Gerardo Varela
General Manager
ZF Services
View from the Top

Merging Entity to Offer New Concepts

Thu, 09/01/2016 - 14:55

Q: How has ZF Services’s acquisition of TRW influenced both companies’ development of new technologies?

A: The merger has been of utmost importance for the companies and for the industry, leading to a complete set of products being newly offered as safety, efficiency and connectivity technologies. Our client base has increased for the group, adding to our existing clientele of Volkswagen, Scania, Volvo, and newly incorporating Ford and Kenworth. Our goal is to keep our clients happy and offer products with greater added value.

TRW will introduce new product lines to the market, including several that would have been time-consuming for ZF to develop on its own. One of the greatest advantages of the merger will be the incorporation of new strategic concepts developed by TRW, such as its Corner Module. This product integrates brakes, shock absorbers, steering and suspension parts. Although TRW was already developing this technology, it was obliged to acquire certain parts from third parties. ZF’s product lines perfectly compliment TRW’s and vice versa, leading to our cooperative manufacturing of these products without relying on suppliers. We will manufacture these modules at our brake plant in Monterrey and shock absorber plant in Guadalajara.

Regarding transmissions, TRW has all the electronic components needed to manufacture these parts. ZF has played a role in creating transmissions for European vehicles but our participation in the US market was low. TRW, on the other hand, already has a large share in this market. We believe our modular concepts will help us obtain a greater market share in the region and present an excellent opportunity for TRW to increase its presence in Mexico. We will offer a complete package to our clients in the original equipment segment by reducing emissions, increasing fuel efficiency and reducing the weight of vehicles. The company will also offer a complete services and parts package for our aftersales clients.

Q: How do you intend to consolidate and expand the group’s R&D operations in Mexico?

A: As ZF’s largest plant for shock absorbers is located in Mexico, we opened a development center here in 2015 to assist our suspension division. All our technology development efforts on suspension components take place in El Salto, Jalisco, where engineers from Brazil, Germany, the US and Mexico are working together on these projects. Moreover, TRW’s brake pads plant in Nuevo Leon is developing new technologies in collaboration with engineers from the Friction Material Group located in Spain.

Q: What do you believe will most affect the aftermarket segment’s mission to offer superior service to end users?

A: We expected 2016 to be more complex than 2015 as the devaluation of the peso will result in domestic price increases. This may force us to create new ways to manage our resources. We expect the fusion of TRW and ZF to generate additional sales volumes without the need to duplicate our marketing investment.

The Mexican market is ready to professionalize the aftermarket structure by reinforcing service centers, minimizing pirated and low-quality products and using technology to improve order communications, logistics and inventory management. Drivers and end users must be made conscious of parts that lack quality or important safety features. The lack of market data will be the first challenge for domestic traders to achieve this goal.

Q: How could the market moving from a small distributor paradigm to a large corporation benefit ZF and TRW?

A: This change will benefit ZF and TRW’s commercial strategies, as component and service systems will be supplied instead of isolated spare parts. This will lead to more competitive prices and logistics costs, benefiting distribution channels as well as end users. In the case of a transition to a large distributor, the consequential organization might lead to greater competition between the largest aftermarket suppliers. We believe that large providers and distribution companies will create a shorter distribution chain, displacing informal providers and resulting in more professional and competitive trade.