Faurecia CEO Says U.S. Strategy Paying Dividends

PARIS – Faurecia sales in the U.S. will increase 30% this year, says CEO Yann Delabriere, thanks to the success of Ford and its German and Asian customers.

Faurecia’s late entry into the market has boosted its success, he says, because its costs are lower.

Supplier thriving on Mondeo, other Ford world cars.

“As a new player in North America, we put a lot of capacity in Mexico and the southern U.S.,” Delabriere says during a round-table interview for K7 Auto, a French automotive business club. “Probably, we are among the suppliers with the largest Mexican base, and naturally in terms of cost that is rather favorable.”

Faurecia is the sixth-biggest global supplier, but in North America it was No.18 as recently as 2009. Spokesman Olivier Le Friec says the company last year jumped to No.9 based on revenues.

In this year’s first half, Faurecia revenues were E8.2 billion ($11.2 billion), up 15.5% from year-earlier. North America accounted for E1.2 billion ($1.5 billion), an increase of 30.1% and good for 19.3% of total sales.

Faurecia produces emissions controls, seating, bumpers, front ends and interior systems. Volkswagen is its largest customer (24.3% of sales), followed by PSA Peugeot Citroen (18.1%), Renault-Nissan (11.5%), Ford (11.0%) and General Motors (8.4%).

A large factor in North American growth is that “our German client base is growing fast in the United States, and this will continue to be a factor,” Delabriere says. “We are waiting for our friends at Audi to announce their decision to produce in the U.S.”

Faurecia also has identified Nissan and Hyundai as priority-target customers in North America. Hyundai sales in the U.S. were up 20.2% through September, while Nissan/Infiniti sales rose 14.9% over like-2010. Anticipating more growth, Faurecia in April bought a Nissan seat-assembly plant in Madison County, MS.

“Among the American customers, our strongest growth is with Ford,” Delabriere says. “The reason is simple: Ford is today the most active global auto maker with the idea of having world cars. Not platforms, but world cars. The Fiesta and the Focus today are world cars, fundamentally. The next Mondeo, or C/D car, will also be a world car.

“We are a big supplier to Ford in Europe, and Ford is also an enterprise that has best married its management in Europe and America. That is one of the big successes of Mr. (CEO Alan) Mulally, among many successes. Ford is attracted by European quality and by our capacity to supply solutions from the European market for their whole range.”

In the year’s first half, Faurecia sales to Ford were up 9.4% year-over-year, despite a decline in deliveries in Europe (down 2.4%) and Asia (off 14.6%).

Delabriere says the reviving U.S. auto makers generally want to put more emphasis on upscale cars, which will favor solutions that have worked in Europe. For example, “Cadillac has big ambitions on the market, and today we furnish more and more interiors to Cadillac.”

Faurecia has decentralized its innovation centers as well as its manufacturing and development.

“Our creative teams are in France, in Germany, in the U.S. and in China,” the CEO says. “We adapt to the different markets. Our team of advance designers is based in the U.S., a team of 15 people who make advance designs for automotive interiors, based in Holland, MI.”

This month, Faurecia’s seating division opened a E5 million ($6.9 million) tech center for frame and complete-seat development in Brières-les-Scelles, France, joining those in Stadthagen, Germany; Shanghai, China; and Troy, MI. A fifth center in Caligny, France, concentrates on seat mechanisms.

The black cloud hanging over European economies has governments and business worried, but Delabriere cannot predict what will happen.

“Our order book is short-term, so we don’t know” what will happen in coming months, he says. “Today, it is continuing normally. The financial markets are down 30%-40% since July, so the market anticipates a fall of 15% in Europe and the U.S.

“Economists think that the auto economy is OK, with a growth of 5%-6%. “For 2012, we are not ready today to change fundamentally our outlook. We think that weak growth is the right outlook.”

The recent past is a factor in Delabriere’s conservative assessment.

“In 2008 the industry was blind; they kept up production when orders fell,” he says. “From August 2008 to spring 2009, the OEMs sold from stock – 2.5 million units in the U.S., 1.8 million in Europe. Half the fall in sales was destockage and half was a fall in demand.”