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Faurecia CEO Patrick Koller
Faurecia CEO: China helps fuel supplier's rapid growth
Automotive News Europe | 2018/10/23

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 around the world. Koller, 59, 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 increased its guidance on sales and operating margins. What gave the company 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.

Does the company foresee any potential problems 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 (Worldwide Harmonized Light Vehicle Test Procedure) 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.

Do any other economic or industry factors pose 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 is the company 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, Faurecia won a contract with BMW for seating, which was its biggest ever in terms of volume. Where does the company 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.

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.

What else?
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.

How have technology-heavy trends such as electrification, connectivity and autonomy changed the way Faurecia works?
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.

How does Faurecia¡¯s business break down globally, and what are the 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.

Does Faurecia 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.

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