Daniel Dewavrin, 64 next month, leaves his post as chairman and chief executive of French supplier Faurecia today (May 22).
Faurecia was formed in late 1998 by the merger of Bertrand Faure and PSA/Peugeot-Citroen's parts division Ecia. Faurecia is now ranked among the top three seat makers and exhaust system suppliers in the world.
During his 10 years with Bertrand Faure and Faurecia, Dewavrin turned what was a small, diversified conglomerate into a global automotive player with a work force of 30,000.
Dewavrin will remain a board member with Faurecia and will hold a key position in French social and economic life as president of Union des Industries Métallurgiques et Minières. He is succeeded as Faurecia CEO by Pierre Lévi, 45, who joined the group last year.
Automotive News Europe's Stephane Farhi spoke to Dewavrin at Faurecia's headquarters near Paris about his experiences in charge of one of Europe's leading auto suppliers.
You became chairman and CEO at Epeda Bertrand Faure (EBF) in 1992. Why did you take the view that this small conglomerate had to make automotive parts its core business?
The group was weakened by a takeover bid launched by Valeo in 1987. There were almost no shareholder funds left. There was some logic to our products - for example, springs, which were used to make Epeda mattresses, and car seats.
But we had many different businesses, such as luggage and aircraft equipment. Considering the balance sheet situation, it was impossible to keep all these interests.
One possible option would have been to sell off the automotive business that was fragile and very oriented toward France. But there was little (takeover and merger) movement in the industry at that time. So, after a lot of talks, we decided to focus on automotive operations and dispose of our other businesses in the best possible conditions. This process ended in 1998 with the sale of Ratier-Figeac (the aircraft equipment division).
Why did you choose this solution?
EBF's automotive business earned money but obviously the rules of the game were about to change - and to succeed you needed a lot of money. Inside the EBF board, a stormy debate took place between members with opposite viewpoints. I couldn't see a future for the mattress business. It used to be a very protected sector, dominated by family-owned companies, but Japanese groups like Sumitomo were coming to Europe. So in 1993 we sold the mattress business to a Swiss group. Luchaire, the defense branch, had been sold previously. At Delsey, the luggage division, it was almost impossible to keep manufacturing operations profitable in Europe.
So, aside from my personal background in business-to-business activities, I could find other reasons to focus on the automotive industry.
At that time, did you receive any support from Renault or PSA to help you build up the group?
I did not really feel it. However, in the early 1990s, the trend for modules was just starting. Some consolidation had already occurred. My predecessor, Pierre Richier, had brought together all the seat component makers in France. That helps explain our corporate culture and how we differ from some of our competitors.
So the trend for modules helped you grow?
Modularization is an answer to questions that the car industry had to consider. The carmakers are facing overcapacity. There is tremendous pressure on prices and lead times. Consequently, a bigger responsibility has been given to suppliers. The carmakers pushed their suppliers not to stay in a single-source culture, and to have several customers in order to both encourage innovation and share research costs. In return, suppliers have been given bigger production volumes. Consolidation happens, and the weakest disappear. In France, Trèves gave up the seat business and Roth Frères was bought by Johnson Controls.
How did you grow in the seat business?
We bought Rentrop of Germany in 1992. We set up Sicam with Fiat but it was then sold to Lear. We were present in Spain, Portugal and the UK. But aside from Rentrop we didn't make another significant purchase. Bertrand Faure had no money at that time. However, Rentrop was a strategic purchase at a reasonable price, made just before the crazy takeover period began. If we had not bought Rentrop, we would not have been present in Germany. We are now No. 1 in Germany. Twenty percent of our sales are made there. Today, there are three global seating players (Faurecia, Johnson Controls and Lear) plus Magna in North America. After Rentrop, we expanded steadily through internal growth. Our sales doubled between 1990 and 1996.
How did you finally get into the US market?
We were facing two major competitors, Lear and Johnson Controls. They had a big advantage thanks to their size in the US market, where they were making most of their profits.
As early as 1996 or 1997, I realized that Bertrand Faure would be handicapped by not going to the USA. My idea, therefore, was to take a position in the USA in order to balance our European position. There were not many opportunities: Douglas & Lomason had been sold to Magna. We tried to buy Delphi's seat business but eventually General Motors preferred to sell it to Lear, mainly because of the unions. GM thought an American company was better able to manage this issue than a European company.
As we were not able to buy our way into the market, we had to choose internal growth. We had bought a small American component maker in the late 1980s and we used it as a basis for our American ventures.
By developing a strategy based on strong technical expertise, we succeeded in going back to GM, through Opel. We were helped by the fact that GM was also seeking more competition.
When did you decide to extend your business beyond seats?
The seat was the first of the so-called modules. All the major seat makers (Lear, Keiper, Bertrand Faure) had complete know-how in that part of the business - for example, metalwork, sewing. But then came a difficult question: Does the carmaker entrust everything to the Tier 1 supplier, including sourcing, or does it retain the choice of Tier 2 suppliers? Opinions vary on this issue. Some carmakers are ahead of others.
As consolidations increase, the opportunities of getting more volume from carmakers declines. Therefore, suppliers are pushed to find new sources of growth with other modules. This is what's happening at the moment. The only problem is that other interior modules, such as cockpits and door modules, demand additional skills.
Does this trend mean that every big supplier today must have an electronics capability?
Yes, because we will all use electronics more and more. But you don't need to know how to do everything by yourself, you can do a lot through joint ventures. Johnson Controls has agreements with Motorola, for instance.
Moreover, it would be very difficult to find someone who has all the skills ... Visteon, maybe. Even if that happened, can one imagine that a carmaker would ask a single supplier to do everything? In my view, it would deny competitive innovation among component makers.
On the other hand, a supplier cannot exist only as an engineering department. It needs manufacturing to earn money, but it also needs the talent and skills of an integrator, to design interfaces between the different components that make up a module.
Overall, I doubt that too many giant suppliers will appear, because this would limit competition. It would also give them considerable power in the profit sharing that is permanently debated between suppliers and carmakers.
How did the link between Bertrand Faure and Ecia begin?
Ecia was controlled by PSA, which had a 67 percent stake in the company. Ecia dated back to the origin of Peugeot and therefore had strong emotional ties with the Peugeot family. Ecia was a regional player in exhausts and had a real know-how in plastics. But it lacked critical size.
On the other side, Bertrand Faure had practically canceled its debt in 1997, had reached a critical size in seats, was about to solve its US problem - and was ready for any new venture that came along.
The tie-up happened by chance. French cloth manufacturer Michel Thierry disposed of its Bertrand Faure stake and in late 1996 Ecia took 16.5 percent ownership and 25 percent of the voting rights in Bertrand Faure. (The full tie up was finalized in 1998.)
Is it an advantage to have PSA as your main shareholder,?
In this business, you need steady shareholders with a long-term view. To have PSA as our main shareholder is certainly an advantage.
What is the ideal second module for Faurecia, after seats?
Clearly, it's the cockpit. It complements our expertise with seats. I don't know if in the future a carmaker will give a broad contract for the vehicle interior to one supplier, because it has not happened yet. What's possible is to be given the integrator role, because it will bring improvements, at least in the engineering phase.
Does Faurecia have to go to Asia?
If you consider the long term, 30 or 50 years from now, Europe and the USA will not be the big car markets. A strategic position must be taken a long time in advance. This is the reason why no carmaker can remain a regional player.
How are talks with Japanese suppliers proceeding?
We have had a lot of talks. But one question remains: Who will be the boss? The point is not to rush into Japan but to find a cooperative way to work with Japanese companies.
What's the priority for Pierre Levi?
What I have done over the past eight years is to make Faurecia a true European company and to lay the foundations for a global company. In the future, the ambition will be to strengthen the US operations and to write a new page in Asia. Pierre Lévi will also have to develop a multinational, multicultural management.