German Supplier Buy-Ups May Continue

German Supplier Buy-Ups May Continue

By Bill Visnic

In Germany, it's been a flurry of automotive-supplier acquisition and merger action that resembles that seen in the U.S. in the earlier part of this decade.

The most recent news comes directly from where the rubber meets the road: European media reports say French tire giant Michelin S.A. may be coveting the tire division of Germany's Continental AG. Michelin, the world's largest tire producer, is gutting out a tumbling stock price and has found trouble expanding into growth regions.

German magazine Automobilewoche quotes Michelin CEO Michel Rollier as saying he believes Continental's tire-making business might be at play following the divisive summer hostile-takeover battle supplier Schaeffler AG fought to gain controlling interest of Continental. Schaeffler's holding in Continental reportedly has reached 48 percent - but Schaeffler already has gone on record to say it has no interest in breaking up Continental, a strategy that often follows takeovers as the new ownership seeks to "unlock" value.

The tire industry is deeply cost-intensive, and Michelin - not to mention many competitors - has been struggling to cut costs and improve productivity. The company's French manufacturing base carries high wage costs, and Michelin is grappling with the need to reduce head counts and consolidate production.

The Continental-Michelin news accompanies reports that German automakers BMW AG and Daimler AG's Mercedes-Benz unit will ink a deal this week to combine their purchasing for a wide variety of automotive components. A media report says the companies expect to save €350 million by cooperatively purchasing largely unseen items such as seat frames and climate-control systems.

More intriguing is a lingering notion the two companies may begin to cooperate on development of components that could be considered brand-defining or, at least, are more obvious to the customer. Some reports continue to suggest BMW and Mercedes are considering joint development of small engines - perhaps signaling the companies now consider such items a commodity.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.