Smart Airbag Systems

The following industry trends have been identified that will play a crucial role in the definition of the "smart" and "intelligent" occupant restraint systems.

We have already seen a major restructuring or "shakeout" in the supply base of occupant restraint components. As already mentioned, the development of these products requires a significant amount of capital in both product development and testing, and thus, only the largest and financially strongest participants are able to provide the full compliment of design and testing services to the auto manufacturers that they require. As occupant restraint designs become more integrated in terms of components, we will see continued vertical integration among the major system suppliers.

Most recently, Breed's acquisitions of both AlliedSignal and Siemens' automotive electronics operations move Breed into direct competition with Autoliv, TRW, and Takata who also possess varying levels of component integration, including both airbag and seatbelt technologies, two prime elements of the occupant restraint equation.

Both Breed and Autoliv are in the process of major restructuring to streamline their operations from their recent mergers. It will take some time (we estimate as long as 24 months, or more) before existing product plans will be replaced by new developments taking advantage of the integration of the capabilities of the merged companies. Thus, it will be several years before the benefits of the merged firms will find their way into production and the market.

The remaining nonintegrated suppliers of major occupant restraint components are candidates for possible merger and/or acquisition . They include:

The trend toward higher levels of vertical integration among the airbag suppliers has thus far been directed at moving up the "food chain". Airbag inflator suppliers have expanded to include module assembly, steering wheel manufacturing, plastic cover molding, seatbelts, sensors, and electronics.

We expect to see further acquisitions and strategic relationships established between the inflator and initiator suppliers as this will be a critical technology area in the more sophisticated systems.

o Autoliv has moved down the "food chain" to initiators and propellants, through their acquisition of the french initiator manufacturer NCS, by their Autoliv Inflators Subsidiary, which also has access to propellant technology through government-owned pyrotechnics firm, SNPE, a partner in Autoliv Inflators.

o	Special Devices, Inc. - Mesa AZ, and Moorpark, CA (glass / medal initiators)
o	OEA, Inc. - Denver, CO (glass / medal initiators)
o	Quantic Industries Inc. - San Carlos and Hollister, CA (plastic and semiconductor initiators, micro gas generators for pretensioners)
o	Talley Industries - Phoenix, AZ (under acquisition by Carpenter Industries, expected to only be interested in retaining Talley's metals business, so the pyrotechnic activity is expected to be back on the market soon. Developing ceramic technology initiators, not yet in production.)
o	Teledyne McCormick Self - Hollister, CA (micro gas generators for pretensioners)
o	Davey Bickford - France (primarily plastic initiators)
o	Patvag - Switzerland (ceramic, deposited bridge initiators)
o	GIAT - France (French government owned, plastic and semiconductor initiators, JV with Motorola)
o	In-Det - the former Chekloslovakia (primarily plastic init