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  1. Analysis
March 16, 2010

ANALYSIS: Are Valeo’s optimistic medium-term goals a sign of a strengthening recovery?

In his first 12 months CEO Jacques Aschenbroich has quelled the row with Pardus that dogged his predecessor, with the company looking at technologies that reduce CO2 and expanding into China, says SupplierBusiness

In his first 12 months CEO Jacques Aschenbroich has quelled the row with Pardus that dogged his predecessor, with the company looking at technologies that reduce CO2 and expanding into China, says SupplierBusiness  French car parts supplier Valeo last week announced a new strategic plan to group its business around four areas, focusing on emissions cuts and increasing its base worldwide. The major point of the plan is a move into to technologies that reduce CO2 emissions, with Valeo saying that it wanted to become a ‘major player’ in the consolidation of the sector.

As part of this, Valeo is forecasting organic growth higher than automotive production in each region, anticipating that its sales will double over the next decade; €15 billion by 2020. The group said 60% of investment would be in emerging countries; including BRIC nations, Thailand and Turkey. Sales in China and India should reach €1 billion in 2013, and €3 billion in 2020.

“Two major trends should drive growth in the automotive market in the next few years: CO2 emissions reduction and high growth in emerging markets,” CEO Jacques Aschenbroich said in a statement. “By focusing our investments in these two areas […] Valeo will be able to return to organic growth.”

The ambition of targets show how far Valeo has come over the last twelve months, which has seen a successful first year under new CEO Aschenbroich. The row over representation on the board with hedge fund Pardus that had been the source of public friction with former CEO Thierry Morin has drifted away from the headlines.

A year ago the company was seen to be struggling, as it asked for a bailout from the French government’s strategic investment fund and began the process of restructuring. The company is still going through measures as it looks to divest €2 billion of business and announced last month that it will sell its Lighting Module Business to a group of investors. The company also cut 5,000 jobs last year, just under 10% of the total workforce.

The question is will Aschenbroich come to regret these bold statements? Early indications have been positive, with share prices rising from 22.9 to 24.8 on the day of the announcement, but most suppliers have been expressing caution over the recent recovery and are expecting a long and slow return to pre-2008 sales levels. In the event of a double-dip recession affecting sales, the CEO also suggested to reporters that he would not be averse to a second cost reduction plan.

Aschenbroich will also have to keep his eye on where his business grows. The French government will take a dim view if further job cuts are based in France, especially as their bailouts were predicated on the notion of saving French jobs. Aschenbroich announced a further 600 job cuts last Wednesday, adding “a little less than half will be in France”.

For the most part though, the company is fighting through the recession by utilising its strong point – its advanced technology. The company invested heavily in R&D (6.3% of sales in 2009; and increase on 5.7% in 2008) despite the downturn. The latest change in focus is a step forward for the supplier, but in moving into emissions reduction, it is stepping into a marketplace that is becoming increasingly crowded and will have to use all of its technical nous to take advantage.

This article was supplied to just-auto by SupplierBusiness, an IHS Global Insight company.

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