Breed Technologies Inc.'s joint venture with Siemens AG - a partnership formed to produce smart airbags and safety restraint systems - is crashing.
Both companies confirmed last week that they are holding talks to dissolve BSRS Restraint Systems GmbH, a two-year-old joint venture.
The move followed Breed's Chapter 11 filing in bankruptcy court last month in Delaware.
'Breed could no longer meet its financial obligations due to its precarious business situation,' said Siemens spokesman David Ladd.
Siemens, a large electronics supplier based in Munich, Germany, specializes in electronic sensors and software. Breed, which is based in Lakeland, Fla., makes airbags, inflators, seat belts and other components. Together, the two companies had hoped to challenge the two giants in the safety restraints segment, TRW Inc. and Autoliv Inc.
Siemens is expected to find another partner to replace Breed. Industry analyst Scott Upham said the joint venture's dissolution represents 'a disappointment for both.'
'It never panned out,' said Upham, president of Providata Automotive Inc. of Ann Arbor, Mich.
A TOUGH MARKET
BSRS and others who geared up to supply complete safety restraint systems have met intense competition. Moreover, automakers have hesitated to embrace 'one-stop shopping,' in which the customer buys all safety restraint components from one supplier.
Instead, automakers are treating seat belts, inflators and airbags as commodities, seeking the lowest possible price on each. The automakers generally seek separate bids on the all-important electronics and software.
Perhaps most important, automakers are very cautiously evaluating smart airbags, which detect a passenger's size and position in an effort to avoid injuries caused by airbags.
The National Highway Traffic Safety Administration is expected to issue rules governing smart airbags soon.
BSRS's failure is not unique to that industry. Takata Corp., a supplier of seat belts, airbags and electronics, and Temic Bayern-Chemie GmbH dissolved their joint venture in the early 1990s, Upham said.
A similar fate was met by Takata's venture with German steering wheel supplier Petri AG. The venture between Robert Bosch GmbH and the former Morton International Inc. also was short-lived, he said.
The 50-50 joint venture with Siemens was seen as a coup for Breed when it was formed in 1997.
Siemens enjoyed considerable prestige as a first-rate electronics supplier. And Breed obtained a critical cash infusion of $115 million from Siemens as part of its equity stake in the venture.
The cash made it possible for Breed to acquire AlliedSignal Inc.'s safety restraints division in 1997.
The AlliedSignal business doubled Breed's revenues and rounded out its product offering, making it North America's largest seat belt supplier. But the AlliedSignal unit failed to deliver the cash flow needed to cover Breed's hefty debts.
Siemens says the impending demise of the joint venture has not discouraged it from pursuing the safety restraints business. Electronics are the key components in future airbag systems, said spokesman Ladd.
'That is a promising horizon for us.'
The two partners will reclaim the plant and equipment each contributed to the joint venture. Siemens supplied its crash-test facility in Alzenau, Germany, along with test equipment and offices.
Breed supplied the Sterling Heights, Mich., test facility it had obtained from AlliedSignal. Most of the joint venture's 240 employees will be transferred to their respective companies.
However, Siemens won't get much back for its $115 million investment. As part of the original deal, Siemens had obtained a 13 percent equity stake in Breed stock. Breed shares, which once traded as high as $45, were selling last week for 38 cents.