Justice Department Requires ZF and WABCO to Divest WABCO’s Steering Components Business to Proceed With Merger

The Department of Justice announced today that it is requiring ZF Friedrichshafen AG (ZF) and WABCO Holdings Inc. (WABCO) to divest WABCO’s North American steering components business, R.H. Sheppard Co. Inc., as well as other related WABCO assets, in order for ZF to proceed with its proposed acquisition of WABCO.  Without the divestiture, the proposed acquisition would eliminate competition between the only two suppliers of steering gears used on large commercial vehicles in North America, the department’s lawsuit alleges.

The Justice Department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the proposed merger.  At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit. 

“The merger, as originally structured, would have given ZF a monopoly over an essential steering systems component used in trucks and buses that move products and people across the United States,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division.  “Today’s settlement, which requires the divestiture of WABCO’s entire U.S. steering systems business, will ensure that commercial vehicle manufacturers continue to benefit from competition as they design and build the trucks and buses of today and tomorrow.”

According to the Justice Department’s complaint, ZF and WABCO are the only North American suppliers of the steering gears that are an essential steering system component used in large commercial vehicles.  These steering gears direct the front wheels of trucks and buses, and are also a key component of advanced driver assistance system (ADAS) steering features.  ADAS steering features, such as lane-keeping assist, are already being implemented today, and are expected to be an area of continued importance as companies develop autonomous vehicle operations.  The department’s complaint alleges that competition between ZF and WABCO has resulted in lower prices, higher quality, better service, and more favorable contractual terms, and has fostered innovation that has led to the development of features that are integral to the current and future development of ADAS technologies.  According to the complaint, the combination of ZF and WABCO would leave manufacturers of large commercial vehicles in North America without a sufficient competitive alternative for this critical input and likely result in higher prices, less favorable contract terms, and reduced research and development efforts.

Under the terms of the proposed settlement, ZF and WABCO must divest the entirety of WABCO’s R.H. Sheppard steering systems subsidiary, including its manufacturing facilities in Hanover, Pennsylvania, and Wytheville, Virginia, as well as other WABCO assets related to steering gears.

ZF is a German company headquartered in Friedrichshafen, Germany.  It has 149,000 employees in 40 countries, and had annual sales of $36.9 billion in 2018, $9.6 billion of which were in the United States. 

WABCO is a Delaware corporation with a North American headquarters in Auburn Hills, Michigan, and a global headquarters in Bern, Switzerland.  It has 16,000 employees in 40 countries, and had annual sales in 2018 of $3.8 billion, $850 million of which were in the United States. 

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to John Read, Acting Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the final judgment upon finding it is in the public interest.

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Author: January 23, 2020

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