CSFB Automotive Conference IAA 2008 Thierry Morin Chairman & CEO Paris- October 2, 2008
Agenda 1 Well positioned to benefit from industry trends 2 A resilient company CSFB Automotive Conference- Paris, October 2, 2008 I 2 I
Well positioned to benefit from industry trends
Industry long term trends Inescapable industry trends � Drive to zero emissions � Drive to zero accidents Will generate growth even with flat automotive markets Valeo heavily investing in these market trends � Potential to reduce CO 2 emissions by 40% � Key player in active safety CSFB Automotive Conference- Paris, October 2, 2008 I 4 I
Valeo Domains support our strategy Sales €9.6bn* Electrical Engine mgmt Engine I Transmission Powertrain Efficiency systems systems cooling N B D R U A Interior control S Lighting Wipers N Driving Assistance detection systems systems T C systems R H I E A S Climate Interior controls Security Compressors Comfort Enhancement L control comfort systems * 2007 CSFB Automotive Conference- Paris, October 2, 2008 I 5 I
Portfolio aligned with Domain strategy Disposed worth €1bn in revenues since 12/2006 � Businesses – Limited technological synergies – Limited value added – Limited market share � Achieved competitive multiples (above 6 x EBITDA) Bolt on acquisitions � High technological content � No financial gearing deterioration CSFB Automotive Conference- Paris, October 2, 2008 I 6 CSFB Automotive Conference- Paris, October 2, 2008 I 6 I
Powertrain trends
CO 2 emissions set to grow dramatically CO 2 (ppm) in atmosphere CO 2 (ppm) in atmosphere 600 500 400 300 200 Year 1000 Year 1200 1400 1600 1800 2000 Source: Intergovernmental Panel on Climate Change CSFB Automotive Conference- Paris, October 2, 2008 I 8 I
Powertrain Efficiency - CO 2 regulation drives the WW market Europe: Japan: USA: 120g CO 2 /km 16.8 km/l 35 MPG by 2012 by 2015 by 2020 95g CO 2 /km Council for transport Policy Senate Bill by 2020 February 2007 June 21 2007 European Commission Equivalent (for gas engine): 2012: 5 l/100km 2015: 6 l/100km 2020: 4 l/100km 6.7 l/100km CSFB Automotive Conference- Paris, October 2, 2008 I 9 I
Gas price trend & forecast US gas retail price (in US$) Oil Barrel (in US$) 160 8 140 7 Forecast 120 6 100 5 80 4 60 3 40 2 20 1 0 0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Source : www.oil-price.net CSFB Automotive Conference- Paris, October 2, 2008 I 10 I
Impact on consumer behavior French “bonus malus” � Sale of vehicles emitting less than 130g/CO2 up 40% � Sales of vehicles emitting more than 160g/CO2 down 25% Market drop in US Above $180/barrel or more than 2€/liter = Revolution* � Major shift from C/D segments to A/B segments � US market significant drop and China growth halves *Source : Arthur D Little based on 2012 market projection CSFB Automotive Conference- Paris, October 2, 2008 I 11 I
CO 2 emissions - OEMs face challenging goals 190 Fuel consumption (g CO 2 /km) GASOLINE 2004 170 Valeo Solutions Divided by 3 Diesel 2004 - 30% 150 - 40% -20% -20% DIESEL HAS TO CATCH UP 130 ON EMISSIONS 120 BUT THE RACE FOR GREENHOUSE - 20% 2012- GASES REDUCTION WILL 110 2020 BE LED BY GASOLINE >2020 90 0.08 0.10 0.15 0.20 0.25 Gasoline Emissions (g NOx/km) Diesel CSFB Automotive Conference- Paris, October 2, 2008 I 12 I
Industry answers Engine downsizing Hybridization and energy recovery Alternative Fuels Electrical Vehicles CSFB Automotive Conference- Paris, October 2, 2008 I 13 I
Valeo Fuel Economy solutions portfolio Power on Low consumption - 3% Demand A/C compressor UltimateCooling™ -3-5% Thermal - 40% Feasible Management - 4% THEMIS™ Transmission DUAL CLUTCH -4-6% Automation transmission Cooled EGR system -5-7% Air Systems MICRO HYBRID -6-15% Hybridization (from Stop-Start to Regenerative braking) Engine -15-20% CAMLESS System -15-20% Operation CSFB Automotive Conference- Paris, October 2, 2008 I 14 I
Hybridization Roadmap -100% 100% - -25% 25% - Congested -25% - 25% urban traffic -15% 15% - FULL HYBRID And PLUG-INs Urban cycle -12% 12% - MILD -12% 12% - HYBRID MICRO - MILD -6% 6% - MVEG cycle HYBRID with Ultracapacitors StARS Full Electric Drive MICRO-HYBRID Part Electric Drive Torque Assistance Regenerative Braking Stop & Start Stop-Start: hybridization basis for mass production affordable solution Stop-Start: hybridization basis for mass production affordable solution CSFB Automotive Conference- Paris, October 2, 2008 I 15 I
Hybrid market vision 2008 – 1.1 M vehicles 2013 – 17 M vehicles µ & µ Mild 80% µ & µ Mild Mild 38% 7% 14 2 Plug In 1 0.7% Full Mild Plug In & EV Full 12% 7% 0.5% 54% Bottom up approach for 2013 with Stop-Start Booming to comply with 2012 CO 2 regulations CSFB Automotive Conference- Paris, October 2, 2008 I 16 I
Driving assistance trends
Towards zero accidents Legislation/repressive measures Infrastructure Driver behavior Technology CSFB Automotive Conference- Paris, October 2, 2008 I 18 I
Safety technology drivers Automation of functions to reduce driver distraction Improve visibility Inform the driver of what he can’t see Intervene to take control of car Pedestrian protection CSFB Automotive Conference- Paris, October 2, 2008 I 19 I
Driving Assistance - Growth drivers REGULATIONS: � Daytime running light (mandatory in 2012) in Europe � Investigations to mandate Lane View, blind spot and emergency braking in US & Europe SEE BETTER WHERE YOU CAN SEE SEE WHERE YOU CANNOT SEE 100% 100% Front Halogen (Low speed maneuvering) 75% 60% 50% 50% Rear LED Daytime running light Park Assist 40% 30% s a r e m a c Front Xenon g n w i 15% e i V 10% D E L n t o r F 06 10 15 20 06 10 15 20 + + Add on functions offered by Valeo Add on functions offered by Valeo + Beamatic front (camera) + Cross Traffic Alert (radar) + Rain sensing + Path View (camera) + Clean Vue + Trailer Assist (camera) CSFB Automotive Conference- Paris, October 2, 2008 I 20 I
Comfort trends
The NO STRESS Car Personalized comfort � Air conditioning � Air quality � Smart car key Reduce distraction through easy to use interface � Head up displays � Virtual environments Secured and automated access � Automatic opening and closure Convenience & well being CSFB Automotive Conference- Paris, October 2, 2008 I 22 I
Valeo innovative solutions gain momentum ORDER INTAKE/ X OE SALES (excluding VMA & VCS in 2006 & 2007) 1.1x 1.3x 1.3x €8.6bn €9.9bn €10.1bn Others +50% Innovative products 2005 2006 2007 CSFB Automotive Conference- Paris, October 2, 2008 I 23 I
A resilient company
Success factors COST QUALITY COST QUALITY TECHNOLOGY TECHNOLOGY GLOBALE GLOBALE PRESENCE PRESENCE Technology as differentiating factor CSFB Automotive Conference- Paris, October 2, 2008 I 25 I
Quality levels Single digit PPMs sites Customer returns As % of total In parts per million 185 64% 47% 39% 39% 26% 53 32 15 10 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 CSFB Automotive Conference- Paris, October 2, 2008 I 26 I
Operational excellence - Industrial footprint 31/03/2001 – 30/06/2008 perimeter changes included 28% of productive workers in LLC 48% of productive workers in LLC +14 +31 -48 -45 170 122 31/03/2001 Closures Disposals Openings Acquis. 30/06/2008 CSFB Automotive Conference- Paris, October 2, 2008 I 27 I
Business model robustness OPERATING MARGIN OPERATING MARGIN % of total operating revenues adjusted for cumulative raw material headwinds (2004-2007*) (2003-2007) 6,0% 5.0% +15.8% 3.6% +2.5% 5,0% +4.5% 4,0% Customer Operating Operating contribu- margin margin tions 2007 2003 3,0% -9.0% Product reengineering & -15.2% Valeo 2,0% Raw Supplier productivity 2004 2005 2006 2007 material productivity Price price deflation** increases Operating margin (reported) Operating margin (adjusted) * Excluding non strategic activities for the 2005- 2007 period ** Identical function CSFB Automotive Conference- Paris, October 2, 2008 I 28 I
Rebalanced customer exposure OE SALES (2001- 2007)* Automaker 2001 2007 Asians 5.7 % 14.7 % Big 3 31.7 % 21.8 % German 22.5 % 24.5 % Mercedes & BMW 7.5 % 10.6 % PSA & Renault 28.1 % 26.7 % Fiat 5.0 % 4.4 % * Excluding VMA & VCS in 2001 CSFB Automotive Conference- Paris, October 2, 2008 I 29 I
H1’08 key figures In euro million H1-2008 H1-2007 Change Total operating revenues 4,914 5,006 -1.8% Operating margin 203 177 +14.7% as % of total operating revenues 4.1% 3.5% + 0.6 pt Net income 100 71 +40.8% Return on capital employed 16.7% 13.6% +22.8% Net financial debt 621 799* €(178)m *year-end 2007 CSFB Automotive Conference- Paris, October 2, 2008 I 30
Solid balance sheet Debt Maturity Profile Current maturities of long-term debt 600 Short-term debt 500 Other Bond issues 400 Syndicated loans OCEANE 300 200 100 0 <1 year 2009 2010 2011 2012 2013 and beyond Debt Maturity Profile <1 year 23% 5 years and 1-3 year beyond - 65% 3-5 years - 1% 35% CSFB Automotive Conference- Paris, October 2, 2008 I 31
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