As North America's Big Three auto makers rediscover the benefits of rear-wheel drive, Germany's Eberspächer Group couldn't be happier.

The supplier has years of experience producing exhaust systems for rear-drive vehicles with pedigree badges such as Mercedes-Benz and BMW. Snaking exhaust pipe along cramped underbody real estate without disturbing driveshafts and rear axles requires considerable engineering. It's a specialty Eberspächer relishes as its own.

That expertise has paid off, as Eberspächer will supply the exhaust system for Chrysler Group's next-generation LX large cars, which will feature RWD in place of the current front-drive configuration.

The contract is significant. In 2002, Chrysler produced more than 200,000 large cars, including Intrepid, Concorde and 300M, at its plant in Brampton, Ont., Canada, according to Ward's data.

The Chrysler business is Eberspächer's first North American production contract. The supplier is opening its first manufacturing facility here — in Brighton, MI — employing 40 people. It is slated to start production in January, says Werner Mantay, president-Eberspächer North America Inc.

Gunter Baumann, CEO of Eberspächer Group in Esslingen, Germany, says his company will be the sole supplier of exhaust systems for Chrysler's large cars, and that Eberspächer's long-standing relationship with Mercedes clearly didn't hurt.

At Brighton, Eberspächer will assemble catalytic converters and other components, while exhaust pipes will be sourced from a Canadian supplier. Eberspächer is setting up a plant near Brampton for final assembly of the exhaust system, which will be shipped in-sequence to Chrysler.

Eberspächer also has a new North American headquarters and Technology Development Center in Novi, MI. The $26 million 66,000-sq.-ft. (6,130 sq.-m) complex has three buildings, including a state-of-the-art prototype shop and test lab. Exhaust systems can be fully designed and undergo a battery of simulation trials on-site.

“Our customers have made it clear to us that if we want to continue to be a strategic supplier, we have to become truly global,” Mantay says. “You can't become truly global unless you have a presence in the Detroit area.”

Eberspächer ranks No.4 in exhaust, behind ArvinMeritor Inc., Tenneco Automotive Inc. and Faurecia SA of France. Most of its plants are in Europe or Asia/Pacific.

The lack of a strong presence in the U.S. ultimately cost Eberspächer some key business. For the past several years, Eberspächer has had a joint venture with Japanese exhaust supplier Calsonic North America Inc. to manufacture the exhaust system for the Mercedes M-Class. Eberspächer supplied engineering support, and Calsonic produces the exhaust system at its plant in Shelbyville, TN.

That work, however, is being drastically scaled back. When the all-new M-Class ramps up production later this year in Vance, AL, its exhaust system will come from ArvinMeritor. Eberspächer will continue supplying about 70% of the catalysts for the system, sources say. (ArvinMeritor won the contract with its German joint-venture partner Zeuna Starker GmbH & Co. Since that time, ArvinMeritor acquired Zeuna Starker outright. The deal closed in January.)

Eberspächer officials hesitate to discuss how the M-Class business got away. But the supplier's stepped-up presence in North America is a strong statement it doesn't want to lose such a crucial contract again.

The strategy appears to be paying off, as Baumann reports the supplier is in advanced discussions with other Big Three auto makers for potential exhaust business.

The Brighton plant has won a contract with General Motors Corp. to supply the hot-end assembly, including the catalyst and outlet tubes, for a low-volume, niche-vehicle V-6 engine program, starting production in the second quarter of 2004.

It's difficult being in the exhaust sector these days. Worldwide emissions regulations are becoming more stringent, and the need for research and development has never been greater, Baumann says. Eberspächer has a new diesel-engine particulate trap, which will be supplied to a French auto maker this year.