Automotive News EuropePARIS - Valeo's stand at Equip Auto last month glittered with fancy new products - from its compact Baroptic headlamps to a new clutchless manual transmission.
But its most important innovations were not on the stand, they were in a small customer showroom hidden away upstairs at the Villepinte exhibition center.
There Valeo showed the products considered most critical to its future, like navigation systems and cockpit modules. With them Valeo aims to turn itself into one of the five biggest suppliers in the world.
Two weeks after the French supplier show opened, Valeo announced a joint venture with Plastic Omnium to develop cockpit modules.
The 10th largest global supplier aims to achieve its goal within four years. Sales are projected to rise from FF33 billion ($5.7 billion) this year to FF50 billion as Valeo concentrates on growth in the USA, South America and Asia.
The company is already a global player. 'Valeo is the only European company besides Bosch and Lucas to have reached a worldwide scale,' said Patrice Solaro, an analyst at Indo-Suez Capital in Paris.
Chairman Noel Goutard wants 50 percent of sales to come from outside Europe by early in the next decade, compared with 26 percent this year. France will account for 29 percent in 1997. European sales outside France will be 45 percent. Goutard wants no more than 15 percent in France and 35 percent in the rest of Europe.
Growth will come from following customers overseas. PSA/Peugeot-Citroen and Renault are the biggest, with 16 and 15 percent of original equipment sales respectively. Both are building plants outside Europe. Volkswagen and Chrysler follow with 11 percent each.
Solaro forecasts that about 30 percent of growth will come from acquisitions.
'We will not embark on any crazy ventures,' said Goutard recently. 'But if a good opportunity occurs, I will not hesitate to seize it.'
With FF1.0 billion in debt and FF11.5 billion in equity, Solaro said Valeo can buy a company with sales of $2.0 billion. Goutard has said he prefers medium-sized acquisitions.
'If he made a big acquisition,' said Solaro, 'it would be either to enter a new business, such as electronics, or to expand quickly in a new geographical area.'
Valeo expanded in recent years by venturing outside France first, then outside Europe.
It has strengthened its core business divisions by lowering costs, raising quality and efficiency and investing heavily in r&d and new facilities.
'Valeo grew by following the pattern of German carmakers,' said an industry consultant with close ties to the company. 'This is Goutard's particular triumph.'
This year's FF33 billion in sales is up from FF25 billion in 1995. Profits are expected to rise 40 percent to FF1.4 billion in the same period.
Valeo is a global leader in two of its business areas, engine cooling and clutches. The group is among Europe's leaders in air conditioning, lighting and security systems.
But clutches and engine cooling are mature businesses and wiper systems, starters and alternators are low-growth. Air conditioning and lighting can grow more, especially outside Europe. But the critical areas are security systems and electronics, said the consultant.
'Valeo's prospects beyond 2002 are highly dependent on the cockpit module, door systems and energy management,' he said.
The deal with Plastic Omnium underscores Valeo's objectives.
'We needed an alliance with a plastics maker,' said Valeo spokesman Denis Berthu. 'We will operate worldwide with Plastic Omnium, serving all carmakers. We want to introduce more Valeo components into those modules.'
The joint venture with Plastic Omnium is not the major deal that some observers are expecting. Plastic Omnium, with FF7.2 billion sales, is a regional company. Half its sales are in France, 90 percent in Europe. But the two groups are complementary. Plastic Omnium's dashboards and consoles fit with Valeo's plans to offer complete cockpit modules that include heating and air conditioning systems, column switches, security devices and instruments.
'The stock market is pushing Goutard to make a big acquisition in the USA,' said Gaetan Toulemonde, analyst at Natwest Securities in Paris. 'But he is resisting.'
In the meantime, Valeo has frozen several planned capital investments in France and Germany, where labor costs are high. Investment will be concentrated instead in emerging markets.
The company has 61 plants in Europe, but 15 manufacturing operations will be merged. Recently, Valeo closed a lighting plant in Evreux, France, moving production to two other French sites. In Germany, Valeo closed its Reichenbach clutch plant, and moved production to Spain and Poland. In Poland, where labor costs are only one sixth as much as in France, it is building three plants - for clutches, engine cooling and lighting systems.
Valeo is building four plants in Brazil, where it already has 10. In China, it has three plants, and plans two more.
Another growth area is the USA, which now accounts for 16 percent of sales. Valeo will open a $20 million technical center in Detroit next year, dedicated to engine cooling and air conditioning systems.
The US lighting business is being merged with Sylvania Osram. Valeo's main US customer is Chrysler, but it aims to sell more to more to GM and Ford.
Valeo divisions (1996 figures)
Sales: FF6.1 billion
Manager: Luc Bleriot
Sales: FF5.3 billion
Manager: Francis Hoyer
Sales: FF4.9 billion
Manager: Felix Caselas
Sales: FF3.2 billion
Manager: Patrice Brion
Sales: FF2.8 billion
Manager: Robert de La Serve
Sales: FF 2 billion
Manager: Gerard Chochoy
Sales: FF1.7 billion
Manager: Jean-Marc Hannequin
Sales: FF1.3 billion
Manager: Claude Leichle
Sales: FF540 million
Manager: Guy Perrot
Sales: FF3.3 billion
Manager: Claude Fabris