October 19, 2018 06:01 CET
French megasupplier Faurecia had a successful first half and expects to maintain its momentum for the full year. CEO Patrick Koller is confident because of the strength of Faurecia’s China business and because it is benefiting from the rapid rise of SUV sales in Europe and around the world. Koller also told Automotive News Europe Correspondent Peter Sigal why he thinks Faurecia has the resilience to cope with disruptions caused by potential trade wars between the world’s largest nations.
Faurecia had a strong first half, and you increased your guidance on sales and operating margins. What gave you the confidence to do this?
All key financial indicators showed double-digit growth. The geographic mix of our sales is moving in the right direction. We are growing fastest in China, where we have higher profitability. We see many opportunities in our commercial vehicle air quality business, with new pollution regulations in China and India. The SUV trend is also favorable because it corresponds to higher content per vehicle. And finally, we continued to deploy our strategy to accelerate in innovative technologies for our Smart Life on Board and Sustainable Mobility units, where we are starting to generate profitable sales.
Do you foresee any potential issues for the rest of this year?
Although there are some uncertainties in the second half, including some probably short-lived delays linked to the WLTP emissions testing, we are very confident in our guidance that we will grow above 8 percent in sales for the full year 2018, which is significantly above automotive production levels.
Are there any other economic or industry factors that present risks?
There remain the macroeconomic uncertainties linked to potential trade wars, but hopefully new agreements will be negotiated – recognizing that nobody has anything to win in such a war. We are in a cyclical industry that has had 10 years of continuous growth, so a downturn is not impossible. When, and of which magnitude, nobody knows, but we will be prepared, and we are working on the resilience of the company.
How are you doing that?
We are permanently ensuring that we have an optimized operational flexibility and that we are systematically doing make-or-buy analyses. In terms of efficiency, we have centralized our business support functions from 34 primarily high-cost country locations to five main regional operations centers in low-cost countries. We are also renegotiating the maturity of our bonds and credit lines systematically. This year we have increased the maturity of our bonds and renegotiated our credit facility of 1.2 billion euros, which now has a maturity of 2023 with an option to extend until 2025.
Recently, you won a contract with BMW for seating, which was your biggest ever in terms of volume. Where do you see the seating market going?
The CARE automotive megatrends (Connectivity, Autonomous driving, Ride-sharing and Electrification) are disrupting the entire industry and seating is no exception. We are seeing increased content going into the interior of the vehicle, including seats, as comfort, safety and well-being become key differentiators for automakers. With our partner ZF, we are working to provide the most advanced integrated safety system that ensures each occupant has an individual safety cocoon in all seated positions. We are also working on how to analyze and use biometric occupant data to measure thermal and postural comfort and provide an appropriate solution to improve well-being.
How would you describe the Cockpit of the Future?
The Cockpit of the Future will be versatile, connected and predictive and will allow new user experiences depending on the driving mode. The combination of autonomous driving and electrification is really accelerating the way automakers view their interiors, which are becoming a key differentiator for them. The car interior has not really changed in the last 20 years. We can change the interior without having to wait until it becomes autonomous, because the car is already autonomous for everyone but the driver.
What role are newly and recently launched brands playing in the sector?
The arrival of new automakers, both in China and in Silicon Valley, is also accelerating the change, as they are approaching the design of their vehicles differently. For example, we now have two orders for complete cockpits, which has never happened before. Our Cockpit of the Future systems represent a triple win: for the consumer offering new experiences, for the automaker by replacing existing and often expensive products with a cheaper complete system and for Faurecia through profitable growth opportunities.
What are some examples?
One example is immersive sound. We are replacing the loudspeakers with surface actuators. We make the surfaces vibrate, and we generate high-quality sound with algorithms. This means you have no packaging issues anymore because the actuators are very small. You can have more of them because they are cheap. You can even have “sound bubbles” for different passengers.
Meet the boss
Name: Patrick Koller
Title: Faurecia CEO
Main challenge: Adapt automotive cockpits and interiors to megatrends such as car-sharing and autonomous driving.
Another example is that digital displays are significantly cheaper than the instrument cluster we had before. It’s the same with thermal comfort. Before you had an HVAC [heating, ventilation, air conditioning] system, now we are looking at more efficient energy dispersion. Today you have to heat up or cool the whole cabin, but if you heat up or cool just the seat you consume less energy and passengers can be individually comfortable.
In July, Faurecia and Parrot finalized a proposal concerning the takeover of 100 percent of Parrot Automotive by Faurecia. What will you use this technology for?
Parrot is an Android infotainment expert with outstanding software engineers. In addition to the infotainment systems, this is an important step to enable us to develop the Cockpit Intelligence Platform that will be the core electronics and software system enabling new user experiences for the connected and predictive interior. It’s a system-agnostic platform in which you will be able to plug in all cockpit applications, including postural comfort, acoustics, thermal comfort and safety.
Is there anything different about building an interior for a shared vehicle rather than one for private ownership?
We will need to configure and design the interior very differently to ensure the privacy of each occupant. We are redefining the ability for the interior to be comfortable, clean and connected, including individualized climate and sound “bubbles” that enable a personal experience even if there are several occupants in the vehicle. It is our unique positioning as a full interior supplier that enables us to manage these user experiences.
How have technology-heavy trends such as electrification, connectivity and autonomy changed the way you work at Faurecia?
These megatrends are important opportunities for Faurecia. We are now becoming a solution provider that is much more end-consumer oriented. We will invest more in innovation but, just as important, we need to change the way we do things. We need to “fail fast to succeed quickly.” This means you need to invest money to promote innovation, but at the same time if you understand that it isn’t providing the results you expect, you have to stop and you have to transfer your resources to something different.
Are there other areas of expertise in which you are looking to make collaborations or acquisitions?
What is very clear is that in the future we will be integrating systems. It will be difficult to offer the full scope through acquisitions alone. We have decided to move rapidly in creating partnerships to accelerate innovation and time to market. For example, we have developed partnerships with ZF for safety systems, with Mahle for thermal comfort and with Accenture for HMI [human-machine interface] and wellness. We are also investing in startups to get access to technology quickly. We have created technology platforms in key areas such as Silicon Valley and Tel Aviv to work closely with ecosystems of startups and academics. I strongly believe that our industry will slowly move to a consumer-goods type of industry. The consumer will decide. The cycles will become shorter. We need to invest more in consumer marketing and research to better understand our customers.
How does your business break down globally, and what are your forecasts for these regions?
It’s 50 percent Europe, 25 percent North America, 20 percent Asia and 5 percent rest of the world. Asia will continue to grow much faster than the other regions. It will probably be 30 percent of our business by 2025.
About two years ago you sold your exteriors division to Plastic Omnium. How have you benefited from that sale?
In a world where complexity is increasing very fast, you need to focus resources on your key areas of expertise, area where you can grow profitably and be among the global leaders. We could not do this with the exteriors business, so the sale made sense for both companies. This has allowed us to focus on investing in technologies for our Smart Life on Board and Sustainable Mobility units.
Do you derive any benefits from having PSA Group as a controlling shareholder?
PSA has always been a supportive shareholder and they are also our fourth-largest customer. There is a big difference between shareholder and customer and the industry understands and respects this. As a customer, the acquisition of Opel by PSA could offer us new possibilities.
Where do you see Faurecia in 10 years?
We will have transformed the company into a strong technology company. We will be an agile company capable of anticipating disruption and seizing opportunities. We will also be engaged in the communities in which we are active and contribute to their development. That is very important in particular for younger generations.
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