DETROIT - The era of the merger isn't completely dead. The impending merger of Siemens Automotive Corp. and VDO North America LLC to form Siemens VDO Automotive shows that companies still are willing to make a deal.
Siemens and VDO will try to create that value as a new $1.5 billion supplier focusing on the electronics and fuel systems markets.
Herb Everss, a former CEO of Mannesmann VDO North America, likes the pairing of the two companies. He said they had first discussed the matter in 1993. Everss became a Siemens vice president that year and joined Mannesmann VDO in 1997.
'It's a good fit for Siemens,' he said. 'They saw that before. It allows them to consolidate some of the business unit functions. ... It's easy for VDO products to fall in or fall out. It puts (Siemens) in a stronger strategic position.'
That position, according to Everss, is to compete head-on with Lear Corp. and Johnson Controls Inc., and to a lesser extent with Delphi Automotive Systems Corp. and Visteon Corp., to produce cockpit modules. Typically, modules are easier to install in a vehicle and cost less than installing individual parts.
Lear and JCI have made public commitments to producing the modules, while Delphi and Visteon have the capability to do so.
VDO produces the gauges on the instrument panel, known as instrument clusters, and supporting components, such as sensors. Siemens produces driver navigation systems, safety restraint systems, diagnostic displays and other sensors.
The merger also would broaden the company's capabilities in fuel systems. However, Everss said the company is missing an important part: fuel tanks.
One competitor, Robert Bosch Corp., said the merger will tighten up the market. 'We respect them,' said Lee Manduzzi, Bosch's executive vice president of automotive sales. 'It definitely takes them up a notch in terms of production capabilities. It's a tough market, and they're going to make it tougher. That said, we're optimistic about this year and years to come.'
Siemens VDO would be based in Auburn Hills, Mich., Siemens' current home. The deal is waiting approval from the Federal Trade Commission.
The approval has been delayed twice but is expected to come by the end of the month. VDO North America is based in Troy, Mich.
The merger is the North American portion of a larger deal in which Siemens Automotive AG is acquiring Mannesmann VDO AG. The companies, based in Germany, have combined revenue of $8 billion worldwide.
The chairman and CEO of VDO, Ronald Marsiglio, resigned last month, clearing the way for Siemens Automotive CEO John Sanderson to lead the consolidated company.