The FreedomLine heavy truck transmissions were produced by the ZF Meritor joint venture, and now by ZF Friedrichshafen.

Eaton Settles Antitrust Case with $500-Million Agreement

June 24, 2014
Former drivetrain venture charged rebates spoiled its earnings, opportunities Heavy truck transmissions Avoids much higher jury award Lost prior appeal

Eaton Corporation agreed to pay $500 million in a settlement with rival auto parts manufacturers Meritor Inc. and ZF Friedrichshafen. The two former joint-venture partners had sought up to $800 million for lost profits and business opportunities relating to their heavy-truck transmission products. Because juries in anti-trust cases may triple damage awards, Eaton may have been obliged to pay up to $2.4 billion if the trial had proceeded.

Cleveland-based Eaton manufactures products and systems for numerous applications in various industries, including automotive.

Meritor — which produces drivetrain systems and parts, and continues to operate the North Carolina plant that was the site of the venture involved in the antitrust case — claimed the agreement with Eaton is one of the largest private, anti-trust settlements in the past decade.

ZF develops and manufactures driveline and chassis systems for automotive and truck manufacturers.

Meritor and ZF operated ZF Meritor in Laurinburg, NC, from 1999 through 2003, manufacturing the FreedomLine and ShureShift transmissions for heavy trucks. They contended that Eaton violated federal anti-trust laws by rewarding commercial truck builders with rebates for using its transmission products, impeding their business.

The FreedomLine is an automated mechanical heavy truck transmission without a clutch pedal that is manufactured now by ZF Friedrichshafen.

The former partners sued Eaton in 2006, and in 2009 a jury ruled Eaton had violated anti-trust laws. Eaton appealed but lost that jury decision.

“It is in the best interests of Eaton shareholders to settle this matter,” stated Alexander M. Cutler, Eaton chairman and chief executive officer. “The settlement results in a permanent resolution of the matter and removes the uncertainty of a trial and a lengthy appeal process.”

Meritor CEO Ike Evans offered a statement saying the settlement “delivers significant benefits to the company, our shareholders, and our customers.

Meritor’s share of the settlement will be $209 million. That company said it would use the proceeds to "prefund" pension plans in the U.S. and U.K.

Meritor also said it would initiate a $201-million share buyback in 2015, aiming to reduce its corporate debt.