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EIB to Contribute Up to €300M in Financing to Valeo for €645M Fuel Consumption and Emissions Reduction Projects

The European Investment Bank (EIB) will grant financing of up to €300 million (US$426 million) to Valeo for its current research projects aiming to reduce the fuel consumption and CO2 emissions of cars and improve active safety. The total research investment of Valeo, one of the world’s top automotive suppliers, for these projects is €645 million (US$916 million) over four years. The EIB loan will come with competitive terms in two installments, the first one of €225 million (US$320 million) to be drawn by the end of July.

Aligned with the objective of the European Union to establish a competitive knowledge-based economy and the policy of the EIB to finance research and innovation as a priority, this funding will cover fuel efficiency technologies such as mild- and micro-hybrid solutions; the development of systems for electric and hybrid vehicles; efficient transmission systems; and active safety technologies including assisted viewing systems, crash avoidance systems and advanced lighting systems.

EIB Vice-President Philippe de Fontaine Vive stressed “how crucial it is—especially now as the crisis has spread—to stimulate long-term investment in those areas that will contribute to economic recovery and benefit future generations. It is also important to support RDI (Research, Development and Innovation) projects with tailor-made financial products as under the EIB/European Commission’s Risk Sharing Finance Facility”.

The EIB is providing this funding under its European Clean Transport Facility (ECTF), which is part of its wider response to the crisis and focuses on car emissions reduction and the development of new-generation vehicle technologies.

This funding is very important, particularly during the current crisis, and will allow Valeo to continue and accelerate existing research projects aimed at improving fuel efficiency and active safety for vehicles, two areas where market demand is very strong and which show strong growth potential for Valeo.

—Jacques Aschenbroich, Valeo CEO

The loan reinforces Valeo’s liquidity situation. The program of confirmed bank lines amounting to €1.2 billion (US$1.7 billion) remains undrawn. The liquidity position is further enhanced through the negotiation of a new covenant based on the net financial debt to EBITDA ratio. To date €866 million (US$1,223 million) have been renegotiated as well as a syndicated loan of €225 million (US$320 million).

In June, Valeo and five other industrial companies in France formed a consortium to promote an electric drive-train industry for vehicles. The role of each of the partners is the following:

  • Valeo – the drive-train electronics and thermal management of the vehicle
  • Leroy Somer – the electric motor
  • Johnson Controls-Saft – the battery system
  • GKN – the transmission
  • Michelin – low rolling-resistance tires and work on the active-wheel
  • Leoni – the development and production of automotive cables and harnesses

These 6 industrial groups proposed different projects, through their consortium, to the French environment agency (Ademe) at the end of June 2009.(Earlier post.) The drive-trains that the consortium develops will become a reference for other national and international programs. The objective is to bring together French industrial companies to propose industrial solutions to car manufacturers that are specifically designed for low emission vehicles.

EIB. The EIB is the long-term lending arm of the European Union, and is wholly owned by the 27 EU member states. Its aim is to contribute to the integration, balanced economic development and economic and social cohesion of EU member states. It does this mainly by providing loans from funds raised on capital markets on favorable terms thanks to its AAA credit rating. In 2008 the EIB signed loans totaling €57.6 billion (US$81.9 billion); €51.5 billion were for projects within the European Union, of which 4.7 billion were in France.

The Bank permanently adapts its activity to developments in EU policy. In December 2008 the EIB committed itself to increase exceptionally its lending in the EU by 30% in 2009 and 2010 to help offset the effects of the global economic crisis, with a focus on SMEs and mid-cap companies, energy and climate change, including clean transport, and convergence regions.

In the first six months of 2009 it has signed loans worth more than €32 billion (US$45 billion) (or 51% more than in the same period in 2008) and has approved some €5 billion (US$7.1 billion) in loans for cleaner vehicles, thereof €3.4 billion (US$4.8 billion) under ECTF (European Clean Transport Facility).


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