The auto industry is facing its biggest disruption in a century, and suppliers are on the front lines facing extreme pressure to speed development and innovate – without raising costs. Given that climate, cut-throat mergers and acquisitions could be the order of the day. German supplier ZF is taking a different tact: buying considerable stakes in smaller, nimble companies and allowing them to remain independent, which it hopes will reward the auto giant with a fresh wave of technological advances.

Supporting this, ZF started a venture capital division, called Zukunft Ventures GmbH, which invests in companies for their specific expertise. Zukunft translates to "future" in German, and its first deals were indeed forward-looking. ZF bought 40 percent of German companies Ibeo and doubleSlash to support its autonomous and connected driving projects. ZF is eyeing companies in Silicon Valley, Asia, Israel, Europe, and other locations for more deals.

Hamburg-based Ibeo is an expert in lidar and software and expands ZF's sensor capabilities, which previously were radar- and camera-based. By melding Ibeo's tech with its own, ZF says it can make lidar systems more compact and easier to integrate into cars. Ibeo's expertise in fusing all three sensors will help create systems that make cars more aware of their surroundings, which advances autonomous projects. The company is expected to grow from 50 workers to more than 250 and plans to create an autonomous driving center.

Meanwhile, doubleSlash, located in ZF's home city of Friedrichshafen, is a data and networking supplier with about 100 employees. It will help ZF develop software architecture for connectivity as the industry pushes development in vehicle communication.
zf ventures
Mergers and acquisitions is once-again a red-hot part of the automotive business, with General Motors, Ford, Daimler, BMW, and others investing or outright buying smaller firms to aid in connectivity, ride-sharing, and other elements of transportation still in their early days.

Torsten Gollewski, managing director of ZF's ventures division, says its strategy is to harvest the technologies but still allow the companies to remain independent. It estimates 30-to 60-percent ownership stakes are the right formula for ZF. "They should keep their culture and their speed of development," he told Autoblog in an interview last week. The companies can also still sell some of their tech to other suppliers and automakers.

It's a different tactic than ZF has employed with larger firms. Last year, it bought safety system producer TRW, one of the largest auto suppliers in the world, and integrated it as a division of ZF.

For the smaller ventures, ZF wants to remain somewhat hands-off, mindful that newer companies could chafe under the weight of corporations – like 101-year-old ZF and its global workforce of 135,000. "If you want to be attractive to these people, you have to give them a certain environment of working," said Gollewski, a former Audi executive in charge of joint ventures.

The deals are still recent with Ibeo and doubleSlash, so production systems are likely at least two to three years away, Gollewski said. But securing their know-how allows ZF to round out its tech portfolio to sell to automakers faster. "It can easily open up access," he said.

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