DETROIT -- Telematics may be the most valuable part of Continental AG's $1 billion dollar purchase last week of Motorola Inc.'s automotive unit.
With the addition of Motorola's expertise in telematics - wireless vehicle communications - Continental will be able to offer automakers complete safety packages that include everything from tires to telephones.
Motorola's sensor and interior electronics will be made to work with Continental's active and passive safety systems, such as antilock brakes and electronic stability control. Executives from both companies simultaneously announced the deal April 3 at the 2006 SAE World Congress and at a press conference in Frankfurt.
Last year Motorola's automotive unit posted sales of $1.6 billion and was profitable, said Greg Brown, president of Motorola's network and enterprise business. He declined to say how much profit the unit posted or how many offers Motorola fielded for the business.
Not enough data?
One potential buyer said privately that Motorola didn't show sufficient financial data for his company to make an adequate appraisal of the business. Motorola has been trying to sell its automotive unit since September 2005 so it can focus on expanding its wireless communications technology.
But William Kozyra, a member of Continental's executive board, said his company had adequate access to Motorola's financial information. Continental would not have made an offer for the Motorola unit without full financial disclosure, Kozyra said
Analysts said Continental should benefit from the deal. A Morgan Stanley research note said Continental's purchase is "a good fit, and will have greater growth potential when it is integrated into Continental Automotive Systems."
Profit impact seen in 2008
Kozyra said the Motorola purchase would begin having a positive impact on Continental's profits sometime in 2008.
In addition to telematics, Motorola's automotive unit makes sensors and electronics for occupant detection systems and powertrain and chassis control systems. It also produces electronics for heaters, air conditioners, seats, windows and power doors.
Manfred Wennemer, Continental's executive board chairman, said the Motorola acquisition will double sales of Continental Automotive Systems in North America and put the company on the map in electronics here.
The deal will see about 4,500 employees - 3,600 in North America - move from Motorola to Continental. Six plants and several engineering centers in North America, Asia and Europe also are part of the deal. Executives from both companies said they doubted significant job cuts would result because there is little overlap between the two companies.
"The addition of telematics allows Continental Automotive Systems to take active and passive safety to the next level of functionality and performance," said Karl-Thomas Neumann, president of Continental's Automotive Systems Division.
Continental, which is based in Hanover Germany, posted $9.3 billion in worldwide sales of auto parts and tires in 2004 and was 14th on the Automotive News list of top 100 global suppliers. Continental expects the deal to close by June 30.
The Motorola deal may not be the last one for Continental.
Says Wennemer: "We are looking for additional acquisitions in North America and Asia. We want to continue to play an important role in the consolidation of suppliers in the worldwide automotive industry."
You may e-mail Richard Truett at [email protected]