DETROIT—If the tires that he builds are little more than lowly commodities, why then is Hubertus von Gruenberg riding so high? Mr. Von Gruenberg heads Continental A.G. of Germany, which ranks a distant fourth among the world's biggest tire makers. But the tall, lean and very intense chairman acts as if he is striding toward a pot of gold.
The reason: A young German physicist, in response to his chairman's plea, has hit on a way to transform tires from rubber commodities into high-tech electronic components.
Continental calls its new, patented concept a ``smart tire.'' If things go Conti's way, automakers will make the tires the centerpiece of complex ride- and stability-control systems. And that will secure Conti's survival among the world's auto parts warriors.
How the innovation came about is a story of desperation amid an industry in upheaval.
And, the 56-year-old chairman freely admits, Conti also has some ``pretty good luck.''
Whether the luck continues is now up to automakers, who will decide whether the technology gets a chance.
The smart-tire system made its U.S. debut in early March at the SAE International Congress and Exposition in Detroit.
But the tire's story can be traced to 1991, when Mr. Von Gruenberg was serving as the first German-born CEO of ITT Automotive, in Auburn Hills, Mich. He had entered the auto business right out of college, where he wrote his doctoral thesis on Einstein's Theory of Relativity.
Mr. Von Gruenberg worked in the research department of German brake maker Alfred Teves GmbH. ITT Automotive's acquisition of Teves led him into the corporate ranks in the U.S.
Then came a 1991 offer to run Continental, which was fending off a hostile takeover bid by Italian competitor Pirelli S.p.A.
Mr. Von Gruenberg successfully beat back the takeover, but he realized that Conti's real problem was financial.
The company lost 127 million German marks in 1991 (about $76.6 million) and floated along with profit margins of less than 1 percent in subsequent years. Its costs-per-unit were too high, the chairman said. Its plants were inefficient and underused. And in a global business where suppliers were congealing into modules and systems, the tire industry was going to be left behind.
Mr. Von Gruenberg focused on cutting plant costs, reducing the work force, resourcing materials to lower-cost producers and trying to modernize the tire factories. But the long-range outlook worried him. In 1994, he summoned his worldwide engineering and development staffs to a meeting in Germany.
We need a breakthrough, he told the engineers. We cannot compete on a cost basis from Germany against tires from Indonesia and Asia. If the company is going to survive, we must compete on the basis of technology and creativity.
``Folks, I am the same as you,'' he recalled telling them. ``Like you, I come from a product engineering background. Now I challenge you. I need a technical breakthrough from you. You must somehow make this old commodity distinct and different. It must be a total landslide victory over everything known before.''
Just do it
Mr. Von Gruenberg vowed to support the mission personally. He would make sure there was no interference from the finance or personnel departments. He called for weekly technical meetings, and for quarterly worldwide meetings to bring ideas together.
At one of those meetings, in late 1995, a senior engineering executive requested the microphone. The executive noted that a young engineer had an idea that deserved discussion.
The idea: to install thin strips of magnetic powder inside the sidewalls of the company's tires. As the tires rolled, the magnetic ``poles'' would generate a readable electronic pattern. Off-the-shelf sensors mounted on the wheel struts would monitor the tire patterns constantly for torsional changes. Any variance in the pattern would mean that the stiff sidewalls were bending or flattening, as though in a turn. The signals would warn in real time if a tire was accelerating, spinning, losing traction, braking, turning or sliding.
That data could create an entirely new vehicle information system. It could be the management point to run electronic braking, traction control, electronic stability programs, adaptive cruise control and/or antilock brakes. In other words, the tire would become the sensor point to run advanced electronic driving systems.
By moving the vehicle's information sensors all the way to the pavement, Continental could offer drivers—and the auto industry—more immediate responses to driving conditions.
After hearing the idea, the inspiration of a 30-year-old technical employee named Thomas Becherer, Mr. Von Gruenberg called for feasibility studies to be finished as quickly as possible.
Within a few weeks, project manager Becherer drove a car fitted with prototype smart tires over to Mr. Von Gruenberg's executive offices in Hanover for a demonstration. Mr. Von Gruenberg, in his business suit and with an hour to spare before catching a plane, came down from his fourth-floor office. He knelt in the parking lot to examine the rough prototype.
Magnetic strips had been glued onto the tires' exterior walls. Wires ran into the car. Mr. Becherer took the chairman for a spin. Mr. Von Gruenberg sat holding a connected laptop computer, watching the data move across the screen from the tires.
``We had our breakthrough,'' Mr. Von Gruenberg recalled. ``Now came the next challenge: finding a chassis supplier who would use it.''
But Continental found little interest from the major chassis component suppliers. Tires were not part of the global systems approach to automaking. Even Mr. Von Gruenberg's old employer, ITT Automotive, politely dismissed the idea.
So to infiltrate the brake and chassis business, Continental entered into a component-making venture with Germany's Siemens A.G. and Italy's Brembo S.p.A. If nothing else, the smart tire could be a part of Siemens' ABS technology.
Continental also decided to develop its own chassis business internally. The effort would take at least eight years, with huge development costs every step of the way.
But last year, fate stepped in. ITT Industries tired of the low margins in its main automotive businesses—once led by Mr. Von Gruenberg— and put them up for sale. Continental bid $1.9 billion for the brake business—and won.
Conti wasted no time absorbing the acquisition. The new unit incorporated the brake-maker's original German name and was christened Continental Teves. Marketing materials were printed quickly to show that the new tire technology went hand-in-hand with Teves' chassis developments.
Conti's Charlotte, N.C.-based tire-making subsidiary, Continental General Tire, will carry the flag for the new project, producing the first sensor-equipped tires. Integrating the tires into Teves' electronic chassis will involve engineers in Auburn Hills and at Teves' German technical center in Frankfurt.
The company expects the resulting systems to go into production by 2002. Executives will not say where they stand with contracts on the systems approach.
Mr. Von Gruenberg said the smart-tire system could see production as early as 2001. He also believes the approach could bring double-digit growth to Conti's tire business.
Whether the plan will succeed now depends partly on the precision of the technology and partly on the sales ability of Mr. Von Gruenberg himself.
``I can't say whether the integrated tire concept will succeed,'' said Saul Ludwig, tire industry analyst with McDonald Investments in Cleveland. ``Conti's competitors aren't focusing on that technology. But at least in terms of where the company has been lately, Mr. Von Gruenberg has exceeded every goal he has set.''
Dismissing, for a moment, the challenges ahead, Mr. Von Gruenberg is plenty content to have traveled this far. ``Who would ever have dreamed that things would work out like they did?''