updated 4/3/2006 12:47:10 PM ET 2006-04-03T16:47:10

Motorola Inc. said Monday it is selling its automotive electronics business to German tire company Continental AG for about $1 billion, enabling the cell-phone maker to focus more exclusively on communications technology.

The 4,500-employee unit, which had about $1.6 billion in sales last year, makes telematics products used for vehicle navigation and safety services, as well as sensors used in steering, braking, and power doors and windows. The companies said the cash deal is expected to close by the end of June.

Continental, a leading automotive supplier, said the acquisition will boost overall sales of its $6.5 billion-a-year automotive systems division while also adding telematics products. Manfred Wennemer, its executive board chairman, called the business “a perfect fit with our strategy of providing sophisticated safety systems to our customers.”

“It makes a lot of sense for us to invest in a (North American) market where we see in the future more than 16 million cars being built,” Wennemer said on a conference call from Frankfurt.

Continental said it will keep the telematics business and its several hundred employees in Chicago while maintaining Auburn Hills, Mich., as the headquarters of its automotive systems division. Wennemer said there will be “hardly any reduction in force” as a result of the acquisition.

Motorola has been looking into selling the unit since last fall. The business has been overshadowed by the handset unit, which accounts for more than half of the company’s $35 billion in sales and is runner-up in the world market behind Finland’s Nokia Corp. Results also have been weakened by the struggles of its automotive-supply customers.

Motorola already had spun off the semiconductor division, which had been the Schaumburg-based company’s second-largest business, since CEO Ed Zander took over a little more than two years ago.

“This takes the Motorola automotive electronics people and assets and a significant backlog of orders and ... overnight makes this business a category leader,” said Greg Brown, president of Motorola’s Networks and Enterprise business, which oversees the automotive electronics unit. “So we saw it as a much better strategic fit for both firms.”

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