PSA/Peugeot-Citroen plans to sell a majority stake in its steering system operations to Japanese supplier Koyo Seiko Co.
The move is the latest phase in PSA's strategy to outsource nonstrategic component operations. Chairman Jean-Martin Folz wants to focus investment and development resources on PSA's core competencies.
The new joint venture will be 51 percent owned by Koyo Seiko and 49 percent owned by PSA. It includes French plants in Dijon and St. Etienne, which manufacture steering system components and mechanical subassemblies.
One thousand people are employed at the sites, which together produce more than 10,000 steering systems a day. PSA has no independent steering system supplier.
PSA said it was selling the stake because of the shift in demand to electric power steering. A major advantage for electric power steering over traditional hydraulic steering is that it can be customized to meet specific performance requirements. Also, a system without fluids means no leaks - so warranty costs can be reduced. Additionally, an electric power steering system does not need a pump, reservoir, belts or hoses.
PSA said it needs to gain more expertise in electric steering and wants a partner to help with investment and development capability.
Koyo Seiko, which is part owned by Toyota, is a leading steering system supplier with a global market share of 13 percent. It is the No.1 producer of electric power steering systems. The company also makes bearings, drive shafts and factory automation systems.
Koyo Seiko produces electric power steering systems for Renault at its plant in Irigny, France. It has about 85 percent of Renault's steering system business.
Koyo Seiko operates globally with plants in Europe, the United States and Southeast Asia.
The PSA transaction is scheduled for completion on March 31, 2000.