ZF Friedrichshafen AG, Germany’s third largest automotive supplier and among the top 10 worldwide, has confirmed reports that it is in the early stages of discussions to sell its rubber and plastics (R&P) department.

A local newspaper Neue Osnabrücker Zeitung (NOZ), revealed Aug. 22 that ZF is looking “very closely” at a specific offer from the Chinese railway products company Zhuzhou Times New Material Technology Co. Ltd. (TMT).

According to that report, ZF chief Stefan Sommer disclosed TMT’s interest at an Aug. 22 meeting attended by 800 employees in the ZF R&P headquarters plant in Damme, Germany.

TMT supplies rubber and metal suspension materials for train and other track transport systems, as well as for wind power plants. Sommer maintained that TMT products complement ZF’s R&P products in terms of market, customer and regional perspectives, stressing that TMT wants to set foot in Europe.

In a press statement last week and earlier in the ZF annual report, the company has expressed dissatisfaction with returns at R&P. ZF has said following consolidation in the market, competitors have cost advantages and more flexible structures than ZF.

Jürgen Weller of the IG Metall trade union told the General Anzeiger newspaper that ZF’s rubber and plastics business is profitable, “but are not as high as ZF wants. But that is due to the rubber parts being dependent by nature on rubber prices.”

NOZ reported that ZF’s R&P department has around 3,400 employees worldwide and 2012 sales of 718 million euros ($960 million), up 6 percent from 2011. Company-wide, ZF has almost 74,000 employees.

ZF R&P has 1,700 employees in three German plants: Bonn, where its has R&D, Damme and Simmern. A ZF spokesman said the company has invested almost 30 million euros in the past three years to expand the Damme plant, where about 1,000 employees make items such as rubber and plastic connectors, airbag housings, servo pump oil containers, plastic composite pedals, hydraulic supports for engines, as well as components for gear-changing and steering systems.

He was clearly attempting to overcome concerns among staff that TMT would close down the German plants. He suggested ZF’s investment “is definitely different to other company acquisitions in Germany and Europe, where the old owner lets a location bleed before it is taken over by investors.”

Nevertheless, staff expressed concerns that, as ZF itself has set up a R&P production site in China, TMT may be seeking German know-how just in order to develop further in China. A sale would require the R&P business to be firstly split off from ZF into a separate company and even if staff are retained, concerns were expressed by staff about retention of their ZF company pension rights and central pay agreements.

Thorsten Gröger from the IG Metall trade union in Nienburg-Stadthagen said, “we consider the whole thing with much skepticism. If the future prospects for R&P are very good in the hands of an investor, they should also be so under ZF, in the view of the employees.”

TMT is listed on the Shanghai stock market and is a subsidiary of state-owned CSR Corp. TMT employs around 2,700 people and achieved sales of 457 million euros in 2012, up from 422 million euros in 2011.

Aside from the three German plants, ZF has R&P operations in Hebron, Ky.; Scorocaba, Brazil; Shanghai; Trnava, Slovakia; and Melbourne, Australia.