Plastic Omnium has taken steps to boost its core businesses in clean energy and exterior plastic components with two recent strategic acquisitions. The company has steadily expanded since the days it made steering columns for Renault. It now produces bumpers, structural parts, door panels, plastic fuel tanks and fuel systems, with research focused on developing composite materials to help reduce vehicle weight. The company reported consolidated global 2017 revenues of €6.68 billion ($8.38 billion), a nearly 16 percent increase from 2016. The suburban Paris-based company is managed by co-CEOs — Laurent Burelle and, since 2012, Jean-Michel Szczerba. Szczerba, 58, spoke with Automotive News Europe's Peter Sigal about Plastic Omnium's recent acquisitions and how it will respond to reduced demand for diesel engines.
Q: Eighteen months ago, Plastic Omnium acquired Faurecia's exteriors business for €402 million ($498 million). What was the reason and how did you integrate it into your company?
A: The first reason was to be present in Germany, and to be present with premium automakers. We also acquired Faurecia's research and development center in Munich with 300 engineers linked to the premium OEMs. We wanted to create a relationship for bumpers with Daimler, with Audi and with Ford, which were our customers for fuel systems. We had a relationship with BMW in the United States, where we produce components for the X types, but not in Germany.
Has the strategy worked?
Last year we got an order for the bumpers for the Mercedes S class. It was proof that we were able to be at an excellent level for our top customers.
In another recent deal, Plastic Omnium agreed to buy Mahle's stake in HBPO, the front-end module company, for €350 million ($433 million). What is the strategy behind this?
Tomorrow there will be a revolution in the auto business, with autonomous, connected, shared and electric cars. Plastic Omnium now has two core businesses, on the one side clean propulsion — so fuel systems — and on the other auto exteriors, for bumpers and other parts.
In exteriors, we want to be No. 1 in the world in "smart bodies." We want to be the integrators of connectivity for the car of tomorrow. We have acquired a stake in Tactotek, a Finnish startup that develops injection-molded structural electronics. We want to integrate and to protect all the sensors and radars which will be integrated in the car of tomorrow. To do that, we need the expertise in modularity that HBPO can give us.
Are you seeking other acquisitions?
In addition to the Faurecia business and HBPO majority stake, last December we announced two small technological acquisitions for hydrogen fuel cell technology — Swiss Hydrogen and Optimum CPV. We want to further develop the two legs of the company. We are actively working on it. We have the willingness, the financial means to be a major player of the car of tomorrow.
What is Plastic Omnium's position on fuel cells as a power source for the future?
Our target with fuel cells is to become a competitor of internal combustion engines. We want to develop a fuel cell powertrain at the same price of an internal combustion one, so about €4,000, with the same autonomy, about 800 kilometers, and with the same recharge time, about three minutes. That is much less than the recharge time of an electric battery.
This is our target, and this is what we want to do with our joint venture in Israel [POCellTech, established in 2016 with Elbit Systems] and with the two different companies that we acquired in December.
If you look a few years ahead, and the fuel cell business isn't really developing, will you seek other alternative fuel opportunities?
The fuel cell business is beyond 2030. We are in 2018. I think it's clear that the main development in the next 10 years will be hybrid electric vehicles.
Today hybrids are 5 percent of total production; that will reach 40 percent in 2030. Our main short-term and midterm target is to provide OEMs with fuel tanks for hybrid-electric vehicles, plug-in hybrid or otherwise. But we think that in 2040 there will be hybrid vehicles with batteries and fuel cells.
You are involved in clean diesel through selective catalytic reduction, or SCR, technology. But the market for diesel passenger cars, at least in Europe, is declining. How will you make up for the possible loss of this business? Are you prepared for the shift away from diesel?
We are perfectly aware of this situation. We are analyzing the penetration rate of SCR and the decline of diesel vehicles as regulations are becoming stronger. We think that demand for SCR systems will increase in the short term, but then it will decline.
Today we are generating €400 million ($495 million) in annual sales with SCR. We have orders that will reach €600 million ($743 million) in four or five years, probably a peak in our sales.
We will balance the decline of diesel vehicle sales with products for plug-in hybrids and water-injection systems that will reduce emissions for gasoline powertrains.
Last year Plastic Omnium took steps to strengthen its independence, including a share buyback and reducing the overall number of shares. Why was that important?
It's important when you are a family group to reinforce this independence. It shows the willingness of the shareholders to have a long-term strategy.
In 2017, nine of your 11 new customers were based in China. What is the importance of the Chinese market to Plastic Omnium?
In 2000, 18 years ago, worldwide automotive production was 50 million, out of which 2 million came from China, and two-thirds from Europe and North America. Today, production is 92 million vehicles and it will be 100 million in 2020, with more than 50 percent coming from Asia. Today China is a 26 million passenger vehicle market and will represent 30 million vehicles in five years. If you're not present in China, you cannot be a leader.
If you remember 20 years ago, China was seen as a country that only made copies. But the technology of tomorrow will come from China. This market is so important and so big, and there are so many engineers dedicated to the automobile of tomorrow, that we have to be present in such a country.
Are you active in China's growing electric-vehicle market?
Four of our new customers in China are pure electric players. Byton and Nio are the two most well known.
Plastic Omnium has 10 factories in Mexico. Are you concerned about possible changes to NAFTA?
This is an indirect risk for us. I would say today we see no impact. It's hard to understand [why there would be a need to change NAFTA] because the automotive plant utilization in the United States today is 100 percent. They need Mexico. However, the Trump corporate tax cuts are a nice win for us. It's a $15 million annual savings for Plastic Omnium.
The trend of lightweighting is helping automakers reduce weight and pollution. What are you working on in that area?
Imagine the car of tomorrow. It will be an assembly of different modules — door modules, roof modules, hood modules. Those modules will be lighter and lighter, not only to reduce emissions of CO2 but also to increase the autonomy of electric vehicles. This is why we took a majority share in HBPO.
Are there structural components now that are made out of metals that can be made from plastics in the future?
If all cars become autonomous and connected, there will be no more accidents, so you can imagine that cars can get lighter and lighter. That will increase opportunities for Plastic Omnium, from the bumpers to the doors to the roof to the tailgate. Light weight is also very important for electric vehicles, because it will increase their range. That is why it is important that some of our new Chinese customers are electric vehicle makers.
Where do you see Plastic Omnium in 10 years?
It is a story of growth and research. Our strategy of 10 years ago, more globalization, is almost achieved. With the technological revolution that is coming, Plastic Omnium has to become bigger and bigger to invest more in research and innovation. We want to become the integrator of the connected car, and we want to be a major player in clean propulsion.