Detroit – Auto suppliers who took a risk in developing vehicle-stabilizing technology 10 years ago might reap bigger profits because the federal government passed legislation requiring their life-saving technology on all vehicles within five years.
As part of a federal mandate, automakers gradually are increasing the percentage of their vehicles equipped with electronic stability control systems, which the National Highway Traffic Safety Administration says will save more than 10,000 lives a year. All new vehicles must have stability control by Sept. 1, 2011.
With 17 million vehicles sold each year, the stability systems, which cost automakers an average of $110, could generate about $1.9 billion for companies that supply them.
“Obviously, if you’re in this business – Continental, Bosch, Delphi, TRW – you’re in for a windfall, because there’s a lot of money to be made,” said Scott Tackett, braking analyst with Global Insight Inc.’s office in Troy, Mich.
Delphi Corp., the nation’s largest auto-parts supplier, first implemented its stability control system on the 1997 model year of the Cadillac.
Delphi spokesman John Shea said the company took a risk that is now paying off.
“When any product starts out, it’s a matter of proving yourself in the market and to your customers,” Shea said. “Just as you see each day with satellite radios, navigation systems and other technologies, there’s a market curve of acceptance.”
Anti-lock braking systems and electronic stability control systems both “went through that,” he said.
But the technology – which detects sliding and tipping and sends messages to other devices in the car to make corrections – didn’t succeed by chance.
Stability control sales leaders Robert Bosch GmbH and Continental AG formed an electronic stability control coalition that in recent years toured regional auto shows in an 18-wheeler truck and invited people inside to view a 3-D movie explaining the technology.
More importantly, the companies sold legislators in Washington, D.C., on the benefit of their technology. Aaron Bragman, now an automotive research analyst, used to work for Bosch as a salesman when the technology was just taking off.
Bragman said Bosch in the mid- to late-1990s was considering marketing its technology directly to the public much like Intel Corp. marketed its microchips directly to consumers. Instead, Bosch put more emphasis on winning government support, Bragman said.
To be sure, the money may not stream in as steadily as auto suppliers would like.
NHTSA is allowing automakers that have more than the required percentage of vehicles equipped with stability control to use the overage as a credit toward meeting the next percentage deadline.
