EuroBusinessMedia (EBM): Valeo, one of the world’s leading automobile suppliers, just reported earnings for 2008. Thierry Morin welcome.
Thierry Morin (TM): Hello.
EBM: You are the Chairman & CEO of Valeo. Before we talk about your 2008 full-year results in just a moment, first, what is your perception of the crisis that hit the automobile sector?
TM: Well, the first thing to say is this is not an automobile crisis. This is more a financial crisis and a liquidity crisis generating a kind of lack of trust and, therefore, consumers are not buying cars anymore. We have this problem therefore of a market that falls 25-30%.
EBM: In response to the crisis what steps did you take and how did they impact Valeo’s 2008 results which you’ve just reported?
TM: As early as the end of August we made decisions in order to cut costs everywhere it was possible and to save cash. Actually, we said “Cash is King, Expense is Exceptional”. It has allowed Valeo to save up to 140 million euros in the last quarter, of which 40 million is nonrecurring and 100 million per quarter is going to be recurring all over 2009.
EBM: Even though sales are declining, your order intake still hit a new record level in 2008. What does that tell us about what is going on?
TM: I think this is because our clients appreciate very much our strategy. First of all, this strategy is about operational excellence and, for example, quality. We are a 10 ppm group, 10 defaults per million parts produced on the one hand; therefore, they know they have less chance to have recalls, for example, for our parts. Point number two, the kind of technology that Valeo has created, like environmental technology: StARS, the stop start system that saves as much as 20% of emissions in towns; products that save lives as well, like Lane Departure Warning system, Blind Spot Detection system and Park 4U (you might know about this product where we have 18 commercial order intakes) that helps parking the car, for example. I think they like these technologies that help differentiate their cars. These are the two major reasons why we have such a high ratio of order intake -- 1.4 times – and you’re right, this is a record!
EBM: As raw materials make up a significant part of your purchases, did the decline in raw materials prices give you some breathing room in 2008?
TM: No. Not yet. 2008 was still a year where we had an increase in the raw material cost. But we are anticipating that 2009 should be the beginning of the decline for those raw materials and therefore we are expecting to have some oxygen, as you say, out of that.
EBM: What is your assessment of the company’s financial health today?
TM: Well, on the one hand, we have those savings which I have mentioned, up to 600 million starting early 2010 obviously. Secondly, we have a good balance sheet. We have 60% gearing, debt over shareholders’ equity, and as you might know, we have 1.2 billion worth of bilateral loans which will help us get through this crisis.
EBM: What’s your reaction to the French government’s plan to help the automobile industry. Do you expect some help for Valeo in particular?
TM: Well, it is important for the state to help the automotive industry, because this liquidity crisis means that individuals cannot buy cars anymore and therefore this liquidity flow will help them buy cars again. So I believe it is a very good measure. As far as Valeo is concerned, we don’t need this liquidity for the time being. Now, I need to be humble in the given circumstances as we see them today.
EBM: In the current crisis, many companies are saying, “Cash is King.” As a result, they are deciding even sometimes to suspend their 2008 dividend. What is the situation at Valeo?
TM: Yes, it is true. The Board took place yesterday and at the Board we decided to offer the general assembly of shareholders not to pay dividends for 2008. I think everyone has to contribute to the global effort, if you will. We are asking some people to move out, other people will have to work more, I have offered myself to reduce my remuneration by nearly one third. I truly think that this is a contribution from everyone to help Valeo get through this crisis.
EBM: What is your outlook for 2009 and what are your priorities for Valeo?
TM: In 2009 we are not very optimistic. We think the year should begin with -30% in the first half and the second half probably around even; so that the year finishes with -20% also. In these given circumstances, we start the year with our restructuring and we benefit from the restructuring at the very end of the year. So we truly believe that the year will be contrasted - a very bad start of the year and we will have losses, and the second half in a better shape.
EBM: Thierry Morin, Chairman & CEO of Valeo, thank you very much indeed.
TM: Thank you.
