German Supplier ZF Watching Exchange Rates

By Bill Visnic June 11, 2008

By Bill Visnic

LAURENS, South Carolina -- It hasn't yet made any major moves, but German Tier 1 supplier ZF Friedrichshafen AG has its eye on the fluid currency exchange-rate environment, conceding the eroded dollar means the U.S. now can be viably considered as a potential low-cost manufacturing region.

BMW X6 240.JPG ZF, primarily known for its transmission development and manufacturing, also is a prime maker of all manner of chassis, driveline and steering components, and already has more than 20 facilities in North America, said Paul Olexa, vice president of driveline sales, ZF Group North American Operations, at a recent media event here.

But Olexa said ZF is carefully watching the currency situation -- and the moves of several German automakers that long have been the company's chief customers. ZF has considerable content in Daimler AG's Mercedes-Benz and BMW AG vehicles built in the U.S. respectively at Vance, Alabama, and Spartanburg, South Carolina -- and both companies have jacked up plans for U.S. production in response to the weak dollar.

And Volkswagen AG reputedly will announce next month that it, too, will build an all-new U.S. plant -- probably in the South and probably in proximity of either the Mercedes or BMW site.

Despite these growth factors, Olexa will not bite, however, on whether ZF has plans to ratchet up U.S. production -- possibly to build high-value, high-content components such as automatic transmissions or the elegant new Vector Drive "torque-vectoring" rear axle/differential. The Vector Drive differential was just launched as standard equipment for BMW's X6 crossover vehicle built in Spartanburg.

"If there's a business case for local production (of high-content components such as Vector Drive), we will pursue it," Olexa said, cautioning that ZF currently has no plans to build either transmissions or Vector Drive in North America.

But ZF does make a high proportion of its chassis and driveline components in North America.

"Fundamentally, in the region, we make the ZF product line except for automatics," he said.

Olexa won't speculate about the potential "push" for more North America-produced ZF content if and when Volkswagen also constructs a plant in the U.S., but says many future scenarios are possible.

He points to ZF's recent deal to make six-speed automatic transmissions for Nissan Motor Co. Ltd.'s coming venture to produce light-commercial vehicles at the Nissan plant in Canton, Mississippi. ZF will manufacture those transmissions in Gainesville, Georgia.

Olexa also said ZF is familiar with the new trend of "supplier park" facilities -- the company is part of a supplier park near the Ford Motor Co. plant outside Chicago that makes the Taurus and Taurus X. ZF produces axles for those vehicles.

He also said the company is preparing for the production launch of its first dual-clutch automated manual transmission, which uses the primary components and design of a manual transmission, but can be sold as an automatic because it requires no clutch pedal. The dual-clutch transmissions are very efficient and offer sport-oriented capabilities, but Olexa says the prospects for North American manufacturing are slim because, unlike in Europe, there is little existing manufacturing capacity for conventional manual transmissions.


BMW X6 flaunts ZF's brilliant new torque-vectoring rear differential (Photo courtesy of BMW North America Inc.).

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