Faurecia S.A.

1980–2003

Faurecia S.A. is a leading automotive components supplier focusing on six core products lines: car seats, cockpits, exhaust systems, acoustic package, doors, and front ends. The company is the leading European producer in all but one of these products (it is number two in acoustic packages) and also holds the number two and three position in each of these categories worldwide. Seats account for the largest percentage of Faurecia's sales, which topped EUR 10 billion ($13 billion) in 2003, representing 43 percent of group revenues. Acoustic packages, cockpits, and doors combine to generate 34 percent of group sales, and exhaust systems and front-ends add 16 percent and 7 percent, respectively. Faurecia supplies components to most of the world's major automotive manufacturers, with PSA Peugeot-Citroen and Volkswagen representing its largest customers, at 28 percent and 23.5 percent of sales, respectively. Other significant customers include Renault Nissan, Ford, General Motors, DaimlerChrysler, and BMW. These seven companies represent nearly 95 percent of group sales. Faurecia supports its operations with a worldwide network of subsidiaries, with production facilities in 27 countries and more than 50,000 employees. Faurecia is listed on the Euronext Paris Stock Exchange; PSA remains the company's majority stockholder, with 71 percent of stock.

French Automotive Origins in the Early 20th Century

Faurecia S.A. was formed in 1998 through the merger of two prominent French automotive component suppliers, Bertrand Faure and ECIA, the former components unit of PSA Peugeot-Citroen. In 2001, Faurecia acquired the automotive division of Sommer Allibert, thereby forming Europe's leading automotive component supplier.

ECIA stemmed from Peugeot's rapid growth in the post-World War II period, when automobile use became commonplace in France. The company began establishing new subsidiaries specialized in the development and production of automotive components and subsystems. Peugeot also diversified into other product areas, such as motorcycles and scooters, power tools, hand tools, lawnmowers and other gardening equipment, and bicycles. Two of the primary subsidiaries to emerge from this period were Aciers et Outillage Peugeot and Peugeot Cycles.

In the mid-1970s, however, these subsidiaries began to refocus around their core automotive components business, launching a long-term divestment program--the last of these noncore activities was sold off only in the late 1990s. In the meantime, both Aciers et Outillage Peugeot and Peugeot Cycles began acquiring scale and competencies in a variety of automotive components. Among the components categories produced by the Peugeot subsidiaries were electric motors (for window mechanisms and sideview mirrors, and other uses), bumpers, hubcaps, steering wheels, and steering columns.

Much of this effort came through a series of acquisitions starting in 1980 and culminating in the purchase of Bertrand Faure in 1998. Among the companies' purchases during this time were the molded plastics company Quillery, and Tubauto, a maker of seat cages and racks. The company became a major producer of exhaust systems through its acquisition of Eli Echappements, and also moved to add a number of foreign operations, including Germany's Leistritz and PCG of Spain.

Then in November 2004, Faurecia received a contract worth nearly $2 billion to produce instrument panels, door panels, center consoles, and other cockpit components for Chrysler's U.S.

1914–1998

The refocusing of the two subsidiaries around an automotive components core led to their merger in 1987. The combined company took on the name of ECIA, for Equipements et Composants pour l'Industrie Automobile. ECIA was then listed on the Paris Stock Exchange. Peugeot maintained majority control of ECIA, and remained the company's primary company. Indeed, into the late 1990s, Peugeot continued to account for some 94 percent of ECIA's automotive components-based revenues. Yet the spin-off of ECIA was made in part to improve its efficiency--by enabling it to compete for contracts from automakers other than PSA.

By 1997, ECIA had picked up contracts with a number of other automakers, including Volkswagen and Renault, which represented 18 and 11 percent, respectively, of ECIA's revenues that year, compared with PSA Peugeot-Citroen's 60 percent. Other customers included Daimler Benz, Opel Honda, and Mitsubishi. By then, the company's sales had topped EUR 1.6 billion--double its sales in 1987. The percentage of automotive components in ECIA's total revenues had more than tripled during this time.

By the late 1990s, ECIA had focused its automotive components operations around three primary areas: exhaust systems, cockpits (including acoustic packages), and front ends. The company's merger with Bertrand Faure in 1998 not only doubled its sales again, but also positioned it as a leader in a new automotive component category.

Merging for Scale in the 1990s

Bertrand Faure had its origins in the early 20th century as a seat-maker for France's trams and the Paris Metro. The company established its first workshop in 1914, shortly before the outbreak of World War I. In the 1920s, the company became interested in the growing automobile market. A significant step in this direction came in 1929 when Faure acquired the patents for the Epéda spring system. This spring system enabled the company, later known as Epéda-Bertrand Faure, to begin producing a new generation of more comfortable automobile seats, which in turn allowed the company to emerge as a French leader in this category.

The spring technology also encouraged Faure to begin producing a new type of mattress, and that activity became a major source of the group's revenues as well. In 1973, the company acquired another mattress maker, Mérinos, becoming a leader in this segment in France. In the meantime, Faure had continued building its automotive seating operation, acquiring two French companies, Cousin Frères, which produced seat frame systems, and Autocoussin, which specialized in rear seat designs.

1987–1998

Faure began a diversification drive of its own in the late 1980s. In 1987, for example, the company acquired Delsey, a leading maker of suitcases. That year also saw Bertrand Faure enter the defense industry, when it acquired Luchaire. That company manufactured components for the aerospace industry, but also produced automotive components through subsidiaries Allinquant (shock absorbers) and Eli Echappement (exhaust systems).

Epéda-Bertrand Faure fought off a hostile takeover attempt by another major French automotive components maker, Valeo, in 1988. In order to prevent Valeo, then controlled by Italy's CERUS, from gaining control of its stock, Faure turned to a number of investors, including Peugeot, Michel Thierry, and Michelin. These companies backed a leveraged buyout (LBO) of Faure, which, through a complex financial structure, protected the company from the takeover attempt. Yet the buyout left Faure in an extremely precarious financial system.

The company's difficulties were quickly exacerbated in the early 1990s. In 1991, the company acquired control of Germany's Rentrop, a major seating systems manufacturer in that country. Faure also bought a stake in Italy's Sepi. But the company's bid to establish itself as a major player in Europe's automotive seating sector stumbled on the deepening economic recession in the region in the early 1990s. Adding to the company's problems was a push by its major American competitors, Lear and Johnson Controls, to enter the European automotive components market as well.

Faure began a restructuring effort into the mid-1990s in order to restore its financial balance. As part of that process, the company refocused around a core of automobile seating systems, selling off its bedding operations in 1994 and its aerospace and defense operations in 1996. The company later divested Delsey as well. By 1997, automobile components accounted for more than 91 percent of Faure's sales, which topped EUR 2.4 billion that year.

In 1996, however, the complexity of Faure's LBO package turned against the company, when Michel Thierry decided to sell its 16.6 percent stake in Faure to ECIA. This move precipitated talks between the two companies, leading to a full-scale takeover offer by ECIA for Faure at the end of 1997. The merger, completed in 1998, created a new French and European giant, Faurecia. While Faurecia remained controlled by PSA Peugeot-Citroen, which held more than 70 percent of its shares and remained its primary customer, the new company was established as an independently operating company.

Global Components Leader in the New Century

1998–2005

Faurecia immediately began developing its position as a leading European--and global--automotive components player. The company launched a new strategy to focus on a more limited range of systems, narrowing its operations to a smaller array of core areas in which it was able to establish leadership positions. As part of that process, the company sold off its steering wheel operations in 1999, and also divested noncore operations, such as Peugeot Motorcycles and Delsey, both in 1998.

Instead, Faurecia began expanding its international presence, opening new plants in Brazil and Poland in 1998. The following year, the company turned to North America, acquiring AP Automotive Systems (APAS), that market's third largest producer of exhaust systems. Faurecia's North American presence was boosted that year as well when it was awarded a major production contract for General Motors. The company quickly began extending its production capacity in North America, opening or acquiring factories to reach nearly 30 facilities in that market by 2005.

By then, however, Faurecia had taken a place among Europe's leading automotive components groups and, in its core components areas, had lifted itself to place in the top three worldwide. The most significant step in this growth came in 2001, when the company acquired the automotive division of France's struggling Sommer Allibert. That company's diversified product range included plastic products for bathroom and kitchen; its automotive segment, however, accounted for the largest part of its revenues, some 61.5 percent of sales of nearly EUR 3.5 billion. Sommer Allibert brought a new specialty to Faurecia, that of automotive cockpits, including acoustic packages.

The purchase, which cost nearly EUR 1.5 billion ($1.2 billion), boosted Faurecia into the global top five among automotive components suppliers, with a nearly 7 percent share of the worldwide market. Nonetheless, the acquisition, coupled with the group's other expansion efforts, notably in the United States, proved difficult to digest. Already losing money at the end of the 20th century, Faurecia's losses continued into the new century, with losses reaching $42 million in 2001 and $59 million in 2002.

Despite these financial difficulties, Faurecia continued making headway in its efforts to expand its geographic base, launching new production joint ventures in China in 2002 and in Korea in 2003, as well as a cockpit production joint venture with Siemens VDO. In that year, the company launched construction of a new manufacturing plant in China, in the city of Wuxi.

Faurecia made headway in its effort to diversify its client base. By 2005, the company had added contracts for a widening range of automakers, including Volvo, DaimlerChrysler, Saab, and BMW. Faurecia also emerged as a major supplier to General Motors at mid-decade. In October 2004, the company began production of cockpits for the new Pontiac G6, beating out usual favorites Johnson Controls and Lear for the contract. Then in November 2004, Faurecia received a contract worth nearly $2 billion to produce instrument panels, door panels, center consoles, and other cockpit components for Chrysler's U.S. automobiles. Faurecia had established itself as a clear and growing force in the global automotive components market.