Appointed in January at the head of Valeo, after having climbed all the levels of the second French equipment supplier for the past 20 years, Christophe Périllat must face major challenges. Only a few weeks after taking office, Russia unleashed war in Ukraine, causing the prices of industrial raw materials to explode and quickly forcing Valeo to close its Russian factory, based in Togliatti, 800 kilometers southeast of Moscow. A lesser evil, compared to other tricolor groups, since the latter weighed only 0.5% of the group’s turnover.
In front of him, a shortage of semiconductors which should last at least until 2023 and obliges the manufacturers, its customers, to multiply the stoppages of production and especially the gigantic challenges of the electrification and the autonomy of cars. Tight turns which – if they are well negotiated – could nevertheless allow the equipment manufacturer, heckled on the stock market in recent years, to find the heights.
L’Express: Soaring energy prices, inflation of industrial raw materials, shortage of semiconductors… Can we talk about a return to all dangers for Valeo and more broadly for the automotive industry?
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Christophe Perillat : As far as energy costs are concerned, we are an energy-efficient society and we have also been constantly reducing our energy consumption for 30 years. Today, our primary concern is material inflation. Steel, aluminum, plastics… have seen their prices rise significantly. Ditto for electronic components. However, Valeo has become a major electronics engineer (in our teams, one in two engineers is an electronics engineer and the group consumes 250 million components every day). When the price of these components increases, it has a direct impact on us. Fortunately, we are able to pass on almost all cost increases to our customers.
The surge in the price of electronic components is fueled in particular by the shortage of semiconductors, which according to specialists should last at least until 2023. Is the bulk of the crisis nevertheless behind us?
For us, the peak of the crisis crystallized in the third quarter of 2021, with the massive production stoppages in Malaysia, where many electronic component factories are located. Since then, month after month, we have seen a real improvement in the situation. The vise loosens.
We also see that the number of stops on the production lines of car manufacturers is decreasing. I also take this opportunity to point out that Valeo has never been the cause of disturbances for any of its customers. This shows the strength and excellence of our teams, especially in logistics and purchasing.
Have you asked yourself the question of taking over a semiconductor manufacturer in order to secure your supply?
It’s not our job. And a trade, you only do it well when you are in the top three of the market. You then have sufficient volumes to be truly both innovative and competitive. This is also the case for Valeo in each of its four businesses (comfort and detection system division, propulsion system division, thermal system division and visibility system division, editor’s note), where we are either leader or co-leader .
Is the collapse of the euro against the dollar (at its lowest level since December 2002) handicapping Valeo?
No, because we buy components in dollars, but at the same time we also sell equipment in dollars. Indeed, Valeo has a very strong presence in the United States. This balance allows us not to suffer from the strong decline of the Euro.
The market is constrained by supply, not demand
Over the first eight months of the year, the French automobile market fell by almost 14% compared to 2021: how do you manage such a drop?
To begin with, it is important to remember Valeo’s low exposure to the French market. Of course, our headquarters are based in Paris and France remains an important country for us because we employ 14,000 people there across 23 factories and do most of our research there. But we only generate 14% of our turnover in France. Above all, we export 80% of our French production internationally. This decline in sales is nevertheless global, even if it is less marked in other countries. What is important to understand is that the market is constrained by supply, not demand. The order book of all manufacturers is very well filled. But the production does not manage to follow, in particular because of the strong tension on the semiconductors. Again, this situation is improving.
So you don’t believe the Cassandres, who claim that the car market is doomed to collapse because people will gradually abandon the car in favor of car sharing and public transport?
Not at all. One of the lessons we have all learned from the Covid pandemic is that we all need mobility. A mobility that is at the heart of the economy, but also of our private life. And the electrification of the automotive industry, which is therefore moving towards zero carbon, makes the car a formidable tool at our service. We deeply believe in the future of the automotive market, but not only. We believe that there is a parallel bright future for bicycles, motorbikes and three-wheelers, such as Rickshaws which are extremely popular in many countries, especially in Asia. Mobility in which Valeo takes a close interest. In December 2020, we unveiled our range of dedicated electric motors and we have already signed 20 customers. And we have ambitious objectives: 250 million euros in turnover from 2025 and 500 million in 2030.
In China, we have learned to live with the Covid
Against the current of other states, China is continuing its zero Covid policy, and once again confining tens of millions of Chinese, like the 20 million inhabitants of the megalopolis of Chengdu, in the Center-West of the country. . What is the impact for Valeo’s activity on site?
The successive confinements obviously had an impact on our local production, which was reduced by 40% in April and 20% in May. As a reminder, we have 35 factories in China: this is the country where we have the most industrial sites. But, like all companies based in China, we have learned to live with Covid. In confined areas, in conjunction with the local authorities, a “closed circuit management” system has been set up around our production centers – with employees who sleep close to the site – which makes them totally sealed off from the outside. The current resurgence of Covid cases in China therefore does not penalize us.
Does this nevertheless add gray to a picture that already seems very dark?
Of course, I’m not going to tell you that we’re going through an easy time. But I believe it makes teams stronger. You have to realize that during the very first wave of Covid, we had to close 150 factories around the world and in the space of a single weekend 30,000 people moved to telework! Who could have imagined that such a thing could happen, and that we would be collectively able to overcome it? Valeo teams are working on 2,000 projects in parallel: despite all the difficulties linked to this historic pandemic, all have been successfully completed and delivered to manufacturers on time. It’s something we can be proud of.
The teams showed courage and solidarity in the face of the succession of shocks that we had to overcome. Qualities that make me very optimistic as the automotive industry is set to experience a real revolution in the next fifteen years, particularly with the electrification and empowerment of vehicles. The road transport sector represents 18% of CO2 emissions worldwide, we have before us an incredible project that will change the world! And I am all the more confident that we are approaching this historic period being technologically ready.
Our Lidar equips the only three models in the world that have received approval for level 3 autonomy
What will be the technologies on which Valeo will concentrate its forces in the coming years?
At the beginning of the year, we redefined our four core businesses and all of them will obviously contribute to our future growth. Nevertheless, our future “hypergrowth” should first be generated by the electrification of propulsion and all that goes with it, as well as by driving assistance systems, which will bring us towards a quasi-autonomy of the car in the years to come. We have a real leadership position in this market. Our Lidar, for Light detection and ranging, (Editor’s note: a system for measuring distances and detecting obstacles by laser beam), now equips the only three models in the world to have received approval from the supervisory authorities for a level 3 autonomy, the one that allows you to read a book or check your emails while the car “drives” for you. These are the Honda Legend in Japan and the Mercedes S-Class and EQS in Germany. We have before us a significant potential for growth in our turnover and our profitability.
Automakers, your customers, are investing heavily to catch up on software, as our cars become real computers on wheels. Are you not afraid that they will encroach on your flowerbeds?
The need is such that there will be room for everyone. Moreover, today we are already a real “tech” company. At Valeo, one in two engineers works on software, system architectures, cybersecurity and artificial intelligence. And we spend nearly 10% of our turnover on research and development every year. We are ready.
The GAFAs are also increasingly interested in software embedded in vehicles.
We already work with these types of companies and I don’t think they constitute head-on competition. I see them more as partners in responding to the ongoing automotive revolution.
Are you, like many companies, facing recruitment difficulties?
The talent war is very real, and we are not escaping it. This is particularly true in businesses around cybersecurity and software. We can nevertheless attract the best thanks to the history that we carry. Valeo is a company that makes the electric and soon to be autonomous car possible. A double mission that speaks to the candidates.
And engineers increasingly see Valeo as a technology company, which sets us apart. We are in a situation of growth – our order book for the first six months of the year reached 16 billion euros – and this is obviously excellent news, but it also forces us to recruit more and more.
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