Faurecia Bucks Trend

Tantamount to the “man bites dog” category of news making, French supplier Faurecia SA will create 2,000 new jobs this year in the U.S. when it opens six new manufacturing plants, most of them supported with United Auto Workers union labor.

While many major parts makers struggle with bankruptcy, plant closings, layoffs and Wall Street instability, Faurecia is bucking the trend in grand fashion.

Five of the six plants are in Michigan and Ohio, at a time when most new component facilities are being built in the South or in Mexico to take advantage of less-expensive labor.

Nearly all of the new business that will support the plants is with Big Three auto makers, mostly for new vehicle programs. This at a time when entrenched suppliers are closing plants because of production cutbacks, particularly at Ford Motor Co. and General Motors Corp.

Perhaps most surprising, employees at several of the new plants will be represented by the UAW. Any boost to membership is welcome to the union, which has lost roughly half its ranks over the past 20 years.

“We have reached, I would say, a very competitive arrangement,” James Orchard, president of Faurecia North America, tells Ward's at the North American International Auto Show in Detroit.

“The UAW has worked with us very proactively in establishing competitive wages and work rules and benefits, which we are very satisfied with in launching these facilities,” he says.

The plants will be fully operational by this summer, as the company is investing nearly $300 million in the region by 2009, Orchard says.

Three of the facilities will be located in Michigan, including two in Sterling Heights (seats, interiors, respectively) and one in Fraser (technology development-interiors).

Two will be in Ohio, one for exhaust systems in Toledo and one for interiors in Northwood. The sixth plant will be in Fountain Inn, SC, to produce seats for BMW Mfg. Corp., which has a vehicle assembly plant nearby.

The Toledo plant will produce exhaust systems for the upcoming Dodge Caliber.

All of the manufacturing facilities will deliver components or modules in a “just-in-time” sequence.

Faurecia also will produce its first front-end module for the North American market at the interior systems plants in Fraser and Sterling Heights.

Orchard says Faurecia is winning Big Three trust “program by program. We are not receiving business because of the fallout of a few other distressed suppliers. We're competing hard and earning our way.”

With the new business in hand, Faurecia says its sales in North America will grow from the present $1.5 billion to $2.5 billion by 2009. The company currently has 17 plants in North America and employs 7,000 workers in the region.

Although growing in North America, Faurecia is not doing as well in its home market, where PSA Peugeot Citroen (which owns 71.4% of Faurecia) and Renault SA have cut vehicle production drastically.

While not in bankruptcy, Faurecia's situation is not unlike that of Delphi Corp., which is growing its business overseas while its home market is troublesome and marred by overcapacity.

But the growth in North America has Faurecia's top executive excited about prospects in an enormously important vehicle market.

“In a way, our growth has not been spectacular — no acquisitions,” Chairman and CEO Pierre Levi tells Ward's. It's about good quality products and good performance on cost.

He notes that Faurecia seats in the new Pontiac G6 have been recognized as “Best in Class” for the entry midsize segment in J.D. Power studies.

Faurecia opened a plant in fall 2004 in Lake Orion, MI, to produce seats for the G6, which GM assembles nearby.

As with several new Faurecia plants to open soon, employees at the Lake Orion plant are represented by the UAW but are paid according to the supplier wage rate, rather than the higher rate afforded Big Three workers based on the national contract.

In 2004, average pay at the Lake Orion plant was about $13 per hour.

UAW Vice President Bob King, director of the union's Independents, Parts and Suppliers Department, praises Faurecia for adopting “a fair and democratic process for workers to decide whether or not they want union representation.”

King says the UAW represents employees at three Faurecia plants currently. “We certainly will reach out to the workers at the additional facilities Faurecia plans to open this year,” he says, “so these workers can also have the democratic opportunity to choose to be a part of the UAW.”

Orchard says his company has the advantage of being able to “selectively bid” on contracts, and that he is confident the Big Three auto makers will reverse their sliding fortunes.

“We are not necessarily fearful of Ford and GM and Chrysler,” he says. “That's where a lot of our growth is coming from.”

Levi says Faurecia will remain competitive in the U.S. by sourcing smaller components, when possible, from low-cost regions throughout the world.

“If the vehicle is built in Michigan, we want our final assembly to be in Michigan as well,” he says. “Where the components are coming from can be worldwide.”

The new plants are part of a grand strategy for Faurecia.

“When I look at what is happening in North America between the Mexico City area and Canada, we are in the process of stringing plants all along the way in order to deliver the most efficient value chain,” Levi says.

By way of other new programs, Faurecia supplies the entire instrument panel, center console and door trim for the '06 Chrysler PT Cruiser, which got a significant interior upgrade. n Faurecia provided '06 PT Cruiser with significant interior upgrade.