Joint Venture Aims to Grab a Slice of U.S. Seat Belt and Air Bag Market : Automotive: Swedish-Japanese company will manufacture belts, air bags at a factory in Tijuana.
Newly formed NSK-Autoliv Inc. is going to make sure drivers have no choice but to buckle up.
In June, the joint venture of Swedish and Japanese seat-belt makers will start producing motorized seat belts in an industrial building on Otay Mesa, its first U.S. plant. The motorized belts automatically strap drivers into their seats before they can start cruising.
Although motorized seat belts are nothing new, the recent enactment of a federal safety standard requiring that all 1990 passenger cars sold in the United States be equipped with “passive” restraint systems--either motorized seat belts or inflatable air bags--will dramatically increase the use and demand for such safety devices.
NSK-Autoliv is trying to join TRW Inc. of Cleveland, Morton International of Chicago and Bayern Chemie of West Germany as the main players in the $3-billion worldwide market for passive and active devices, a category that includes motorized and manual seat belts as well as air-bag systems.
“By 1994, it should be close to a $6-billion industry,” said Claude Gianino, a spokesman for TRW, a $7-billion international corporation involved in automotive, space and defense, and information systems. In 1989, TRW, the passenger restraint market leader, posted seat-belt and air-bag sales of $820 million and “expects to surpass the $1-billion mark this year” Gianino added.
NSK-Autoliv is a joint venture between $12-billion Swedish conglomerate Electrolux and Nippon Seiko Co. (NSK), a giant Japanese ball bearings manufacturer with $6 billion in annual revenues. The joint venture combines the resources of Electrolux’s Autoliv, a seat-belt manufacturer with a 50% share of the European seat-belt market and NSK’s seat-belt division that supplies nearly 20% of the Japanese market.
Although it will start off making only motorized seat belts, company president Mark Lobanoff said NSK-Autoliv hopes to start manufacturing the more lucrative air-bag systems in 1993.
NSK-Autoliv has signed a five-year lease for a 40,000-square-foot plant in the San Diego Business Park in Otay Mesa where testing, assembly and shipping operations will be housed. Lobanoff said the San Diego facility will employ about 50 workers once production of motorized seat belts begins in June. The plant is targeted for expansion in 1991, when NSK-Autoliv plans to build a plant in Tijuana.
Auto makers’ increasing use of air bags is the primary reason that industry experts say the restraint-systems market will boom in a few years.
“The problem with (motorized seat belts) is that they’re put to work every time you open the door . . . they tend to wear out,” said Joseph Phillippi, an automotive analyst with Shearson Lehman Hutton in New York. “That could lead to warranty problems, etc. Auto makers prefer the air bag because it only has to work once.”
By the mid-1990s, industry experts say 10 to 14 million air bags will be installed annually in U.S. passenger cars. Even more will be manufactured if light trucks are required to install the devices also. And experts say a more lucrative market is in the making if Europe and Japan adopt safety standards similar to the one passed by the National Highway Traffic Safety Administration (NHTSA) in Washington.
Starting with 1990 models, the new safety standard requires that all passenger vehicles sold in the U.S. be equipped with passive restraint systems in the front seats, according to NHTSA spokesman Tim Hurd. The standard requires the installation of motorized belts for both seats or an air bag for the driver’s side. By 1992, a passive restraint system will be mandatory for both sides.
According to Gianino, the TRW spokesman, air bags only accounted for $550 million of the $3 billion worldwide auto-passenger restraint market. But, by 1994, air bags alone are expected to inflate to $3.1 billion and account for more than half of the projected $6-billion restraint systems market.
Already, Chrysler Motors Corp. has made driver’s side air bags standard equipment in all of its 1990 U.S.-built passenger vehicles.
The Chrysler air bag, for example, is housed in the hub of the steering wheel and is deployed only when “crash/collision” sensors detect a significant impact--a crash that occurs at speeds equal to or greater than 11 m.p.h. Such an impact triggers the system’s igniter, which contains sodium azide pellets, which in turn explode and generate nitrogen gas that inflates the bag in 1/20th of a second.
“We elected to go with air bags because our engineering department confirmed that the combination of (manual) seat belts and air bags provide the best protection,” said Tony Cervone, a Chrysler spokesman based in the company’s Detroit headquarters. Ford has followed suit and says it will make air bags--for front seats, both driver and passenger sides--standard equipment by the mid-1990s.
Improved safety, however, will drain a few more dollars from consumers’ pockets.
Industry officials say the cost of air-bag systems ranges from $700 to $1,100. As a result, the average price of a 1990 Chrysler passenger car increased by 5% over the price of last year’s models, Cervone said. Replacing a Chrysler air-bag system costs $500 to $700.
Morton International and TRW now supply the nation’s Big Three auto makers--Chrysler, Ford and General Motors--with air-bag restraint systems. That’s fine with NSK-Autoliv’s Lobanoff who is primarily seeking to supply Japanese auto manufacturers that have established operations in North America.
“We have production orders with Asian-based car manufacturers in North America, but right now I would rather not get more specific,” said Lobanoff, in a phone interview from NSK-Autoliv’s corporate headquarters in Bloomfield Hills, Mich., a suburb of Detroit.
The joint venture was formed by the foreign manufacturers in a bid to crack the North Americana market, Lobanoff said.
‘Although both were dominant players in their respective domestic markets, neither had a presence in North America,” Lobanoff said. “That’s what they were seeking, and that’s why they ended up forming NSK-Autoliv.”
By 1991, NSK-Autoliv plans to shift the bulk of its seat-belt production from Otay Mesa to a plant it will build in Tijuana. Lobanoff said the new plant will hire 450 workers, who are expected to start making air bags in 1993. The San Diego plant will be used primarily for shipping and testing, he said.
“A lot of labor goes into assembly,” Lobanoff said. “San Diego is the perfect location for us because it allows us access to a cheaper labor pool in Tijuana, and it’s also closer to Japan, where our raw materials will be coming from.”
Morton International, a producer of chemicals, salt and air-bag restraint systems, recorded $1.6 billion in sales for the fiscal year ended June 1989. The company, which specializes in manufacturing the air-bag inflater, posted systems sales of $50 million in 1989 and expects to triple its air-bag sales this year.
