Bloomberg News

Faurecia Bets on Global Projects to Escape Europe Car-Market Woe

June 11, 2013

Faurecia SA (EO), Europe’s largest maker of car interiors, is pushing for global supply contracts with customers such as Ford Motor Co. (F:US) as the component manufacturer weans itself from relying on its recession-strapped home region.

The strategy will be key to Faurecia’s expansion into growth markets including China, where it’s planning to open five factories a year for a total of 60 sites in the country by 2016, and the U.S., where it will run 43 plants that year compared with 38 now, Chief Executive Officer Yann Delabriere said.

“The equation now is to have one model launched everywhere in parallel,” Delabriere said in an interview at Faurecia headquarters in the Paris suburb of Nanterre. “It’s a very favorable trend for the equipment industry. Fragmentation of the supply base is stupid.”

Faurecia forecasts that markets outside Europe will account for more than 50 percent of its sales in 2013, versus 44 percent last year, as a sixth consecutive annual drop in auto sales pushes the company to seek business elsewhere. It’s tapping into carmakers’ lower-cost procurement strategies, including Volkswagen AG (VOW)’s modular model design and joint purchases by French producer Renault SA (RNO) and Japanese partner Nissan Motor Co. (7201)

“It’s a trend that’s been going on over several years now, even if it’s been accelerating over the last two to three years,” said Thomas Besson, a Paris-based analyst at Kepler Cheuvreux who recommends buying the shares. “Carmakers such as Volkswagen and Renault-Nissan are in the process of implementing new modular platforms that require a global parts supply, which generates very large contracts for the chosen suppliers.”

Ford Focus

Faurecia makes instrument and door panels for the Ford Focus, which research company R.L. Polk & Co. ranked as the world’s top-selling car last year. Under the Dearborn, Michigan-based manufacturer’s One Ford strategy to develop a single model range worldwide, 13 Faurecia factories supply seven of the carmaker’s assembly lines for the Focus, said Olivier Le Friec, a Faurecia spokesman.

The French company, which last year bought Ford’s car-interior business in Saline, Michigan, has a goal of becoming one of the top five industry suppliers in North America with $7 billion in yearly sales there by 2016, Delabriere said. The Chinese car market, the world’s biggest, will double its proportion of Faurecia’s revenue to about 20 percent by then, he said, reiterating a target outlined in November.

Faurecia has gained 49 percent this year, valuing the company at 1.94 billion euros ($2.57 billion). That’s the second-biggest increase in 2013 on the 15-stock Bloomberg EMEA Auto Parts & Equipment Index, which has risen 12 percent.

Spending Reductions

Growth plans outside Europe contrast with Faurecia’s cutbacks in the region, where the company is reducing expenditures by about 100 million euros, or 6 percent of fixed costs. Faurecia’s global projects limit the effects of the European car-market contraction, Delabriere said.

“When we discuss with Volkswagen or Renault-Nissan, we don’t discuss Europe specifically from the rest of the world,” Delabriere said. “Our clients know that their first cost driver is volume, so the more volume they get with global players, the more they get cost benefits.”

Ford and Wolfsburg, Germany-based VW are Faurecia’s two biggest customers, while controlling shareholder PSA Peugeot Citroen (UG) ranks third. The Paris-based carmaker consumed 3 billion euros in cash last year amid falling sales. Peugeot’s turnaround efforts have included reducing capacity, cutting jobs and selling some businesses.

The largest remaining asset that’s available for sale would be Peugeot’s 57.5 percent Faurecia stake. The holding isn’t for sale, Peugeot Chief Financial Officer Jean-Baptiste de Chatillon said in February. The company is reluctant to sell the stock because of Faurecia’s contribution to profit, two people familiar with the situation said in May.

“You need a stable shareholder when you’re not stable,” Delabriere said when asked about the consequences of a disposal by Peugeot. “We’re prepared” for the possibility of a sale.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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  • F
    (Ford Motor Co)
    • $17.62 USD
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