FRIEDRICHSHAFEN, Germany—ZF Friedrichshafen A.G., Germany's third largest automotive supplier and among the top 10 worldwide, has confirmed reports that it is in the early stages of discussions to sell its rubber and plastics department.
A local newspaper Neue Osnabrucker Zeitung, revealed Aug. 22 that ZF is looking "very closely" at a specific offer from the Chinese railway products company Zhuzhou Times New Material Technology Co. Ltd.
According to that report, ZF chief Stefan Sommer disclosed TMT's interest at an Aug. 22 meeting attended by 800 employees in the ZF rubber and plastics headquarters plant in Damme, Germany.
TMT supplies rubber and metal suspension materials for train and other track transport systems, as well as for wind power plants. Sommer maintained that TMT products complement ZF's rubber and plastics products in terms of market, customer and regional perspectives, stressing that TMT wants to set foot in Europe.
In a statement last week and earlier in the ZF annual report, the company has expressed dissatisfaction with returns from the rubber and plastics business unit. ZF has said following consolidation in the market, competitors have cost advantages and more flexible structures than ZF.
Jurgen Weller of the IG Metall trade union told the General Anzeiger newspaper that ZF's rubber and plastics business is profitable, "but are not as high as ZF wants. But that is due to the rubber parts being dependent by nature on rubber prices."
NOZ reported that ZF's rubber and plastics department has around 3,400 employees worldwide and 2012 sales of $960 million, up 6 percent from 2011. Company-wide, ZF has almost 74,000 employees.
ZF rubber and plastics has 1,700 employees in three German plants: Bonn, where its has research and development, Damme and Simmern. A ZF spokesman said the company has invested $40 million in the past three years to expand the Damme plant, where about 1,000 employees make items such as rubber and plastic connectors, airbag housings, servo pump oil containers, plastic composite pedals, and hydraulic supports for engines, as well as components for gear-changing and steering systems.
He was clearly attempting to overcome concerns among staff that TMT would close the German plants. He suggested ZF's investment "is definitely different to other company acquisitions in Germany and Europe, where the old owner lets a location bleed before it is taken over by investors."
Nevertheless, staff expressed concerns that, as ZF itself has set up a rubber and plastics production site in China, TMT may be seeking German know-how just to develop further in China. A sale would require the rubber and plastics business first to be split from ZF into a separate company. Even if staff were retained, the staff expressed concerns about retaining ZF company pension rights and central pay agreements.
Thorsten Groger from the IG Metall trade union in Nienburg-Stadthagen said, "We consider the whole thing with much skepticism. If the future prospects for (rubber and plastics) are very good in the hands of an investor, they should also be so under ZF, in the view of the employees."
TMT is listed on the Shanghai stock market and is a subsidiary of state-owned CSR Corp. TMT employs around 2,700 and achieved sales of $611.75 million in 2012, up from $564.9 million in 2011.
Aside from the three German plants, ZF has rubber and plastics operations in Hebron, Ky.; Scorocaba, Brazil; Shanghai; Trnava, Slovakia; and Melbourne, Australia.