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Valeo Electrical files Chapter 11

Valeo Electrical Systems Inc., a North American group of French supplier Valeo SA, filed for Chapter 11 bankruptcy protection on Friday, saying its expects to lose $70 million this year and calling for wage and workforce cuts at its plant in Rochester, N.Y., as part of its reorganization.

The filing affects the electrical business' manufacturing operations in Rochester and its sales and administrative offices in New York City and Auburn Hills, Mich. Valeo acquired the business in 1998 from ITT for $1.7 billion. The business makes windshield wiper systems, airflow systems, motors and other components. General Motors, which originally owned the plant as part of its components group, is a primary customer for the plant's output.

Valeo in August 2000 agreed to an eight-year labor contract for its Local 509 IUE-CWA workers at its Rochester operations.

But last June, Automotive News reported that Valeo was making preparations to put the U.S. unit into Chapter 11 bankruptcy as a way to escape the labor contract and its high costs. At that time company officials, including Edward Planchon, then president of Valeo Electrical Systems Inc., denied that the company had a strategy of using a bankruptcy filing to cut its costs.

In July, Valeo hired Robert Strazzella away from DuPont to head its North American operations. Planchon remained with Valeo to address the situation in Rochester.

Valeo Electrical promises customers on its Chapter 11 web site, , that orders will be filled on time, projects will continue without interruption and payroll will be fulfilled. But information posted on the web site makes it clear that Valeo will seek wage concessions from its workers.

"There is no question that this will require significant downsizing of our workforce, a more flexible working environment, and lower contract costs," says Valeo Electrical on that web site. "We need the union leadership to work with us on the changes that will reduce costs to make us competitive at Rochester and also to agree to enhanced attrition programs that we will propose."

Valeo's main Web site is at .

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