Valeo expects lift in N. America from new joint venture
Valeo North America President Francoise Colpron: Supplier was eager to complete the deal.
Valeo SA is poised to become North America's second-largest producer of climate-control systems, breaking a tie with Visteon Corp., now that the French supplier has formed a joint venture to acquire operations producing those systems from Ford Motor Co.
Valeo will have an 18 percent market share of HVACs -- heating, ventilation and air conditioning units -- produced for North America-built light vehicles, research firm IHS Automotive estimates.
The region's top producer is Japan's Denso Corp., with 25 percent of North American production. Valeo's rise will drop Visteon to third with 15 percent, followed by Delphi Automotive with 10 percent. The figures do not include sales of condensers, which IHS counts separately.
The acquisition gives Valeo "an immediate 'in' with Ford," said David Smith-Tilley, IHS' London-based director of component forecasts.
HVAC systems are undergoing a major makeover. As stop-start systems gain popularity, automakers need air conditioners that will operate when vehicle engines temporarily shut off.
Automakers also need heaters that will work in hybrid-powered vehicles, which generate little waste heat with their engines.
Moreover, the EPA is offering automakers incentives to use more efficient air conditioners. Automakers earn carbon dioxide credits if they use energy-efficient air conditioners that don't leak refrigerants into the atmosphere.
"HVAC is becoming much more pivotal," Smith-Tilley said. "Everyone is battling to come up with solutions. We are in for interesting times."
Valeo has pursued Ford's climate-control business for years.
In 2005, Visteon spun off 17 plants to its former parent, Ford, which in turn set up Automotive Components Holdings to sell those operations. The Sheldon Road plant in Plymouth Township, Michigan, which makes climate-control components, was one of the 17 factories.
Valeo announced an agreement to buy the plant in 2006, but the deal fell apart the next year when the plant's UAW membership vetoed the contract.
On Nov. 9, the plant's union membership ratified a new contract with Valeo's joint venture.
To get the deal done, Valeo partnered with a minority-owned company, V. Johnson Enterprises, to form a joint venture dubbed Detroit Thermal Systems.
Valeo has a 49 percent share of the venture, which will transfer HVAC production from Ford's Sheldon Road plant to a factory less than 30 miles (about 50km) away in Romulus, Michigan.
The Romulus plant, which will employ 500 workers, will assemble as many as 2 million HVAC units annually when it hits full production in 2014.
The arrangement will help Ford meet its minority purchasing goals. Vinnie Johnson, CEO of V. Johnson Enterprises, is a black former NBA star who played for the Detroit Pistons.
Valeo declined to estimate how much the acquisition will boost its North American revenue, which totaled $1.9 billion last year.
But Valeo noted that it will join Ford's Aligned Business Framework, which directs the lion's share of Ford's annual purchases to key suppliers.
Francoise Colpron, president of Valeo North America, said that's one reason why Valeo was eager to complete the acquisition. Said Colpron: "It's an indicator of the strength of our company today and our continuing interest in this deal."
Valeo ranks No. 11 on the Automotive News Europe list of the top 100 global suppliers, with sales to automakers of $15.6 billion in 2011.
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