Plastic Omnium grows in auto exteriors
2018-12-13

In this feature for Plastics News Europe, David Eldridge reports on Plastic Omnium’s takeover of Faurecia’s exteriors business.

Plastic Omnium’s acquisition of Faurecia’s automotive exteriors business will boost its position in the market segment, especially in Europe. But the North American market is also a growth driver in the near term for the injection moulding giant.

The €665m deal is expected to close in the second half of 2016 providing it gets clearance from competition authorities. Faurecia’s €2bn turnover exteriors business is a major supplier of bumpers and front-end modules, with 90% of its sales to European car makers.

Plastic Omnium calls the Faurecia operation the “European leader for bumpers” and notes that seven of its 22 manufacturing facilities are in Germany. It is also eyeing the customer list of the business, particularly Audi which accounts for 27% of its sales, as the German car maker is not currently a customer of Plastic Omnium’s own exteriors business.

In February, Plastic Omnium announced record sales of ?5.982bn (including joint ventures) in 2015, so the addition of Faurecia’s exteriors business would elevate it to the ?8bn mark. Sales increased by 15.6% to €5.597bn in Plastic Omnium’s automotive division, which also makes selective catalytic reduction (SCR) technology for diesel engines, in addition to exterior parts such as bumpers and tailgates.

Faurecia’s sales in 2015 were €20.69bn, with increases in its three biggest businesses: automotive seating, emissions control technologies and interior systems. But Faurecia’s exteriors business saw its sales slipping 1.4% to €2.04bn and profitability also fell. Selling the exteriors business “enhances our financial flexibility to accelerate investments in high added-value technologies”, said Yann Delabrière, chairman and CEO of Faurecia.

Plastic Omnium thinks it can do better with the business, according to Jean-Michel Szczerba, deputy CEO. “With an operating margin of 3.5% of [Faurecia’s exteriors] sales, versus 9.7% for Plastic Omnium, we are confident that we will be able to double this in the next three years which will establish a great potential for added value for shareholders,” he said.

Spending plans

It is planning €100m in additional capital expenditure so the 22 plants match Plastic Omnium’s group standards, said Szczerba, speaking at Plastic Omnium’s annual results presentation in Paris.

“At present we haven’t identified any restructuring in Europe,” he said, but nonetheless indicated the duplication of jobs if the deal receives regulatory approval. He pointed out it is possible the competition authorities may require “a couple of plants” to be sold before approving the sale, he said.

At the presentation, Szczerba said Plastic Omnium was now “moving into the North American period” for its plant investments after a period when it opened a number of facilities in China. It has 60 plants in Europe (accounting for 52% of group sales), 38 in Asia (17% of sales), 17 in North America (28% of sales) and five in South America (3% of sales).

Its 2015 order intake was skewed heavily towards the Americas with a 49% share, followed by 32% in Europe and 19% in Asia. Group sales were split €3bn in Europe, €2bn in North America and reached €1bn in Asia for the first time. But within just four years, Szczerba said Plastic Omnium expects North American sales to rise to €3bn as recent and upcoming investments ramp up.

In 2015, two plants, serving Volkswagen and General Motors, came into operation in the USA. In 2016, the group will start two new facilities in Mexico and one in the UK, and will start building three new plants, one each in Mexico, China and India, to come into operation in 2017 and 2018.

Szczerba was asked during the Q&A session about Plastic Omnium’s exposure to the VW group, which has seen its sales badly hit in the USA by the so-called Dieselgate scandal. He responded that VW accounts for €900m in group sales, including joint ventures, but in North America sales to VW group are ?120m and the impact is expected to be limited.

“At the local level, we estimate we are going to lose approximately €35m versus our forecast when we launched our Chattanooga plant [in 2014 to supply bumpers and fenders to VW],” said Szczerba. “This impact will also be apparent in Mexico in the Puebla plant where we also work for Volkswagen. [Losses of] €35m while adapting our cost base will have a negative impact but we are not worried at all about that and I think if it were to continue over time, given our footprint in South Carolina, in Georgia, in Tennessee, we will be able to adapt our structure to the new Volkswagen forecasts.”

Outside North America, Plastic Omnium does not envisage any decline in sales to VW, he said.