PARIS - Faurecia said it will report net losses for 2000 after suffering a sharp drop in first-half earnings.
Pierre Levi, the French supplier's new chairman and CEO, said he will launch a restructuring program to restore profitability.
Levi, 45, succeeded Daniel Dewavrin as CEO in May.
Faurecia's sales climbed 17.7 percent in the first half to E2.9 billion, compared with the year-ago period. Operating profits also grew, by 14.5 percent to E126.1 million.
But net profits in the first six months dropped 29 percent to E19.9 million.
Levi's restructuring plan - called the '10 out of 10' program - is designed to improve operating efficiencies.
The first '10' in the program title refers to Levi's aim of achieving a profit before interest, taxes, depreciation and amortization equal to 10 percent of sales within three years.
The second '10' refers to Faurecia's aim to become one of the top 10 auto suppliers worldwide. The French supplier of seats, exhausts, door panels, cockpits and front-end modules was ranked 17th in 1999, with sales of $4.8 billion, according to Automotive News Europe estimates.
'Our profitability has eroded in the past four years,' Levi said. Faurecia's profit margin was 9.7 percent in 1997. That fell to 8 percent in 1999 and will be about 7.5 percent this year.
'I originally planned to announce the restructuring with our fiscal year 2000 results,' said Levi in an interview with Automotive News Europe. 'But I am doing it now to address the needs of our customers and shareholders.
'When a company grows fast, you can always make improvements - because there is a time when the existing organization reaches a breaking point.'
Levi wants to cut Faurecia's costs by E300 million a year through to 2004. Four main areas are targeted: project management, purchasing, manufacturing and general expenses.
Levi said 50 people are working on reducing purchasing costs.
'We won't systematically slash the prices of what we purchase from our Tier 2 suppliers but will try to optimize these costs,' he said.
Faurecia's chief financial officer Philippe Douay blamed the decline in first-half net profits on the closure of remaining cut-and-sew operations in France and on a long-standing tax dispute.
This summer, Faurecia closed two plants - one for cut-and-sew operations in Nogent-sur-Seine and another for seat mechanisms in Tredegar, Wales.
Faurecia plans to build new plants for seats and other products in Poland, Slovakia, Portugal and Tunisia.
'Our research and development expenses will peak this year but should not grow again in 2001-2002,' said Douay.
Levi said the company is 'facing an unprecedented concentration of new product launches in the seat business, with 17 new programs in 2000-2001.'
These programs include setting up four just-in-time seat facilities in France to supply the new Renault Laguna and Safrane, Toyota Yaris, Citroen C5 and Peugeot 307.
Levi wants Faurecia to grow, both internally and externally. He forecast sales of E7.2 billion in 2004. But he said the figure only refers to contracts already signed.
Seats account for 60 percent of Faurecia's sales, and Levi wants to see improvement in the company's four other main business areas - cockpits, door panels, exhaust systems and front-end modules.
Asked about possible acquisitions, Levi said: 'Consolidation among suppliers is happening now. Either we participate, or we miss the turn.
'But the opportunities are different in each business area,' he said. 'In cockpits, nobody owns all the technologies. In the seat business, the game is coming to an end [in Europe and the USA] but there are still a lot of makers in Japan and Korea where alliances, even buy-outs, could happen.'
Johnson Controls last month acquired the Nissan affiliate Ikeda Bussan, a seating supplier.
'We still plan to supply seats to Nissan [as a result of the Renault-Nissan platform strategy],' said Levi. 'But in Japan we think it's better to work with different partners for different customers. It's a totally different approach than in Europe or the USA.'
Levi would say little about a possible deal between Faurecia and French plastics maker Sommer-Allibert.
'If Sommer-Allibert is for sale, we would be interested,' he said. 'With mergers and acquisitions, you have to look at individual cases.'