The automaker is taking over the Hella Aglaia division for an estimated 100 million euros. A deal that will benefit both sides.
Volkswagen’s software unit could soon get a large number of employees. As the automotive supplier Hella announced on Tuesday, the business with software for front cameras including around 200 employees of the subsidiary Hella Aglaia is to be sold to “Car.Software.Org”. The car manufacturer from Wolfsburg bundles its software competencies in this unit. Among other things, the central operating system for vehicles of the Volkswagen Group and new driver assistance systems are to be created here in the future.
Hella did not specifically name the sales price. By selling parts of the subsidiary, however, the company expects an extraordinary income of around 100 million euros. “The transaction is still subject to approval by the responsible antitrust authorities and is expected to close in the first quarter of the calendar year 2021,” said the group’s announcement. According to a company spokesman, Hella approached VW with a plan to sell part of Hella Aglaia.
At first glance, the business looks insignificantly small for a global corporation like VW. Strategically, however, it is important. Volkswagen is likely to target the software experts at the Hella subsidiary in particular. In the Ullsteinhaus in Berlin, under the leadership of Hella Aglaia boss Kay Talmi, over 400 international employees develop software codes for the automotive industry. The company and its employees are both well-versed in the industry. Front camera division boss Oliver Klenke and his employees do not have to move to Wolfsburg. Last year VW opened a new location in Berlin for its Car.Software.Org.
Volkswagen, on the other hand, has been looking for precisely such employees since the division was founded. So far, the car manufacturer only has 5,000 software experts. By 2025 there should be around 11,000. Talks about collaborations with the major suppliers Bosch and Continental, for which around 20,000 software developers work each, came to nothing. Behind closed doors, both speak of “outrageous conditions” to which the suppliers should have bowed to VW.
Hella boss Rolf Breidenbach justifies the sale of the front camera software area with “extraordinarily high investments, combined with a great entrepreneurial risk” that the group would have had to bear in order to achieve the specified goals in the long term. “Our strategic cornerstones of technology leadership, market leadership and the fulfillment of certain financial key figures are decisive for this,” said Breidenbach. “If we cannot sustainably achieve one of these three criteria with a product, we will no longer pursue the corresponding business activities.”
High competitive pressure in the front camera business
The main reason for this is likely to be the high competitive pressure in the area of front camera software, in which multi-billion dollar players such as Intel’s Mobileye cavort. In addition, it is becoming apparent that carmakers want to carry out a greater part of the development in the future in the area of the higher levels of automation in autonomous driving.
“With the takeover of Hella’s camera software division and the associated expertise in image processing, we are continuing our strategy of developing key software components internally in the future,” says Dirk Hilgenberg, head of the VW software unit. “We are thus driving the development of competencies in the Car.Software Org in the area of machine vision and strengthening our position in the development of safe and innovative driving functions.”
The share, which was able to gain pre-trading hours, reacted to the start of trading with price losses of more than 1.5 percent. Last week, Hella presented the balance sheet for the first quarter of its current fiscal year. Due to provisions for the planned job cuts in the amount of 169 million euros, the operating result (EBIT) slipped 115 million euros in the first quarter. Sales fell by almost eleven percent to just under 1.4 billion euros. Adjusted for one-off effects, Hella comes to an EBIT of 56 million euros.
Hella Algaia will retain its business in the areas of energy management, lighting control and people sensing. The company wants to continue investing in radar sensors and power electronics, for example. “We will continue to invest consistently in future automotive topics such as electromobility, automated driving, software and digitization,” says Breidenbach.
At the beginning of September, Hella founded the “Global Software House”, which is anchored at Hella Aglaia. The aim of the start-up is to reduce the complexity in software development through uniform processes and methods.
