acquisitions from DaimlerChrysler and AB Volvo involving heavy-duty truck suppliers
and manufacturers in North America will reinforce the already existing trend for
greater participation of European suppliers in the market. A recent Frost &
Sullivan analysis of the Class 6, 7, and 8 powertrain and chassis component market
in North America showed that participation of European-rooted suppliers, although
still quite low, has increased by around 40 percent in the last three years. In
fact, sales in 1997 were about $160 million and for 2000 the total approached
$230 million. Revenues only account for less than 3 percent of the total market
and are yet quite low to make for a strong force in the market.More important,
however, is the feeling that European truck manufacturers might be contemplating
the use of European components in the North American market. Here, Alfonso Corredor,

Research Analyst at Frost & Sullivan, talks about the industry.

In the summer of 2000 DaimlerChrysler acquired the outstanding shares of Detroit
Diesel Corporation (DDC), as it already had 21.3 percent of the shares. DDC
manufactures diesel engines for automobiles, buses, trucks, and various vocational
heavy-duty vehicles. In the truck segment, production is specialized in heavy-duty

participation of European suppliers has

been reinforced

by recent acquisitions from DaimlerChrysler and AB Volvo

In addition, DaimlerChrysler is the owner of Freightliner Trucks, the largest
manufacturer of Class 6, 7, and 8 trucks in North America. In turn, Freightliner
is the owner of Western Star Trucks and Sterling Truck Corporation. Before the
DaimlerChrysler’s acquisition, the Freightliner Group was DDC’s main customer.
The move, then, is not a surprise for the market. However at the beginning of
2001, the PACCAR Group — Kenworth Trucks and Peterbilt Motors — announced
that it will stop offering DDC engines in its trucks.

In January 2001, AB Volvo acquired Renault V.I. The move gave Volvo control
of Mack Trucks, since Renault owned Mack. This is an important movement for
Volvo in the North American market. Mack Trucks mainly covers the Class 8 market
and is the third largest manufacturer of medium and heavy-duty trucks. The joint
production of the two companies will move Volvo to the second largest producer
of Class 8 trucks. Additionally, Mack Truck produces its own engines and only
buys marginal quantities from other suppliers.

The result is that now more that 60 percent of the truck production in North
America will be guided by European parent companies and this is making American
truck suppliers nervous.

four companies above are the main players covering the powertrain and
chassis component market for medium and heavy-duty trucks

European Suppliers Activity

On the truck component supplier side, there are mainly four companies covering
the powertrain and chassis component market for medium and heavy-duty trucks.

The oldest participant in this market is Behr Heat Transfer Systems, Inc.,
part of the German Behr Group. Behr entered the market in 1974 and is now the
second provider of cooling systems for Class 6, 7, and 8 trucks in North America,
with about a third of the share of the market.

The largest European participant in the truck component market is Haldex Brake
Systems, part of the Swedish Haldex Group. Haldex started production of brake
adjusters in the North American market in 1981 and solidified its market position
in 1998 with the acquisition of Midland-Grau from Echlin, Inc. It is now the
dominant provider of slack adjusters for Class 6, 7, and 8 trucks, with more
than 80 percent of the market.

competitors in the North American
market are getting nervous about the possible changes in the purchasing
policies of companies such

as Volvo

Valeo is a third participant in the truck component market, mainly with Valeo
Engine Cooling, but also with a small participation with Valeo Clutches &
Transmissions. In the provision of cooling systems, Valeo won more than 10 percentage
points in revenue market share from 1997 to 2000.

BorgWarner is a fourth European participant in this market. It started to compete
under its own name in the turbocharger market when it bought Schwitzer from
Kulhman Corporation in 1999. Kulhman had acquired Schwitzer, Inc. in 1995. However,
BorgWarner was previously participating in the market as part of Warner Ishi
Corporation and sold its participation to Ishikawajima Harima Heavy Industries,
Ltd. (IHI), the other partner, in 1998. Schwitzer used to be a strong a participant
in the market and BorgWarner has increased revenue market share at about 4 percentage
points, since the acquisition.

It is quite clear that European suppliers do not have a strong participation
in the total market, although they are strong competitors in some market segments.
However, the rest of the competitors in the North American market are getting
nervous about the possible changes in the purchasing policies of companies such
as Volvo.

It might still be to too early to predict the impact of Volvo’s acquisition
or DaimlerChrysler move to have full control of DDC. But Volvo has already formed
a business unit called Volvo Global Truck to include not only Volvo Trucks,
Renault V.I., and Mack

Trucks, but also a new unit called 3P, for planning, purchasing and product

There is no doubt that competition will get tougher. Even if the component
market does not really witness new European providers, the potential for them
to enter the North American market is enough for truck maker like Volvo to push
for more price reductions. The market is bound for leaner margins and though
negotiation of provision contracts.
is Frost & Sullivan’s new innovative and interactive homepage aimed
at the global automotive and transportation industries. Bringing together
the experience of our team of analysts positioned around the world,
offers unrivalled market analysis of all sectors of the automotive and
transportation industries. Frost & Sullivan is currently studying
the North American Class 6, 7, and 8 truck component market (7989-18).
The results of the study will be published in July 2001.

For more information contact:

Nikki Cole

Tel. +44 (0) 20 7343 8325

To view related research reports, please follow the links

North American Heavy Truck Market

2000-2005 World Outlook for Trucks, Trailers and Buses

Global Supplier Report