Speaking exclusively to just-auto managing editor David Leggett at Valeo's Paris headquarters, Valeo chairman and CEO Thierry Morin said yesterday that 2003 will not be a good year for the automotive industry. He also declined to forecast an improvement in Valeo's operating margin to six percent from 2002's five percent.

"Six percent is a good target, but it is not a forecast," Morin said. He stressed that he was not saying that 2003 results will be bad for Valeo and that he expected Valeo's financial performance to continue to improve.

"What is happening in the world? 2003 will not be a good year and the economy will be drastically down worldwide," Morin said. "Valeo will improve because we are foreseeing this," he added.

Looking at the west European car market, Morin forecast that 2003 would see a five percent decline.

Across the Atlantic, he pointed to inventory problems in North America - with manufacturers hitting over 90 days' stock - as a sign of the serious difficulties facing the Detroit Big Three.

"There is too much inventory in North America," he said

Morin also said that he was concerned that the Japanese manufacturers in North America are gaining market share without incentives.

"So what is going to happen when the P and L of the Big Three doesn't cope any more with incentives, which will happen at the end of the day?

"That is why it is very important for Valeo to supply the Japanese as well.

"The important thing for our shareholders to know is that we work with every client in the world."

Morin has said before that he sees a big market opportunity in North America and that he wants to double the value of Valeo's North American business to $US 4 billion by 2007.

Morin also pointed out that Valeo is positioning itself to take advantage of higher demand in Asia, especially China.

"Asia has replaced North America as the second most important region for Valeo with revenues of 2.5 billion euros last year, against 2.4 billion euros in North America. We also had 17% growth of our sales in Asia last year against 10% for the region, so we outperformed the market and are gaining share.

"Valeo was first in China in 1991 and we have eight factories there. We are well positioned in both the Shanghai and Beijing regions and I believe that in the next two years we will benefit very much from new projects in China. The arrival of Nissan at Dongfeng is also very important to us."