Q&A: CEO Morin says Valeo will reduce the number of suppliers

Paris. Valeo, France's largest independent automobile supplier, is restructuring its supplier network. Automobilwoche spoke to CEO Thierry Morin about the lighting and air conditioning specialist's strategies.

What are your plans for the German market?

In the past few years we have put a lot of money into the German market. We have invested a total of 80 million euros in our German locations in 2002 and 2003. We expect a revenue increase of 6 percent in Germany for 2003.

Which products are you focusing on?

I don't want to focus on specific products. We have categorized our development activities into functional sectors, which reflect market demand. I am talking of domains such as to-see-and-be-seen, electrical energy management and thermal systems. With those technology domains we can drive our product -- and engineering competencies forward and always keep an eye on the original equipment manufacturers (OEMs) and the consumers.

Recently there was an article saying that Valeo is planning to directly supply OEM authorized workshops with spare parts. Can you give us some details?

Let me get something straight: We do not plan to become rivals with the OEMs regarding the spare parts business. We are simply looking for ways of eliminating unnecessary costs within the supply chain. The supply of spare parts still is too expensive. That is why I hope that we will find a way in cooperation with the OEMs to reduce costs. In the past we have been asked by a few OEMs if we could support their aim to optimize the logistics chain, to reduce delivery times, for example. So that is what we do, but no more than that.

In the past few years Valeo has transferred large parts of its production to low-cost countries. Is this process finished now?

No, due to cost-cutting measures this process is still ongoing. Two years ago approximately a quarter of our employees were working in low-cost countries. I believe that in the medium term this will increase to approximately 50 percent. At the same time we are planning to reduce the number of plants worldwide from 131 to something between 120 and 125.

Are you planning to reduce the number of your suppliers?

Yes. Two years ago we were cooperating with 4,500 businesses, now it is 2,900. Our aim is to further reduce the number to approximately 2,000 suppliers and we are hoping that by the end of 2003 we will be half way there. On the other hand we have recently finalized VIP contracts. VIP stands for "Valeo Integrated Partner", which are companies that will be favored by us in regard to cooperation. So far 87 companies have received that status.

How many will there be?

In the long term we are aiming to have 200 to 300 partners. However we are taking our time and choosing them very carefully. We have very high demands: Not only the quality of supply has to be right. They also have to be financially strong and have to be globally orientated.

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