DETROIT -- Key Safety Systems is starting to look like the Mouse that Roared.
The Sterling Heights, Mich., airbag maker is engaged in an uphill battle to acquire Takata Corp.
Autoliv Inc., Key Safety's big competitor and rival bidder for Takata, generates four times as much revenue from airbags and seat belts. Moreover, Key can't match the r&d firepower of Autoliv, which has partnered with Volvo to develop software for self-driving cars.
Yet Key Safety is the apparent front-runner in the bidding for Takata, and automakers may prefer it that way, said Scott Upham, president of Valient Market Research, a consulting firm in Rochester, N.Y.
If Autoliv acquires Takata, it would control more than half of airbag sales in some global markets -- a red flag for antitrust regulators. "Autoliv is just too big to buy Takata," Upham said. "They would be too big in certain markets and would have to sell off some divisions."
But is Key Safety ready for the big time?
In 1999, a similar play for the big time drove Key Safety's predecessor, Breed Technologies Inc., into bankruptcy.
After a string of acquisitions in those days, the airbag company's pioneering founder, Allen Breed, had handed control over to his wife, Johnnie, a former travel industry entrepreneur. In 1997, Johnnie purchased Allied-Signal's seat belt unit for $710 million.
She overpaid. After Breed went bankrupt, Carlyle Management Group of Dallas purchased of Breed's assets and formed Key Safety in 2003. Since then, the company has kept a low profile.
"Key Safety was the auto industry's red-headed child," Upham said. "But they got rid of the plants that weren't producing, and they slimmed down their product lines."
They also kept stable management despite having three corporate owners in 14 years. Jason Luo has been CEO since 2007, and he kept his job after the Chinese company Ningbo Joyson Electronic Corp. acquired Key Safety last year for $920 million.
Ningbo Joyson has deep pockets. In recent years, it has made several acquisitions to establish niches in infotainment and safety.
But acquiring Takata would be the big time.
Takata, its biggest target to date, would raise Key Safety's annual sales to $8 billion or so -- nearly equaling Autoliv's revenue from airbags, seat belts and electronics.
Ningbo Joyson, which generated sales of $3 billion last year, also is bankrolling an expansion of Key Safety's production.
Such big-time spending is going to be necessary for somebody as the Takata mess finally gets sorted out. Automakers must recall as many as 100 million airbags to replace Takata inflators that can explode when exposed over long periods to heat and humidity.
To compensate for the meltdown at Takata, its largest competitors -- Autoliv, TRW, Daicel and Key Safety -- have been expanding production as automakers shift inflator contracts away from Takata.
Key Safety plans to double annual inflator production to 60 million units by 2020, a move that will cost $100 million. With factories in Europe, North America and Asia, the company now can supply global platforms.
"We are manufacturing on all three continents," said Mark Wehner, Key Safety's chief technology officer in Detroit. "We are growing organically with all our customers worldwide."
The company also is beefing up its r&d to exploit the blurring line between passive and active safety. Last year, Ningbo Joyson acquired ImageNext Co., a South Korean company that develops obstacle detection software for cameras.
Now Key Safety is marketing cameras and software for 360-degree surveillance and forward obstacle detection.
The company also has designed infrared sensors to pinpoint a passenger's position. An electronic control unit can use that information to adjust airbag deployment during a crash.