The world's largest parts supplier is trying to edge out a Swedish rival in an attempt to buy all or part of troubled seat belt maker Breed Technologies Inc.
Delphi Automotive Systems Corp. and Autoliv Inc. of Sweden have tendered their final bids. Investment advisers for Breed, which is in Chapter 11 bankruptcy reorganization, could announce soon whether the third and final round of bids satisfies Breed's bankers, said people familiar with the plan. Creditors are owed more than $1 billion.
Delphi and Autoliv could face an obstacle: Johnnie Breed, CEO of the Lakeland, Fla., company, plans an 11th hour bid. She claims to have raised a large but unspecified amount of money to pay off creditors and rescue at least part of the company her late husband founded.
The stakes for all are high. Automakers are preparing new installations of side airbags and other full safety systems.
Both Autoliv and Delphi want to play bigger roles. Delphi of Troy, Mich., is seeking to rebuild its safety systems and could use Breed's seat belt and steering wheel operations and possibly some electronics, according to industry consultant Scott Upham. In addition to those components, Breed also makes crash sensors and airbag systems.
Autoliv, with just 10 percent of North America's seat belt business, has publicly stated its intent to inflate that to 25 percent within a few years. The Stockholm-based supplier also would like Breed's steering wheel business, said Upham, president of Providata Automotive of Ann Arbor, Mich.
Other safety companies have expressed interest in Breed, sources say. But it's not clear whether they're willing to get into a bidding war.
TRW Inc. of Cleveland is North America's No. 1 supplier of seat belts, with more than 30 percent of the market, Providata research shows. Buying Breed's seat belt business could stir Justice Department lawyers. Takata Corp., a privately held Tokyo-based supplier of seat belts, airbags and electronics, may not have the financial capability. Petri AG, a family-owned German steering wheel supplier, could face similar limitations.
NEED TO MOVE FAST
Breed and its bankers need to move quickly because Breed's value is deteriorating. GM, worried about Breed's stability, is moving business to other suppliers, according to one supplier who has benefited from such a switch.
Breed put a fright into GM last August. In a pricing dispute, Johnnie Breed halted seat belt shipments to nine GM truck plants. For three days, GM was forced to juggle its seat belt inventory to avoid a production shutdown.
Delphi, which was spun off from GM last year, is trying to rebuild the seat belt manufacturing capacity it sold in 1989. It re-entered the business last July, creating a majority-owned joint venture with Sungwoo Corp., a seat belt and airbag company in Seoul, South Korea.
Delphi also produces airbag modules, steering wheels and electronic parts. The supplier also makes airbag inflators in a joint venture with B.F. Goodrich Aerospace.
Last October, Delphi announced that it had been awarded its first seat belt contract generated through its venture with Ashimori Industry Co. Ltd. of Osaka, Japan.
Autoliv and others are gearing up for a surge in safety-system business, said spokesman Barry Murphy. This time, the push is for side-impact bags; seat belt pre-tensioners, the pyrotechnic devices that cinch the belt when airbags deploy; and, later, inflatable seat belts.
But unlike the current piecemeal approach of buying safety components, the trend is toward sourcing all restraint components to a single supplier, said analyst Gregory Janicki. That's because components will have to be wired together to react to specific conditions.
For suppliers, that means greater content per vehicle and higher dollar value per components. 'The value to the (supplier) industry is huge,' said Janicki, vice president of CSM Worldwide, an automotive marketing and forecasting firm in Northville, Mich.
Johnnie Breed wants to position her company for that new market. She said she is 'searching the world' for financial commitments to pay off Breed's lien-holding banks, allowing the company to re-emerge from bankruptcy court.
'My goal is to raise enough money to exceed what is raised through a sale,' she said. 'Breed will emerge from Chapter 11. There is no doubt about it.'
What all bidders are believed to covet is the safety restraint systems business that Johnnie Breed acquired from AlliedSignal Inc. in 1997 for $710 million in cash. When the division's earnings did not meet expectations, Breed could not meet debt repayment and sought Chapter 11.
Given the interest in Breed, the bidders will have to make sure they don't overpay as well.