Valeo Expecting Plant Deal This Month
By Tom Murphy WardsAuto.com, Mar 9, 2007 1:01 PM

With the end of the month just around the corner, French supplier Valeo SA says it remains optimistic it will complete the purchase of a former Visteon Corp. air-conditioning manufacturing facility in Plymouth, MI, by the end of the quarter.

Valeo announced in December it had signed a memorandum of understanding to acquire from Ford Motor Co.’s Automotive Components Holdings LLC the Sheldon Road Thermal Systems plant, which supplies AC units and radiators to Ford in North America.

But sizable hurdles stand in the way before the deal can be sealed. Valeo says it will take over the plant only if it can reach “a new and competitive agreement” with the United Auto Workers union, which represents 1,000 hourly workers of the 1,250 employees at Sheldon Road.

Blower motor assembly at Sheldon Road Thermal Systems plant in Plymouth, MI.

Valeo and Ford officials this week tell Ward’s that talks with the UAW are progressing, but the parties are bound by a confidentiality agreement.

If it can be reached, the agreement likely will follow the pattern of other UAW-represented supplier plants, with hourly employees swallowing concessions such as lower pay, particularly for new hires.

Valeo’s top priority is that the wage agreement be structured such that the plant is profitable. The supplier also is seeking less restrictive work rules in line with its 16 other North American production facilities.

Also to be worked out is whether employees at Sheldon Road will draw their paychecks directly from Valeo or remain ACH employees leased to the supplier.

At a press briefing during the North American International Auto Show in Detroit, Valeo Chairman and CEO Thierry Morin says his company is interested in the Sheldon Road plant because it wants to grow its market share in North America and worldwide. He seems unconcerned with Ford’s precipitous market share slide over the years.

“We believe it is a significant move toward Ford, and we are pushing our partnership with Ford,” Morin says. “Ford seems very happy with us working for them, and I want to extend this partnership to a higher level than the one that we have today.”

Related Stories

Valeo Camless Engine Shows Promise ACH Expects More Plant Sales Early Next Year

Strategically, Morin says Sheldon Road helps cement Valeo’s status as the No.1 supplier of engine cooling and air conditioning. Ford business makes up about 7% of Valeo’s global sales.

Valeo’s more significant customers are Renault SA, PSA Peugeot Citroen, Volkswagen AG, DaimlerChrysler AG and General Motors Corp.

Ford created ACH in October 2005 as a conglomeration of 23 plants and research facilities previously owned by Visteon. The supplier, spun off from Ford as its primary parts maker in 2000, gave the unprofitable facilities back to Ford in 2005. Ford now is attempting to sell the facilities.

In addition to Sheldon Road, ACH announced plans in December to sell its fuel-rail manufacturing operations in El Jarudo, Mexico, to Cooper-Standard Automotive, as well as its fascia and fuel-tank operations in Milan, MI, to Flex-N-Gate Forming Technologies LLC.

Asked if Valeo is interested in other ACH facilities for sale, Morin says he is not aware of any that would be a good fit for Valeo.

Meanwhile, he says Valeo is winning new business in North America as established players, such as Visteon and bankrupt Delphi Corp., tread water.

Morin says Valeo has lost out on certain contracts to other suppliers, only to see those suppliers reporting losses at the end of the year.

“We are here to make money,” Morin says, adding that troubled parts makers demonstrate the auto industry “is in disarray.”

Still, he does not think negatively of the North American market.

“Volumes are there. This is not a bad market,” he says. “There is an issue with prices and with costs of raw materials. This is a worldwide issue now, not just a U.S. issue.”

Valeo has reduced the ranks of its own suppliers, from 4,500 to 2,700, and expects to purchase 70% of its parts from operations in low-wage regions of the world by 2010. By the end of this year, Morin says he expects the figure to reach about 50%.

tmurphy@wardsauto.com