Washington, DC - Two of the world’s largest auto parts suppliers, ZF Friedrichshafen AG and TRW Automotive Holdings Corp., have agreed to divest TRW's linkage and suspension business in North America and Europe, to settle Federal Trade Commission 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. A tie rod is a rigid connector that links a vehicle’s wheels with the steering control mechanism. In this case, the tie rods are designed for vehicles weighing at least six tons. Because the tie rods are heavy, it is not economical to ship them over long distances, and, as a result, customers in North America predominantly buy from suppliers that have production facilities in the United States, Canada, and Mexico and do not consider suppliers outside of North America as viable options. 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 fulfill 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. Details about the divestiture are set forth in the analysis to aid public comment for this matter.
Throughout the investigation, Commission staff cooperated with staff of the antitrust agencies in Canada, Mexico, and the European Union. In particular, they worked closely with the European Commission on the analysis of the proposed transaction and potential remedies to reach outcomes that benefit consumers in the United States. The FTC acknowledges the exemplary work done by all agencies, which led to compatible approaches on an international scale.
The Commission vote to issue the complaint and accept the proposed consent order for public comment was 4-1, with Commissioner Joshua D. Wright voting no. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through June 5, 2015, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.