UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

COMMISSIONERS: 

In the Matter of 

ZF Friedrichshafen AG, 

a corporation; and, 

TRW Automotive Holdings Corp., 

a corporation. 

Edith Ramirez, Chairwoman 

Julie Brill 

Maureen K. Ohlhausen 

Joshua D. Wright 

Terrell McSweeny 

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Docket No. C-4520 

APPLICATION FOR APPROVAL OF DIVESTITURE OF 

THE TRW L&S BUSINESS 

Pursuant to Section 2.41(f) ofthe Federal Trade Commission ("Commission") Rules of 

Practice and Paragraph II of the Decision and Order ("D&O") accepted for public comment by 

the Commission on May 5, 2015 in the above-captioned matter, Respondent TRW Automotive 

Holdings Corp. (together with its relevant subsidiaries, "TRW") and Respondent ZF 

Friedrichshafen AG (together with its relevant subsidiaries, "ZF") respectfully submit this 

Application for Approval of Divestiture of the TRW L&S Business 1 ("Application") to THK 

Co., Ltd. ("THK") upon the terms and subject to the conditions of the series of agreements 

Capitalized terms not defined in this Application have the definitions given to them in the D&O. 
dated April 21, 2015 (together the "Divestiture Agreement"), provided with this Application as 

Confidential Appendix A hereto. 

I. Introduction 

On September 15, 2014, ZF and TRW (together, the "Respondents") entered into an 

Agreement and Plan of Merger (the "Respondents' Agreement") whereby the Respondents 

agreed that ZF would acquire TRW for $105.60 per share in an all-cash deal valued at 

approximately $12.4 billion. 

On April22, 2015, the Respondents executed an Agreement Containing Consent Orders 

("Consent Agreement") that included the D&O and an Order to Hold Separate and Maintain 

Assets ("Hold Separate Order"), which, if approved, would require the Respondents to divest 

the TRW L&S Business. 

On May 5, 2015, the Commission served on the Respondents a Complaint alleging that 

ZF's acquisition of TRW, if consummated as described in the Respondents' Agreement, would 

increase the likelihood of coordinated interaction among the remaining competitors in the North 

American heavy vehicle tie rod market and eliminate direct competition between ZF and TRW, 

resulting in the increased probability that customers would pay higher prices for heavy 

commercial vehicle tie rods in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 

§ 18 and Section 5 ofthe FTC Act, 15 U.S.C. § 45 (the "Complaint"). 

On May 5, 2015, concurrently with the issuance ofthe Complaint, the Commission 

accepted the Consent Agreement and issued the Hold Separate Order. 

On May 15, 2015, ZF closed its acquisition ofTRW. 

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Il The Proposed Divestiture 

On April 21, 2015, subject to the Commission's approval, TRW entered into a binding 

and definitive Divestiture Agreement to sell the TRW L&S Business to THK for $400 million 

in cash, subject to working capital and other adjustments. The Divestiture Agreement includes: 

• An overarching umbrella agreement (the "Umbrella Agreement"); 

• A Stock Purchase Agreement regarding the TRW L&S Business subsidiary located in 

the Czech Republic (the "Czech SPA"); 

• Asset Transfer Agreements regarding the TRW L&S Business assets located in 

Canada, Germany, and the United States (the "Canada A TA," "Germany ATA," and 

"U.S. ATA," respectively); and 

• Certain ancillary agreements regarding, inter alia, supply, transition services, and 

intellectual property licenses. 

The Divestiture Agreement includes, among other assets, all assets identified in 

Paragraph II of the 0&0. Furthermore, as described below, THK has the necessary financial 

wherewithal, industry experience, and operational capability to ensure that the TRW L&S 

Business remains a strong, competitive business and a trusted partner to both customers and 

suppliers worldwide. Accordingly, the proposed divesture will accomplish the purposes of the 

D&O by ensuring the continuation ofthe TRW L&S Business as an ongoing, viable, and 

effective competitor in the North American market for the research, development, engineering, 

manufacture, marketing, and sale of tie rods for heavy vehicles. 

III. The Proposed Acguirer THK Is Well-Qualified to Be a Viable Competitor 

A. Overview of THK 

THK is a global manufacturer of machinery components. THK operates 

28 manufacturing plants across Asia, North America, and Europe, and has approximately 9,250 

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employees. Approximately one quarter of its overall business involves the production of 

automotive machinery and components. In 2007, THK acquired 1 00% of the shares of Rhythm 

(a company active in the development, design, manufacture, and distribution of automotive 

parts for use in key safety devices from steering mechanisms, suspension, and brakes to 

transmissions) from The Carlyle Group. In 20 II, THK acquired TRW's Asia-Pacific 

automotive linkage and suspension components business. THK successfully integrated both 

acquired companies into THK's automotive components business. THK is currently not 

controlled by a majority shareholder and is its own parent entity. THK's headquarters are in 

Tokyo, Japan and its shares are listed on the Tokyo Stock Exchange. 

B. THK Has the Resources, Expertise, and Incentive to Maintain and Develop 

the TRW L&S Business 

1. THK Has Sufficient Resources to Maintain and Develop the TRW L&S 

Business 

In its financial year 2014, THK reported net sales of approximately ¥185.5 billion 

(approximately $1.54 billion) and a gross profit of approximately ¥53 billion (approximately 

$440 million). THK's financial year 2014 annual report is attached as Exhibit I hereto. 

In 2015, THK has an estimated market capitalization ofapproximately¥409.5 billion 

(approximately $3.4 billion) and an estimated enterprise value of approximately ¥331.1 billion 

(approximately $2.75 billion). The difference between THK's market capitalization and its 

enterprise value reflects a positive cash balance, which underscores the financial strength of 

THK 

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As such, THK has ample financial resources to develop the TRW L&S Business as part 

of its existing operations. THK plans to use its cash on hand to finance the acquisition ofthe 

TRW L&S Business and thus does not require any external financing. 

2. THK Has Proven Expertise Operating Linkage and Suspension 

Businesses 

As mentioned above, THK is a global manufacturer of machinery components with a 

proven track record in automotive product areas and as such the TRW L&S Business falls 

directly under THK's core focus. Approximately one quarter of its overall business involves the 

production of automotive components and THK has years of experience in the manufacture and 

sale oflinkage and suspension components in United States as well as China, Japan, Malaysia, 

Mexico, and Thailand. THK's principal customers include original equipment manufacturers 

("OEMs") such as Nissan, Honda, General Motors, Ford, Chrysler, and KYB? THK's current 

linkage and suspension components portfolio includes tie rods, stabilizer links, and suspension 

ball joints.3 THK's other major products include a myriad of automotive parts, such as miniature 

joints, transmission component parts, engine component parts, brake parts, cold~ forged products, 

and precision plastic products.4 

In 2011, THK further enhanced its preexisting linkage and suspension expertise by 

acquiring TRW's Asia-Pacific linkage and suspension business. That operation was integrated 

into THK's business without any significant issues. 

4 

THK Rhythm, Principal Customers, available at http://www.rhythmmp.co.jp/english/company/abstract.html. 

THK Rhythm, Products Information, available at http://www.rhythmmp.co.jp/english/product/steering.html. 

THK Rhythm, Products Information, available at http://www.rhythmmp.co.jp/english/product/brake.html#reizyushi. 

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Based on THK' s history of success in the automotive parts industry and its successful 

acquisition ofTRW's Asia-Pacific linkage and suspension business in 2011, the Respondents 

fully believe that THK has the expertise to operate the TRW L&S Business in a similarly 

successful and competitive manner. 

3. THK Has Ample Incentive to Maintain and Develop the TRW L&S 

Business 

THK is making a substantial investment to acquire the TRW L&S Business as an 

important part of its long-term strategy to grow its North American and European linkage and 

suspension business. THK is fully committed to, and has every incentive to maintain and 

improve, the TRW L&S Business. 

C. There Are No Competition Concerns and No Risk That the 

Implementation of the Order Will Be Delayed 

The Complaint identified heavy commercial vehicle ("HCV") tie rods as the source of 

the Commission's competition concerns relating to the Respondents' Agreement. Although 

THK is an important and growing supplier of linkage and suspension components to OEMs and 

original equipment suppliers ("OESs") worldwide, THK does not currently produce or sell any 

HCV tie rods or any other HCV linkage and suspension components in North America. Thus, 

the proposed divestiture does not result in a concentration with respect to HCV tie rods and 

therefore does not present any competition concerns relating to that product. 

While there are product overlaps between THK and the TRW L&S Business in certain 

light vehicle linkage and suspension components, these overlaps also do not present any 

competition concerns, as they are limited and the parties' activities are largely complementary. 

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The following tables contain the Respondents' estimates of market shares with respect to the 

overlapping light vehicle suspension components in North America5: 

[REDACTED] 

The proposed combination ofTRW's and THK's shares in these product areas represent 

incremental increases in concentration and present no competitive issues. 

Notwithstanding the absence of competition concerns, consummation of the proposed 

divestiture is conditioned on, inter alia, the receipt of competition clearances by all relevant 

Governmental Authorities (including the approval ofTHK as a suitable purchaser by the 

Commission and European Commission). THK and the Respondents have determined that 

formal merger control filings are necessary in the United States, Canada, Germany, and Poland 

and are in the process of preparing the required notifications. The Respondents are confident 

that THK will receive the requisite approvals in a timely manner and that the implementation of 

the 0&0 will not be delayed. The parties' objective is to close on the transaction by July 31, 

2015 but in all events no later than October 22, 2015. 

D. THK Is Independent of the Respondents 

As discussed below, THK is independent of, and unconnected to, the Respondents. 

Specifically: 

• THK has no direct or indirect ownership interests in any company owned or controlled 

by the Respondents or any of their affiliates. 

• No director ofTHK or any of its subsidiaries is on the board of any company owned or 

controlled by the Respondents or any of their affiliates. 

The estimates provided herein differ from the estimates the Respondents provided to the FTC on December 

2, 2014 due to direct input from THK's outside counsel regarding THK's sales in North America. Those 

actual figures have replaced the estimated figures from the previous estimates. 

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• No company owned or controlled by either of the Respondents or any of their affiliates 

has any direct or indirect ownership interest in THK or any of its subsidiaries. 

• No director of any company owned or controlled by the Respondents or any of their 

affiliates is on the board of THK or any of its subsidiaries. 

• THK is not economically dependent on the Respondents. 

• The Respondents are not economically dependent on THK. 

For completeness, the Respondents note the following regarding arm's-length, ordinary 

course dealings between THK and the Respondents during the last financial year: 

• In 2014, ZF did not sell any products to THK. 

• In 2014, THK supplied steering tie rods to ZF's chassis system assembly business in 

Asia for approximately [REDACTED]. 

• In 2014, TRW provided services to THK for approximately [REDACTED]. 

• In 2014, THK supplied steering tie rods and components to TRW in Brazil, China, 

Germany, Japan, Korea, Malaysia, and Thailand for approximately [REDACTED].6 

These commercial relationships between THK and the Respondents do not undermine 

the commercial independence ofTHK as a purchaser ofthe TRW L&S Business. None ofthese 

relationships are material to THK or to either of the Respondents. THK's sales to the 

Respondents represented less than 1% ofTHK's 2014 revenues and less than 0.5% ofthe 

Respondents' 2014 revenues. All of these relationships are ordinary course and reflect arm's 

length terms that are customary in the industry. 

IV. The Proposed Divestiture Conveys All of the TRW L&S Assets Required to Be 

Divested and Is Consistent with the Decision and Order 

6 

A. The Proposed Divestiture Conveys All of the TRW L&S Business Assets as 

Required by the Decision and Order 

On April1, 2015, we advised the FTC that TRW had purchased approximately [REDACTED]worth of 

products (primarily ball joints and tie rods) from THK in 2014. TRW subsequently discovered that total 

purchases in 2014 were approximately [REDACTED]because some ofTRW's spend had been classified as 

intercompany transactions as a legacy of TRW purchasing such products from the Asia-Pacific business 

sold to THK in 2011. As explained in the text, the volume of TRW purchases in 2014 is still immaterial to 

THK's and TRW's businesses. 

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Paragraph I.RR of the D&O describes the package of assets the Commission has 

required the Respondents divest to remedy its competition concerns. The scope ofthe TRW 

L&S Business pursuant to the Divestiture Agreement is consistent with Paragraph I.RR of the 

D&O. In pmiicular, the Respondents will transfer all of their legal and equitable rights, title, 

and interests in all tangible and intangible property of any kind used for or relating to: 

• 

10 

II 

The research, engineering, manufacture, marketing, and/or sale ofL&S Components at 

or from the TRW L&S Facilities7; 

TRW L&S Books and Records 8; 

TRW L&S Contracts9; 

TRW L&S Intellectual Property 10; and 

TRW L&S lnventories. 11 

See, e.g., Paragraph 2.1 ofthe U.S. ATA. 

See, e.g, Paragraph 2.1 (h) ofthe U.S. AT A. 

See, e.g, Paragraph 2.1(e)-(g) of the U.S. ATA. 

See, e.g., Paragraph 2.1 (a)-(d) of the U.S. A TA. In terms of Intellectual Property and patents in pa1iicular, 

see Schedule 3.18(a) of the German ATA. 

See, e.g, Paragraph 2.l(i) ofthe U.S. ATA. 

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B. The Terms of the Divestiture Agreement Are Consistent with the Terms of 

the Decision and Order 

1. Timing 

Paragraph II.A of the D&O requires the Respondents to divest the TRW L&S Business 

no later than six months from the ACCO Execution Date, April 22, 2015, or October 22, 2015. 

The Divestiture Agreement contemplates the closing will occur by the later of (i) the date that is 

five business days after all of the conditions to the closing set forth in the Divestiture 

Agreement are satisfied or waived and (ii) July 31, 2015. In all events, the Respondents expect 

the divestiture will close no later than October 22, 2015, consistent with the terms ofthe 

2. Transition Services 

The D&O requires the Respondents to provide various transition services at the option 

of the Acquirer, to ensure that the divested business is able to function fully and without 

prejudice during the period immediately following the divestiture. The Divestiture Agreement 

includes a Transition Services Agreement that provides for a variety of transition services that 

are more than adequate to meet the requirements of the D&O. 

Specifically, Paragraph H.B.2 of the D&O requires the divestiture to include a 

Transition Services Agreement that commits the Respondents to the provision of certain 

services relating to the TRW L&S Business-such as payroll, employee benefits, accounts 

receivable, accounts payable, utility services, heating and air conditioning services and systems, 

and other logistical and administrative support-for a term of up to two years at no more than 

the Direct Costs of the Respondents. The Divestiture Agreement contain a Transition Services 

12 See, e.g., Paragraph 9.1 ofthe U.S. ATA. 

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Agreement and affiliated Statements of Work describing in detail the variety oftransition 

services the Respondents will provide to THK post-transaction, satisfying this requirement. 13 

Moreover, Paragraph Il.B.l of the D&O requires the Respondents to lease to the Acquirer of the 

divested business, upon commercially reasonable terms and for a period of at least one year 

with an optional six-month extension, the areas within the TRW's DUsseldorf facility used or 

planned to be used for DUsseldorf Design, Engineering & Sales Support. The Transition 

Services Agreement will include a Statement of Work that provides for lease tenns that comport 

with the D&O's requirements. 14 

Finally, consistent with Paragraph II.B.4 of the D&O, the Divestiture Agreement 

includes a Transition Trademark Assistance Agreement as Exhibit A of the Umbrella 

Agreement. 

3. License Back Agreement 

Paragraph II.C of the D&O permits the Divestiture Agreement to include License Back 

arrangements for the Respondents to use TRW L&S Intellectual Property which was delivered 

to or used by TRW businesses other than the TRW L&S Business prior to March 12, 2015 for 

the research, development, production, manufacture, marketing, and sale of products related to 

(i) tie rods used in TRW's non-competing steering business currently at TRW's Schalke facility 

and (ii) L&S Components used in TRW's independent aftermarket business, but only insofar as 

such L&S Components are not sold in competition with products produced by the TRW L&S 

13 

14 

See, e.g, Schedules 1-15 of Exhibit 2.1.A of the U.S. AT A. The Statements of Work remain a work in 

process as the parties discuss final wording but no material changes are expected. 

See, e.g, Schedule 7 of Exhibit 2.l.A of the U.S. ATA. The final wording of this Statement of Work 

remains subject to further discussion with THK although again material changes are not anticipated. 

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Business and sold to OEMs or OESs. 15 In addition, Paragraph I.W of the D&O notes that 

nothing contained in the D&O prevents the Respondents and the Acquirer from agreeing to 

license back additional TRW L&S Intellectual Property, with the understanding that any such 

agreement is subject to the Commission's approval. 

Consistent with these provisions, THK has agreed to grant the Respondents a perpetual, 

royalty-free license back to allow the Respondents to continue manufacturing certain L&S 

Components in its Schalke facility to allow Schalke to continue to support an extremely limited 

number of existing OEM programs, the bulk of which produce parts for Daimler Sprinter 

vehicles, approximately [REDACTED]% of which are sold in Russia. 16 These other tie rod 

sales comprise less than [REDACTED]% of the volume of tie rods manufactured in Schalke, 

with a projected 2015 sales value of less than [REDACTED]. In light of the de minimis nature 

of these components and sales, and the fact the additional license back is limited to supporting 

current and not future OEM programs, the Respondents submit that these insubstantial OEM 

programs will have no impact on competition and respectfully request that the Commission 

permit this additional limited use, as provided for in Paragraph I.W of the D&O. 

As previously discussed with the FTC staff, Christophe Baron, the Chief Executive 

Officer ofthe TRW L&S Business, suppmis all ofthe foregoing License Back arrangements. 

15 

16 

Confidential Appendices A-1 and A-2 of the Decision and Order permit the License Back of the 

Intellectual Property delivered to or used by TRW's Schalke facility (located at Freiligrathstrasse 8-28, D45881, Gelsenkirchen, Germany) prior to March 12, 2015, and necessary to research, develop, produce, 

manufacture, market, or sell the products described on the drawings specifically identified in those 

appendices. 

See Intellectual Property License Agreement (Exhibit C ofthe German ATA). The Intellectual Property 

License Agreement included with the Application for Approval of Divestiture of the TRW L&S Business is 

as-proposed to THK, and is consistent with the terms of the D&O, but has not yet been finalized. The few 

OEM programs supported by Schalke will be identified in an exhibit to the Intellectual Property License 

Agreement. 

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4. Consents 

[REDACTED]. The Divestiture Agreement requires the Respondents obtain all 

consents listed on certain schedules. 17 

[REDACTED]. [REDACTED] 18 and [REDACTED], 19 [REDACTED].20 

5. Indemnification 

Paragraph Il.E of the D&O requires that the Divestiture Agreement include provisions 

that promote achieving the purposes of the Order allocating and providing for indemnification 

of any liabilities and direct or indirect damages and claims of customers or any other Persons 

(including, but not limited to, environmental liabilities, product liabilities, and product recalls) 

related to the operation of the TRW L&S Business prior to the Divestiture Date. The 

Divestiture Agreement includes mutually agreed provisions that provide for the allocation of 

certain liabilities between THK and the Respondents, subject to certain caps and deductibles 

that are normal, customary, and appropriate for the industry. 21 

6. Tillsonburg Production Line Relocation 

Paragraph II.B.l and Confidential Appendix E of the D&O impose various requirements 

with respect to the transfer of the Tillsonburg Production Lines from the Retained Tillsonburg 

Facility to the Tillsonburg Facility. The Respondents have covenanted in the Canadian ATA to 

perform this undertaking in the manner required by the 0&0?2 

17 

18 

19 

20 

21 

22 

7. Cooperation with Hiring and Retention Efforts 

See, e.g., Schedule 3.10(a) ofthe U.S. ATA. 

See Schedule 1 of the Umbrella Agreement. 

See Schedule 2 of the Umbrella Agreement. 

See Paragraph S(a)(ii) of the Umbrella Agreement. 

See, e.g., Paragraphs 10.2, 10.6, and 10.7 ofthe U.S. ATA. 

See Paragraph 5.19 of the Canada AT A. 

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The D&O requires the Respondents to cooperate with and assist the Acquirer in 

evaluating and retaining employees of the divested business and also to abstain from directly or 

indirectly soliciting, hiring, or entering into any arrangement for the services of any former 

TRW employees employed by Acquirer (for one year in the case of TRW Workforce 

Employees, and two years in the case ofTRW Key Employees). 23 The Divestiture Agreement 

contains provisions that require the Respondents to cooperate with THK's efforts to continue 

the employment of the TRW Employees, and also impose restrictive covenants on solicitation 

and hiring that are consistent with the terms of the D&0. 24 

C. The Divesture Agreement Is Consistent with the Purpose of the Decision 

and Order 

Paragraph II.H of the D&O states that the purpose of D&O is to ensure the continuation 

of the TRW L&S Business as an ongoing, viable, and effective competitor in the North 

American market for the research, engineering, manufacture, marketing, and sale of HCV tie 

rods, and to remedy the lessening of competition resulting from the Acquisition as alleged in the 

Commission's Complaint. Divesting the TRW L&S Business to THK fulfills the purpose of the 

D&O because THK will continue to operate the TRW L&S Business as a viable and effective 

competitor in both North America and Europe. As discussed above, THK has the incentive, 

financial capacity, and experience necessary to operate a robust, competitive linkage and 

suspension business in North America. Moreover, the divested TRW L&S Business includes an 

experienced management team that is committed and excited to work with THK to maintain and 

23 

24 

Paragraph III.A-C 

See, e.g., Paragraph 5.5, 5.9(a), and 5.9(b) ofthe U.S. ATA. 

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grow the TRW L&S Business. Respondent's sale ofthe TRW L&S Business to THK will 

remedy any alleged competitive harm described in the Complaint. 

V. Request for Confidential Treatment 

This Application, including the attached Agreement and related documents, contains 

confidential and competitively sensitive information relating to the Respondents, the divestiture 

ofthe TRW L&S Assets, and THK. Disclosure ofthis confidential information may prejudice 

the Respondents and THK, and cause harm to the ongoing competitiveness of both companies, 

as well as the divested TRW L&S Assets. 

Pursuant to Sections 6(±) and 21(c) ofthe Federal Trade Commission Act, 15 U.S.C. §§ 

46(±) and 57b-2(c), and Sections 2.41(±), 4.9 and 4.10 the Commission's Rules ofPractice and 

Procedure, 16 C.F.R. §§ 2.41(1), 4.9 and 4.10, the Respondents requests that nonpublic, 

commercially or competitively sensitive information contained in this Application be treated by 

the Commission as strictly confidential and not be made available to the public. The 

Respondents requests that the Commission inform it immediately if the Commission cannot 

treat the confidential information contained in this Application as confidential in order to 

provide the Respondents an opportunity to seek relief. 

For the convenience of maintaining the public record, the Respondents are submitting 

two versions of this Application. The confidential version contains the information necessary to 

enable the Commission to assess the Application. The public version has been redacted to 

exclude confidential and proprietary information. 

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VI. Conclusion 

For the reasons set forth above, the proposed divestiture of the TRW L&S Business to 

THK is pro-competitive, in the public interest, and addresses any competitive concerns raised in 

the Complaint and the D&O. The Respondents respectfully request that the Commission 

approve the divestiture of the TRW L&S Business to THK. 

Dated: May 19,2015 Respectfully submitted, 

Peter C. Thomas 

N. Preston Miller 

Nicholas 0. Ridley 

Simpson Thacher & Bartlett LLP 

1155 F St. NW 

Washington, DC 20004 

Counsel for TRW Automotive Holdings Corp. 

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