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The Hard Driver At Valeo's Wheel


International Business

THE HARD DRIVER AT VALEO'S WHEEL

Back in 1986, Italian industrialist Carlo DeBenedetti was having trouble finding a new boss for Valeo, a sick French company in which he had just bought a 16% stake. Mused a colleague: "What we need is someone like Nol Goutard"--a highly regarded executive. DeBenedetti agreed. He persuaded Goutard to give up the presidency of a top French company--electronics giant Thomson--to run Valeo, a moribund maker of auto parts, dredges, and construction materials in which red ink had flowed for three years.

Nothing on Goutard's resume indicated that this onetime New York commodities trader would be a whiz at fixing a car-parts company. But Goutard has used his skill at tight financial controls, honed at Thomson and elsewhere, to build Valeo into one of the world auto industry's strongest suppliers. His profit record has been enviable, even during Europe's 1993 recession (chart). Under Goutard, Valeo has become the world's biggest maker of clutches and radiators and Europe's top producer of car air conditioners. And in September, he announced more happy news: a first-half earnings jump of 27%.

QUALITY PUSH. Goutard's makeover isn't just good news for shareholders, who have seen the stock triple in five years. It's proof that laggard European companies that have been slower to globalize than their American and Japanese rivals can catch up. In Valeo's case, success stems largely from an aggressive global growth binge that has built economies of scale and won new clients. When Goutard arrived, Valeo had plants in France, Italy, and Spain. Through acquisitions and direct investment, it now produces in 17 countries, from Brazil to Korea. "We have no choice--autos are a global industry," says Goutard.

Valeo's boss now has his eye on expanding business in the hyper-competitive U.S. As American carmakers build fewer of their own components and adopt Japanese-style supplier relations, Valeo is moving in with aggressive pricing and a growing reputation for quality. North American sales have grown tenfold in five years, to $500 million. Chrysler Corp. is the biggest customer: LH sedans carry Valeo radiators and air-conditioning components. Now, Goutard is plotting a stronger sales effort at Ford Motor Co. and General Motors Corp. The latter named Valeo its most-valued supplier last year. To help customize products, Goutard has opened a 300-person research center in Detroit.

This global push could not have worked without some major tune-ups back home. Goutard quickly dumped all nonautomotive businesses, then slashed costs savagely. He cut the workforce by 25%, to 25,000, and has dumped more than half of the company's 6,000 suppliers. Over the next few years, Goutard plans to cut his supplier list almost in half again. He also aims to boost Valeo's productivity 10% a year.

Numbers are Goutard's forte. The Moroccan-born son of a tannery owner compares himself to Harold S. Geneen, the fabled former chairman of ITT Corp. "I know businesses intimately through their figures," he says. Now 62, Goutard once worked as a financial analyst for Warner-Lambert Co. and Pfizer Inc. before joining a string of French companies.

PEDAL-FREE CLUTCH. Some competitors call Goutard a "hatchet man," but most admire his success. "They're a very aggressive organization," says Graham J. Bell, marketing director of GM's European components unit. Analysts find little to fault at Valeo. Caroline Bault of Robert Fleming Securities Ltd. in Paris thinks Valeo may face a tough market-share fight in Europe when Japanese parts makers eventually move in. She also fears Goutard may use his profit-fattened treasury--now totaling $250 million--to make a profit-diluting acquisition. But Goutard says he's not in the market for anything big.

Valeo's chairman says his primary goal is to keep his bandwagon rolling--aiming for 11% to 12% annual sales growth and a higher rate in profits. Part of his strategy is to go high tech. While laying off workers, he has hired nearly 2,000 engineers over the past three years to propel Valeo into higher-value products. The company spends a fat 6% of sales on research and development. One new payoff is an electrically operated clutch that requires no pedal for changing gears.

Some industry executives think Valeo's main risk may be a management vacuum if Goutard should leave. "It's very much a one-man band," says one. Goutard admits he has no succession plan. But with Valeo humming along nicely, finding a new CEO shouldn't be as tough as last time.Stewart Toy in Paris


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