Supplier Faurecia reportedly said on Monday it would not be able to meet its second-half profit margin target due to weakness in its vehicle interiors business and high raw material prices.

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It will also take restructuring charges in the second half and in 2006, chief financial officer Frank Imbert said, according to Reuters.


“The increase in plastics prices in the fourth quarter, the contraction in automobile production of our main customers, and continued pressure on selling prices means that Faurecia will not achieve its profitability target for vehicle interiors in the second half of 2005,” the group said in a statement cited by the news agency.


According to Reuters, Faurecia said it now expected its overall operating margin to fall to between 1.7% and 2% in the half from 3.5% a year ago. Europe’s second-biggest listed car-part maker had previously forecast a second half in line with the first, when it had an operating margin of 2.9%.


The vehicle interiors business makes up 77.3% of total sales, but a Faurecia spokeswoman told the news agency the finished seat activities, making up 43% of the total on its own within the segment, were not involved. The problem areas are dashboards, door panels and acoustic packages.

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The company reportedly announced a restructuring charge of €80m for the second half and said it would have to take €180m in goodwill writedowns due to new IFRS accounting standards in its annual results for vehicle interiors.


Analysts were on average expecting a net profit of €100m for 2005 according to Reuters Research, up from €87.6m for 2004, but the restructuring charges could pull that to a net loss.


Imbert reportedly said there would also be restructuring costs in 2006. A spokeswoman told Reuters these charges would not only be for vehicle interiors, as the group sought cost savings across its 160 sites around the world.


“We have ongoing negotiations with car makers both on existing and new contacts,” Imbert reportedly said.


“Regarding future contracts, we might decide not to compete on car projects if investments … are too high compared to volumes and the risks we would incur,” he added, according to Reuters.