Valeo's main shareholder is selling most of its 20 percent stake in the French supplier.
Investor holding company CGIP said that it would sell its stake either through the immediate sale of shares or by offering bonds convertible into Valeo shares in May 2005.
'It's never encouraging to see a company's leading shareholder, which has access to prime information, sell its stake,' said an analyst at an investment bank in London who declined to be named.
'I don't doubt Valeo's ability to boost its sales and operating profit margins, but I doubt it will succeed in outperforming its rivals as it did in the past,' the analyst added.
Analysts say only a quarter of Valeo business units have the capability to grow faster than the supplier industry average of 2 to 3 percent a year. Valeo's growth areas include electrical systems, lighting and wipers.
A reputation for outpacing rivals by growing internally while controlling costs propelled Valeo shares to a high of E82 in January 2000. Since then, the shares have lost nearly half their value, trading at about E47 on April 30.
The move reverses previous statements that CGIP would support Valeo through its restructuring program.
'We are a long-term investor, so we are used to backing a company when it is going through a hard time,' CGIP Chairman Ernest-Antoine Seillière said last year.
In March 2001, Seillière forced out Valeo Chairman Andre Navarri and replaced him with former Chief Financial Officer Thierry Morin. Seillière also called back former Valeo Chairman Noel Goutard.
CGIP will take a loss of nearly E10 for each Valeo share it sells, having bought its stake of 16 million shares at an average price of E56 each in the mid-1990s. In strict accounting terms, CGIP will show a profit on the planned sale, but only because it wrote down Valeo's share value to E42 last year.