Valeo CEO outlines how supplier will evolve to keep pace with megatrends

Autonomous driving, car-sharing schemes and the electrification of powertrains are megatrends that are shaking up the car industry. Valeo CEO Jacques Aschenbroich's mission is to make sure the French supplier evolves fast enough to keep pace with the changes. He outlined his plans during an interview last month at his office in Paris with Automotive News Europe Correspondent Bruce Gain.

How radically are automotive applications changing and how does that affect your role as a supplier?

There is a very major trend involving how the driver will be taken care of as the car assumes greater responsibility. As we move toward the autonomous car, you will be able to do other things in your car, besides driving. The other part of the transformation is mobility, especially in urban areas. There will be more car sharing, more Uber-like services. The ownership structure for cars will become very different. There will be driverless Ubers and driverless taxis. Companies like Uber or car rental agencies might be our customers in the future. They might one day specify the cars and components they need directly to use. Nobody knows how fast this transformation will take place, but what we know is that we need to work with our customers to understand our place as a supplier of emerging mobility solutions.

How will companies such as Google and Apple fit into your future?

They represent exciting opportunities. We may have new relationships with different customers, but our relationships with our automotive customers remain key. But newcomers are entering the market and we must find the right way to grow with them.

What business areas will drive Valeo's growth in the coming years?

We are focusing on two strategic priorities. The most difficult one with the highest growth potential is CO2 emissions reductions. The other technology is what we call intelligent driving, also known as intelligent cars and autonomous driving. These are the two technology businesses that are growing the fastest and that have the highest levels of complexity.

When will intelligent driving be your largest business in terms of sales?

Autonomous driving and CO2 emissions reductions are our most important businesses. You find CO2 emissions reductions everywhere: in powertrains, thermal components, and [even] lighting where you can save grams of CO2 emissions. Autonomous driving will be one of the pillars of the group.

What future do you see for diesels in the aftermath of the Volkswagen Group's emissions-cheating scandal?

In the near term, I don't think much will change. Diesel car production will continue to decrease slightly in Europe, for example. In the long term, it is difficult to predict where diesel will be 10 years from now. I am pretty sure that the electrification of powertrains and pure electric cars will increase. Hybrid technology and plug-in hybrid adoption will increase. What will be the balance, nobody knows. As a supplier, we must develop a wide range of technologies to meet the different levels of electrification and hybridization of cars.

Valeo increased original equipment sales 16 percent to 12.6 billion euros last year. How much of your revenue growth is from acquisitions?

We are now in a position to grow organically, in addition to any purchases we might make.

How has your acquisition strategy changed since last year?

We decided that, despite the quality of our IP [intellectual property] and our technology network, it would be much better to see what other potential commercial partners could provide as we seek the best available technologies for the markets where we have a presence. This strategy led to our collaboration with Peiker, Mobileye, Safran, and other partners. With Mobileye, for example, we have the best front camera on the market. Already this year, our sales for front camera applications have totaled 1 billion euros. Also, we are strong enough to consider making acquisitions. We will look for companies that are technology leaders close to our core business groups.

When will cameras replace side mirrors on cars?

I think it will be really quick, before 2020, in Europe and North America.

Will Valeo need to cut more plants? Add any? If so, where?

No, we are growing so I do not see any reduction in capacity this year in Europe.

How would you compare growth in Europe with North America and China?

What is completely unexpected so far [this year] is that growth everywhere, meaning China, Europe, and the U.S., has been better than expected. However, we will stick to our guidance that automotive production will growth 3 percent to 5 percent worldwide this year. Europe will grow 2 percent; China will grow 5 percent and the U.S. will grow 2 percent.