electronics industry took an- “It’s a great fit,” Continental Automotive General Motors, Chrysler and other other shift away from Detroit—this time Systems division president, Karl-Thomas carmakers have for years been leaning on toward Germany—with the acquisition by Neumann, told us recently. “We are a their suppliers to reduce prices. As a re- Continental AG of Motorola’s automo- strong player in Europe but not in North sult, profits have suffered and a number of tive electronics business. Starting with car America, while Motorola is a strong suppliers are hurting. One way suppliers radios, Motorola had been in the automo- player in North America but not in Eu- are fighting low prices is by taking their tive electronics business for 75 years. rope.” Continental’s acquisition of case directly to consumers through long Continental paid $1 billion in cash for DaimlerChrysler’s Temic business in 2001 term investments in brand building. the business, which had $1.6 billion in put Continental into powertrain electron- Support for that idea came recently sales in 2005 and no debt. ics in Europe. Motorola is a leading inde- from an automotive market research firm Motorola had been flirting off and on pendent supplier of powertrain electronics in Nürnberg, Germany, puls GmbH, with the idea of selling its automotive in the United States. which sent us the results of some con- unit for the last six years and finally put According to Glenn Mercer, director sumer research. The data strongly support the business in play last fall. In 2004, of automotive services for McKinsey & the view that parts suppliers should invest Motorola spun off its semiconductor busi- Co., one of the things that set the buyer in programs that build brand recognition ness, now known as Freescale, the world’s apart from the seller is that “Continental and awareness directly with consumers. number-one supplier of automotive semi- is committed to the , As part of its monthly Internet survey conductors. even though it isn’t as profitable as mak- of 2,000 German consumers, last Novem- According to insiders, the Motorola ing cell phones.” For the last few years, ber puls posed a series of questions to Automotive business unit had been Motorola’s automotive business has been gauge consumer views on ingredient part mostly profitable, making EBIT margins more profitable than most auto parts busi- branding. The German researchers found from 3% to 10%, depending on the prod- nesses. that 59.5% of respondents thought it is uct line, and growing sales at about 8% to Continental also appreciates Motor- either “very important” or “important” to 10% per year. While that growth is a few ola’s telematics business. As the key buy cars that use parts from leading sup- percent faster than the auto electronics source of OnStar, BMW Assist and pliers. The majority of those respondents, market, it wasn’t enough. Motorola LoJack hardware, Motorola is the world’s 65.1%, said it increases the quality of the wanted to see 15% annual sales growth number-one supplier in a market that car, and 44.6% said it increases the value and at least 10% EBIT margins. Continental expects will surely grow. “I’m of the car. More compelling in Motorola’s deci- still confident that sooner or later there is Turn to Branding, page 2 sion to opt out of automotive electronics, going to be a big future in telematics,” however, was the fact that it had become declared Dr. Neumann. “We want to be a In an aided question, the following percent- such a small part of the company, ac- leading and comprehensive supplier of ages of respondents said they were pre- counting for just 4% of total sales. Auto- safety systems, and the telematics emer- pared to pay more for cars that use these motive was a drain on management’s gency call business was missing,” he parts from these suppliers: attention, and there wasn’t enough syn- noted. ergy between automotive electronics and As Ford and GM shrink, and as other Brakes by Brembo 37.8% cell phones. Moreover, it can’t have American companies sell out, Detroit is Audio systems by Bose 34.9% helped that Motorola’s largest automotive steadily losing influence over the automo- Clutches by Sachs 33.7% customers were General Motors and tive electronics world, a trend that has Rims by BBS 26.0% Ford, the two carmakers most desperate to been ongoing for 20 years. The Continen- Active steering by ZF 23.8% lower their parts costs. tal acquisition of Motorola is indicative Sunroof by Webasto 17.1% Despite the seller’s disinterest in the that the trend is likely to continue. Ac- business, Continental, which had been cording to an investment banker close to Source: puls GmbH, Automotive Components Insight promising investors for months that it Trendmonitor Turn to Acquisitions, page 8 CEA Surveys Consumer Interest in Mobile Electronics The Consumer Electronics Association how the system would U.S. Consumers’ Current Usage and recently released the results of a market be updated throughout Future Interest in Mobile CE Products research study it commissioned to assess the life of the vehicle. the current use of consumer electronics in Strangely, the CEA 100 automobiles and to gauge American con- survey showed future 90 Percent of respondents who regulary use these mobile devices either as a driver or passenger and percent 80 sumers’ future interest in using these elec- interest to be lower who are interested in using them in a future vehicle tronic devices, either as a driver or than current usage for 70 passenger. The research showed falling these products: DVD 60 interest levels for traditional consumer players, games, TV, 50 electronics such as AM/FM radio, CD component speakers, 40 Current Usage players and cell phones, and a substantial digital radio, MP3/iPod Future Interest 30 growth potential for OnStar-type safety/ options and wireless security/telematics systems and naviga- headsets. Future inter- 20 tion. est in satellite radio 10 0

While 24% of the respondents said was just 2% higher i t y t ) t s t M e le l r m rs D io d n e io r r p V e C n g u t r k V d o io s d a a to T e n P /F o n a P t t t r in M l p D a i d a S p m t h E / a a S a a e e M P S A S R 3 g R n t l A D s t l i e te L G n b ll s n a P v H te O I D C t a i ( o a they currently use a navigation device in than current usage and e C le e i M s ll T n g N y m C y i s te it e e o D e r K p l a u R e S c m ir o e C W /S the car, 47% indicated they would be in- future interest in y t fe a terested in using one in the future. Curi- Internet was just 3% S ously, 78% of the people interested in higher than current usage. ers preferred three outlets, on average, but using navigation in the car would prefer The study recommends that the con- younger consumers indicated they would that the navigation device was integrated sumer electronics industry work with car prefer four. in the car rather than portable. Note, manufacturers to increase the number of When CEA asked consumers about however, that the survey question did not power outlets in their vehicles. Consum- their preferences for device controls, 40% include any mention of the price of inte- Respondents showed the greatest future of the respondents preferred a single mas- grated systems vs. portable devices, nor interest in doing these activities while ter control; 29% said they preferred two riding or driving in a vehicle: controls. Most respondents, 70%, opted to Consumer preference for location of have the controls located in the front device controls: Get updates on traffic 80% center console. Center front console 70% Watch/listen to weather 76% For more information or to purchase Steering wheel 56% Watch/listen to news 73% the entire study, contact Joe Bates, Center rear console 32% Listen to satellite radio 53% [email protected], or visit www.ce.org. ◆ Driver side door 25% Listen to books on tape 51% Front passenger door 24% Watch/listen to sports events 44% Back of passenger head rest 20% Instant messenger 36% THE HANSEN REPORT ON Back of driver head rest 17% Note: Consumers weren’t asked about listening Rear passenger door 15% to AM/FM radio and/or CDs. AUTOMOTIVE ELECTRONICS © 2006 Paul Hansen Associates, 150 Pinehurst Rd., Portsmouth, NH 03801, Branding... Continued from page 1 USA. Telephone: 603-431-5859. Fax: 603- 431-5791. Email: [email protected]. Many of the German consumers even has its OnStar telematics system. BMW All rights reserved. Materials may not be said they would be willing to pay an add- promotes its own Steptronic automatic reproduced in any form without written per- on charge for parts furnished by certain transmission and Nasca leather uphol- mission. The Hansen Report on Automotive brand suppliers, namely, Brembo brakes stery. Mercedes advertises its Distronic Electronics is published 10 times a year, (37.8%), audio systems by Bose (34.9%), adaptive cruise control and Parktronic monthly; July/August and December/Janu- and clutches by Sachs (33.7%), among ultrasonic parking system brands. If ary are combined issues. The annual sub- others. (See the chart on page one for a there is extra margin to be made with scription rate is $717 (North America), $747 full list.) good brands, it’s money that the (elsewhere). Back issues are available for Component branding is not at all new. carmakers want to keep, not share with $50 each; see our online index at We have all seen promotions for personal parts suppliers. www.hansenreport.com. Paul Hansen Asso- computers that boast “Intel Inside,” which Yet some supplier brands are actively ciates is a strategy and market research led to great profits not only for Intel, but promoted by carmakers, particularly audio firm consulting to the electronics industry. also for the manufacturers who installed system brands: BMW sells Logic 7, Publisher/Editor Paul Hansen Intel processors in their machines. But Mercedes sells Harman Kardon and Lexus Managing Editor/ Brianne Wolfe branding OEM auto parts is fairly rare. sells Mark Levinson branded audio sys- Circulation Manager The few brand names that are used usually tems, all of which are produced by belong to the carmaker. General Motors continued on page 8 ISSN 1040-1105 Page 2, May 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com Dave McNamara on Automotive Electronics We had the opportunity to interview what it takes to win significant contracts protocol) addressable components with veteran automotive electronics engineer with the likes of Ford. “Suppliers aren’t plug and play features.” Dave McNamara, who recently retired nearly proactive enough when it comes to Also hot, according to Mr. McNamara, from Ford to start his own consulting busi- program management and getting the key is digital short range communications in- ness, McNamara Technology Solutions. skills onboard in the project’s early stages. cluding vehicle-to-vehicle and vehicle-to- Mr. McNamara has watched automotive I can remember two suppliers in particular infrastructure communications, which electronics almost from its beginning, first who hired people who knew the Ford sys- have enormous potential to improve as a supplier and then as an OEM cus- tem, even before they got a production safety. “This is something we should all be tomer. Starting in 1976, he was a product commitment. That impressed us.” He also experimenting with and understanding … engineer with Ford’s electronics division, noted that “Too many times, suppliers are ‘transponding’ from one car to another which became Visteon, where he worked kept at arm’s length; working on gaining that I’m stopped in the middle of the first on sensors and later on the world’s that customer access is important.” highway; or the wipers are on, I’m head- first electronic compass. He received a Mr. McNamara provided examples of ing into a storm.” Several OEMs, suppliers couple of patents for an oil quality moni- two suppliers who brought exceptional and the United States Department of tor, helped pioneer route-guidance navi- value to Ford: “Pioneer is a highly effec- Transportation are launching the Vehicle gation systems, and eventually moved into tive and trustworthy supplier of dual-me- Infrastructure Initiative to allow vehicles strategic and technology planning posi- dia radio systems, navigation and to communicate with a low-cost roadside tions. In 1995 Mr. McNamara left the audiophile equipment, with outstanding infrastructure, as well as with each other, parts manufacturing side of Ford to man- program management teams; and Delphi, in real time. This capability, in combina- age an advanced electronics engineering with millimeter-wave radar sensors, be- tion with a nationwide data collection group. There he helped launch North cause of their commitment to bring us and processing network, will enable sig- America’s first ultrasonic parking aid and their best technology and willingness to nificant improvements in safety, mobility one of the world’s first radar adaptive partner with us during these difficult [fi- and convenience. cruise-control systems, on the Jaguar. In nancial] times.” “In active safety, the next frontier is 1999 he picked up responsibility for audio, Which infotainment technologies are extending the bumper of the vehicle to family entertainment systems and naviga- hottest right now? “All things wireless, include forward collision warning and tion product development for Ford North software operating systems and digital blind spot detection.” Mr. McNamara, America. From 2002 until his retirement memory technologies—hard disk drives who is presently working with clients in Mr. McNamara led the advanced and Flash. All are key enablers that will the area of active safety and wireless tech- infotainment systems team at Ford Re- lead to revenue opportunities for nology, will focus on strategy development search. carmakers. High-speed wireless will re- and mentoring of suppliers. Contact Mr. There is much to learn from Mr. place cables in vehicles and lead to TCP/ McNamara by email at dmcnamara@ McNamara’s experience, for example, IP (transmission control protocol/Internet connectedvehicle.org. ◆ Aisin Seiki FY 2005 Financial Results

FY 2005 is the fiscal year ending March 31, 2006. Accounting for 42.5% of sales, were a driver monitor system, a six-speed, transmission products for passenger and front-wheel drive manual transmission, a Aisin Seiki commercial vehicles are Aisin’s largest DVD navigation system for North FY 2005 Consolidated Net Sales: product segment, followed by brake, America and an electric active stabilizer ¥2,120.6 billion ($19.3 billion) suspension and steering systems, which actuator. Change from FY 2004: 15.9% growth represent 20.1% of FY 2005 sales. Sales of Sales in North America were up 33% FY 2005 Net Income: ¥61.1 billion body-related products, including power over the prior year, due in part to in- ($557 million), or 2.9% of sales com- sliding doors, power seats, door latches creased business with General Motors. pared with 2.6% net margin in FY 2004. and sunroofs, were 17.9% of total sales Aisin supplies transmissions for the new FY 2006 Estimated Sales: ¥2,250 billion and showed the largest growth, 19.4%, Pontiac Solstice and Torrent and the ($20.5 billion) over the prior year. The information- Chevrolet Equinox. Change from FY 2005: 6.1% growth related product segment, which includes Aisin AW, the Aisin subsidiary FY 2006 Estimated Net Income: park assist systems, front and side moni- responsible for making six-speed auto- ¥61 billion ($556 million) tors and navigation, contributed 5.8% of matic transmissions and navigation Automotive products account for Aisin sales, compared with 6.2% last year. systems, reported sales of ¥723.1 billion 95.6% of Aisin Seiki sales. With 59,500 Toyota is Aisin’s largest customer. At ($6.6 billion) in FY 2005, an 18% employees, Aisin operates 132 subsidiar- the 2006 SAE World Congress, Aisin increase compared with the prior year. ◆ ies worldwide. Seventy-two percent of introduced a new hybrid transmission for sales were to customers in Japan; North rear-wheel drive vehicles, jointly devel- Our summary of Japanese auto electronics American customers contributed 16.4%; oped with Toyota. Other new Aisin suppliers’ financial results will continue in the Europeans, 6.7% of sales. products shown at the SAE Congress June issue of The Hansen Report. The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com May 2006, Page 3 The Company Profile... ZF Friedrichshafen

Thumbnail Sketch ZF Consolidated Group Sales ZF Consolidated Group and Net Margin Employees by Year Headquarters: 88038 Friedrichshafen, Germany; phone: 49 7541 77-0; Fax: 49 2000 to 2005 CAGR: 12.1% 2000 to 2005 CAGR: 8.2% 7541 77-908000; www.zf.com Sales in € millions Products: Transmissions, steering systems, components and axle systems 2005 Sales: €10,833 million Net Margin: 2.3% R&D: 5% of sales 36,400 33,959 53,281 53,487 54,523 53,940 Employees: 53,279 at year end 2005; 6,113 6,761 9,169 8,928 9,899 10,833 5,000 are engineers 2000 2001 2002 2003 2004 2005 Cash Flow from Operating Activities: 2000 2001 2002 2003 2004 2005 €1,122 million ZF Consolidated Group Sales per Employee: €203,326 Net Margin Sales by Region 2000 2.9% 2003 (1.8%) Current Ratio: 1.7 as of 12/31/05 2005 Sales: €10,833 million 2001 2.2% 2004 1.8% Owners’ Equity: €2,214 million 2002 0.3% 2005* 2.3% So. America, 3.3% Asia-Pacific, 7.0% Ownership: Zeppelin Foundation, Africa, 1.4% Friedrichshafen, 93.8%; Dr. Juergen *2005 accounting follows International Financial Reporting No. America, Ulderup-Stiftung, 6.2 % Standards; prior years follow the German Commercial Code. 16.0% Germany, 40.3% Background ZF Consolidated Group Eastern The company was incorporated in Sales by Sector Europe, 3.0% 1915 as Zahnradfabrik Friedrichshafen 2005 Sales: €10,833 million Rest of Western Europe, 29.0% (ZF) to produce gears and transmissions Agricultural and construction machinery, marine for Zeppelin airships. Much of the craft, aircraft, special and rail vehicles, 13% of sales in R&D. In 2005 ZF submitted company’s initial financing came from the 511 patent applications to the German Zeppelin Foundation, which had been Commercial Cars and light Patent and Trademark Office. formed to administer a fund of some six vehicles, 21% commercial The company anticipates modest sales million German marks donated to help vehicles, 66% growth in 2006 with its workforce remain- Ferdinand Graf von Zeppelin recover his ing roughly at the current level for the losses following the crash of an early air- next few years. To meet its customers’ ship. At the close of World War I, ZF With the acquisition in October 2001 of needs, ZF emphasizes technology, quality started building automotive transmissions Mannesmann Sachs from the Siemens and service. If there is one guiding prin- and ventured into steering systems in Group, ZF became Germany’s third-larg- ciple for new product development 1932. Production facilities in Friedrich- est automotive supplier, behind Bosch and throughout ZF it is the improvement of shafen were destroyed by bombings in Continental. In addition to a full range of fuel economy and reduction of emissions. World War II, and ZF was not permitted clutches, torque converters and manual Roughly one-third of ZF sales come from to resume manufacturing aircraft parts at transmission components, the Sachs prod- products which entered volume produc- that time. uct line included fan clutches, chains, tion within the last four years. According to the terms of the Zeppelin chain tensioners, electric drive systems According to the company, ZF’s stron- Foundation charter, if the company was and a fuel-saving crankshaft starter/gen- gest competitors are Aisin Seiki and no longer able to continue the founders’ erator assembly. JATCO for automatic transmissions and intention, making aircraft, the Zeppelin ZF is organized into 11 profit and loss Getrag for manual transmissions. For elec- Foundation funds were to be turned over centers, each serving global markets. The tric power steering the company’s stron- to the city of Friedrichshafen and used for company operates 122 plants located in gest competitors are TRW, Delphi and charitable and social purposes. In 1947 26 countries. Approximately 4,500 em- Koyo Seiko. the city of Friedrichshafen became the ployees work in research and development ZF’s purchasing volume increased to majority owner of ZF and continues to worldwide. Not only does ZF aim to €5,982 million in 2005, accounting for administer the Zeppelin Foundation, sup- source and produce locally what it manu- 55% of sales. porting hospitals, education, cultural en- factures, but the company also aims to richment and recreation. conduct R&D locally. Technical centers Electronics By 1965, ZF was making automatic in China and Brazil are under construc- With the exception of some modules transmissions for BMW and Peugeot. tion. ZF will continue to invest about 5% for shift levers, ZF manufactures none of Page 4, May 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued

ZF Consolidated Sales by ZF’s Major Customers ZF Owners’ Equity Division and Business Unit Top Five (not ranked) € millions € 2500 millions BMW Car Chassis Technology 2,075 DaimlerChrysler 2,214 2000 Powertrain and Suspension 2,028 Fiat Group Components Ford Group 1,525 1500 Car Driveline Technology 1,917 VW Group Commercial Vehicle and 1,647 1,434 1,139 1,276 1000 Special Driveline Technology 2001 2002 2003 2004 2005* the approximately 5,000 ZF engineers, Off-Road Driveline Technology 1,411 *2005 accounting follows International Financial and Axle Systems 350 to 400 of them function as electrical Reporting Standards; prior years follow the German Steering Technology 1,114 engineers; 75% to 80% of the electrical Commercial Code. Rubber-Metal Technology 535 engineers are involved with software. The ZF transmission can be linked to Aftermarket Trading 525 Harald Deiss is head of electronics de- the engine, brakes and stability control Sales and Service Organization 294 velopment; he replaced Wolfgang Runge systems via CAN (controller area net- Marine Propulsion Systems 218 in 2004. work). Aviation Technology 50 When The Hansen Report last profiled Internal Sales (981) Six-Speed Automatic Transmission ZF in December 2001, continuously vari- Consolidated Group Total 10,833 One of ZF’s fastest-growing products is its six-speed automatic transmission, even able transmissions (CVTs) were very the electronic control units (ECUs) that though ZF began producing the six-speed much a part of the company’s product fo- go with its transmissions, driveline, steer- automatic in 2001. According to ZF, most cus along with six-speed automatic trans- ing and damping control systems. In Eu- of its transmission customers are switching missions. Plans called for ZF’s joint rope those ECUs are manufactured by over from five-speed automatic transmis- venture with Ford in Batavia, Ohio, to Bosch, Siemens VDO and Wabco. In the sions, and sales have continued to in- produce one million CVTs based on ZF States, Continental (formerly the auto- crease each year. In 2005 ZF produced technology for Ford by 2005. But in Feb- motive division of Motorola) is the manu- approximately 1.28 million passenger car ruary 2004, Ford took over 100% of the facturer. ZF designs the ECUs in transmissions; 885,000 of them were six- operation, and since then ZF has not had cooperation with its suppliers who take speed automatics. much CVT business in North America charge of the ECU construction. ZF pur- With six speeds, the engine can run beyond the Mini Cooper. ZF is among chases roughly 2.5 million ECUs per year. closer to its optimal speed, producing bet- Ford’s 27 strategic suppliers. More electronics are being mounted ter fuel economy and smoother accelera- ZF is developing a CVT that is sched- inside ZF’s components, so the company tion. ZF’s six-speed transmission can uled to go into production in a hybrid ap- looks for robust technologies such as hy- handle up to 750 Nm of drive torque with plication in 2007. brid modules that can stand up to the better acceleration and fuel efficiency harsh automotive environment. Manufac- than a five-speed automatic. Industry esti- Networking tured by Bosch, the electronic control mates of fuel savings realized by six-speed ZF has been actively promoting its in- unit for ZF-Lenksysteme’s electric power transmissions compared with four-speed terest in electronically networking the steering system is packaged within the automatics range from 3% to 7%. driveline and chassis components it motor and is built using low-temperature, ZF continues to improve its six-speed manufactures. The most recent embodi- co-fired ceramic (LTCC) hybrid circuit transmission and recently added a new ment of its networking product strategy is assembly processes. The power MOSFET fuel-saving feature. The transmission’s the SUC (sports utility cabrio) concept drivers are packaged using direct bonded stand-by control function automatically vehicle ZF developed jointly with car de- copper technology to maximize thermal uncouples the transmission from the en- veloper/manufacturer Wilhelm Karmann cooling. gine when the car is at a standstill. GmbH for presentation at the Frankfurt ZF develops its own software control ZF’s five-speed automatic transmission Motor Show in the fall of 2005. In that systems using ARTiSAN tools for algo- debuted in the 1992 BMW 5 Series, and vehicle, ZF networked into a “holistic, rithm design, other tools for implementa- its first six-speed came out in the 2002 functioning system” its six-speed auto- tion, and ETAS and dSPACE tools for BMW 7 Series. Mercedes-Benz’s 7G- matic transmission, active steering, all- automatic code generation. ZF also uses TRONIC was the industry’s first seven- wheel-drive transfer case, “wheel torque IBM Rational configuration and change speed, introduced in 2003. At the 2006 vectoring” axle drive and electronic management tools. ZF software develop- Detroit Auto Show Toyota featured an damping system. ment processes are certified to different eight-speed automatic transmission, Networking such systems with each quality management models like Boot- which will be available on the 2007 Lexus other and with other suppliers’ systems— strap, CMM and SPICE level 3. Among LS 460. continued on following page The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com May 2006, Page 5 ZF Friedrichshafen adaptive cruise control, ABS and elec- Automotive Products tronic stability control—not only im- proves vehicle dynamics and comfort, but DRIVELINE TECHNOLOGY Clutches and brakes for industrial engineering also significantly increases safety. An elec- Transmissions Manual and automatic transmissions for cars, CVs and CHASSIS TECHNOLOGY tronically networked vehicle will respond special vehicles Axle Systems more precisely in critical situations such Continuously variable transmissions for cars Front and rear axles and corner modules for cars as a driver suddenly swerving and braking Synchronized transaxles, powershift transmissions and Axles for CVs to avoid an obstacle. CVTs for tractors Axles and axle components for off-road machinery Hydronamic and hydrostatic powershift transmissions Chassis Components Since demand for electronic stability for construction machinery and lift trucks Damper modules and systems for cars, CVs, rail control systems has blossomed, carmakers Electric drives for lift trucks systems, racing cars and are exploring the benefits of linking ESC Transmissions, propellers and control systems for boats Tie rods, stabilizers, stabilizer links, control arms, systems with ZF’s continuous damping and ships suspension joints, suspension level regulating Rail vehicle drives systems and crash-absorption elements for cars control system. Electronic damping con- Aircraft transmissions 4-point links, wishbones, torque rods, tie rods, trol can improve braking performance by Industrial drives stabilizers and suspension joints for CVs maintaining consistent tire patch loads on Elevator transmissions Chassis mounts for cars, CVs, agricultural machinery, rough road surfaces. Driveline Components rail vehicles and industrial engineering Gearshift systems Precision plastics parts for cars and CVs Because of the added complexity that Clutch systems Steering Systems networking brings, it will take many years Torque converters Electric, electro-hydraulic, hydraulic power steering to prove out some of these driveline/chas- PTOs (power takeoffs) for cars, CVs, off-road systems and mechanical steering systems for cars sis integration concepts. One application machinery and special vehicles Hydraulic power steering systems and rear axle Electric drives for cars and CVs steering systems for CVs and special vehicles that could come sooner rather than later Retarder systems for CVs and special vehicles Steering pumps, steering columns and steering is a stability control system that doesn’t Axle drives, bevel gear sets, differentials and powertrain accessories for cars and CVs rely on the brakes as an actuator. Instead suspension systems for cars and CVs it depends on wheel traction, damping tem based on the skyhook algorithm, in development will take at least another and active steering control to stabilize the the late 1990s. Today’s CDC can share two to three years. vehicle. A new organization called ZF En- information with ABS or electronic sta- gineering has been established to respond bility control systems via a CAN bus or Hybrid Drive Technology to customers wishing to set up integration any kind of high speed LAN. The In September 2005, ZF formed a strate- projects. Astra introduced in 2004 was the first gic partnership with Continental to de- compact car to offer CDC networked with velop, produce and sell hybrid systems and Continuous Damping Control (CDC) stability control and ABS. According to components for passenger cars. ZF brings ZF Sachs continuous damping control ZF, production vehicles with fully inte- to the partnership its knowledge of hybrid systems automatically adjust the stiffness grated (beyond data sharing) CDC and components, modules and transmission of the dampers to maintain a smooth ride. ESC are in development and could be systems and Continental brings its exper- The CDC system’s control mechanism available in about 18 months. tise in power electronics, energy manage- operates according to the “skyhook” prin- ment and electronic braking systems. ciple, which aims at keeping the body of Dual Clutch Transmissions Each partner will engineer and manufac- the vehicle calm, as if it is linked to a rail ZF is expecting fast growth from its ture the components that comprise the in the sky that runs parallel to the road. new electro-hydraulically controlled dual hybrid system at their own facilities. The The system gets its inputs from five clutch transmission. The 7-speed trans- collaboration says it could start shipping accelerometers: three attached to the mission consists of two sub-drives con- parallel hybrid drive systems in 2007. body (two in the front over the shock nected to the engine via a dual clutch The partnership’s first customer is tower area, one over the left or right rear module with two parallel power-shift which placed an order for shock tower) and two attached to the clutches. One sub-drive handles the even electric drive systems in January 2006: front wheels, either on the control arm or gears, the other the odd gears. While the Continental will supply the power elec- the . Body perturbations are vehicle is running from one sub-drive, the minimized by continuously varying a pro- next gear is pre-selected in the other. As a Key ZF Products portional valve in each shock absorber. result, shifting takes place within a few in High-Volume Production The system’s OEM cost ranges from $485 milliseconds with almost no interruption to $700 depending on volume. ZF will Units Shipped in 2005 in traction force. Well-suited to sports soon start shipping CDC systems to a new 6-speed automatic transmissions 885,000 cars, the transmission yields fuel savings North American customer. Electric power steering systems 1,350,000 and consequently, lower emissions. ZF is ZF has been making software improve- Complete car axle systems 1,200,000 developing the transmission under con- ments since it first introduced a CDC sys- Electronic CDC shock absorbers 650,000 tract with a German carmaker. That Automatic transmissions for CVs 47,000

Page 6, May 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com The Company Profile Continued tronics and ZF the electric motor, clutch 2005 ZF Lenksysteme Sales 2005 ZF Lenksysteme Sales and dual-mass flywheel. in € millions ZF has established a separate organiza- 2005 ZF Lenksysteme Sales: €2,229 million tional unit, Hybrid Drives, under the di- 2000 to 2005 CAGR: 9.5% By Product rection of corporate R&D to establish ZF as a “system leader in the field of hybrid Steering assemblies and columns for CVs, 13% drive systems.” Steering Car steering ZF Sachs has been developing electric 1,418 1,485 1,536 1,778 2,044 2,229 assemblies, 57% motors for more than ten years. One such columns, 16% motor is the DynaStart crankshaft genera- Steering pumps, tor, a permanently excited synchronous 2000 2001 2002 2003 2004 2005 14% machine. Mounted on the crankshaft be- Servoelectric Electric Power Steering By Region tween the engine and transmission, Initially designed into small cars as DynaStart can accelerate the engine up to Asia Pacific, 6.8% parking aids, electric power steering (EPS) South America, 3.3% Other, 1.0% idle speed in less than 300 milliseconds, systems are now available for large cars as North making it suitable to start-stop operation. America, 7.8% well. Depending on how much space is In traction boost mode, the motor is ca- available for installation, how much elec- pable of supplying 100 Nm of torque at trical power is available and the amount Germany, 44.5% power levels in excess of 10 kW. Accord- Rest of Europe, of rack and pinion steering force that is ing to the company, fuel consumption can 36.5% required, EPS can be connected to the be reduced by up to 10% with DynaStart. steering column, the pinion gear or paral- lessening the effect of sudden steering ◆ ◆ ◆ lel to the steering rack. wheel motions while driving at high The main benefit of EPS is reduced speed. ZF Lenksysteme GmbH fuel consumption. ZFLS’ electric power In the new BMW 3 Series due in late Thumbnail Sketch steering system consumes up to 85% less 2006, AFS is integrated with stability energy than hydraulic power steering. control. Future AFS systems will also be Headquarters: Richard-Bulinger-Strasse According to ZFLS, EPS systems will integrated with antilock braking systems, 77, 73527 Schwäbisch Gmünd, Germany; gradually outnumber hydraulic systems in according to ZFLS. phone: 49 7171 31-0; zf-lenksysteme.com Europe and Asia, with the exception of BMW has said it will use EPS to actu- 2005 Sales: €2,229 million China, where unit sales of hydraulic sys- ate lane departure warning feedback Products: Steering systems and compo- tems will maintain strong growth. In Eu- through the steering wheel, as if the ve- nents rope the demand for EPS will outpace the hicle is driving over a rumble strip, and as Net Margin: 2.1% demand for hydraulic power steering by part of an active yaw-torque control sys- R&D: 2.7% of sales 2009, according to the company, based on tem, where the steering angle is adjusted Employees: 9,337 (2005 average) the high-volume, lower and middle class along with the brakes to help stabilize the Sales per Employee: €238,696 vehicle segments. All vehicle. Current Ratio: 1.5 models based on the Golf platform have Owners’ Equity: €365.8 million ZFLS electric power steering, as does the Variable Displacement Hydraulic Pumps Ownership: GmbH and ZF new Passat. Despite the fuel efficiencies of EPS, approximately 40 million hydraulic power Background Active Steering steering systems are still manufactured ZF Lenksysteme or ZFLS is a 50-50 EPS systems are not only used to make worldwide each year, according to ZFLS, joint venture between ZF and Robert it easier to steer the vehicles while park- accounting for the majority of power Bosch GmbH established in January 1999. ing, they are also used to actuate active steering systems made globally. And since Lenksysteme has been with ZF since the steering control systems. Launched in hydraulic power steering systems are still 1930s. 2003, Lenksysteme’s first active steering being improved, they will continue to ZFLS manufactures three types of project went into volume production on hold a strong position in the market for power steering systems: the traditional the 2004 BMW 5 Series. ZFLS’ power years to come. ZFLS is developing a vari- hydraulic types, which are belt driven, steering system is part of BMW’s Active able vane hydraulic pump that consumes and the electro-hydraulic and electric Front Steering (AFS) feature now avail- 40% less energy than constant displace- power steering types, both of which are able on some BMW 1, 3, 5, X5 and 6 Se- ment pumps. The new pump will go into powered by an electric motor. ries models. The system varies the steering mass production on a German luxury ve- Of the nearly 600 engineers who work ratio according to the vehicle’s speed to hicle at the end of 2006. Hydraulically for Lenksysteme, roughly 80 are involved maximize the steering wheel’s effect on controlled, the pump’s displacement var- with software development. turning during parking maneuvers, while ies according to its speed. ◆ The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com May 2006, Page 7 Branding... Continued from page 2 Harman International, a company that J.D. Power and Associates’ 2005 Automo- Below are some of the results of a Novem- has been quite profitable. Cadillac and tive Component Branding Study measured ber 2005 Internet survey of 2,000 German other carmakers promote Bose branded consumers’ awareness and impression of consumers by the market research firm audio systems. XM and Sirius satellite the leading audio system brands. These puls GmbH. radio brands are widely promoted by well-liked and well-known U.S. brands Which suppliers do you know? Unaided, carmakers. And Volvo sells factory-in- scored above the industry average, but 31% of respondents were able to mention stalled Dolby Pro Logic Surround Sound carmakers using components made by at least one automotive parts supplier at systems. Dolby Laboratories had 15.9% these companies don’t always promote the these rates: net margin in its 2005 fiscal year. fact that the branded part is onboard. Bosch 60.0% Beyond audio systems, supplier- 23.0% branded products are harder to find. Bose 738 JVC 563 Siemens VDO 15.1% Volvo, Lexus and others offer HomeLink Sony 678 557 Brembo 11.9% Universal Transceivers (garage door open- Pioneer 610 Alpine 556 Recaro 9.8% ers) from Johnson Controls. Johnson Dolby 595 Harman/Kardon 540 ZF 9.3% Controls is a profitable company. Acura Panasonic 588 Average Score 535 Delphi 7.3% and other carmakers offer some vehicles Kenwood 571 ATE 7.1% with Brembo brake components. Brembo Webasto 6.9% Source: J.D. Power and Associates is a profitable company, with 5.7% net Sachs 6.4% margin in 2005. How important is it for you that your automo- Brembo gets its reputation by actively This coming November or December, tive parts are from leading suppliers? supporting car racing, as does the Italian puls will host a meeting in Germany for Very important 25.3% seat maker Recaro, whose seats, with the parts suppliers, carmakers and dealers to Important 34.2% Recaro logo prominently displayed, are discuss the pros and cons of automotive Less important 22.9% offered not just on Lamborghinis, Jaguars parts-branding strategies. For more infor- Unimportant 15.4% and Aston Martins, but also on vehicles mation please visit www.puls- No answer 2.1% from Honda, Toyota, , GM, Ford and navigation.de or call puls director Dr. ◆ Source: puls GmbH, Automotive Components Insight others. Konrad Wessner at 49 911 95 35 400. Trendmonitor

Acquisitions... Continued from page 1 the deal: “There are no American compa- businesses in North America and Asia, support of the Siemens AG board, and nies that could be buyers. The people who and so is Siemens VDO. Siemens has the cash.” Siemens VDO are doing well in North America you can Having successfully transitioned the took over the Huntsville operation in count on the fingers of one hand. Johnson Huntsville Electronics operation from a April 2004. Controls is doing fine, BorgWarner is Chrysler cost center to a profit center and Robert Bosch GmbH should also be doing fine, a few others are doing okay. “due to growth forecasts for automotive listed among the German companies defi- But none of them were particularly strong electronics,” Siemens VDO will move on nitely interested in acquisitions. In in the electronics area. In a different other acquisitions of automotive electron- Bosch’s annual press conference in April, world you’d expect Delphi and Visteon to ics businesses “if the fit is correct and the CEO Franz Fehrenbach said “... we are on be looking at these electronics assets from assets reinforce our core strategic business the lookout for possible acquisitions. If Motorola or whomever else. But the only areas,” wrote Dave Ladd, manager of such opportunities arise in automotive American buyers are financial sponsors, North American public relations, in an technology, then we will take advantage and you can’t get financing in the auto email to The Hansen Report. “We have the of them.” market in North America.” Even when it comes to fundamental Key German Acquisitions of American Should big pieces of Visteon or Delphi building-block technology, U.S. compa- Automotive Electronics Companies change hands, the most likely bidders nies are losing influence. While Freescale would include Continental, Siemens By Continental has the largest share of the automotive VDO, Robert Bosch, Denso, Aisin Seiki, ITT Teves in 1998 semiconductor business, the German Yazaki and Magna, the only North Motorola’s automotive electronics unit in company Infineon is only a few percent- American company. 2006 age points behind in share, followed by With EBIT margins projected to con- By Siemens VDO STMicroelectronics, a firm with French tinue in the high teens through 2008, Bendix Electronics in 1989 and Italian roots, followed by three Japa- Continental is in a good position to stick Huntsville Electronics division of DCX in nese companies, Renesas, NEC and with its acquisition policy. Continental is 2004 Toshiba. ◆ particularly interested in auto electronics American Electronic Components in 2005

Page 8, May 2006 The Hansen Report on Automotive Electronics, Portsmouth, NH USA www.hansenreport.com