Dana / Gkn Regulation (Eec)

EN Case No COMP/M.1587 - DANA / GKN Only the English text is available and authentic. REGULATION (EEC) No 4064/89 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION AND Article 6(1)(a) INAPPLICABILITY Date: 04/11/1999 Also available in the CELEX database Document No 399M1587 Office for Official Publications of the European Communities L-2985 Luxembourg COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 04.11.1999 In the published version of this decision, some PUBLIC VERSION information has been omitted pursuant to Article 17(2) of Council Regulation (EEC) No 4064/89 concerning non-disclosure of business secrets and MERGER PROCEDURE other confidential information. The omissions are ARTICLE 6(1)(a) and (b) shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a DECISION general description. To the notifying parties Dear Sirs, Subject: Case No COMP/M.1587 - DANA/GKN Notification of 30.09.1999 pursuant to Article 4 of Council Regulation N° 4064/89 1. On 30.09.1999, the Commission received a notification of a proposed concentration (the operation) pursuant to Article 4 of Council Regulation (EEC) N° 4064/89 whereby 1) Dana acquires GKN’s medium and heavy propeller shaft businesses and 2) GKN's light propeller shaft business will be transferred to a joint venture in which GKN will have a shareholding of 51% and Dana of 49%. 2. After examination of the notification, the Commission has concluded that the creation of the joint venture, which constitutes an operation with Community dimension and therefore falls within the scope of the Council Regulation EEC 4064/89 does not raise serious doubts as to its compatibility with the common market and the EEA-Agreement. I. THE PARTIES 3. Dana is a publicly listed company in the USA, which is active in the manufacture of components and systems for vehicle and industrial manufacturers. Dana also provides financial leasing services. The company operates plants in the USA, South America, Asia, and in several EU Member States, especially in France, Italy and the UK. 4. GKN, a publicly listed company in the UK, is an engineering group and its activities are focussed on the automotive, aerospace and industrial service sectors. The company operates plants in the USA, South America, Asia and in several EU Member States, in particular in the UK, France, Italy, Spain, Sweden and Germany. Rue de la Loi 200, B-1049 Bruxelles/Wetstraat 200, B-1049 Brussel - Belgium Telephone: exchange 299.11.11 Telex: COMEU B 21877. Telegraphic address: COMEUR Brussels. II. THE OPERATION 5. The parties notified two transactions. In one transaction, Dana will acquire GKN’s medium and heavy propeller shaft businesses (MHP shafts). In the other transaction, Dana and GKN will create a joint-venture for light propeller shafts (LP shafts). The notified transactions are a part of a larger Umbrella Agreement between the parties. The consequence of the transactions in the Umbrella Agreement is that Dana is, in essence, exchanging its CVJ wheelshafts businesses for GKN’s MHP shaft businesses. Dana is an established global producer of cardan-jointed propeller shafts, whereas GKN is a global leader in the CVJ driveshaft technology. The notified transactions cover thus different markets and customers with distinct economic considerations. 6. These two operations constitute two different concentrations because the nature of the control exercised by the undertakings concerned is different for Dana’s acquisition of GKN’s MHP shafts business and for the joint venture created by Dana and GKN. The operation involves thus the acquisition of joint control of one part of an undertaking and sole control of another part, which is in principle regarded as constituting two separate concentrations under the Merger Regulation1. No specific circumstances justify a deviation from this principle. 7. The joint venture vehicle (JointCo) will own the various GKN subsidiaries which manufacture or sell LP shafts (GKN Driveshafts Limited UK, GKN Ayra Cardan Spain). The structure of the transaction involves Dana acquiring a 49% stake of the share capital of JointCo. GKN is to own 51% of the issued share capital and entitled to nominate 3 of the 5 JointCo board directors. III. CONCENTRATION WITH COMMUNITY DIMENSION 8. Dana and GKN will exercise joint control of the joint venture as a number of matters relating to the strategic conduct of the joint venture (such as the disposal or closing down of the main business of the JV, the approval of its capital and revenue budget and financial plans, any material change in the nature of the business of the JV, appointment and removal of directors and senior employees) are reserved for the unanimous agreement of both the share holders. The joint venture will have its own facilities and resources with which it will operate on the market. The joint venture will perform on a lasting basis all the functions of an autonomous economic entity. 9. The creation of the JV is a concentration of Community dimension in view of the turnover generated by the parent companies. Dana and GKN have a combined 1 Commission Notice on the concept of concentration under Council Regulation (EEC) No 4069/89 on the control of concentrations between undertakings (OJ C 66 of 2.3.1998) paragraph 16. 2 aggregate world-wide turnover in excess of EUR 5,000 million2 (Dana EUR 11,450 million; GKN 5,480 million). Each of them has a Community-wide turnover in excess of EUR 250 million (EUR 1,668 million and EUR 3,680 million) and does not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension. It does not constitute a co-operation case under the EEA Agreement, pursuant to Article 57 of that Agreement. 10. The acquisition by Dana of the MHP business does not meet the threshold of article 1(2) of the Merger Regulation as the turnover of the acquired business (120 million Euro) is below 250 million Euro nor the threshold of article 1(3) of the Merger Regulation, as the acquired business does not generate 25 million Euro in at least three Member States. Dana’s acquisition of the GKN MHP business is therefore not a concentration with Community dimension. IV. COMPATIBILITY WITH THE COMMON MARKET Relevant product market A. Relevant Markets A.1 Product Markets 11. Propeller shafts are used in rear-wheel drive and all-wheel drive vehicles as the components which transmit power between a vehicle’s transmission and axle. Distinction can be made between Light Propeller shafts (LP shafts) and medium/heavy propeller shafts (MHP shafts). The operation only covers light propeller shafts as they are used in passenger cars and light duty vehicles, including rear-wheel drive and four-wheel passenger cars, sports utility vehicles and light commercial vehicles such as vans and pick-ups. 12. The parties submit that LP shafts constitute a distinct product market, and that no further segmentation (e.g. in terms of application or technical specifications) is relevant. Both competitors and clients have confirmed this point of view. The parties have submitted that the distinction between MHP and LP shafts essentially lies in the different performance and use of requirements of the vehicle or equipment in which they are used. LP shafts are produced in large volumes in an automated process, whereas MHP shafts are produced in smaller quantities and according to individual requirements. According to the parties, LP shafts need to operate at higher speeds than MHP shafts (as used in e.g. heavy commercial vehicles) and have to respond to high customer demands in what concerns minimising noise, vibration and harshness levels (NVH-requirement). 13. According to the parties, there is a variety of physical and technical factors (e.g. torque range, speed capabilities, vibration control, balance requirements, safety features, materials used …) which distinguish the performance capabilities of MHP 2 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis. 3 and LP shafts, although none of these factors could be isolated as the only distinguishing feature for market definition. The joint is the main feature on the propeller shaft, controlling the transmission of power to the vehicle’s axle. The parties have submitted that propeller shafts utilise either cardan or constant velocity (CV) joints. For LPs there is a growing trend in using constant velocity joints instead of cardan joints in those cases where the need for reduction of noise and vibration can outweigh the important price difference (CVJs are twice as expensive as cardan joints) and/or the vehicle configuration requires this. This is especially the case for the growing market of sports utility vehicles. MHP shafts use exclusively cardan joints. 14. Producers of LPs can not readily shift production to MHPs, and vice versa. Although estimations from competitors fluctuate, it is fair to say that shifting production would require constructing and equipping a new production plant involving 2 years and an investment of at least 5 Mio. Euro. The LP and MHP production of GKN is conducted in separate plants located in different Member States (LP in the UK and Spain; MHP in France, Sweden, Germany and Italy). 15. The parties have submitted that alongside the original equipment manufacturer (“OE”) segment, an aftermarket exists. However, since light propeller shafts are designed to function without need for maintenance or replacement, the LP shaft aftermarket volumes are very small.

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