ZF Friedrichshafen AG and TRW Automotive Holdings Corp., have agreed to divest TRW’s linkage and suspension business in North America and Europe in order to settle the US Federal Trade Commission’s (FTC) charges that their proposed $12.4 billion merger would likely harm competition in the North American market for heavy vehicle tie rods. The merged company will have six months after the proposed consent agreement takes effect to divest the TRW assets to an FTC-approved buyer.
The merger of German-based ZF and Livonia, Michigan-based TRW will create the world’s second-largest auto parts supplier.
ZF and TRW are two of only three North American suppliers of heavy vehicle tie rods. The FTC stated that as the tie rods are heavy, and it is not considered economical to ship them over long distances, customers in North America predominantly buy from suppliers that have production facilities in the United States, Canada, and Mexico. The complaint alleges that the merger would eliminate direct competition between ZF and
TRW and that reducing the number of competitors from three to two would increase the likelihood of coordinated interaction between a combined ZF/TRW and its only other competitor for heavy vehicle tie rods in North America.
Under the proposed consent agreement, the combined company is required to divest TRW’s North American and European linkage and suspension business for heavy and light vehicles (which includes heavy vehicle tie rods). The business includes five manufacturing plants in Michigan, Canada, the Czech Republic, and Germany, and leased space in a research and development lab in Germany. At the divestiture buyer’s request,
ZF must provide transition services for logistical and administrative support as well as transitional supply agreements for key manufacturing inputs needed to fulfil existing customer contracts.
The proposed consent agreement also includes an Order to Maintain Assets to preserve the assets until they are divested. A monitor will ensure that the merging parties comply with their obligations under both the consent agreement and the Order to Maintain Assets.