During the past two years, Valeo Chairman Noel Goutard has turned his ailing company into one of the world's 10 biggest auto suppliers. Through acquisitions and aggressive U.S. marketing, the French electronics supplier became the 24th-largest original equipment parts supplier in North America in 1998.
Goutard, 68, will leave his post in June after 13 years in charge. Andre Navarri, who turns 47 next month, will succeed Goutard at the helm of Valeo. Navarri joined the company eight months ago from the French engineering group Alstom.
Goutard and Navarri were interviewed in Paris by Automotive News Europe Staff Reporter Stephane Farhi.
The purchase of ITT Automotive's electrical systems unit in 1998 has broadened your U.S. base. Will you go farther?
Goutard: We ended 1999 with a very good balance sheet, thanks to the profit we've made by selling our stake in (clutch maker) LuK for 1.2 billion euros ($1.18 billion at current exchange rates). So we erased our debt and now have $457.8 million in cash. That will allow us to rationalize our operations in North America and Europe and to think of new acquisitions.
We must target those acquisitions very precisely because we want to upgrade our high-technology portfolio. Electronics already makes up 40 to 45 percent of the cost of a top-range car and will do the same for mainstream models within five to six years. Valeo wants to be among the leading electronics corporations. We are also paying great attention to the coming upheaval in distribution, both for car parts and services.
Navarri: Aftermarket makes up 20 percent of Valeo sales. We've made a great effort to develop the Valeo brand in the aftermarket business. But we will also use other brands, like Cibie, which is very well known in Brazil.
Last year you announced alliances with Unisia Jecs and Zexel in Japan. What are your next plans?
Goutard: We set up a technical and sales operation in Japan 10 years ago, and we have a long-standing relationship with Japanese carmakers all over the world. But new opportunities have been raised with the Renault-Nissan alliance. It's a way to supply global vehicle platforms.
Therefore, we have been looking for alliances. So we set up a first joint venture with Unisia Jecs in clutches and components for gearboxes. We are currently negotiating with Zexel to set up joint ventures in air conditioning and engine cooling in Japan, the U.S. and Europe. Beside transmissions and thermal systems, we would like to find a third Japanese opportunity in the electrical/electronic field.
Navarri: With Zexel, we've just won a $489 million contract to supply air conditioning systems for the next Renault-Nissan small-car platform.
In announcing Valeo's 1999 results (a 28 percent increase in sales and a 117 percent increase in net profits), you unveiled a major change in your manufacturing strategy. In the next two years, Valeo will cut 6,000 jobs in Western Europe and the United States. It also will move some production to low-cost countries in Central Europe and Mexico. How will you proceed?
Goutard: I will let Andre answer, but I did not talk about job cuts. I talked about a work force decrease in North America and Western Europe. We are in a process of recruiting 1,000 engineers, managers, experts, as we do every year. I said we would partly shift our wage bill toward Central Europe - that is Hungary, the Czech Republic and Poland. We will also create new facilities in Mexico where we recently opened a lighting factory, for instance.
Navarri: The shift started some time ago. Recently, 11 facilities were set up in Europe and North America. That includes six in Central Europe. We are going to speed up this program.
In each division, we are scrutinizing the optimal split for our activities. The most automated and high-tech operations will be kept in (Western Europe) while manual, small-scale operations can be established in better conditions in Central Europe. Therefore, the (Western European) plants can focus on mass production and automation. The same thing applies in the U.S. and Mexico.
Goutard: Logistics matters, too. In Poland, for instance, the local market is important, with Fiat, Daewoo and GM facilities. Secondly, Poland is close to Germany.
You must take into account the cost of investment and the cost of the work force, both manual and qualified. Clearly, investing in France and Germany is worthwhile in some cases because you can find experienced, qualified people and excellent schools.
Navarri: Besides, we are still investing in (Western Europe) and in the United States. We are investing in a wiper facility in Germany. We are also investing in electronics in Meung, France, and in Fort Worth, Texas.
Valeo has said it will invest in high-tech or Internet-driven automotive businesses. It has a fund of $98.7 million to invest in technology startups and e-business. Why did you create this fund?
Goutard: Valeo needs to have access to these innovative companies. Not to do so would be a handicap. We think that the 'Valeo Innovative Entrepreneur Fund' will make it easier to get in touch with innovators in electronics, services and e-business.
Navarri: The point is to make Valeo an e-corporation. We want to be a reference point in this field, for example, in our relationships with our customers and suppliers. And we will do it at a fast pace.
Mr. Goutard, how would you sum up your 13 years with Valeo?
Goutard: My concern was to make Valeo an international group, an electronics-driven, information technology-driven company. Valeo had to satisfy its customers - not only PSA/Peugeot-Citroen, Renault and Fiat, but also American, German and Japanese carmakers. My concern was to create a culture for this company and to build a decentralized organization. My concern was also the bottom line (financial results) and the stock price of the company.
Why did you choose Andre Navarri as your successor?
Goutard: A CEO must be able to design and develop, with a team, a strategy that meets the customers' needs. I believe this man must be a team leader.
He has to bring values - personal values - but also corporate values. He must produce results and be able to integrate various aspects in his management - technical, legal and international aspects, plus other areas.
I started with this idea and I found Andre, who perfectly fits these specifications - if I may use such a word.
I think that with Andre Navarri, Valeo will continue to evolve and will make the necessary break with the past. He is a modern man, and he showed his ability when he was with Alstom.
Mr. Navarri, why did you come to Valeo?
Navarri: I'm a lucky man. My wish was to run a very successful company and to take it farther. I could not dream of a better opportunity than Valeo in this respect.
I'm also impressed by the car industry - its efficiency, its ability for renewal, its speed and its dynamism. After eight months in the business, I've found much more than I hoped for.
Clearly, the industry is approaching a critical turning point. That includes the move to consolidation, the development of global vehicle platforms and the growing technological content. It's a fascinating adventure for Valeo.