TRW CEO blasts price paid for Siemens VDO

Supplier TRW Automotive Holdings Corp. CEO John Plant said today that TRW did not make a binding offer to buy competitor Siemens VDO Automotive Corp. because the price was way too high.

He also blasted the price that a competitor agreed to pay.

"It was interesting for us to look at and consider, especially when one of our principal competitors had publicly stated their interest," Plant said. "But when you look at it, the value hurdles were impossible."

On Wednesday, July 25, Continental AG announced plans to acquire Siemens VDO from German industrial giant Siemens AG for $15.66 billion, or 11.4 billion euros. If consummated, the deal will create the world's fifth-largest auto supplier and a powerhouse in automotive electronics and software.

"An extremely full price has been paid -- I mean extremely full," Plant said during a quarterly conference call with analysts today, "and that is something that we did not and could not contemplate."

Focus on smaller acquisitions

In the past, TRW Automotive, of suburban Detroit, has made smaller, or "bolt-on," acquisitions, Plant said, and TRW plans to continue with that strategy.

"Our principal focus is on bolt-ons. I certainly think it was absolutely right of our company to consider the Siemens VDO opportunity and decide whether it was an opportunity for us, or maybe it's a threat," Plant said.

But, Plant said, "The threat sometimes on these things is you get carried away. And it doesn't meet your fundamental criteria."

As a result, Plant said TRW never considered offering a price as high as those in published reports, which speculated that TRW was preparing to offer as much as $16.4 billion.

Plant also pointed out that Continental has agreed to pay a price greater than Siemens VDO's annual sales of about $13.6 billion - a value that is higher than typically seen in the automotive industry.

'We paid a fair price'

So, did Continental overpay?

"Absolutely not," William Kozyra, CEO of Continental Automotive Systems North America, said last week in an interview with Crain's Detroit Business.

"We feel we paid a fair price. We are in similar businesses with very little overlap," Kozyra said in the interview.

Plant also said today that a combined Continental and Siemens VDO will not necessarily cause further industry consolidation because a larger company isn't always a more competitive company. Delphi Corp., for example, was much larger than many competitors, but was still unable to avoid filing for Chapter 11 bankruptcy protection in October 2005, Plant said.

And while Continental will become much larger when it acquires Siemens VDO this year, Plant argued that TRW will remain just as globally competitive as it is today, especially in its core automotive safety product offerings.

"The technology road map that we have had and do have is intact, and we see no impediments to our execution," Plant said.

TRW makes steering, suspension, braking and engine components as well as airbags, seat belts, steering wheel systems and safety-related electronics.

TRW ranks No. 10 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $12.16 billion in fiscal 2006.