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Valeo

Valeo

43, rue Bayen
75848 Paris France
Telephone: ( +33) 01 40 55 20 20
Fax: ( +33) 01 40 55 21 71
Web site: http://www.valeo.com

Public Company
Incorporated: 1923 as Société Anonyme Francaise du Ferodo
Employees: 68,200
Sales: EUR 9.23 billion ($11.59 billion) (2003)
Stock Exchanges: Euronext Paris
Ticker Symbol: FR
NAIC: 336322 Other Motor Vehicle Electrical and Electronic Equipment Manufacturing; 336350 Motor Vehicle Transmissions and Power Train Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing

France's Valeo is the tenth-largest supplier of components and systems to the worldwide automobile and truck industry. Valeo operates approximately 129 manufacturing plants, 65 research and development centers, and nine distribution centers serving the European, North and South American, and Asian markets. The company is one of the largest automotive suppliers in Europe and has several times declared its intention of moving up to becoming one of the top five such companies in the world. Valeo is divided into ten industrial branches, making transmissions, climate control devices, engine cooling devices, lighting systems, electrical systems, wiper systems, motors and actuators, security systems, switches and detection systems, and electronics and connective systems. The company groups these industrial branches into four main areas: electrical and electronic systems, which account for more than 50 percent of total sales; thermal systems, which represent close to 25 percent of sales; aftermarket activity, at 17 percent of sales; and transmissions, which make up just 4 percent of sales.

Changing the Ferodo in 1980

When Valeo adopted its new name in 1980, it gave up what many manufacturers can only hope for: a name that had become synonymous with an entire product category. For more than 50 years, Société Anonyme Française du Ferodo had dominated the French brake linings market to the extent that the phrase "change your ferodo" all but meant "reline your brakes" in many of the country's service stations. Yet, by 1980, the founding company had grouped together many of France's most celebrated names in automotive equipment and systems, including Cibie, Marchal, Paris-Rhone, and SEV, representing some 30 product lines. Changing the company's name to Valeo (Latin for "I'm very well") created a consolidated and independent force in the global automotive supply market.

Ferodo's origins dated back to England of the 1890s. It was then that Herbert Frood witnessed a heavily loaded horse and carriage having difficulties braking and the driver thrusting his shoe between the brake and wheel to bring the carriage to a halt. Frood kept the event in his memory; 20 years later, as the newly emerging automobile industry was struggling with its own braking systems, Frood introduced the first brake lining, replacing the driver's shoe with a more durable sheet of asbestos. Frood dubbed the lining "Ferodo," and the product quickly became a mainstay in the British automotive industry's brake systems.

Frood's brake linings also caught the attention of the automobile industry on the Continent. In 1910, Frood agreed to give a French entrepreneur, Eugene Buisson, the right to import and distribute the Ferodo linings in France. Soon after, Buisson received the rights to begin manufacturing the Ferodo linings in France, and the Société Anonyme Française du Ferodo, founded in 1923, grew to become one of France's most prominent automotive equipment suppliers.

Although its initial success was based on brake linings, Ferodo soon diversified into other automotive equipment markets, adding first clutch linings and then complete clutch systems. The 1962 acquisition of Sofica added automotive heating systems, from which the company branched out into cooling systems by the mid-1960s. As with its other product lines, Ferodo soon came to dominate the French market for this product category as well. Meanwhile, as automobile makers established international and then global markets for their cars and trucks, Ferodo also began its international development, opening subsidiaries and factories close to its customers. An early subsidiary, formed in Italy in 1964 to produce clutch systems, adopted the name Valeo for the first time. The Italian Valeo went on to capture the majority of the Italian clutch market. From Italy, Ferodo moved into Spain, then into the South American market through operations in Brazil and Argentina. North America and the crucial U.S. market followed soon afterwards; during the 1970s, the company turned east, entering the soon-to-boom Asian market. Meanwhile, Ferodo remained in the Buisson family, with André Buisson succeeding as CEO.

During the 1970s, the French automotive equipment market underwent a shift. Spurred by the 1973 oil crisis and the resulting economic chaos in the automobile industry on the one hand and, on the other, the French government's eagerness to consolidateand later nationalizemuch of French industry, Ferodo began to absorb a number of other prominent automotive equipment makers. By 1980, the company had been joined by SEV (Société Anonyme pour l'Equipement Electrique des Vehicules, founded in 1912), which had pioneered automotive electrical systems; Paris-Rhone (Compagnie Industrielle de Paris et du Rhone, founded in 1915), which retained a leading position supplying military aviation and radio-electric markets; Cibie, founded in 1919, France's pioneering and leading maker of lighting systems for automobiles and trucks; Marchal, founded in 1923, which specialized in headlamps and lighting systems; and a number of other similarly prominent automotive brands, including Soma, which added transmissions and hydraulic systems for the trucking industry, as well as IMCH, ISHA, PPB, SIME, UFAGA, and Flertex.

In 1980, Ferodo took the bold move of adopting a new name under which it grouped and later replaced its panoply of brand names. The new company boasted revenues of FFR 7 billion, a payroll of 27,000, and a product line of more than 30 products capable of providing most of the critical internal components of automobiles for some 26 automakers worldwide, supported by 100 factories and other facilities in 16 countries.

A Worldwide Leader for the 1990s

The 1980s would mark the company's strongest period of growth, with revenues reaching FFR 20 billion by 1990, establishing the company as the world's premier independent automobile components and systems supplier. Valeo's globalization strategy would also be put in place by the start of the 1990s, with the company's foreign sales topping its domestic sales for the first time. Yet not all of the company's strategies would be as successful. At its formation, Valeo determined to diversify its activities into the nonautomotive industrial and manufacturing market. A number of acquisitions made in the early 1980s brought the company into the construction industry, smelting and steelworks, industrial equipment, and other activities that would eventually stretch the company too thin and drag heavily on its profits.

Weathering the recession of the early 1980s, and its annual sales rising to FFR 11 billion by the middle of the decade, Valeo faced a new crisis in 1986. At a time when French industry was reemerging from the country's brief flirtation with nationalization, Valeo, which had steadfastly remained independent, found itself involved in a struggle for control. In a period that gave rise to a new breed of corporate raiders, Valeo became a target for one of the best known of these, Carlo De Benedetti of Italy. In February 1986, De Benedetti began buying up shares of Valeo, gathering 19 percent and effectively gaining majority control of the company. Valeo's CEO André Buisson turned to the French government in an attempt to head off this passage of the company into foreign control. Buisson was almost successful: Valeo succeeded in becoming classified as strategic to France's national defense. While the company was indeed manufacturing components for a model of a new French tank, this activity formed less than 1 percent of its revenues. Nonetheless, the action barred Valeo's takeover by a foreign concern.

De Benedetti was only temporarily thwarted, however. In June 1986, he purchased an inactive French holding company, Airflam. Renamed Cerus, the shell company received De Benedetti's 19 percent of Valeo, giving De Benedetti a controlling stake in the auto equipment maker after all. In fact, Valeo's years under Cerus proved a period of strong growth, if only because of the appointment of Noel Goutard to replace André Buisson as Valeo's CEO.

Goutard came to Valeo after a career that included stints with a number of the biggest companies in France as well as globally, including Warner Lambert and Pfizer, and leadership positions with Gevelot, Copmteurs Schlumberger, Pricel (later Chargeurs), and Thomson. Under Goutard, Valeo rapidly shed its nonautomotive activities, at the same time boosting its position in its core market with a new series of acquisitions, including Tibbe of Germany, Bongotti of Brazil, and Chausson Thermique and Neiman of France. By 1988, Valeo's revenues had climbed to FFR 16.5 billion and its profits soared, rising 127 percent in a single year to reach a net profit of FFR 817 million. Unsatisfied, Goutard would suggest that Valeo needed to attain a "critical mass" of FFR 25 billion in revenuesa milestone reached in 1995.

Company Perspectives:

Valeo ranks among the world's leaders in automotive suppliers. Valeo is an independent industrial company entirely dedicated to the design, manufacture and sale of components, integrated systems and modules for cars and trucks.

Goutard was also credited with foreseeing the economic crisis of the 1990s and proactively restructuring Valeo by shedding subsidiaries, and even entire product categories, while shutting 12 plants (representing 15 percent of the company's activity) to realign its manufacturing activities on an international scale. Cutting back its work force by some 2,000 helped the company boost its per-employee productivity from FFR 560,000 in 1988 to FFR 690,000 in 1990. The sale of a series of nonstrategic subsidiaries, which reduced Valeo's revenues by some FFR 1.2 billion, helped the company reduce its debt load, bringing its net debt/earnings ratio down from 0.70 in 1989 to 0.54 in 1990, and to 0.42 in 1991.

The now leaner Valeo found itself in an enviable position as the recession of the early 1990s turned into a prolonged European economic crisis. Aided by Valeo's moves into the booming Asian market and its successful alignment with the major Japanese auto makersalong with its continued global implantation, including a policy of opening production facilities close to its clients' plantsValeo would see a steady progression of its net profits through the first half of the 1990s despite the stagnant market. While its revenues stuck at around FFR 20 million through 1993 and would climb only slowly afterwards, reaching FFR 28 billion in 1996, the company attained net profits of FFR 1 billion by 1994.

In the mid-1990s, Valeo continued making key acquisitions, including Borg Instruments in 1995 and Brazil's Univel in 1997, while shedding other operations. Valeo had also embarked on the creation of a number of joint venture partnerships, among them a European project with Japan's Seiko-Seiki; the formation of and 50 percent participation in Nobel Plastiques Climatisation; partnerships with Siemens in automotive climate control systems; and 1997 joint venture agreements reached with France's Plastics Omnium, a world leader in plastics-based automotive components, and with Yuejin Motor Corporation of China, marking Valeo's fifth joint venture in that crucial market. In 1996, Valeo regained its "independence" when De Benedetti's Cerus sold off its stake in the company.

Valeo continued to invest heavily in research and development and, especially, capital expenditures. New Valeo plants started up operations in France, Spain, the United States, Canada, Mexico, China, Argentina, and Brazil. The company also moved into the former Soviet bloc, bringing production facilities to the Czech Republic and Poland. Valeo's global development strategy and its specialized focus would seem a model for a new industrial age. In addition, the company could begin eyeing its next milestone, that of becoming a FFR 40 billion company by the year 2000.

Stops and Starts in the Late 1990sEarly 2000s

In U.S. dollars, Valeo's sales stood at about $5.7 billion for 1997, and the company was one of only a handful of European firms in the automotive components industry to operate on a truly global level. At the close of 1997, Valeo revealed an expansion plan that would increase sales outside Europe. The company hoped to bring sales to about $8.6 billion in four years, with a larger percentage of sales coming from North America, South America, and Asia. Achieving this goal would make Valeo one of the top five in the automotive components industry. CEO Goutard wanted 50 percent of sales to come from outside Europe over the next few years, and he hinted that a North American acquisition would not be unwelcome. In 1998, Goutard engineered the biggest acquisition during his tenure at the company, paying some $1.7 billion for the automotive electrical business of U.S. conglomerate ITT. Shortly after the deal went through, Noel Goutard retired. He was succeeded by André Navarri.

The ITT deal made sense for Valeo, giving it a valuable slice of the North American market, where Valeo hoped to grow rapidly. Before the acquisition, North American revenue had stood at around $700 million, and the purchase of ITT's 11 plants were expected to boost that figure to $2.6 billion. A year after the acquisition, most business areas were doing well, and the ITT plants in Europe had been refitted. However, the former ITT plant in Rochester, New York, a facility that employed 3,500 workers to make electrical components, turned out to be a bugbear. The plant was outdated and in need of considerable new investment. Valeo contemplated shutting the Rochester complex, yet vehicle production in the U.S. was very high in the late 1990s, and the company was afraid it would miss out on new business opportunities if it closed the plant to move to Mexico or another lower-wage country. Relations with the labor union in Rochester were described as "bitter," yet Valeo ultimately signed an eight-year agreement with the union, twice as long as the typical contract.

Then the auto market began to slow down in 2000, with the three largest auto makers cutting their production by 10 percent. By that time, missteps at the Rochester plant had taken a toll on Valeo. The company lost $159.5 million in the first quarter of 2001. Andre Navarri, in the job only ten months, was ousted as CEO and replaced by the former chief operating officer, Thierry Morin. Noel Goutard came out of retirement to act as head of the company's supervisory board, a position that made him responsible for long-range planning. Morin quickly sold or closed 26 of Valeo's 170 manufacturing plants. The company also cut the number of its suppliers from 4,600 to 3,900 by the end of 2001. Then two of Valeo's U.S. subsidiaries, Valeo Electrical Systems and Valeo Electrical Systems and Marketing LLC, filed for bankruptcy. These comprised most of the business bought from ITT in 1998, including the troublesome Rochester plant. Some industry analysts saw the bankruptcy filing as a ploy to pressure the Rochester union. In early 2002, Valeo announced more cost-cutting measures, axing 5,000 jobs worldwide on a pessimistic forecast of a further 10 percent fall in automotive output in both Europe and North America. A month later, the company announced its financial results for 2001, a net loss of $509 million (EUR $591 million). Sales had actually risen slightly over the year because of new acquisitions, but Valeo took a huge charge of EUR 526 million for its problematic Rochester facility.

Key Dates:

1910:
Inventor Frood sells the rights to his brake shoes to a French entrepreneur.
1923:
Société Anonyme Française du Ferodo is founded.
1962:
Sofica is acquired.
1980:
The company changes its name to Valeo.
1986:
Italian investor De Benedetti acquires 19 percent of the company.
1998:
Valeo acquires the electrical business of ITT.
2001:
The company's North American electrical unit declares bankruptcy.

Later in 2002, the company announced long-range plans that would turn the company around. Valeo planned to further reduce its number of suppliers and to work with its suppliers to improve quality and cut costs. The company also sold off non-core businesses and began to look more to low-cost countries in North Africa and Eastern Europe as well as to Mexico for new suppliers. The company also pinned its hopes again on growing sales in North America. CEO Morin announced in late 2002 that Valeo would double its sales in North America by 2007. The U.S. subsidiaries had just emerged from bankruptcy, and Morin predicted the Rochester plant would be consistently profitable by 2005. Valeo turned a profit in 2002, and by early 2003 its crisis seemed to be over. Noel Goutard announced that he was retiring again, leaving Thierry Morin with full responsibility for the direction of the company.

Morin felt that business conditions in the automotive industry would remain difficult for the next few years, and the company worked assiduously to prepare for the end of the decade. Valeo had had significant problems with quality control in the early 2000s, but it seemed to be on the way to solving them by 2004. In 2003, the company reported 200 problems per million parts, but by 2004 Valeo claimed it had only 53 problem parts per million. The company concentrated its technical expertise on what it called "seeing and being seen" systems, which it hoped would lead to greater North American sales. "Seeing and being seen" included advanced lighting devices, such as night vision systems, special "bending" lights for turning, and new sensors inside headlamps which offered obstacle detection. Initially, costs for these advanced features were high, but the company was confident it could bring prices down. This was to help Valeo double its North American sales by 2007. In a new strategic road map released in 2004, to take the company through 2010, Valeo also emphasized the increasing importance of Asia. By 2010, Valeo hoped to have 400 suppliers in China and to bring in 25 percent of its revenue from Asia, which accounted for only 10 percent of sales in 2004. In 2004, Valeo reiterated its hope to become one of the top five automotive suppliers in the world over the next few years. The company had first announced this vision in 1997 and had overcome several obstacles and significantly revamped its operations since then. Nevertheless, in 2004 the company remained in the number ten spot in the industry.

Principal Subsidiaries

Valeo Gmbh (Germany); ITT Automotive Inc. (U.S.); Valeo Electronique et Systèmes de Liaison; Valeo Espana S.A. (Spain); Valeo Thermique Habitacle; Valeo Sistemi S.p.A. (Italy); Valeo Thermique Moteur S.A.; Valeo Climate Control de Mexico, S.A.; Valeo Sécurité Habitacle; Valeo S.p.A. (Italy); Valeo Service; Valeo Termico Ltda. (Brazil); Valeo Termico S.A. (Spain); Valeo Vision Belgique (Belgium); Fiamm Technologies (U.S.); Valeo Group (China); Zexel Valeo Compressor USA Inc.

Principal Competitors

Delphi Corporation; Visteon Corporation; Robert Bosch GmbH.

Principal Divisions

Electrical & Electronic Systems; Transmissions; Thermal Systems Activity; Valeo Service.

Further Reading

Armstrong, Julie, "Valeo Plans Major Shift to Low-Cost Countries," Automotive News, March 15, 2004, p. 16.

Armstrong, Julie Cantwell, "Valeo Braces for Another Tough Year," Automotive News, May 26, 2003, p. 28.

De Saint-Seine, Sylviane, "Navarri out as Valeo Restructures," Automotive News, March 26, 2001, p. 8.

, "Valeo's Goutard Retires (Again)," Automotive News, February 24, 2003, p. 3.

Harnischfeger, Uta, "French Group Victim of Sharp Edge of Car-Parts Production," Financial Times, April 10, 2001, p. 30.

Mallet, Victor, "Loss Caps Grim Year for Valeo," Financial Times, February 4, 2002, p. 28.

Sherefkin, Robert, "Valeo's Growth Hits a Pothole," Automotive News, October 2, 2000, p. 3.

Sherefkin, Robert, "Valeo to Slash 5,000 Jobs in Sluggish Market," Financial Times, January 12, 2002, p. 8.

Simonian, Haig, "Healthy Appetite Remains after a $1.7bn Purchase," Financial Times, March 1, 1999, p. 3.

Ulrich, Lawrence, "Two U.S. Units of Paris Auto Supplier Valeo File for Bankruptcy," Detroit News, December 15, 2001.

"Valeo Aims to Be Top 5 Global Supplier," Ward's Auto World, May 1, 2004.

Whitbread, Colin, "Valeo Trims Some Suppliers, Coddles Others," Automotive News, July 29, 2002, p. 22D.

Wilson, Amy, "Valeo Wants to Double N.A. Business," Automotive News, October 28, 2002, p. 41.

M.L. Cohen

update: A. Woodward

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Valeo

Valeo

43, rue Bayen
75017 Paris
France
(33) 01 40 55 20 20
Fax: (33) 01 40 55 21 71
Web site: http://www.valeo.com

Public Company
Incorporated:
1923 as Société Anonyme Franchise du Ferodo
Employees: 32,600
Sales: FFr 28.87 billion (1996)
Stock Exchanges: Paris
SICs: 5013 Motor Vehicle Supplies and New Parts

Frances Valeo is a world-leading independent supplier of components and systems to the worldwide automobile and truck industry. Valeo operates more than 104 facilities, including 95 manufacturing plants and 15 research and development centers in some 20 countries, serving the European, North and South American, and Asian markets. With nearly FFr 30 billion in annual sales in 1996and goals to top FFr 40 billion by 2000Valeo has invested aggressively to establish leadership positions in several components and systems groups. The company is the world-leading supplier of clutch systems, friction materials, and engine cooling systems, and the European leader in air conditioning systems, lighting systems, security systems, and electrical systems. To maintain its position and growth, Valeo invests approximately six percent of its consolidated sales in research and development per year (resulting in filings for 500 patents in 1996 alone) while continuing a policy begun in the late 1980s of strong capital expenditures designed to increase its global presence. In 1996 Valeos capital expenditures reached FFr 2.3 billion; in 1997 the company expected to spend FFr 3.0 billion, representing some nine percent of its 1996 sales. In January 1997 Valeos growth earned the company a listing on the Paris Bourses CAC 40 indicator of leading French companies. Principal shareholders include Frances CGIP, with 20 percent, and Caisse des Depots et Consignations, with seven percent, following the sale of former major shareholder, Cerus, a French holding company owned by Italys Carlo De Benedetti, in 1996. Since 1987 Valeo has been led by CEO Noel Goutard.

Changing the Ferodo in 1980

When Valeo adopted its new name in 1980, it gave up what many manufacturers only hope for: a name that had become synonymous with an entire product category. For more than 50 years, Société Anonyme Française du Ferodo had dominated the French brake linings market, to the extent that the phrase change your ferodo all but meant reline your brakes in many of the countrys service stations. Yet, by 1980, the founding company had grouped together many of Frances most celebrated names in automotive equipment and systems, including Cibié, Marchal, Paris-Rhone, and SEV, representing some 30 product lines. Changing the companys name to Valeo (Latin for Im very well) created a consolidated and independent force in the global automotive supply market.

Ferodos origins dated back to England of the 1890s. It was then that Herbert Frood witnessed a heavily loaded horse and carriage having difficulties braking and the driver thrusting his shoe between the brake and wheel to bring the carriage to a halt. Frood kept the event in his memory; 20 years later, as the newly emerging automobile industry was struggling with its own braking systems, Frood introduced the first brake lining, replacing the drivers shoe with a more durable sheet of asbestos. Frood dubbed the lining Ferodo, and the product quickly became a mainstay in the British automotive industrys brake systems.

Froods brake linings also caught the attention of the automobile industry on the Continent. In 1910 Frood agreed to give a French entrepreneur, Eugene Buisson, the right to import and distribute the Ferodo linings in France. Soon after, Buisson received the rights to begin manufacturing the Ferodo linings in France, and the Société Anonyme Francaise du Ferodo, founded in 1923, grew to become one of Frances most prominent automotive equipment suppliers.

Although its initial success was based on brake linings, Ferodo soon diversified into other automotive equipment markets, adding first clutch linings and then complete clutch systems. The 1962 acquisition of Sofica added automotive heating systems, from which the company branched out into cooling systems by the mid-1960s. As with its other product lines, Ferodo soon came to dominate the French market for this product category as well. Meanwhile, as automobile makers established international and then global markets for their cars and trucks, Ferodo also began its international development, opening subsidiaries and factories close to its customers. An early subsidiary, formed in Italy in 1964 to produce clutch systems, adopted the name Valeo for the first time. The Italian Valeo went on to capture the majority of the Italian clutch market. From Italy, Ferodo moved into Spain, and then into the South American market through Brazil and Argentina. North America and the crucial U.S. market followed soon afterwards; during the 1970s the company turned east, entering the soon-to-boom Asian market. Meanwhile, Ferodo remained in the Buisson family, with Andre Buisson succeeding as CEO.

During the 1970s the French automotive equipment market underwent a shift. Spurred by the 1973 oil crisis and the resulting economic chaos in the automobile industry on the one hand and, on the other, the French governments eagerness to consolidateand later nationalizemuch of French industry, Ferodo began to absorb a number of other prominent automotive equipment makers. By 1980 the company had been joined by SEV (Société Anonyme pour lEquipement Èlectrique des Vehicules, founded in 1912), which had pioneered automotive electrical systems; Paris-Rhone (Compagnie Industrielle de Paris et du Rhone, founded in 1915), which retained a leading position supplying military aviation and radio-electric markets; Cibié, founded in 1919, Frances pioneering and leading maker of lighting systems for automobiles and trucks; Marchal, founded in 1923, which specialized in headlamps and lighting systems; and a number of other similarly prominent automotive brands, including Soma, which added transmissions and hydraulic systems for the trucking industry, as well as IMCH, ISHA, PPB, SIME, UFAGA, and Flertex.

In 1980 Ferodo took the bold move of adopting a new name under which it grouped and later replaced its panoply of brand names. The new company boasted revenues of FFr 7 billion, a payroll of 27,000, and a product line of more than 30 products capable of providing most of the critical internal components of automobiles for some 26 automakers worldwide, supported by 100 factories and other facilities in 16 countries.

A Worldwide Leader for the 1990s

The 1980s would mark the companys strongest period of growth, with revenues reaching FFr 20 billion by 1990, establishing the company as the worlds premier independent automobile components and systems supplier. Valeos globalization strategy also would be put in place by the start of the 1990s, with the companys foreign sales topping its domestic sales for the first time. Yet not all of the companys strategies would be as successful. At its formation, Valeo determined to diversify its activities into the nonautomotive industrial and manufacturing market. A number of acquisitions made in the early 1980s brought the company into the construction industry, smelting and steelworks, industrial equipment, and other activities that would eventually stretch the company too thin and drag heavily on its profits.

Weathering the recession of the early 1980s, and with annual sales rising to FFr 11 billion by the middle of the decade, Valeo faced a new crisis in 1986. At a time when French industry was reemerging from the countrys brief flirtation with nationalization, Valeo, which had steadfastly remained independent, found itself involved in a struggle for control. In a period that gave rise to a new breed of corporate raiders, Valeo became a target for one of the best known of these, Carlo De Benedetti of Italy. In February 1986, De Benedetti began buying up shares of Valeo, gathering 19 percent and effectively gaining majority control of the company. Valeo, and CEO Andre Buisson, turned to the French government in an attempt to head off this passage of Valeo into foreign control. Buisson was almost successful: Valeo succeeded in becoming classified as strategic to Frances national defense. Yet, while the company indeed was manufacturing components for a model of a new French tank, this activity formed less than one percent of its revenues. Nonetheless, the action barred Valeos takeover by a foreign concern.

De Benedetti was only temporarily thwarted, however. In June 1986 he purchased an inactive French holding company, Airflam. Renamed Cerus, the shell company received De Benedettis 19 percent of Valeo, giving De Benedetti a controlling stake in the auto equipment maker after all. In fact, Valeos years under Cerus proved a period of strong growth, if only because of the appointment of Noel Goutard to replace Andre Buisson as Valeos CEO.

Goutard came to Valeo after a career with many of Frances, and the worlds, largest names, including stints with Warner Lambert and Pfizer and leadership positions with Gévelot, Copmteurs Schlumberger, Pricel (later Chargeurs), and Thomson. Under Goutard, Valeo rapidly shed its nonautomotive activities, at the same time boosting its position in its core market with a new series of acquisitions, including Tibbe of Germany, Bongotti of Brazil, and Chausson Thermique and Neiman of France. By 1988 Valeos revenues had climbed to FFr 16.5 billion and its profits soared, gaining 127 percent in a single year, to reach a net profit of FFr 817 million. Unsatisfied, Goutard would suggest that Valeo needed to attain a critical mass of FFr 25 billion in revenuesa milestone reached in 1995.

Company Perspectives:

Valeos growth and profitability strategy, which is deployed in 4 directions Global Presence, Advanced Technology, Competitive Costs and Total Quality is aimed at Customer Satisfaction.

Goutard was also credited with foreseeing the coming economic crisis of the 1990s, restructuring Valeo, including shedding subsidiaries, and even entire product categories, while shutting 12 plants (representing 15 percent of the companys activity) to realign its manufacturing activities on an international scale. Cutting back its work force by some 2,000 helped the company boost its per-employee productivity from FFr 560,000 in 1988 to FFr 690,000 in 1990. The sale of a series of nonstrategic subsidiaries, which reduced Valeos revenues by some FFr 1.2 billion, helped the company reduce its debt load, bringing its net debt/earnings ratio down from 0.70 in 1989 to 0.54 in 1990, and to 0.42 in 1991.

The leaner Valeo found itself in a somewhat luxurious position as the recession of the early 1990s turned into a prolonged European economic crisis. Aided by Valeos moves into the booming Asian market and its successful alignment with the major Japanese auto makers, along with its continued global implantation, including a policy of opening production facilities close to its clients plants, Valeo would see a steady progression of its net profits through the first half of the 1990s, despite the stagnant market. While its revenues stuck at around FFr 20 million through 1993 and would climb only slowly afterwards, reaching FFr 28 billion in 1996, the companys net profits would reach FFr 1 billion by 1994.

In the mid-1990s Valeo continued making key acquisitions, including adding Borg Instruments in 1995, Brazils Univel in 1997, while shedding other operations. Valeo also had embarked on the creation of a number of joint venture partnerships, including a European project with Japans Seiko-Seiki; the formation of and 50 percent participation in Nobel Plastiques Climatisation; partnerships with Siemens in automotive climate control systems; and 1997 joint venture agreements reached with Frances Plastics Omnium, a world leader in plastics-based automotive components, and with Yuejin Motor Corporation of China, marking Valeos fifth joint venture in that crucial market. In 1996 Valeo regained its independence when De Benedettis Cerus sold off its stake in the company.

Valeo continued to invest heavily in research and development and, especially, capital expenditures. New Valeo plants started up operations in France, Spain, the United States, Canada, Mexico, China, Argentina, and Brazil. The company also moved into the former Soviet bloc, bringing production facilities to the Czech Republic and Poland. Valeos global development strategy and its specialized focus would seem a model for a new industrial age. And the company could begin eyeing its next milestone, that of becoming a FFr 40 billion company by the year 2000.

Principal Subsidiaries

Valeo Kupplungen (Germany); Valeo España; Valeo SpA (Italy; 99.9%); Valeo Sprzegla Poland; Valeo Clutches and Transmissions (U.S.); Valeo Debriyaj (Turkey); Valeo Embragues Argentina (68%); Emelar (Argentina); Valeo Pyeong Hwa (South Korea; 50%); Valeo Embrayages (Tunesia); Valeo Materiales de Fricción (Spain); Valeo Friction Materials Inc. (U.S.); Valeo Materiales de Fricción de Mexico; Valeo Climatisation (France; 79%); Valeo Seiko Compressors (France; 50%); Nobel Plastiques Climatisation (France; 50%); Siemens Automotive Moteurs Electriques (Germany; 30%); Valeo Limasystem (Germany); Valeo Climate Control de España; Valeo Climate Control Ltd. (U.K.); Valeo Climate Control Corp. (U.S.); Valeo Thermique Moteur (France); Valeo Engine Cooling AB (Sweden); Valeo Tek Inc. (South Korea); Electrical Equipment: Valeo Vision (France); Valeo Iluminación (Spain; 99.7%); Cibie Argentina; Prismatic (Brazil; 80.4%); Hubei Valeo Autolighting (China; 51%); Valeo Equipements Electriques Moteur (France); Valeo Electrical Systems (U.K.); Valeo Elektrik (Turkey); Shanghai Valeo Automotive Electrical Systems (China; 30%); Valeo Systémes dEssuyage (France); Paul Journée (France); Valeo Térmico (Spain); Valeo Wiper Systems Ltd. (U.K.); Valeo Wiper Systems Inc. (U.S.); Valeo Sécurité Habitacle (France); Valeo Security Systems Ltd. (U.K.); Valeo Sicurezza Abitacolo (Italy); Valeo Neiman Argentina; Valeo Lock Systems Ltd. (U.K.); Valeo Borg Instruments KG (Germany); Valeo Distribution (France); Chausson Service.

M.L. Cohen

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