PARIS - Valeo SA posted a $157 million net loss for the first half of 2001, mainly reflecting a $115 million one-time charge to restructure operations at its plant in Rochester, N.Y.
Valeo CEO Thierry Morin said 1,200 jobs at the plant will have to be cut in the next three years as a slowing economy reduces demand for auto components. Altogether, Valeo has made provisions of some $230 million to cover the plant's restructuring costs, he said.
He acknowledged that the Rochester operation had become slightly profitable in the first half and had added DaimlerChrysler as a client. But this was far from being enough, he said.
Morin, who was named head of Valeo's executive committee in May, made clear he was determined to cut losses at the Rochester plant. Valeo bought the plant three years ago from ITT Automotive, which acquired it from General Motors.
'Rochester was a failure for GM, for Delphi (GM's former component unit) and for ITT. It won't be a failure for Valeo,' Morin said.
Valeo has been pressing the plant union to renegotiate an eight-year wage and benefit package. Even though the package was signed only last year, the company argues that it is unrealistically generous given economic conditions.
A 40 percent cut in Rochester's staffing was indispensable, he said. 'We've given all the elements to the unions, and we're negotiating with them,' he said.
The restructuring plan also involves early retirements and a cut in wages, Morin added. 'We need significantly lower labor costs. It makes no sense to keep a plant on artificial life support,' he said. 'We have to convince the unions to renegotiate the contract.'
Morin said Valeo expects the U.S. new-vehicle market to fall to around 15.4 million or 15.6 million units this year from a record 17.4 million in 2000. 'We've set rather pessimistic targets for our plants,' he said.
The long-lasting stalemate between management and unions at Rochester helped trigger sweeping management changes at Valeo in recent months.
Morin, formerly Valeo's CFO and director-general, was put at the company's helm to replace Andre Navarri, who was ousted partly because he was deemed too slow in tackling Rochester's losses.
In North America, Robert Strazzella, a former DuPont Automotive executive, has been named group vice president for North America, replacing Edward Planchon. Walter Kneuer, a former TRW Inc. executive, has been named general manager at the Rochester plant.
The new North-American management reports to Morin twice a week on the situation there.