Valeo To Put 2/3 of its Advanced Research Investment Toward Solutions for Reducing CO2 Emissions; Lower CO2 Technologies to Represent More Than 1/3 of Sales by 2020
During an investor day organized in Paris, Valeo presented its new strategic plan focused on CO2 emissions reduction as well as medium-term financial objectives that include higher organic growth; being a major player in the consolidation of the sector; re-organization around four business groups; and a return on capital employed (ROCE) objective of around 30% in 2013, to be among the best in the industry.
As part of the new plan, Valeo will devote two-thirds of its advanced research investment to developing technology solutions for downsized internal combustion engines and for hybrid and electric vehicles. Another key focus point is reduced component weight and energy consumption. Valeo expects to double its sales for technologies linked to CO2 emissions reduction to €1 billion (US$1.4 billion) by 2013 (10% of total sales) and then to boost that to more than €5 billion (US$6.8 billion) in 2020 (more than one-third of total sales).
Two major trends should drive growth in the automotive market in the next few years: CO2 emissions reduction and high growth in emerging markets. By focusing our investments in these two areas, I am convinced that Valeo will be able to return to organic growth and play an active role in the consolidation of the sector.
—Jacques Aschenbroich, the Group’s Chief Executive Officer
Valeo forecasts organic growth higher than that of global automotive output in each region of production, thereby achieving sales of €10 billion (US$13.6 billion) in 2013 and €15 billion (US$20.5 billion) in 2020. At the same time, Valeo will investigate external growth opportunities, particularly in areas related to CO2 emissions reduction. Should there be a further consolidation of the sector, the Group intends to position itself as an active player in this consolidation.
Valeo plans to devote 60% of its investments to emerging countries in order to reinforce its historical positions, notably in China, India, Brazil, Thailand and Turkey, and progressively develop its presence in Russia. The Group is targeting sales in China and India of €1 billion in 2013 and €3 billion (US$4.1 billion) in 2020.
New organization. To respond to the new demands of the automotive industry and the growing globalization of its markets and its customers, Valeo will put in place its new organization centered around four business groups and a strengthened role for the national directorates. The goal of this new organization is to accelerate growth and improve efficiency. A dossier has been presented to the European Works Council.
Valeo’s objective is to achieve by 2013 one of the best performances in its sector in terms of return on capital employed (ROCE). With sales of around €10 billion in 2013 and an operating margin level of 6 to 7%, the Group’s ROCE should be close to 30%.
In addition to the lowering of its break-even point to around €7 billion (US$9.6 billion) in sales and its negative working capital, Valeo has three other levers which will contribute to improving its operating margin by 3 points as of 2013:
- Reduced administrative expenses from around the end of the first half 2011;
- Investment limited to 80% of depreciation in 2010 and 2011; and
- Return to Group-average profitability for the Visibility Systems Business Group.