Continental AG could decide this week whether to buy electronics specialist Temic Automotive from DaimlerChrysler.
The supervisory board of the $9 billion German chassis systems supplier was scheduled to meet today, Feb. 12, to consider a deal to buy all or part of Temic, a $900 million maker of automotive electronics systems.
Details about price and the structure of the proposed deal were not available, but one source said approval is likely.
Officials from DaimlerChrysler, Temic and Continental would not comment.
The match makes sense, industry observers say. Continental Chairman Stephan Kessel has made acquiring an electronics supplier a top priority and a key part of the company's bid to offer complete chassis management. For DaimlerChrysler, extracting value from noncore operations such as Temic becomes more likely as the automaker seeks to restructure its Chrysler unit.
DaimlerChrysler last week reported a 44 percent drop in 2000 profits, largely stemming from second-half losses at Chrysler. The Chrysler group is cutting nearly 26,000 jobs, closing some plants and shrinking production at others.
The sale of Temic, which makes highly sought electronic controls for chassis, powertrain and body systems, could bring several hundred million dollars.
Other parts makers, eager to extend their capabilities in one of the industry's fastest-growing and highest-margin businesses, also have pursued Temic, according to automotive consultant Scott Upham, president of Providata Automotive in Ann Arbor, Mich.
If Continental wins Temic it will ascend to a new level of competitiveness in the global chassis systems business, said Upham. Continental already supplies tires, brake systems and suspension components.
'Continental has a lot of the hardware and sophisticated know-how of integrating the different chassis systems, like the braking,' Upham said. 'The missing component is the high-end electronics that coordinate the deployment of all these different systems. It's kind of like having an orchestra without a conductor.'
Continental also seeks capabilities for steering and adjustable shock absorbers. Kessel's management team may be looking at a match with Sachs Automotive, a $2 billion German suspension supplier, according to published reports in that country and financial sources in Europe.
Sachs is being acquired, along with some corporate siblings, from Atecs Mannesmann of Dusseldorf by Siemens AG and Robert Bosch GmbH. Because Sachs is not involved in a core business of either Siemens or Bosch, its future is not clear.
That could create an opportunity for Continental. The company has explored a Sachs connection in the past, a Continental source said.