7 points largely because the raw materials

The first quarter of Valeo is characterized by a strong growth: 15.4. This figure breaks down into three components: 3.4 from the effects of foreign exchange, 7 from changes in structure and 5 from organic growth. Promised by Thierry Morin, Valeo's CEO, in 2004, it is therefore the appointment. And the dedicated formula, Valeo has "beat" in its different markets: 14 in North America, then local production has increased by 4. Same effects in Europe: 10 to 2, and South America, 35 to 11 in Asia, 51 for 6. If growth is good, the prices of raw materials, and particularly the volatility of prices, was not expected. This impact the margins of the group, including the gross margin, which is growing in value (EUR 423 million), but moves if ride turnover (from 16.2 to 15.8). The rising prices of raw materials absorbed 0.9 point margin with the impact after corrective measures is 0.6 of a point on the accounts of Valeo. Note that in a year, the price per tonne of aluminum increased 27 to 51 and same 71 for zinc copper. And it is not finished, says Thierry Morin: "copper was 4.940 dollars per tonne late March, it is three weeks later, 6.600 dollars." And the CEO of Valeo prevents that the second quarter will be "terribly affected in the industry by the price of raw materials". Over a period of two years, the current of the first quarter of 2004 in the first quarter of 2006, gross margin decreased by 2.7 points, largely because the raw materials. "OEMs can not permanently sell copper, zinc and aluminum to the market price," said Thierry Morin.

Taken awareness among manufacturers

But what happens upstream providers of Valeo Previously, the CEO of Valeo felt that the company could not be the ambulance at the service of its suppliers. Now, the speech has changed, and Valeo understood the difficulties of its suppliers to the increase in raw material: "go asphyxiate a provider materials does appear not interesting, it must negotiate," he said. But our interlocutor identifies the major problem among manufacturers that produce too high cost. They then a single outcome, for lower costs. "The problem is that there will always be one of their competitors to sell a cheaper car, because for some manufacturers, it is more interesting to run a plant to stop it". Thus, the problem lies both in manufacturing costs, but also in production capacity. "I hope that manufacturers will finally address the true subject, overcapacity". It is true that with a production of 62 million vehicles for a capacity of 80 million, there appears to be the margin. But can be thinking globally on this issue while overcapacities are local and disseminated Can add 150,000 Modus not produced the Peugeot 1007 surplus 50,000 "I believe that the decrease in production capacity is the first good thing to do for this market," said Thierry Morin, who believes that manufacturers seem to have identified the problem.

Improvement of margins by the growth

In this difficult environment, Valeo has yet managed to advance its operating margin of 25. It reached the 90 million euros, which is 3.3 of the products of the activity. The passage of an operating margin of 3.1 in the first quarter 2005 to 3.3 in the last quarter decomposes so: 0.9 point for raw materials, 0.3 point additional raw materials "refacturé client", 0.1 point to the end of the restructuring of the wiper activity, 0.6 point for productivity and 0.6 point to the effectiveness of R & D, these last two positions are drawn by the increase in volumes, and - 0.3 point for perimeter adjustment operations. In this regard, Thierry Morin said that there is still a little bit of work to do on Zexel: "I hope that this will be settled at the end of the second quarter." The operational result is stable at EUR 59 million, and in the end, the net back 8 from the previous year to EUR 23 million. Reached degradation comes from future restructuring costs, bringing the position "other net expenses" of EUR 31 million. Also note an increase in financial expenses related to the acquisitions and share repurchases occurred in 2005. 0.3 Points of raw "passed" to manufacturers on the 0.9 points suffered by Valeo, Thierry Morin is very clear: "don't go that Valeo will be satisfied to pass only one-third of the increase of contents first to its customers.

In the first quarter, Valeo has used its growth to improve its financial situation, notably by reducing its debt ratio is now 59, a decline of three points compared with the situation of the end of 2005.

For the current quarter, Valeo estimates that vehicle production will be down 5 in Europe and 2 in North America. "Valeo will grow in a universe that will be down." Not forgetting the tension increased on raw.

Three projects underway Stars

More than ever, the two levers of growth of Valeo are international expansion and new products with high technological content. In this field, the strengths of Valeo are tracking system of line Laneview already adopted by Infiniti and the Stars starter-alternator mounted by Citroën C2 and C3. Valeo is currently conducting three projects Stars with a German manufacturer, an American and a "another French." The American manufacturer has already launched a campaign of teasing in the North on the theme of the micro-hybrid American. And Thierry Morin said: "this constructor had launched a project with one of our competitors, but it didn't work and he turned to Valeo." Of these three projects currently in development, Thierry Morin expects "a minimum of two other commands. While the Citroën were presented at the fall of 2004, no new contract has come since. "It is not easy to launch a new product such as Stars or Laneview, since it requires changes to the constructor and driver habits", defends the President and CEO of Valeo. More than ever, predicted, the differentiation is more strong between low-cost mass products and high-end technology products: "when we make Stars or Laneview, the question is not whether where on the product, but to produce well." In any case, Valeo turned more and more to high technology products leaving the joys of the product of mass to its competitors, they are American or, tomorrow, Asian.

Problems of structure for the American OEMs

Side industrial device, the Group considers be trimmed and have an optimal number of production sites. "Of course, if I had to build Valeo on a white sheet, the group have less sites", said Thierry Morin, but "we have more overcapacity, especially that now, growth comes". On the above mentioned restructuring costs, "this year, they are not as strong as last year. The industrial device to capture the growth in Asian markets. "The Japan is the first country in our harvest of orders currently. The group is organized throughout China/Korea/Japan/Thailand, so that "we can provide our Japanese customers and Korean from our Chinese production bases".

With regard to growth by procurement of the group, Thierry Morin brought a different light on the situation of American manufacturers. "The question of the social costs in the United States has masked the poor organisation of sites and a large bureaucracy. And Valeo is familiar with the subject, with the site of Rochester acquired with the electrical systems of ITT late 1990s activity. About Rochester, Thierry Morin in supports while distinguished method: "the problem is that we have assaulted him in March 2001, while we had bought it in 1998". Note that historically, the site of Rochester was part of GM until the end of the 1980s and that it Automotive Components Group, which became Delphi GM being at the time, had not wanted! And Thierry Morin said that the acquisition of ITT "it was also a SWF, a remarkable company in the field of the wiping and wiping components."

More generally, he said that the United States, "which appears as a gigantic wall is not, it can negotiate with American unions." What Dieter Zetsche has shown when he was head of Chrysler from 2001 to 2005 including.