Christophe Périllat (Valeo): “The automotive industry is facing an incredible project”

Appointed in January at the head of Valeo, after having climbed all the levels of the second French equipment supplier in the last 20 years, Christophe Périllat must face great challenges. Just weeks after taking office, Russia unleashed a war in Ukraine, causing prices for 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, if compared to other tricolor groups, since the latter only weighed 0.5% of the group’s revenue.

Ahead, a shortage of semiconductors that should last at least until 2023 and forces manufacturers, their customers, to multiply production stops and above all the gigantic challenges of electrification and autonomy of cars. Tight turns that – if traded well – could, however, allow the equipment maker, beleaguered in the stock market in recent years, to find heights.

L’Express: Rising energy prices, industrial raw material inflation, semiconductor shortages… Can we talk about a return from all perils 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 main concern is material inflation. Steel, aluminum, plastics… have seen their prices rise significantly. Ditto for electronic components. However, Valeo has become a great 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 were able to pass on almost all cost increases to our customers.

The rise in the price of electronic components is mainly fueled by the shortage of semiconductors, which experts say is expected to last at least until 2023. Is the bulk of the crisis, however, behind us?

For us, the peak of the crisis crystallized in the third quarter of 2021, with 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 walrus breaks free.

We also see that the number of stoppages on auto manufacturers’ production lines is decreasing. I also take this opportunity to point out that Valeo has never been a cause of disruption for any of its customers. This shows the strength and excellence of our teams, especially in logistics and purchasing.

Have you ever asked yourself the question of taking on a semiconductor manufacturer to guarantee its supply?

It’s not our job. And a trade, you only do well when you are in the top three of the market. You then have enough volumes to be truly innovative and competitive. This is also the case for Valeo in each of its four businesses (Comfort and Sensing System Division, Propulsion System Division, Thermal System Division and Visibility System Division, Editor’s Note), where we are either a leader or -leaders.

Is the collapse of the euro against the dollar (at the lowest level since December 2002) hurting Valeo?

No, because we buy components in dollars, but at the same time we also sell equipment in dollars. In fact, Valeo has a very strong presence in the United States. This balance allows us not to suffer from the strong devaluation of the Euro.

The market is limited by supply, not demand.

In the first eight months of the year, the French car market fell by almost 14% compared to 2021: how do you manage this drop?

To begin with, it is important to remember Valeo’s low exposure to the French market. Of course, our headquarters are in Paris and France remains an important country for us because we employ 14,000 people in 23 factories and do most of our research there. But we generate only 14% of our revenue in France. Above all, we export 80% of our French production internationally. This decline in sales is, however, global, although it is less pronounced in other countries. What is important to understand is that the market is limited by supply, not demand. The order book of all manufacturers is very well filled. But production can’t keep up, mainly because of the strong voltage on semiconductors. Again, this situation is improving.

So you don’t believe the Cassanders, who claim that the car market is doomed to collapse because people are gradually abandoning the car in favor of car-sharing and public transport?

No way. One of the lessons we 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 moving towards zero carbon, makes the car a formidable tool at our service. We believe deeply in the future of the automotive market, but not only. We believe there is a bright parallel future for bicycles, motorcycles and three-wheeled vehicles such as rickshaws, which are extremely popular in many countries, especially in Asia. Mobility in which Valeo has a keen interest. In December 2020, we introduced our range of dedicated electric motors and we have already secured 20 customers. And we have ambitious goals: 250 million euros in sales from 2025 and 500 million in 2030.

In China, we learned to live with Covid

Against the grain of other states, China continues 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 country’s Midwest. What is the impact for Valeo’s activity at the site?

The successive confinements obviously impacted our local production, which was reduced by 40% in April and 20% in May. We remind you that we have 35 factories in China: this is the country where we have the most industrial facilities. But like all China-based companies, we’ve learned to live with Covid. In confined areas, together with the local authorities, a “closed loop management” system has been implemented around our production centers – with employees sleeping close to the site – which makes them completely sealed off from the outside. The current resurgence of Covid cases in China, therefore, does not penalize us.

Does this, however, add gray to an image that already looks too dark?

Of course, I’m not going to say we’re having an easy time. But I believe it makes teams stronger. You have to realize that during the first wave of Covid we had to close 150 factories around the world and in the space of a single weekend 30,000 people switched to telecommuting! Who could have imagined that such a thing could happen and that we would collectively be able to overcome it? Valeo teams are working on 2,000 projects in parallel: despite all the difficulties linked to this historic pandemic, all were 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 should experience a real revolution in the next fifteen years, mainly with the electrification and training 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 even more confident that we are approaching this historical period with a technological preparation.

Our Lidar equips the only three models in the world that have received approval for level 3 autonomy

What technologies will Valeo focus on 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. However, our future “hyper-growth” must first be generated by the electrification of the propulsion and everything that goes with it, as well as the driving assistance systems, which will lead us to a near autonomy of the car in the coming years. We have a real leadership position in this market. Our Lidar, for light detection and range, (Editor’s note: a system for measuring distances and detecting obstacles by laser beam), now equips the only three models in the world that have received approval from the supervisory authorities for an autonomy of level 3, the one that lets you 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 in our profitability.

The automakers, their customers, are investing heavily to update the software, as our cars become true computers on wheels. Are you not afraid that they will invade your flower beds?

The need is such that there will be space for everyone. Furthermore, today we are already a true “tech” company. At Valeo, one in two engineers works in software, systems architectures, cybersecurity and artificial intelligence. And we spend almost 10% of our revenue on research and development every year. We are ready.

GAFAs are also increasingly interested in in-vehicle software.

We have already worked with this type of company and I don’t think they constitute direct competition. I see them more as partners in responding to the ongoing automotive revolution.

Do you, like many companies, face recruitment difficulties?

The talent war is very real, and we’re not getting away from it. This is particularly true in businesses around cybersecurity and software. We can, however, attract the best thanks to the history we carry. Valeo is a company that makes the electric and soon autonomous car possible. A dual mission that speaks to candidates.

And engineers increasingly see Valeo as a technology company, which sets us apart. We are in a growth situation – 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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