Robert Bosch Corp.'s Robert Oswald, like most supplier chiefs, has plenty to worry about these days. For starters, the U.S. market for antilock brakes is slipping. And a promising new Bosch technology, common-rail injection for diesel engines, won't go anywhere in the United States until sales of diesel engines take off.
Yet the brake and electronics supplier continues to grow in North America. And so does its German parent's confidence in Oswald.
Last month, Robert Bosch GmbH - the world's third-largest parts supplier - made Oswald a full board member. He was previously an associate member.
Oswald is also chairman of the U.S. subsidiary and head of Bosch's worldwide braking operation. He spoke at the Automotive News Southeast Conference in Nashville, Tenn., with David Versical, John Couretas and Lindsay Chappell of Automotive News. Edited excerpts:
The antilock brake market has hit a plateau in recent years as consumers questioned the value of ABS. Where do things stand now?
In North America, at about a 60 to 70 percent overall application rate. We are starting to see effects from the combination of the ABS Education Alliance (a campaign by Bosch and three other suppliers) and also the ITT Automotive advertising program.
We're not seeing effects in terms of the market, but in terms of some reconsideration by the car companies on how they are going to handle the marketing of ABS. They are trying to increase option percentages, marketing incentives - things of that type.
Has the ABS Education Alliance been effective?
Yes. The difficulty on any soft subject like this is to completely measure effectiveness. We've got some data points that we can measure. A very critical one - the accuracy of reporting in the press - has substantially improved.
The ultimate objective of the ABS Education Alliance, however, was to have the end customers be better informed, and to positively impact either the option decision or the purchase decision. So far, that's not possible to measure.
Is cost the reason you're not interested in buying ITT Automotive's ABS business?
No. Speaking specifically for Bosch, it would be impossible for us to consider purchase of ITT, given our current market position both in ABS and in foundation brakes. We would never get approval from the FTC, or the equivalent organization in Europe.
Will ITT Automotive sell its ABS business to someone who is not a major player in brakes?
Unless there's some surprise, in terms of regulatory action, that would have to be my conclusion.
The diesel engine market is much further advanced in Europe than it is here. What's your scenario for growth in the United States?
We had a very bad experience with diesels in this market 20 years ago. Many people still remember that, and are not willing to take the risk of repeating it. Second, the U.S. has a completely different philosophy about the role of government and the taxation of fuels. So there isn't the same incentive in terms of cost-of-ownership. Third, the overall price of fuel in the United States is still substantially below world market levels.
Then there is the concern over which technology will be able to meet future emission requirements. There is clearly a belief that diesel has some unique problems compared to regular spark-ignited engines or some of the alternative technologies.
What we see developing in Europe is the new common-rail injection technology, combined with the new diesel engine design characteristics, resulting in a package that is a substantial improvement in performance over the diesel as we know it today. Emissions, especially NOx emissions, are still a problem with the diesel, but it's looking much better than it did a year and a half ago.
The overall pressure for fuel-economy improvement and carbon dioxide reduction - global warming - is going to put more emphasis on the characteristics where diesels are inherently superior. We see all these factors coming together. There is going to be a rethinking of this whole question.
Is excess capacity as big an issue with suppliers as it is among automakers?
It's much more difficult to measure excess capacity in the supply industry than it is in the total vehicle industry. In the cases where we have been able to do it, we do find a disturbingly similar trend, especially in the emerging markets. Each of the car companies is asking its existing suppliers to follow them into emerging markets. Everyone thinks they are going to capture 'X' percent of an emerging market, so when you actually add up all of the forecasts, you come up with something that's four or five times what the actual market could possibly support.
In the past you have talked about public policy inconsistencies in the United States. What's your advice for Washington?
In Europe, public policy is used to motivate the right kind of actions from industry, and I find that to be much less true here. For example, we want to motivate better fuel economy, but we refuse to do it through taxation - we would rather make fuel a commodity, at prices substantially below world market prices. On one hand, we legislate for safety, and then on the other hand we have roads that are beyond description in terms of the impact they have on driving safety. We allow vehicles on the road that other developed countries would never allow. And yet, you see them driving around at 70, 80 mph on our freeways. We have nothing in our regulations that either controls or tries to eliminate gross emitters. I just see other places that take a more balanced view of how to achieve a goal. Here I think we are missing a major opportunity.
As suppliers get bigger, should they be getting more actively involved in influencing public policy?
At one level you are absolutely correct, and the logic is true. At the other level, we are already trying to handle so many things. You need to be careful that you're not getting yourself into an environment where you really aren't competent. We ought to be watching what is going on, though. AlliedSignal has essentially gone out of the auto business now. ITT is thinking of going out of the business. Why are they doing this? It isn't because the business is so great and such a wonderful place to invest your money.