PARIS - Lear Corp. has won a major contract to supply seats to PSA/Peugeot-Citroen SA, strengthening Lear's position in the tough European market.
Peugeot insiders say the company has signed its first major contract with Lear and also has shifted in-house seat production for about 400,000 cars a year to Faurecia, another seat maker.
Lear will supply seats for the successors to the Peugeot 106 and Citroen Saxo superminis, scheduled for debuts in 2002 and 2003, respectively.
The contract is eye-catching because Lear beat out Faurecia, which was formed when Ecia - Peugeot's former in-house parts operation - purchased Bertrand Faure. That deal was announced in 1997 and completed last year. Peugeot owns 52.5 percent of Faurecia.
Seats for the 106 and Saxo currently are supplied by Faurecia.
Lear's deal will increase its business with Peugeot tenfold, to an estimated 500,000 vehicles a year.
Previously, Lear's Peugeot business was limited to small-series production models such as the 406 coupe built by Pininfarina S.p.A. in Italy.
According to a source familiar with the deal, Lear won the contract by offering a $32 rebate on its price of $285 a car.
Lear may buy a Faurecia plant near Paris for just-in-time assembly operations near Peugeot's Aulnay plant, the source said.
As consolation, Faurecia has won a contract to supply seats for the Peugeot 307, which is scheduled to replace the lower-medium 306 in 2001. Seats for the 306 are produced at Peugeot plants in Mulhouse and Sochaux, France.
For Faurecia, the deal is worth $325 million, sources say.
Production of the 307 will start next year. Faurecia likely will spend up to $13 million to build two plants near the Sochaux and Mulhouse plants. The Faurecia plants eventually could employ 600 people.
In 1997, Peugeot made seats in-house for 1.1 million of the 1.9 million vehicles it produced in Western Europe. According to a Faurecia internal document, the remainder came from Bertrand Faure, Ecia and Lear.