Despite headwinds brought on by COVID-19, ZF Friedrichshafen has not hit the brakes on its ambitious plans to bolster its expertise in self-driving commercial vehicles.
The German supplier of chassis, steering and braking components and systems closed its acquisition of trucking parts maker Wabco Holdings Inc. last week with hopes of forming a leading integrated systems provider for commercial vehicle technology.
ZF said the Wabco addition enables its existing commercial-vehicle division to expand its expertise in vehicle dynamics control.
The deal — valued at more than $7 billion — also is expected to substantially boost revenue. With worldwide sales to automakers of $36.9 billion in 2018, ZF had said it expects to generate about $44 billion a year following the purchase.
The deal comes as suppliers face existential shifts in the industry and cost tightening brought on by the coronavirus.
The global pandemic did not significantly delay the close of the Wabco deal, as it was expected to be finalized in the second quarter of this year, but it could buoy ZF, which has taken other hits.
The supplier said in a memo to employees last week that it plans to reduce its work force by up to 15,000 jobs, or around 10 percent, by 2025 because of slumping demand, Reuters reported.
Still, ZF's acquisition makes sense, said Calum MacRae, director of automotive product development at GlobalData.
"As we're seeing, there's still a need to freight goods. Wabco's share price, apart from one dip, is where it was at the time of the deal, so there's less risk to ZF's balance sheet," MacRae said.
"But if one stood back for a bit, you'd have to be wearing very rose-tinted spectacles to see such a deal being initiated now," he added.
ZF announced its plans to purchase Wabco in March 2019, saying the combination would accelerate the development of new technologies to enable autonomous commercial vehicles and make "ZF less dependent on the economic cycle of the passenger-car industry."
Wabco, based in Bern, Switzerland, supplies integrated braking systems and stability control, air suspension systems and transmission automation controls, as well as aerodynamics, telematics and fleet management solutions for commercial vehicles, including trucks, buses and trailers. In 2018, the company opened its Americas headquarters in Auburn Hills, Mich., not far from several other major automotive suppliers in suburban Detroit.
Wabco will operate as an independent division, Commercial Vehicle Control Systems, working with ZF's existing commercial-vehicle technology division, aftermarket division and global development team.
As part of the transaction, Wabco CEO Jacques Esculier has retired from his role. The division is now headed by newly appointed Fredrik Staedtler.
The Wabco deal is just one future-oriented move by ZF. The company has pledged to invest more than $13.6 billion into electric vehicles and automated driving.
In 2014, ZF acquired TRW Automotive in a $13.5 billion deal to expand into the self-driving car market. ZF also announced in March its partnership with self-driving truck company TuSimple for development and commercialization of its autonomous systems.
"We are closing this acquisition in an unprecedented social and economic situation," ZF CEO Wolf-Henning Scheider said in a statement. "We are currently focusing our efforts on protecting our employees, ramping up production and securing our company's liquidity. In the long term, this thoroughly prepared acquisition will make us even stronger for the future once we have overcome the immediate effects of the pandemic."