2008 Reference Document

Transcription

2008 Reference Document
Enabling a better automotive world
1
Key Figures
1.A.
1.B.
1.C.
1.D.
1.E.
1.F.
1.G.
1.H.
1.I.
2
3
Net sales by geographic area
Net sales by market (2008)
Gross margin
Operating income
Research and development expenditure
Net attributable income
Basic earnings per share from core activities
Basic earnings per share for the year
Net debt
3
4
4
5
5
6
6
6
6
7
Activity
9
2.A.
2.B.
2.C.
2.D.
2.E.
2.F.
10
13
31
32
32
37
History
The Group
Geographical presence
Competitive Situation
Highlights in 2008
Recent events and outlook
Management report
3.A.
3.B.
3.C.
3.D.
3.E.
3.F.
3.G.
3.H.
3.I.
3.J.
3.K.
3.L.
3.M.
3.N.
3.O.
3.P.
3.Q.
Accounting methods
Statement of income
Investments over the past three years
Change in stockholders’ equity
Provisions
Cash flows and debt
Commitments
Remuneration of corporate officers, directors
and other Group executive managers
Risks and uncertainties
Factors likely to be material in the event
of a public tender offer
Claims, litigation, governmental, legal
and arbitration proceedings
Outlook
Subsequent events
Annual financial statements
Composition of the Board of Directors
during the year ending December 31, 2008
Environment and sustainable development:
management and performance
Social indicators
4
4.A.
4.B.
4.C.
4.D.
Consolidated statements of income
Consolidated balance sheets
Consolidated statements of cash flows
Statements of recognized income and
expenses
4.E. Consolidated statement of changes
in stockholders’ equity
4.F. Notes to the consolidated financial
statements
4.G. Statutory Auditors’ report on the
consolidated financial statements
5
6
47
57
69
69
70
70
77
98
Information on
the Company
and its capital
6.A. General information about the issuer
6.B. Fees paid by the Group to the Auditors
and members of their networks
6.C. General information on the Company’s
capital
6.D. Current ownership structure
6.E. Market for the Company’s securities
6.F. Investor relations
6.G. Information on subsidiaries and affiliates
64
71
Corporate Governance
5.A. Report of the Chairman of the Board
of Directors on the composition of the Board,
the conditions in which the Board’s work
is prepared and organized, and the internal
control procedures put in place by the
Valeo Group
5.B. Statutory Auditors’ report, prepared
in accordance with Article L.225-235
of the French Commercial Code (Code
de commerce), on the report prepared
by the Chairman of the Board of Directors
of the Company Valeo
39
40
40
42
43
45
46
46
2008 Consolidated
financial statements
7
Other information
7.A. Annual information document
7.B. Person responsible for the Reference
Document containing the annual financial
report
115
117
118
119
120
121
122
174
177
178
197
201
202
211
212
218
223
224
229
233
234
239
Reference document
2008
Group profile
Valeo is an independent and international industrial
group, fully focused on the design, production and sale
of components, systems and modules for automobiles
and trucks, both on the original equipment market and
the aftermarket.
This “document de référence” was filed with
the Autorité des M archés F inanciers (AMF) on
March 17, 2009, pursuant to article 212-13 of
the AMF’s General Regulations. It may only be
used in connection with a financial transaction
if it is accompanied by a memorandum
approved by the AMF.
It is one of the world’s leading automotive suppliers.
In accordance with article 28 of European
Regulation No. 809/2004 dated April 29,
2004, the reader is asked to refer to previous
“documents de référence” containing the
following specific information:
The Group employs 51,200 people in 121
production sites, 61 Research & Development centers
and 10 distribution platforms in 27 countries.
Valeo applies its profitable growth strategy in line with
a policy of sustainable development.
1. The management report, consolidated
financial statements, parent company financial
statements, Statutory Auditors’ reports on the
consolidated financial statements and parent
company financial statements for the year ended
December 31, 2007, and the Statutory Auditors’
special report on regulated agreements relating
to 2007 included in the “document de référence”
filed with the Autorité des Marchés Financiers on
April 30, 2008 under No. D. 08-338.
2. The management report, consolidated
financial statements, parent company financial
statements, Statutory Auditors’ reports on the
consolidated financial statements and parent
company financial statements for the year ended
December 31, 2006, and the Statutory Auditors’
special report on regulated agreements relating
to 2006, included in the “document de référence”
filed with the Autorité des Marchés Financiers on
March 29, 2007 under No. D. 07-0249.
valeo added
TM
Reference document 2008 - VALEO
PAGE 1
PAGE 2
Key Figures
1.A.
4
1.B.
Net sales by market (2008)
4
1.C.
Gross margin
5
1.D.
Operating income
5
1.E.
6
1.F.
Net attributable income
6
1.G.
Basic earnings per share from core activities
6
1.H.
Basic earnings per share for the year
6
1.I.
Net debt
7
1
PAGE 3
1
Key Figures
1.A. Net sales by geographic area
In millions of euros and in % of net sales
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1.B. Net sales by market (2008)
In % of net sales
PAGE 4
%-
Key Figures
Operating income
1
1.C. Gross margin
In % of net sales
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1.D. Operating income
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PAGE 5
1
Key Figures
1.E. Research and development
expenditure
1.F. Net attributable income
In % of total operating revenues
(net of R&D expenditure rebilled to customers)
In millions of euros and in % of total operating revenues
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1.G. Basic earnings per share
from core activities*
1.H. Basic earnings per share for the year
(in euro/share)
(in euro/share)
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PAGE 6
%+
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Key Figures
Net debt
1
1.I. Net debt
In millions of euros and in % of equity
PAGE 7
1
Key Figures
PAGE 8
Activity
2.A.
History
10
2.B.
The Group
13
2.C.
31
2.D.
32
2.E.
Highlights in 2008
32
2.F.
37
2
PAGE 9
2
Activity
History
2.A. History
The Group’s origins date back to the creation, in 1923, of Société
Anonyme Française du Ferodo (SAFF), which operated out of a
workshop in Saint-Ouen near Paris. SAFF started by distributing, then
manufacturing, brake linings and clutch facings under the Ferodo
license. In 1932, SAFF was listed on the Paris Bourse.
1989
For SAFF, the 1960s and 1970s were a time of development, both
through diversification into new sectors (brake systems in 1961,
thermal systems in 1962, lighting systems in 1970 and electrical
systems in 1978) and through international growth (Spain in 1963,
Italy in 1964 and Brazil in 1974). On May 28, 1980, at its Annual
General Meeting of Shareholders, SAFF adopted the name Valeo, a
Latin word meaning “I am well”.
This drive for growth was accompanied by the refocusing of the
Group’s activities around a number of core businesses, and the sale
of non-strategic activities (brake linings, ignition, horns) in 1990.
By the 1980s, Valeo had become a global Group, developing
through acquisitions around the world:
1987
■
Acquisition of Neiman (security systems) and its Paul Journée
subsidiary (wiper systems).
■
Acquisition of Chausson’s heat exchanger business.
■
Acquisition of Delanair (climate control in the UK).
■
Acquisition of Blackstone (engine cooling in the United States with
businesses in Mexico, Canada, Sweden, Italy and Spain).
Through the 1990s
The Group implemented a powerful strategy based on:
■
a new industrial culture: the Group adopted its “5 Axes”
methodology in 1991 (see “The Group”, section 2.B.4.3. Technical
Department Functions);
■
a sustained Research & Development drive: in 1992, the Group
set up an electronics research center in Créteil (France) and an
electronic module production site at Meung-sur-Loire (France).
In 1993, Valeo opened Research and Development centers
for lighting systems in Bobigny and for clutches in Saint-Ouen
(France);
■
increasing international growth: the first production sites in Mexico
and Wales (climate control) and Italy (lighting systems) opened in
1993, and in 1994 the first joint ventures in China were created
for wiper systems, climate control, lighting systems and electrical
systems.
1988
■
Acquisition of Clausor and Tibbe (security systems in Spain and
Germany).
■
Creation of Valeo Pyeong Hwa (clutches and ring gears in Korea),
Valeo Transtürk (clutches in Turkey), and Valeo Eaton (clutches for
heavy-duty trucks in the United States).
■
Creation of the Valeo/Acustar Thermal Systems Inc. joint venture
(climate control, United States).
The Group’s external growth continued throughout the decade:
1995
■
PAGE 10
Acquisition of Siemens’ thermal business in Germany.
Activity
History
1996
■
Acquisition of a stake in Mirgor (thermal systems in Argentina).
■
Acquisition of Fist Spa and a division of Ymos AG (security systems
in Italy and in Germany).
■
Acquisition of Klimatizacni Systemy Automobilu (thermal systems
in the Czech Republic).
The first years of the new millennium
In March 2001, Thierry Morin was appointed Chairman of the Board
of Directors of Valeo. The Group launched a program to streamline
its business and give itself greater room for maneuver:
■
industrial rationalization with production reorganized across
fewer sites, and a greater proportion of sites in competitive-cost
regions;
■
selective disposals of non-strategic businesses;
■
accelerated integration of recently acquired businesses, notably
the redeployment of the US facility at Rochester acquired from
ITT;
■
partnership approach with a select number of suppliers;
■
intensification of Research and Development efforts coupled with
improved productivity;
■
a revitalized marketing approach based on the concept of Domains,
which facilitate transversal synergies;
■
creation of technological partnerships with experts in various
fields, including International Rectifier, Iteris, Raytheon and Ricardo,
to introduce new technologies into the automotive industry and
accelerate the development of new products.
1997
■
Creation of clutches joint ventures in India and China and a friction
materials joint venture in India.
■
Acquisition of Univel (security systems in Brazil).
■
Acquisition of Osram Sylvania’s automobile business to create
Valeo Sylvania (lighting systems) in the United States.
1998
■
Acquisition of the Electrical Systems activity of ITT Industries.
2
This program resulted in the gradual improvement of Valeo’s margins
between 2001 and 2003, and boosted confidence among the
Group’s customers.
1999
Acquisition of a division of Mando (electrical systems in
South Korea).
2004
Following this rationalization campaign, Valeo embarked on a new
phase of development as part of “Valeo 2010”, its strategic project
based on four drivers:
■
The first driver is the expansion of its technological offer in
order to provide solutions that incorporate systems and services
from three Domains: Powertrain Efficiency (see section 2.B.2.1),
Driving Assistance (see section 2.B.2.2), Comfort Enhancement
(see section 2.B.2.3);
■
The second growth driver is the Group’s regional expansion and
increased presence in the aftermarket;
■
The third driver is operational excellence;
■
The fourth driver is optimized organization.
2000
■
Creation of a joint venture with Unisia Jecs (transmissions in
Japan).
■
Acquisition of a stake in Zexel (thermal systems).
■
Strategic alliance with Ichikoh (lighting systems in Japan).
■
Acquisition of Labinal’s automotive business (Argentina, Eastern
Europe, France, India, Italy, North Africa, Portugal, Spain).
PAGE 11
2
Activity
History
2005 to 2007
2006
Guided by its strategic objectives and its financial position, Valeo
implemented a policy of targeted acquisitions designed to reinforce
its three Domains and increase its organic growth potential.
■
Valeo pursued its strategy to rationalize its portfolio, resulting in
the sale of its Electric Motors & Actuators business to the Japanese
group Nidec, the sale of the bluetooth specialist Parrot, and the
sale of Logitec, a logistics business in Japan.
■
Valeo also acquired a 50% share in Threestar, one of the leading
radiator manufacturers in South Korea. This new entity, of which
the other 50% is held by Samsung Climate Control Group, is called
Valeo Samsung Thermal Systems.
2005
■
The Group significantly developed its structure, notably by
increasing the role of the three innovation Domains, grouping
together the product families into one operational structure,
and strengthening functional teams, particularly the Technical
Department.
2007
■
Valeo acquired the Engine Electronics division of Johnson
Controls (JCEED), which designs and produces complete engine
management systems, electronic control units and electronic
motor drives as well as engine components.
■
In selling its Wiring activity to Leoni, Valeo reaffirmed its strategy
of focusing its offer on solutions in the three Domains with
strong competitive positions and diverse customers, via targeted
disposals and acquisitions.
■
2005 also saw a number of other operations which increased the
Group’s presence in Asia, especially China:
■
In July, Valeo acquired Connaught Electrics Ltd (CEL), an Irish
manufacturer of automotive electronics, reinforcing its Driving
Assistance Domain.
■
Two joint ventures were created in India: Valeo Minda Security
Systems and Valeo Minda Electrical Systems India Private Limited.
• Acquisition of shares held by Bosch in the Group’s Climate
Control businesses in Asia (Zexel Valeo Climate Control and Valeo
Zexel China Climate Control). This gave Valeo control of all the
share capital of its climate control activities and compressor
production.
• Following this transaction, Valeo increased its holding in two Thai
companies – Siam Zexel Co. Ltd. and Zexel Sales Thailand Co. Ltd. –
by 35.9% and 14.3% respectively, giving Valeo 74.9% ownership
of each of these two companies specializing in automotive climate
control.
• Valeo concluded a new joint venture with FAWER, the automotive
supply branch of FAW, one of the main Chinese automakers. The
new entity, 60% owned by Valeo, develops and manufactures
compressors for climate control systems aimed at the Chinese
market and at export. It has a plant in Changchun in the northeast
of China.
2008
■
With a view to focusing its engine cooling activity on passenger
cars and light utility vehicles, on May 31, 2008, Valeo sold its
truck engine cooling division to EQT, an investment fund based
in Northern Europe.
■
The Group established its first industrial presence in Russia by
signing an agreement to form a joint venture with Itelma, a
Russian automotive supplier, in which Valeo holds a 95% stake.
■
The Group created a joint venture with the Anand group in India
to produce lighting systems. The new company is called Valeo
Lighting Systems India Private Limited and is majority owned
by Valeo.
■
The strategic links with Ichikoh, one of Japan’s leaders in automotive
lighting, were strengthened with the signing of a new agreement
on operational management and corporate governance: two
Chief Executive Officers, one of whom is chosen from the Board
members designated by Valeo, now manage Ichikoh; Valeo has
boosted its presence in the operational management by having
three out of the nine members of the Executive Committee; Valeo
also increased its presence on the Board of Directors, with three
directors out of a total of nine (down from 19 previously).
• Valeo created a joint venture with Hangshen Electronics, a Chinese
Tier One automotive supplier, for the production of ultrasonic park
assist systems. Valeo owns a 75% share in this joint venture.
• Valeo increased its stake in Ichikoh – the Japanese manufacturer
of automotive lighting systems and mirrors – from 22.7% to
28.2%.
PAGE 12
Activity
The Group
2
2.B. The Group
2.B.1. Description and organization
2.B.1.1. Group profile and structure
Valeo is an independent industrial group, fully focused on the design,
production and sale of components, integrated systems and modules
for cars and trucks to both the original equipment market and the
aftermarket. The company ranks among the leading worldwide
suppliers.
The Group’s sole sector of activity is automotive supply.
At December 31, 2008, the Group employed 51,200 people at
121 production sites, 61 Research & Development centers and 10
distribution platforms in 27 countries.
The Group’s management organization does not mirror its legal
structure. It is a decentralized organization in which the industrial
and commercial activity is managed by:
■
Around a hundred operational Divisions, autonomous entities
which are in charge of production and sales for their product line
within their allocated geographical area;
■
Product Families, which coordinate the operational Divisions,
pool and distribute Research and Development, and optimize
production on industrial sites;
■
Domains, designed to encourage transversal innovation between
several Product Families.
the country acts as a holding company and holds shares in the
other operational companies, forming a local sub-group. Through
this system cash management of the sub-group members can be
centralized and optimized and, whenever it is legally feasible, a
consolidated fiscal entity can be created.
In order to penetrate new markets, consolidate the range of systems
it offers customers, or develop new product offers, Valeo has created
a number of jointly owned companies with industrial or technological
partners in various countries.
2.B.1.2. Operational Divisions
The operational Divisions are completely autonomous in terms of the
management of their product lines within their geographical area,
and have all the resources they need for development, production
and commercialization, in order to fulfill their mission.
2.B.1.2.1. Organization: Original Equipment
Valeo’s operational Divisions are responsible for handling business
relating to OE production and sales from the various Product Families
in geographical areas.
The Group also promotes synergies using functional networks and
central functions.
2.B.1.2.2. Organization: Aftermarket
The Group’s legal structure is based around three holding companies,
which link the parent company Valeo to its operational subsidiaries:
Valeo Finance, which holds shares in the French companies, Valeo
Bayen, which holds shares in foreign companies, having taken on the
role of investor previously played by the Dutch-registered V.I.H.B.V.
For historical reasons, there are two other holding companies: Société
de Participations Valeo and Valeo Thermique Habitacle.
The operational Divisions are also responsible for the production and
part of the distribution of Aftermarket products on behalf of the Valeo
Service structure, which handles the sale of products and services
relating to the aftermarket. Valeo Service comprises two Branches,
one for each major distribution channel: automakers and their
networks, and independent distributors (including trading groups).
Valeo Service provides shared marketing and logistics services for
both Branches.
On an intermediary level, in some countries – Czech Republic,
Germany, Italy, Spain, the UK and the US – a company based within
PAGE 13
2
Activity
The Group
2.B.1.3. Domains
2.B.1.5. Functional networks
In 2004, the Group adopted an approach to implement new solutions
and develop transversal innovations in Domains, responsible for
the Research & Development and marketing of innovations. Their
work centers around three strategic areas, in line with customers’
fundamental requirements: respecting the environment (Powertrain
Efficiency Domain), safety (Driving Assistance Domain) and comfort
(Comfort Enhancement Domain). When the innovations designed
and developed by the Domains reach the marketing stage, they
are transferred to one or several Divisions which take charge of
commercial negotiations, final development and production.
The main functional networks are as follows:
2.B.1.4. Product Families
■
Technical networks, under the responsibility of the Group’s
Technical Vice-President since May 2005 (Quality, Purchasing,
Industrial, Projects, Logistics, Information Systems, Real Estate
and Valeo’s 5 Axes deployment and audit system;
■
the Sales and Business Development function, structured according
to customer business, with a Customer Director dedicated to each
major automaker, and according to geographic region, with a
National Director for each major region (China, Germany, India,
Italy, Japan, North America, Poland, South America, South Korea,
Spain);
■
Research & Development and Product Marketing, under the
operational responsibility of the Product Family Research and
Development centers and the functional responsibility of Domains
and Product Marketing;
■
Human Resources, in charge of managing skills (from recruitment
to remuneration and internal mobility), training and adherence to
the Group’s Ethics code;
■
Risk, Insurance, Environment, Health and Safety, which coordinates
all actions in these fields;
■
the Financial Control network, which guarantees the reliability
of financial reporting and certain physical indicators. Along
with the teams in the Operations Department, it oversees the
implementation of action plans.
At December 31, 2008, Valeo had the ten following product families
(alphabetical order):
■
Climate Control
■
Compressors
■
Electrical Systems
■
Engine Cooling
■
Engine Management Systems
■
Interior Controls
■
Lighting Systems
■
Security Systems
■
Transmissions
■
Wiper Systems
A new Product Family was created on January 1, 2009: Engine and
Electrical Systems, combining all the activities of the former Electrical
Systems and Engine Management Systems Product Families except
air management systems, which were incorporated into the Engine
Cooling Product Family. As a result the Group now has nine Product
Families instead of the original ten.
PAGE 14
2.B.1.6. Central Functions
The central functions are:
■
Treasury, which defines and applies rules relating to the risk
management of external financing and of market risks relating
to changes in interest rates, currency values and raw material
costs;
■
Financial Affairs and Strategic Operations, responsible for disposals,
acquisitions, joint ventures and Financial Communications, drawing
on the expertise of a specialized team and the Product Families
and Divisions;
■
Legal;
■
Communications.
Activity
The Group
2
2.B.2. Domains and Product Families
The purpose of the Domains is to foster innovation in order to offer the
market comprehensive solutions relating to the environment, safety
and comfort (see section 2.B.1.4). The Domains work in synergy with
the various Product Families in order to offer innovative solutions
bringing together the Group’s different fields of expertise.
2.B.2.1. Powertrain Efficiency
This Domain develops systems for enhancing vehicle performance
and driving pleasure while minimizing fuel consumption and
pollutant emissions. Four Product Families contribute specifically to
the development of this Domain: Engine and Electrical Systems (see
information about this new Product Family in sections 2.B.1.4 and
2F), Engine Cooling, Transmissions and Climate Control.
2.B.2.1.1. Engine and Electrical Systems
• Electronic engine management systems
By improving the specific performances of the engine, electronic
management systems reduce the environmental impact of
vehicles while enhancing the driving experiencing and enriching
the Powertrain Efficiency Domain offer.
The technological innovations developed by this Product Family
include:
■
■
Sequential natural gas injection for vehicles – a complete
engine control system that can adapt gasoline engines to natural
gas, reducing carbon dioxide emissions by 20%;
The e-Valve, an electromagnetic valve control system, allows
automakers to reduce vehicle emissions and fuel consumption by
15%-20%. It replaces the traditional mechanically driven camshaft
with an electromagnetic control system that actuates each valve
individually and independently of the position of the crankshaft.
The system allows the deactivation of cylinders.
Some developments are aimed at electric cars, and Valeo is preparing
new technologies that will provide solutions for 100% electric cars.
In recent years, over 10,000 electric vehicles have been fitted with
first-generation Valeo electronic control modules.
Other products of Valeo Engine and Electrical Systems in this product
line include:
■
engine control units;
■
electric motor drives;
■
emission control systems and components;
■
ignition components;
■
injectors;
■
sensors.
• Electrical systems
Electrical systems cover key functions of the vehicle, such as electrical
energy generation and management and engine ignition, in order
to provide greater driving comfort and reduce fuel consumption and
pollutant emissions.
Among the products developed by Valeo Engine and Electrical
Systems is:
■
StARS, the micro-hybrid system that shuts the engine off when
the vehicle comes to a standstill, and restarts it again instantly
and quietly when the driver either releases the brake pedal or
engages a gear. The system can reduce fuel consumption by as
much as 28% in heavy urban traffic.
Alongside StARS, this Product Family has widened its range of stopstart systems with a heavy-duty starter with functions adapted to the
constraints of stop-start driving, and a battery management system
that allows the battery to meet the demands of stop-start driving.
This expanded portfolio allows Valeo to position itself as the supplier
for technologies that enable automakers to reduce their carbon
dioxide emissions.
Other products of Valeo Engine and Electrical Systems in this product
line include:
■
starters;
■
alternators;
■
remanufactured alternators and starters for the aftermarket;
■
electromagnetic retarders for trucks and buses.
PAGE 15
2
Activity
The Group
2.B.2.1.2. Engine Cooling
This Product Family develops and manufactures components and
modules for a full range of powertrain cooling functions, with a
view to reducing pollution and fuel consumption, and enhancing
passenger comfort. (See information about the new organization
in sections 2.B.1.4 and 2.F.)
Innovative products and systems from Valeo Engine Cooling
include:
■
■
■
■
UltimateCooling™, which can reduce the number of exchangers
needed in the front end, by using a single thermal fluid. This
innovative architecture generates fuel savings of up to 9% for
vehicles using air-conditioning and saves space in the front end.
The water-cooled charge air cooler, which reduces consumption
and pollutant emissions through enhanced efficiency in cooling
intake air. The traditional frontal air-to-air heat exchanger has
been replaced by a new air-to-water heat exchanger. This solution
reinforces the trend towards engine downsizing, one of the most
promising sources of fuel savings;
The EGR (exhaust gas recirculation) system, which takes part
of the exhaust gases at the cylinder head outlet and re-injects
them into the air intake, reducing nitrogen oxide emissions during
combustion.
THEMIS™, an electronic valve that improves engine yield with
smart temperature control. The major advantages are fuel savings
and enhanced cabin comfort. The electronic valve will also
contribute to the development of downsized engines.
Other Valeo Engine Cooling products include:
■
thermal management systems for internal combustion, hybrid
and electric powertrains;
■
cooling modules;
■
charge air cooler modules and charge air coolers;
■
condensers;
■
exhaust gas coolers;
■
oil exchangers;
■
fan/motor systems;
■
front end modules.
2.B.2.1.3. Transmissions
Valeo Transmissions develops and produces systems that control
and transfer engine power to the transmissions of passenger cars
PAGE 16
and industrial vehicles. The solutions it offers incorporate innovative
systems that dampen noise, vibrations and harshness. This Product
Family is present in all major markets in both the original equipment
and aftermarket segments.
The technologies developed by Valeo Transmissions include the
double dry clutch, one of its key innovations, which is a genuine
alternative to hydraulic automatic transmission. With two clutches
(one for even gears and one for odd gears), this system allows the
driver to change gear with no interruption to torque and no jolting,
just like an automatic transmission. Without a hydraulic circuit, it also
improves efficiency, cutting consumption by 4-6%.
Other products produced by this Product Family include:
■
clutches with and without self-adjusting technology;
■
clutch discs with a new generation of multi-louver dampers
offering effective protection from vibrations;
■
environmentally friendly clutch facings with no heavy metals,
manufactured using an water-based process;
■
release bearings with built-in automatic self-centering;
■
hydraulic clutch actuators;
■
flexible flywheels that provide effective reduction of the axial
vibrations generated by the engine;
■
dual mass flywheels, with rigid or flexible primary flywheel
and the option to add an internal damper to improve filtration
efficiency in front- or rear-wheel drive vehicles with either manual
gearboxes, dual clutches or hybrids;
■
torque converters, including a lock-up function, wide clearance
damper and an optimized hydraulic circuit.
2.B.2.1.4. Climate Control
This Product Family contributes to the Powertrain Efficiency Domain
via its lithium-ion battery cooling system. The main feature of this
system is that it keeps the battery at its ideal working temperature.
The cooling system can be direct, using air or water. This Product
Family also contributes to the Comfort Enhancement Domain (see
2.B.2.3.3).
Several Product Families in the Powertrain Efficiency Domain were
reorganized in early January 2009 (see sections 2.B.1.4. and 2.F).
Activity
The Group
2.B.2.2. Driving Assistance
The Driving Assistance Domain designs and produces solutions for
monitoring the vehicle perimeter, providing the driver and other road
users with information about the vehicle’s immediate environment
and initiating necessary corrective actions. Four Product Families
contribute in particular to the development of innovations for this
Domain: Interior Controls, Lighting Systems, Wiper Systems and
Engine Cooling.
2.B.2.2.1. Interior Controls
This Product Family designs solutions to improve the driver’s control
of the vehicle’s immediate environment. Valeo Interior Controls
includes the HMI (Human-Machine Innterface) activity, Top Column
Modules, steering sensors and body controllers. It is also part of the
Comfort Enhancement Domain (see section 2.B.2.3.2).
Using ultrasonic sensors, cameras and radar, a range of assistance
systems for low-speed maneuvers support the driver by monitoring
the area around the vehicle and providing 360° vision. These
systems include:
■
■
■
Park4U™, which uses ultrasonic sensors to assist in parking. Once
the lateral sensors have detected a parking space, the driver
simply stops the car next to it, puts the car into reverse and
releases the steering wheel. The system manages the maneuver,
while the driver remains in control of braking and acceleration. It
takes just a few seconds to carry out the maneuver;
ParkVue™, which uses a rear-view camera and ultrasonic sensors
to provide the driver with perfect visibility behind the vehicle and
a precise indication of distances;
360Vue™, which uses a multi-camera system to provide 360°
vision around the vehicle, making dangerous maneuvers with
poor visibility, such as reversing or crossing a dangerous junction,
much safer.
In addition to assisting low-speed maneuvers, this Product Family
also develops innovative technologies designed to increase safety
on the road, including:
■
The blind spot detection system, for safer lane changes. Two
multiple-beam radars warn the driver if there is a vehicle present
in the blind spot on either side of the vehicle, via an icon displayed
2
in the rear-view mirror. When the icon disappears, the driver can
carry out the maneuver in complete safety;
■
The lane departure warning system, LaneVue™, which alerts the
driver to unintentional lane departures via an audible or vibrating
signal when activated by a camera located in the upper part of
the windshield;
For the Driving Assistance Domain, Valeo Interior Controls
develops and produces detection systems based on the following
technologies:
■
ultrasonic and infrared sensors;
■
radars;
■
cameras.
2.B.2.2.2. Lighting Systems
The role of the Lighting Systems Product Family is to improve driver
visibility and vehicle signaling in all road conditions. The distinctive
styles of headlamps and rear lamps are also key design features,
playing an increasingly important role in automakers’ efforts to
differentiate the styling of their new models.
This Product Family enhances design, performance and safety. It has
developed the following technologies:
■
Camera-assisted Adaptive Front Lighting, allowing motorists to
enjoy ideal night-time lighting, without dazzling oncoming traffic.
BeamAtic® switches between high and low beam automatically.
BeamAtic® Plus and Premium avoid dazzle by gradually
adapting the beam according to the presence of other vehicles,
while preserving maximal lighting;
■
MicroOptics™ technology provides uniform light surfaces, offering
not only optimal visibility but also a wide range of styling options.
It can be applied to front and rear signaling lights, even if they
have complex shapes;
■
Xenon lamps, which provide optimal visibility, similar to daylight.
Xenon lamps have low beams with a range of 110 meters,
instead of the 80 meters offered by traditional technologies,
i.e. an improvement of 30%, which can be increased to 44%
with bending light. The 2007 TÜV survey conducted in Germany
concluded that if all vehicles were equipped with Xenon lamps, the
number of deaths on the road at night could be cut by 18%.
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The Valeo Lighting Systems product range also covers:
■
main headlamps;
■
fog lights;
■
auxiliary lights;
■
leveling devices and lamp wipers;
■
lighting and signaling controllers;
■
daytime running lights (traditional lamps and LEDs);
■
rear lighting including LED rear lamps and center high-mounted
stop lamps;
■
cigar lighters, multifunction sockets and USB ports.
2.B.2.2.3. Wiper Systems
Valeo Wiper Systems offers windshield and rear window wiping
solutions to give the driver perfect visibility in all conditions, for both
the original equipment sector and the aftermarket. This Product
Family also helps generate fuel savings, through its commitment
to innovation and weight reduction.
The latest innovations include:
■
■
Second-generation front and rear ultra-flat wipers,
combining performance and elegance. The second generation is
more aerodynamic, more compact, lighter and helps to prevent
snow piling up on the windshield;
The new generation of lightweight wiper motors optimizes
wiping effectiveness with precision electronics, offering new
speed control and wiping angle functions.
The Wiper Systems Product Family includes:
■
arms;
■
blades;
■
linkages;
■
motors;
■
washing systems;
■
front and rear wiping systems integrating other functions such as
stop lights and latches.
2.B.2.2.4. Engine Cooling
This Product Family (which is also covered under the Powertrain
Efficiency Domain, in section 2.B.2.1.2) contributes to the Driving
Assistance Domain with its front-end module Safe4U™, an active
pedestrian detection system using a radar on the upper crosspiece
and cameras along the radiator grill. Safe4U™ temporarily separates
the upper crosspiece from the front end, allowing it to tip. The
system complies with, and even surpasses, current pedestrian
protection regulations.
2.B.2.3. Comfort Enhancement
The Comfort Enhancement Domain aims to facilitate vehicle use
and improve vehicle comfort. This covers all phases of vehicle use:
approach, access, ignition, driving and exiting. The four Product
Families which work in synergy to develop solutions for this Domain
are Compressors, Internal Controls, Security Systems and Climate
Control.
2.B.2.3.1. Compressors
Valeo Compressors develops and produces compressors for
automotive air conditioning systems. The solutions it offers include
controlled air conditioning compressors, with reduced energy
requirements.
Valeo Compressors contributes to the Comfort Enhancement
Domain with the R744 Compressor, a key component in the next
generation of air-conditioning systems which will use the natural
and environmentally friendly CO2 coolant.
This Product Family also develops and produces the following
products:
■
pallet compressors;
■
fixed-cylinder compressors;
■
variable-cylinder compressors.
2.B.2.3.2. Interior Controls
Already mentioned in section 2.B.2.2.1. above for its contribution to
the Driving Assistance Domain, Valeo Interior Controls also develops
innovative, intuitive and user-friendly solutions designed to improve
cabin comfort.
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Activity
The Group
The control panel creates the consumer’s first impression of perceived
quality. It is a human-machine interface in constant evolution. Airconditioning and multimedia systems are increasingly sophisticated
and numerous, making the central area in the control panel cluttered
and complex. In order to create intuitive and user-friendly systems
that cover all functions, Valeo Interior Controls is developing several
innovations:
■
■
■
■
the control panel, which manages both air conditioning and all
multimedia applications, using a complete range of innovative
technologies that allow the driver to navigate easily between
the various functions;
the multicontrol joystick or touchpad, located between the
front seats, which facilitates the management of the various
applications;
the e-media™ control console, which helps motorists adjust even
the most sophisticated on-board comfort and communications
devices quickly and in complete safety. e-media™, with three
separate touch-sensitive joysticks, offers the ideal compromise
between managing a large number of functions and ease of
use;
Senseative®, which offers touch-sensitive seat settings, has
replaced the electric buttons with a system using four resistive
sensors. After pressing the ON button, the user slides a finger
over one of the segments to move the corresponding part of
the seat.
One of the Product Family’s flagship innovations is the smart key.
Part of the new generation of hands-free keys, the smart key allows
people to send information to their vehicle over a considerable
distance (several hundred meters). The key’s mini screen displays
information such as whether the doors are locked and the alarm is
activated, tire pressure, and the level of the fuel tank. The key can be
used to preprogram the seat position or radio station, to pre-ventilate
the cabin, or for many other functions requiring communication
between the user and the vehicle.
Valeo Security Systems also develops and produces the following
product lines:
■
keyless entry and start systems;
■
automatic Power Closure System with movement detection;
■
radio-frequency remote access controls and receivers;
■
assisted closing of side doors;
■
transponder-based immobilizer systems;
■
steering column locks (mechanical and electrical);
■
handles (especially mechatronic handles for hands-free access
systems);
■
mechanical keys and locks;
■
latches.
2.B.2.3.4. Climate Control
■
top column modules;
This Product Family offers intelligent heating, ventilation and air
conditioning (HVAC) systems that enhance individual comfort
for vehicle occupants in all circumstances, while limiting energy
consumption, thanks to:
■
cabin comfort controls and control panels;
■
multi-zone HVAC units for personalized cabin comfort;
■
steering angle sensors (angle and torque sensors);
■
a complete range of electric radiators for instant cabin heating;
■
electronic control units.
■
a new generation of heat exchangers, such as evaporators
and accumulators using new cooling fluids that are more
environmentally friendly;
■
consideration of air quality, with air filtration and purification
systems such as:
For the Comfort Enhancement Domain, Valeo Interior Controls
develops and produces the following product ranges:
2.B.2.3.3. Security Systems
This Product Family develops and manufactures parts and systems
that guarantee secure and easy access to vehicles, while ensuring
maximum protection against theft. The end user can therefore enjoy
practical and comfortable solutions in a personal and innovative
style, from the Comfort Enhancement Domain.
2
• the combined filter, which filters particles and provides
protection against polluting gases and odors, using a layer of
activated charcoal. This filter, combined with a pollution sensor
and rapid electric actuator, almost entirely blocks the entry of
polluted outside air;
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• the anti-allergen function, which disables airborne allergens
with a natural surface treatment;
• the air purifier, a self-contained module that filters out particles,
gases and odors. It cleans the air by reducing the quantity of
bacteria in the cabin;
• the Vitamin C filter which, in addition to its filtration function,
diffuses vitamin C, thereby helping to moisturize the skin;
• an adjustable fragrance diffuser, adding a personal touch to
the cabin.
Valeo Climate Control has four product lines:
■
air-conditioning systems and modules (air-conditioning loop and
modules, including evaporators and heater cores);
■
decentralized interior comfort modules (rear air-conditioning,
booster, Thermeo thermo-electric module);
■
air quality products (filters for particles, gas and odors, scent
diffusers, ionizers);
■
derivative products for the aftermarket.
■
Valeo Service also offers a full range of post-equipment
innovations, such as:
2.B.3. Aftermarket products and services
Valeo Service is an activity divided into two Branches whose roles
are to supply replacement parts respectively to automakers and to
the independent aftermarket.
It offers Aftermarket networks a wide range of products and services
designed to increase the effectiveness of repair specialists, in order to
increase consumer safety and comfort. In addition to supplying parts,
Valeo Service offers ever more innovative and optimized services
and technical skills: diagnostic tools, training, sales materials, and
technical and marketing support.
Valeo Service offers product ranges covering twelve functions for
light, commercial and industrial vehicles and trucks:
■
PAGE 20
Wiper systems (under the Valeo, Marchal, PJ and SWF brands),
transmissions, lighting systems, climate control, engine cooling,
electrical systems, electrical accessories, security systems,
switches, braking and engine management.
• Beep&Park/Vision™ (an updated version of Beep&Park™)
which combines the functions of a camera and a reversing radar
in order to make parking easier by detecting, signaling and
displaying all obstacles;
• Guideo, a camera attached to the interior rearview mirror that
performs the four following functions: lane alert, trajectory
correction, video memory and alert when the vehicle ahead
starts up at traffic lights;
• Speed/Visio™, which displays the vehicle speed on the
windshield and warns drivers with a sound signal when it exceeds
the preset limit, allowing drivers to check their speed without
taking their eyes off the road;
• 4-Part Clutch Kit, an alternative to the dual mass flywheel and
its kit.
Activity
The Group
2
2.B.4. Functions: main actions
2.B.4.1. Human Resources
■ Recruitment and relations with schools and
universities
Valeo’s Human Resources function continues to pursue a strategy of
supporting the Group’s international expansion by designing a global
policy that is then rolled out to the local job markets while taking
account of their local characteristics.
Recruiting the best talent is a key factor of Valeo’s success. Qualified
teams ensure Valeo can offer its customers around the world valueadded services in terms of innovation, total quality and competitive
solutions and services.
The Group is eager to encourage the commitment of its employees
at every level throughout the world, and pays close attention to all
those factors which help to motivate people at work.
To ensure that recruitment, both internal and external, is managed
coherently and professionally, all managers are trained with the aid
of a recruitment kit. This kit brings together in a single document all
the existing tools, such as the Employer Brand, which was revised
and given a new visual identity in 2008, the Internal Mobility
Charter and the Valeo Competences system, launched in 2004. A
Recruitment Guide explaining the Group’s operating culture and the
key messages to communicate to applicants is the main element in
the kit. By offering a standard recruitment policy based on objective
selection criteria, the Recruitment Guide helps to promote diversity
at Valeo and to eliminate all forms of discrimination.
A worldwide survey of 1,100 Valeo managers was carried out in
June 2008 in order to determine the biggest commitment drivers
at Valeo.
A steering committee with three “champions” was set up to handle
the significant volume of responses and to identify the main actions
to undertake in 2009 to boost commitment among Valeo’s teams.
Updating and improving people’s skills, thanks in particular to a
dynamic training policy using the latest techniques, allows Valeo to
maintain an edge in a highly competitive environment while giving
its employees career development opportunities.
Internal mobility grew strongly in 2008 as Valeo focused on the
internal promotion of its employees and managers.
All these actions help to foster a feeling of belonging to Valeo
and to cultivate a pride in “being Valeo” at every level of the
organization.
In 2008, Valeo recruited 7,534 employees throughout the world,
including 1,855 engineers and managers. The acquisition of this
new talent should enable the Group to support its growth in new
countries.
2.B.4.1.1. Management development
The competence management system comprises a comprehensive
range of procedures and tools available to managers to effectively
drive the development of Valeo employees. This system is used to
recruit, develop and motivate the necessary human resources, not
just for ensuring day-to-day operations but also for achieving the
Group’s strategic objectives.
The three major constituents of the management development
strategy are external recruitment, which also includes relations
with educational establishments, internal mobility and personal
development, and lastly, remuneration and benefits.
In the interests of the management of external applications, the
Group has also added new functions to its recruitment website
(valeocareers.com) and created a completely new visual identity
for its communications (press and Internet), in order to raise its
employer brand on job markets.
Valeo has also continued and strengthened its relations with higher
education institutes, in particular by developing partnerships with
foreign universities and schools recognized at an international
level, and encouraging diversity in its teams. In 2008, the Group took
part in many events to make contact with future graduates, such as
the ATUGE forum in Tunisia, the Best forum in Krakow (Poland), and
the ATHENS forum, Women in Leadership, and CESI Apprentissage in
Paris (France) and special one-day events organized with universities
in Wuhan and Changchun (China).
Valeo has also intensified relations with a number of partner schools
and universities, especially Supélec, the Technological University of
Compiègne (UTC), Supméca, ENS Cachan, ESEO and Audencia Nantes,
and has concluded a new partnership agreement with Esigelec.
Valeo also sponsors the “Elles Bougent” organization which
promotes transport careers for girls at secondary school, and played
an active role in the education promotion campaign by FIEV (French
Automotive Equipment Industries Association).
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Finally, Valeo sponsors the ShARE student association, for students
from the top Asian universities, and took part in the organization of
ShARE’s world seminar in Beijing in December 2008.
■ Internal mobility and personal development
To offer attractive career prospects to the 11,468 engineers and
managers employed by Valeo, the Group’s policy requires that at
least three out of four positions are filled internally. These career
prospects are formalized through the creation, each year, of a
succession and development plan to identify the next stages in
the career development of each engineer and manager. The plan
is implemented by a committee responsible for making decisions
regarding internal job applications. In order to prepare employees
for success in the next stage of their career, Valeo has a standard
“individual development plan” form comparing skills acquired with
skills required for the next stage, allowing very detailed individual
development plans to be drawn up. The plan is based on the “3Es”
approach (Education, Exposure, Experience), which favors structured
experience and first-hand knowledge in addition to more traditional
training and education. The Group has also developed a new career
appraisal form in order to help identify possible career developments
for each engineer and manager, based on an analysis of their
interests.
Using these tools, 2,400 engineers and managers benefited from
career development actions in 2008.
To encourage the spread of policies, cultures and methodologies,
and to offer international career opportunities, the Group must send
around 100 experienced managers abroad every year. In order to be
effective, Valeo’s international policy must be both competitive on
the employment market and contribute to cutting costs.
PAGE 22
■ Remuneration and benefits
The Group constantly monitors the employment market in order to
maintain a good positioning, motivate and retain its talent. It also
has to adapt its practices by offering appropriate remuneration to
its teams everywhere in the world. The Group makes a point of
offering competitive salaries on such volatile job markets as China,
Czech Republic, Egypt, Poland, Romania and Slovakia, while adapting
the benefits extended to its employees in the following countries:
Brazil, China, Czech Republic and Poland. The Human Resources
management rules are constantly updated in the Group’s new
countries, such as Russia.
2.B.4.1.2. Employee training and commitment
In a highly competitive environment, training is an essential tool for
reinforcing the skills of employees. Training policy and schemes are
defined according to the needs of operational activities, functional
networks and the personal aspirations expressed in annual and
career development appraisals.
Training is vital to boosting employability. It is seen as a shared
investment: it is up to all employees to be proactive and to involve
themselves in their own training path, in collaboration with their
superiors and Human Resources.
Training is also a major factor in rallying the workforce around a
shared set of values, methods and a common language, conveyed to
all sites by the 5 Axes schools based in Europe, America and Asia.
The Valeo Experts pass on their product and process expertise
in technical institutes designed for all employees and external
customers.
The Group’s functional networks train their members at internal
Academies staffed by their business managers.
Activity
The Group
The sites design and organize all operational and multidisciplinary
training for teams with the help of local management.
For greater flexibility and efficiency, training is designed as a course:
the Group has chosen to alternate theory and practice, in order to
consolidate the skills learned. This system uses several methods:
seminars, telephone training, workstation or operational training,
virtual classrooms and e-learning.
Online training is available in all fields: languages, office tools,
management, technical, personal development and communication.
New modules are added frequently, and have usually been designed
in-house. The Group has, for example, deployed an e-learning
program about ergonomics in eight languages, in order to prevent
musculoskeletal disorders and work-related illnesses, as part of
the “Well-being and efficiency at the workstation” project which
supports safety training.
2.B.4.1.3. Code of Ethics
Valeo has been aware of its social and environmental responsibilities
for many years, and has pledged to honor them by adhering to
national laws and international treaties and agreements.
It has made a number of commitments, both internally and
externally, and has joined the UN Global Compact. In doing this,
Valeo undertakes to promote the fundamental rights set forth in the
Universal Declaration of Human Rights, respecting the dignity and
value of human beings, the private life of its employees and the
equality of women and men.
As required of signatories, Valeo informs the Global Compact
(Communication of progress: COP) every year of the progress it has
made in these areas.
In 2005, these commitments were enshrined in a Code of Ethics,
circulated worldwide and laying down rules for the Group’s
employees and for all the legal entities constituting Valeo, including
countries where the law is less severe.
The Code of Ethics covers the prohibition of child labor, the use
of disabled workers, discrimination and harassment, and health
and safety in the workplace. It also demonstrates the Group’s
commitment to sustainable development: the environment, human
resources, social dialogue and freedom of expression, as well as
each employee’s personal development. It includes the Group’s
commitments to society (professional training, new employment
2
assistance, reindustrialization), business conduct and professional
conduct. Finally, the Code states that Valeo service providers,
consultants and subcontractors are obliged to act in accordance with
the ethical rules outlined by the Group.
In 2008, for the second year in a row, the Halde (French authority
combating discrimination and promoting equality) listed a Valeo
“best practice” in its annual report. The exemplary practice cited by
the Halde, after last year’s “Recruitment Kit”, was the “Manager’s
Evaluation Procedure”.
2.B.4.1.4. Labor Relations
Valeo is firmly committed to a forward-looking employment and
skills management policy.
In view of the ongoing necessity to rationalize its industrial base, the
Group actively seeks solutions which will provide alternative jobs
for employees affected: transfers within the Group, individual and
collective external redeployment, new employers to take over sites
in question, the reindustrialization of employment regions and local
economic development initiatives.
Employee representatives are regularly informed and consulted on
these operations.
The Group’s social indicators can be consulted in Section 3.Q. “Social
indicators” of Chapter 3.
2.B.4.2. Risk, Insurance, Environment, Health
and Safety
2.B.4.2.1. Risk Management and Insurance
Valeo’s risk management policy is founded on the basis of a network
of correspondents, rigorous procedures, management systems for
continuous performance improvement and regular external audits.
The Risk, Insurance and Environment Department has created a
dedicated organization, led by Coordinators assigned within each
Product Family. Coordinators provide technical assistance to the
sites’ Health Safety Security Environment (HSSE) managers. The
Risk Management Committee is the central steering body for the
Group’s Risk, Insurance and Environment Department,
PAGE 23
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Valeo’s risk management policy, applied systematically at all sites,
can be summarized as follows: respecting obligations imposed
by national legislation as well as those defined by Group policy
(which exceed the requirements of national regulations in many
areas), identifying risks, evaluating their impacts, setting objectives,
implementing action plans to reduce – or where possible to eliminate
– risks, and finally to measure, by means of regular audits, the
progress being made.
The objective is not only to prevent pollution, but also to protect the
environment with a sustainable development policy that encourages
a reduction in the consumption of natural resources (water and
raw materials) and energy, by reducing or eliminating the use
of dangerous products, reducing waste and achieving maximum
recyclability of all products, and offering an industrial environment
that is both safe and pleasant to work in.
■
All stages of each product life cycle, from design and manufacturing,
to use and end of life, systematically incorporate environmental
policy. Since 1998, a group of experts in environmental matters
and research and development from different Valeo Product
Families have been working together to reduce the environmental
impacts of processes and products over their entire lifecycle. This
research group meets regularly to discuss specific topics such as
the elimination of banned and restricted substances or the use
of recycled plastic, for example, and in 2008 continued to work
on compliance with REACH, an EU regulation on the registration,
evaluation, authorization and restriction of chemical substances.
REACH requires companies that buy or make chemicals to list
them, evaluate the toxicological risk linked to their use and, if
necessary, to apply for market authorization.
■
Valeo has also created a reference database of substances that are
banned or restricted in the automotive industry. Updated again
in 2008, this database details the regulations applicable in the
different countries where Valeo operates and the requirements
of its automaker customers concerning over 600 substances
used in the composition of parts and in manufacturing and repair
processes.
■
To fulfill its progress objectives, Valeo bases its environmental policy
on performance as well as the implementation of a management
system which leads to regularly renewed external certification.
This is the case with ISO 14001 certification, the international
standard in terms of environmental management systems. At
the end of 2008, 88% of the Group’s sites had ISO 14001
certification, compared to 94% at the end of 2007 and 77%
at the end of 2006. This decline is due to the deconsolidation of
some certified sites. The aim is for all Valeo sites to be certified,
and newly acquired sites are immediately integrated into the
certification system.
All procedures regarding health and safety, building security, the
environment and the protection of knowledge and expertise are
detailed in the Risk Management Manual, which is updated on
a regular basis. The Group also produces an Insurance Manual,
updated on an annual basis, providing comprehensive information
on risk coverage and managing insurance programs.
There are clearly identified risks for each site. To achieve its objectives
and bring risk levels down to zero, Valeo requires continuous
visibility. Each site is subject to a full audit every three years at
most, covering the environment and sustainable development,
health and safety at work and the protection and safety of buildings.
This audit is carried out by external consultants, in accordance with
local obligations, Group policy and good practice. It provides useful,
detailed information – especially with regard to environmental
concerns – on site activity, the surrounding area and the natural
environment: geology, seismic risks, flood plains, etc. Actions to be
implemented and associated action plans are established on the
basis of these audits.
Site action plans are communicated twice yearly at the Group
level, providing the Risk, Insurance and Environment Department
with precise and comprehensive information for evaluating the
performance of individual sites. Each site is graded on an annual
basis, based on factual criteria.
2.B.4.2.2. Environment
Environmental protection requires a number of initiatives which
are, by definition, long-term. Valeo has been committed to this for
nearly twenty years, both in terms of product innovation and the
management of industrial sites.
PAGE 24
Activity
The Group
■
The Generic plant is a concept developed by Valeo, based on the
work of the HQE (High Quality Environment) association, the US
Green Building and World Bank recommendations. All new plant
construction and refurbishment projects are carried out according
to very detailed specifications. These cover site selection, plant
architecture and construction, employee working conditions,
plant operation, application of regulations, Valeo risk prevention
standards, optimized energy consumption, and the reduction of
emissions and waste. All building and renovation specifications
involving safety, security, health and the environment are outlined
in the Valeo Factory Design Guide.
The 5 Axes methodology is applied around the world, by all
Group employees, in order to deliver “zero defects” to the
customer. The 5 Axes are:
■
Involvement of Personnel: this implies recognizing skills,
enhancing them through training and giving people the means
to carry out their responsibilities. Employees are particularly
encouraged to make suggestions for improvement and participate
actively in the work of autonomous teams;
■
Valeo Production System (VPS): the VPS is designed to
improve the productivity and quality of products and systems. It
consists of a pull-flow organization, flexible production resources,
the elimination of all non-productive operations and stopping
production at the first non-quality incident;
■
Constant Innovation: to design innovative, easy-to-manufacture,
high-quality and cost-effective products while reducing
development time, Valeo has set up an organization based on
project teams and the simultaneous engineering of products and
processes;
■
Supplier Integration: allows Valeo to take advantage of suppliers’
ability to innovate and develop productivity plans with them to
improve quality. Valeo sets up close and mutually beneficial
relationships with a limited number of world-class suppliers and
sustains these relationships in the long term;
■
Total Quality: in order to meet customer demands in terms of
product and service quality, Total Quality is required throughout
the Group and from its suppliers.
2.B.4.2.3. Health and Safety
Health and safety in the workplace constitute a priority for Valeo,
which is aiming for “zero accidents”. This policy is based on strict
procedures, indicators tracking the efficiency of action taken, a
feedback system borrowed from the QRQC (Quick Response Quality
Control) approach and adapted to health and safety, and finally an
OHSAS 18001 certification program for all industrial sites by the
end of 2008.
At the end of 2008, 76% of sites had OHSAS 18001 certification,
compared to 74% at the end of 2007 and 52% at the end of 2006.
Like the ISO system, this health and safety management system is
based on continuous improvement.
The Group’s environmental indicators can be consulted in section 3.P.
“Environment and sustainable development: management and
performance”, in Chapter 3.
2
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2.B.4.3. Technical Department Functions
Operational excellence is a key challenge at Valeo. The controlled
expansion of the Group’s business requires the daily implementation
of a basic principle: obtaining cost-effective total quality firsttime, whether this involves methods, manufacturing, projects or
purchasing.
Through the Technical Department, which brings together the Quality,
Purchasing, Industrial, Projects, Logistics, Information Systems and
Real Estate Departments and the 5 Axes audit and deployment
system, the Group pursues its plan of reducing costs and optimizing
quality, as well as fostering cooperation between these seven
functions. Its objective is to ensure that the 5 Axes are applied in a
strict and disciplined manner.
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PAGE 25
2
Activity
The Group
In 2008, the Group focused on ten key points of operational
excellence for deployment in all sites.
Three of these points rely on the QRQC approach (Quick Response
Quality Control): safety, plant and supplier QRQC. Any problem
which arises is immediately identified and analyzed on the spot by
the parties involved. Corrective action is defined and implemented
within 24 hours. This approach now applies to all areas: Production,
Quality, Projects, Purchasing, Warranty, Logistics and Safety.
The seven other points are:
■
Standard certification of operators: ensures that every
workstation has clear instructions and that all operators are trained
and capable of producing the right parts with the right quality at
the right speed;
■
The pull-flow industrial method: allows Valeo to reduce stocks,
improve the productivity of the direct workforce and optimize
deployment of resources and investments, in accordance with
actual customer demand;
■
Kosu: measures the resources required to manufacture one part.
This is a cost performance and time monitoring indicator, designed
to improve productivity;
■
Compliant project management: Project Management
Committee meetings are held regularly, in accordance with Valeo’s
project management process, to ensure “zero defect” launches,
on time with the predicted gross margin;
■
For the past ten years internal audits have been used to evaluate
the results of the 5 Axes approach, and Valeo has developed its
own standards to analyze and improve the application of each of
the 5 Axes.
At the end of 2008, Valeo initiated the extension of Step 1 of QRQC
(Detection, Communication, Analysis and Verification) to all Axes,
to be launched in 2009.
2.B.4.3.1. Purchasing
The role of Valeo’s Purchasing team is to reduce supply costs
through increased sourcing in competitive-cost countries,
implement rigorous selection processes for new suppliers,
apply the total quality and innovation approach to suppliers
and sub-contractors and establish close partnerships with the
most innovative and best performing suppliers, in order to
turn this strategy into a genuine competitive advantage.
■
Identification of risk in the projects: all analyses of failure
modes, their effects and their severity are carried out and the
critical features are integrated into the control plans to ensure
perfect quality;
The Purchasing network manages all activities linked to supplier
integration. Suppliers are divided into purchase families, from raw
materials to electronic, mechanical and plastic components, etc.
Valeo’s Product Families each have their own Purchasing networks
and there is a separate Purchasing team for every Group site.
Group Commodity Leaders are responsible for coordinating the
Product Families. They are responsible for defining the sourcing
strategy and target panel by purchasing family. Lead Buyers are
located on production sites, and their role is to coordinate and
harmonize the purchasing policies of all Valeo Divisions that work
with a given supplier.
■
■
An appropriate supply base: all suppliers are selected according
to several criteria, including their ability to provide Valeo with parts
of the highest quality, their financial soundness and their capcity
for continuous improvement;
Valeo deploys tools to help its suppliers improve their own
quality processes. The Group’s QRQC approach continues to be
implemented to assist suppliers in achieving zero defects. In 2008,
290 suppliers were trained in this method.
■
■
The San Gen Shugi approach: all sites adhere to the principle
of the three “reals” – real place, real parts and real data – in order
to carry out flawless analyses of all problems encountered and
to eliminate them once and for all. Feedback on experience, in
the form of “Lessons learned cards” is entered into a database
accessible to everyone via an intranet search tool.
Supplier Relationship Management (SRM) is an essential tool
in the relationship between Valeo and its suppliers. Modules
such as the Incident Management System, PQA (Product Quality
Assurance, the qualification of new components for projects),
the Supplier Scorecard (reporting back to suppliers on their
performance in terms of quality, cost and delivery) can be accessed
on the extranet, enabling Valeo and its suppliers to work closely
together and share standardized processes, such as sharing project
schedules, or exchanging and validating component qualification
documents.
PAGE 26
Activity
The Group
■
By retaining only the best suppliers in terms of quality, technology
and productivity, Valeo is better able to support them in their
quality strategies and to integrate them into its projects. In 2008,
the Group reduced the supply base by 55, bringing the total down
to 2,573 (see also section 2.E.3, Operational Excellence).
■
As specified by its new Code of Ethics, Valeo further tightened
the requirements imposed on its suppliers in terms of labor rights
and environmental protection. 891 suppliers signed the Code of
Ethics in 2008;
■
Innovating and designing products using different materials and
new architectures can also help improve quality and reduce costs.
Conferences are regularly held to discover suppliers’ innovations
and examine ways to integrate them into new projects.
■
Valeo has increased purchasing in competitive-cost
countries. These purchases represented 42% of total production
purchases in 2008 (compared to 37% in 2007). This result was
achieved with the contribution of all Valeo teams as well as those
of Valeo’s APO (Asian Purchasing Office) in Shanghai, which
employs around 40 people.
floor, performance is monitored in real time through a concrete
analysis of what really happens on the production line. Problems
are identified, immediately processed and seen as opportunities
for improvement. Each operation is assessed for its contribution
to the added-value of products, and operations lacking in this
respect are eliminated.
■
The ergonomic design of workstations continued to be improved.
Each workstation is organized around the needs of operators,
who have made significant contributions to improving their
comfort and safety at work. This approach is also part of Valeo’s
Occupational Health and Safety policy (see also section 2.B.4.2.3,
Health & Safety), and helps reduce the number of accidents at
the Group’s production sites.
■
The specific features of the aftermarket are also taken into account
at Valeo. This market imposes certain limitations on industrial
operations. Products are mainly manufactured using the same
production machines as for original equipment parts. If necessary,
simplified lines designed for small volumes with low levels of
automation can meet the requirements of this market. Servicing
and maintenance of these specific machines are already in
place.
■
In 2008, special attention was paid to inventory reduction and tight
production and delivery flows, with every Valeo plant drawing up
a complete map of its physical flows and associated information
flows. Using this map, breakpoints and tasks with no added value
were identified and steps were taken to eliminate them. The use
of VSA (value stream analysis) methodology helped to tighten
and accelerate flows in the plants.
2.B.4.3.2. The Valeo Production System and logistics
The role of the Valeo Production System (VPS) is to improve
product quality and customer service while at the same time
reducing production costs and illiquid assets. At the heart of
this strategy lie the optimization of the industrial footprint
and the deployment of a Total Quality Culture.
■
In 2008, Valeo continued to implement both its plan to
standardize processes and equipment, using the Kosu approach
to measure the resources required to manufacture a part, and
also its investment optimization strategies. These operational
standards make it possible to capitalize on experience, cut product
development lead times, stabilize new production lines quickly
while avoiding start-up problems, and cut costs at every stage of
the process. All activities are now carried out using standards that
supervisors must ensure are respected and improved. On the shop
2
In terms of supplies, 2008 saw the wide-scale deployment of VRO
(visual re-ordering), a technique for supplying in accordance with
the exact demand. By the end of 2008, 47% of new supplies were
ordered using this technique, allowing part stocks to be reduced
significantly and adjusted according to customer needs. VRO will
be extended in 2009 with the aim of using it on 70% of new
supplies.
PAGE 27
2
Activity
The Group
The implementation of manufacture to customer order was also
stepped up in 2008 with the deployment of the “truck image”
technique, which allows production to be launched according to the
sequence of customer orders. This technique has significantly raised
the customer service rate, and the number of parts not delivered
on time fell from 31,348 per million in 2007 to 7,850 in 2008,
representing a service level of over 99.2%.
■
With regular monitoring between the Group and the production
sites, the methodologies implemented allowed Valeo to reduce
total inventory by 18% throughout 2008.
2.B.4.3.3. Quality
Quality is a key demand from consumers and automakers.
Quality is a daily obsession for all Valeo employees: it is the
cornerstone of Valeo’s 5 Axes methodology and forms an
integral part of the Group’s culture.
Reinforcing the Valeo culture involves the mobilization of all
employees at all levels and is based on:
■
the San Gen Shugi approach, inspired by Japanese best practices
and based on a concrete analysis of what actually happens on
the shop floor. San Gen Shugi is based on reality: Gen-ba (where
and when a problem arises), Gen-butsu (using the actual parts
involved, whether good or bad versus the standard), Gen-jitsu
(with measurable facts). This attitude is founded on both individual
responsibility and teamwork;
■
the QRQC approach (Quick Response Quality Control) is also
essential. When a problem occurs it is immediately identified
and analyzed by the parties involved. Corrective action is defined
immediately and implemented within 24 hours. In the event of
a quality incident, meetings are held on the spot to identify the
root cause and eliminate it for good. These meetings involve
employees from various functions as required: production,
logistics, maintenance, etc.;
■
In the automotive industry, non-quality of products is expressed
in ppm (the number of defective parts per million produced).
This number rose to 14 ppm in 2008 (compared to 10 ppm in
2007), but 25% of sites reached zero ppm at end 2008 (up by
11% from 2007). Total non-quality costs (direct costs, special
transport and warranty costs) fell over the same period by 29%
compared to 2007.
Total Quality is not just a question of methodology; it is above all
a state of mind. It therefore requires the involvement of everyone
at all times and in all circumstances. At Valeo, this approach is the
responsibility of all 51,200 employees.
■
The role of the Quality network is to ensure that everyone is aware
of and understands their individual responsibilities. It also consists
of evaluating problems and requirements in terms of training
support, and of training, supporting and validating lessons to be
retained and shared to avoid any recurrence;
■
The Quality network functions on the basis of a decentralized
network and involves each of the 5 Axes:
• the Quality System Manager validates internal procedures, checks
that they are applied properly, and updates them to ensure
that they are in line with both internal and external quality
standards;
• the Project Quality Manager ensures that the quality methodology
is duly applied to projects and checks that projects are covered for
their entire duration, in accordance with Valeo standards;
• the Supplier Quality Manager manages the quality of components
delivered, from the project phase right through the product’s
lifecycle and assists supplier progress through the implementation
of improvement plans;
• the Production Quality Manager ensures that quality-specific tools
are properly implemented within the manufacturing process and
coordinates the deployment of control plans as well as work
instructions. He/she also acts as the “voice of the customer”
for all quality incidents in order to ensure the customer’s total
satisfaction;
PAGE 28
Valeo has also implemented a program of resident engineers
to provide optimal customer support. Engineers are not simply
assigned to a given customer; they actually go and work at the
customer’s premises. As soon as a problem is detected, the
engineer communicates it to the appropriate people at Valeo, so
that actions can be defined immediately to protect the customer.
At the end of 2008, the Group had 79 resident engineers: 50
in Europe, 12 in North America, 4 in South America and 13 in
Asia. Among these 79 people, a program of resident warranty
and project engineers was also deployed, whereby 10 resident
engineers joined the customer teams, either at the head offices
or in their warranty management centers.
Activity
The Group
2.B.4.3.4. Projects
The role of the Projects Department is to promote good project
management, allowing the successful launch of all Group projects,
in terms of quality, delivery and cost by implementing rigorous
methods and applying them to the Group’s entire Project network.
■
■
■
The Project function covers all areas of new application
development, from standard products to advanced development
projects. Project teams consist of buyers, sales staff and employees
specializing in Research and Development, Quality and Process
Engineering. The methodologies implemented by the Projects
function are taken from the 5 Axes approach. In 2008, Valeo
had 1,800 projects in its portfolio, covering a wide variety of
products from simple sensors to highly sophisticated systems or
complex integrated modules. The project management method is
described in a document entitled Constant Innovation Policy.
This document also covers Group best practice and details the
organization of teams, resource management guidelines and
the development of systems and modules. Lean Investment,
meticulous preparation of full production runs and target cost
techniques are also used to minimize production costs and
maximize team outputs. The QRQC approach has also been
adapted to the Projects function. Optimized IT tools support the
monitoring of projects and performance.
A new visual 3P launch preparation system (Project, Production,
Preparation) has been implemented: the number of projects with
100% success improved by 47% in 2008.
the environment. In 2008, Research and Development spending
represented 5.5%(1) of sales, and 527 new patents were filed.
■
Faced with an ever more demanding market in terms of new
products, Valeo has developed the processes necessary for
reducing design lead times for new products. Thus, the Group
works upstream to improve the in-house efficiency of projects,
ensuring the appropriateness of actions scheduled and checking
that existing competences correspond to those required (see
section 2.B.4.3.4, Projects, above). Major efforts are made to
reduce the cost of research and development, in order to satisfy
market expectations;
■
Since an innovation’s success is closely linked to its effectiveness
and close compliance with drivers’ expectations, Valeo deploys
a wide range of tools, market research, forecasts and testing.
Surveys are carried out to gain a better understanding of driver
requirements and tests evaluate how new products are perceived.
These tools enable Valeo to measure the extent to which
innovations are accepted. The ultimate goal is to quickly develop
and implement innovations which are useful to the driver and
generate growth for Valeo;
■
Valeo partners a variety of universities and academic institutions,
such as France’s École des Mines–Paris Tech within the Driving
Assistance Domain, ESIGELEC for electronics, and in the US, Stanford
University for simulation techniques and fluid mechanics;
■
Valeo has proposed projects for “competitive clusters” on themes
relating to energy, powertrains, mechatronics, software and
complex systems, but has also invested in the governance of
some of these clusters (MOVEO, MTA, System@tic Paris-Région),
which enables the Group to help bring universities, industry and
research closer together;
■
Valeo Research and Development centers are located
throughout the world. The Group had 61 at the end of 2008,
employing nearly 6,180 people. Very high level Research and
Development centers have been opened in developing countries.
Valeo has sites dedicated to Research and Development in Mexico
City (Mexico), Prague (Czech Republic), Wuhan and Shanghai
(China). Teams working at these centers contribute to projects
for both the local market and Group-wide projects.
2.B.4.4. Research & Development and Product
Marketing
Designing the automobile of tomorrow, creating technologies
and products in line with the market – anticipating its
expectations and driving it through innovation: these are the
fundamental principles of Valeo’s Research & Development
strategy.
Anticipate automakers’ demand for solutions that offer real added
value for drivers: increased comfort, performance and respect for
2
(1) Net of customer rebilling.
PAGE 29
2
Activity
The Group
2.B.4.5. Sales and business development
Valeo develops, produces and sells original equipment
and aftermarket products and systems for all car and truck
manufacturers. The Group’s sales policy extends well beyond
everyday commercial relations and involves forging very close
partnerships and accompanying customers in developing their
markets, throughout the world.
2.B.4.5.2. Operation
The Sales and Business Development Function comprises three
networks:
■
National Directorates, which act as veritable ambassadors
for Valeo in given geographical areas. Their role is to promote
the Valeo brand in these regions, establish close relationships
with the key customers in the regions and to resolve locally any
legal or social problems, where necessary. There are ten National
Directorates, based in China, Germany, India, Italy, Japan, North
America, Poland, South America, South Korea and Spain.
■
the Group Customer Directors are the Sales Directors responsible
for major automaker customers. Each represents Valeo in dealings
with a given manufacturer and coordinates relations with the
customer on a Group-wide basis, for all Product Families.
■
the Sales and Business Development network, consisting
of ten Sales Directors reporting to the Group’s Product Families,
defines the commercial strategy and is responsible for day-to-day
customer relations.
2.B.4.5.1. Automaker customers
In 2008, Valeo’s top five OEM customers (by descending order of
sales: Renault-Nissan, Volkswagen, PSA Peugeot Citroën, Ford and
General Motors) accounted for 65% of the Group’s original equipment
passenger car sales. Each customer represented between 7% and
20% of total sales.
The Group’s biggest customer accounts for 18% of Valeo’s sales.
The main original equipment customers are (in alphabetical
order):
■
BMW;
The 2008 strategy for this function was as follows:
■
Chery;
■
■
Chrysler;
■
Daimler;
■
FAW;
■
Fiat;
■
Ford Motor Company;
Price management: During the difficult economic conditions in
the second half of the year, the priority was to maintain prices.
Declining automotive production made it impossible for Valeo to
cut prices, and talks were held with customers on a case by case
basis in order to reach agreements about long-term productivity.
These productivity agreements were not implemented with some
customers whose orders to Valeo have fallen significantly.
■
General Motors;
■
■
Honda;
■
Hyundai;
■
Man;
■
Mitsubishi;
■
Navistar;
■
Paccar;
■
Porsche;
■
PSA Peugeot Citroën;
Improving customer satisfaction: Valeo carried out a customer
satisfaction survey in 2008. 800 replies were sent by customer
representatives worldwide, and the Group was able to conclude
that it had improved in five key indicators: Quality, competitive
costs, product innovation, customer relations and logistics. The
best score was for Quality. In those areas in which improvement
was not so marked, a drive has been launched with each of the
Product Families to determine the actions necessary to improve
customer satisfaction.
■
Renault Nissan;
■
Scania;
■
SAIC Group;
■
Tata Motors;
■
Toyota;
■
Volkswagen Group;
■
Volvo Trucks.
PAGE 30
Activity
2
2.C. Geographical presence
The Group optimizes its industrial footprint on an ongoing
basis in relation to customer demand, markets and labor
costs.
In 2008, Valeo continued the deployment of its sites in line with its
strategy of globalization and accompanying its automaker customers
all over the world. Valeo now has production facilities in each of
the world’s major vehicle assembly regions and new sites based in
countries offering the most competitive production costs or strong
growth.
Valeo presence by region at December 31, 2008
Production
plants
R&D centers
Distribution
platforms
Number of
employees
Western Europe
Belgium/Netherlands, France, Germany, Ireland, Italy,
Spain, United Kingdom
52
35
6
24,742
Eastern Europe
Czech Republic, Hungary, Poland, Romania, Russia,
Slovakia, Turkey
12
1
3
8,308
North America
12
11
-
4,670
11
-
1
3,903
31
13
-
8,490
3
1
-
1,087
121
61
10
51,200
USA, Mexico
South America
Argentina, Brazil
Asia
China, India, Japan, South Korea, Thailand
Africa
Egypt, South Africa, Tunisia
At December 31, 2008, the Group’s real estate portfolio (land and
buildings) had a net book value of 502 million euros (see Chapter 4,
Notes to consolidated financial statements, section 4.F.4.3, Property,
plant and equipment). It is largely composed of production sites,
mostly wholly owned.
The Group’s equipment is largely made up of technical facilities,
materials and tools. At December 31, 2008, they were stated as
having a net value of 897 million euros excluding fixed assets
under construction (see Chapter 4, Notes to consolidated financial
statements, section 4.F.4.3, Property, plant and equipment).
Environmental constraints result from the regulations applicable in
this area to all Group establishments (see Chapter 2, section 2.B.4.2.2,
Environment; Chapter 3, section 3.I, Industrial and Environmental
Risks and Chapter 3, section 3.P, Environment and sustainable
development: management and performance).
PAGE 31
2
Activity
2.D. Competitive Situation
The market for automotive components and systems is
subject to fierce competition, in terms of cost, quality, service
and technology.
For some product lines supplied by the Group on the original
equipment market, Valeo is consistently one of three to five major
suppliers who together represent more than half of the market (in
sales), the remainder being made up of a large number of regional
suppliers:
■
■
for certain product lines, such as transmissions, thermal systems
and lighting systems, the leading suppliers include companies that
are smaller or more geographically concentrated, such as Behr,
Hella, Koito, Kostal, LuK, Melco, Sachs, etc;
■
the following Product Families are among the world leaders in
each segment (in sales): Transmissions, Climate Control, Engine
Cooling, Wiper Systems, Lighting Systems, the electrical systems
product line of Engine and Electrical Systems, and one of Valeo
Interior Controls’ product lines (ultrasonic sensors). In addition,
several products in Valeo Interior Controls and Valeo Security
Systems enjoy other European or regional leadership positions
(source: Valeo).
in several product lines, Valeo competes against the three largest
international automotive suppliers (in alphabetical order): Robert
Bosch, Continental and Denso;
2.E. Highlights in 2008
2.E.1. Strategic operations
Valeo’s acquisitions/disposals strategy is designed to reinforce the
Group’s three Domains and increase its organic growth potential.
■
■
PAGE 32
With a view to focusing its engine cooling activity on passenger
cars and light utility vehicles, on May 31, 2008, Valeo sold its
truck engine cooling division to EQT, an investment fund based in
Northern Europe. This division employs 900 people across three
production sites (two in Sweden and one in the United States),
and achieved sales of 176 million euros in 2007.
The strategic links with Ichikoh, one of Japan’s leaders in
automotive lighting, in which Valeo increased its stake to 32% in
2007, were strengthened with the signing of a new agreement
on operational management and corporate governance. Ichikoh is
now led by two Chief Executive Officers, one of whom is chosen
from the Board members designated by Valeo. They both have
equal executive authority. In addition, Valeo boosted its presence
in Ichikoh’s operational management by having three out of the
nine menbers of the Executive Committee (Jomukaï) and taking
responsibility for quality, electronic engineering, purchasing,
financial control and several industrial sites. Valeo also increased
its presence on the Board of Directors, with three directors out of
a total of nine (down from 19 previously).
■
Valeo set up its first site in Russia by forming a 95%-owned joint
venture with the Russian company Itelma, a supplier to Russian
automakers. The new company, called Valeo Climate Control
Tomilino LLC, will produce heating, ventilation and air conditioning
systems. Eventually Valeo intends to deploy all its product lines
on the Russian market.
Activity
Highlights in 2008
■
Valeo also announced the creation of a joint venture with the
Anand group in India to produce lighting systems. The new
company, called Valeo Lighting Systems India Private Limited,
will be majority-owned by Valeo. Located in Chennai, the joint
venture will develop, produce and sell lighting systems, headlamps
2
and rear lamps for automakers serving the fast-growing Indian
market.
■
Valeo took total control of Valeo Raytheon Systems, Inc. which has
become a Division of the Interior Controls Product Family, under
the name Valeo Radar Systems, Inc.
2.E.2. Commercial successes
2008 saw a number of commercial successes that helped
enhance Valeo product content per vehicle. Despite the global
crisis in the automotive sector, OE orders came to 1.4 times
sales, the highest level since 2001.
In spite of decision deferrals on several new contracts, Valeo won
significant new orders worth a total of 10.2 billion euros, making it
a record year. This success was particularly marked among German
automakers. Innovations and new products accounted for 32% of
new orders, unchanged from 2007. Valeo also signed contracts with
Chinese, Indian and Russian customers, who have strong growth
potential, and they accounted for 10% of new order intake.
Alongside these promising developments for its stop-start technology,
Valeo signed a contract with OSEO, the French public body dedicated
to supporting business innovation, to fund Valeo’s LOWCO2MotionTM
research program, which focuses on improving automotive engine
efficiency and helping to reduce CO2 emissions. This funding was
authorized by the European Commission on June 17, 2008. The
LOWCO2MotionTM program represents an investment of 211.6 million
euros between 2007 and 2011 for Valeo and its partners. As part of
the contract signed with OSEO, Valeo will receive up to 54.8 million
euros (19 million euros in direct grants and the remainder in
loans).
■
Valeo Engine Cooling signed two major contracts, one with a
Japanese automaker to supply front-end modules that incorporate
engine cooling components, a radiator and a condenser, on two
models whose production will start in Japan in December 2009
and in June 2010 in the United States, and the other with one of
the main German automakers to equip a new vehicle with the full
cooling module, including new-generation heat exchangers;
■
Ford chose Valeo Transmissions to provide torque converters
for 6.2l and 6.7l engines on utility vehicles and for engines on
economical light vehicles. They will be produced by the new plant
in San Luis Potosi in Mexico. Valeo Transmissions also won several
first orders for the dual mass flywheel from several automakers,
including BMW. Last, this Product Family signed two development
contracts with two different automakers for the double dry clutch,
and a development contract for a continuous torque transmission
system for automated transmissions;
2.E.2.1. Powertrain Efficiency Domain
■
2008 saw the success of the micro-hybrid StARS system,
developed by Valeo Engine Electrical Systems, with a major new
contract with PSA Peugeot Citroën, to equip over a million of its
vehicles by 2011.
The system also entered the market in 2008 on the MercedesBenz A and B Class and an extension of the system to all Smart
45kW and 52kW gasoline engines models was also announced;
■
Valeo Engine and Electrical Systems also took other orders for
stop-start systems based on StARS or a heavy-duty starter, and
on battery management systems. These orders were placed
by European, Asian and American automakers and support the
strategy of offering a complete range of stop-start and microhybrid systems. This Product Family also took a first order from a
Japanese customer for I-StARS.
PAGE 33
2
Activity
Highlights in 2008
■
Valeo Engine and Electrical Systems signed an agreement with a
European automaker to supply gasoline engine control systems for
3-cylinder engines. With carbon dioxide emissions below 100g/
km, these engines will equip eight of the customer’s models and
the first will be operational by 2011.
2.E.2.3. Comfort Enhancement Domain
■
Valeo Interior Controls won its very first contract, worth 240 million
euros, in 2008, for a central control console with innovative
electrical architecture, available on various European models from
2011. Another first order was taken for a dome control module
with innovative electrical architecture, expected in 2011 on
various European models. Last, the Top Column Modules product
line took a significant order, worth 135 million euros, for a top
column module incorporating a contactless gear lever, which will
be available on several vehicles as of 2012;
■
Valeo Security Systems took several major orders, including
remote controls, electronic starters and electric steering column
locks for Chery in China;
■
Valeo Climate Control took orders worth 1.4 times 2008 sales,
signing several major contracts, including with BMW for the
forthcoming 3 Series, PSA Peugeot Citroën for a B-segment
vehicle, and Mercedes-Benz for the successor to the M Class.
2.E.2.2. Driving Assistance Domain
■
After its success in 2007, especially on the Volkswagen Touran,
Park4U™ was chosen to equip new models in 2008, including
the Audi A3, Skoda Superb and Volkswagen Passat and Golf VI.
Seven new contracts were signed in 2008, and a total of 18
models produced by various automakers will be equipped with
Park4U™ by 2010.
■
After the American market, the blind spot detection system was
launched in Europe in 2008 on the new Jaguar XF. Other vehicles
will be equipped by 2010.
■
The rear camera (ParkVue™) has been available on the Ford Kuga
since 2008.
■
The 360Vue™ vision system, based on several cameras all around
the vehicle, was chosen by several automakers to equip new
models, beginning in early 2009. 2008 saw the signing of a
contract with a third European automaker.
2.E.2.4. Aftermarket
■
The first two orders for the rain and light sensor were taken in
2008, from automakers in two emerging countries.
■
expanding the innovative post-equipment range of parking
and driving assistance products;
■
Valeo Lighting Systems supplied the Volvo XC60 with its
MicroOptics™ technology, in a world first. The system offers
designers great styling freedom and spreads light evenly.
■
launching a new range of Air Quality products for trucks;
■
developing innovative products for the aftermarket, based on
OE technologies, such as the StARS reversible starter alternator;
■
PAGE 34
Second-generation Flat Blades appeared on a European
automaker’s model.
In 2008, Valeo Service focused its efforts on improving customer
satisfaction by:
Activity
Highlights in 2008
improving the service rate, by perfecting logistics systems
between Valeo production sites and aftermarket warehouses,
more flexible deliveries to customers and the creation of local
logistics centers;
■
continuously updating product catalogs;
■
developing additional Internet and extranet functions for
customers (rates and instruction sheets for downloading, creation
of extranets by the customer);
■
speeding up “Time to Market”: OEM product availability for
the original equipment spares market;
■
■
offering a solution of tailored recommendations and
optimization of inventory for customers, ValeOptistock;
widening the “Flat Blade” offer for the aftermarket, now available
in all ranges: Silencio Xtrm, Compact Révolution, SWF VisioNext
and PJ FX.
■
increasing coverage of vehicle models, with the launch of over
4,600 part numbers, giving special attention to lighting, climate
control and ignition;
■
2
2.E.3. Operational excellence
2.E.3.1. Industrial rationalization
2.E.3.2. Supplier Integration
Valeo continued to optimize its industrial facilities in order to support
its customers’ growth and ensure a competitive cost base.
■
Valeo has reaped the rewards of the purchasing policy
launched several years ago, in order to increase sourcing
in competitive-cost countries. This policy is designed to help
suppliers in these regions to apply Valeo’s quality and organizational
standards in their own processes (Focus, VPS and QRQC).
■
The results have enabled Valeo to integrate an increasing number
of these suppliers into advanced phases of new projects.
■
In 2008, a great number of projects were launched in production,
with over 70% of purchasing sourced in competitive-cost
countries.
■
This strategy helped to achieve the 14% growth of competitivecost sourcing, which reached 42% by the end of the financial
year.
■
Three sites opened during 2008: Gravatai in Brazil (Engine and
Electrical Systems), Wuxi in China (Lighting Systems) and Pune in
India (Engine and Electrical Systems).
■
Three production sites left Valeo as a result of the disposal of the
truck engine cooling business: Jamestown in the United States
and Mjällby and Linkoping in Sweden.
■
The sites at Rochester in the US (Wiper Systems), Humpolec in
the Czech Republic (Interior Controls) and Saveh in Iran (Engine
Cooling) were closed.
■
The Porrino site in Spain (formerly Electronics and Connective
Systems) was sold.
■
At December 31, 2008, 45% of the Group’s sites were located in
competitive-cost countries.
■
After a dramatic decline in automotive production towards the end
of the year and with no indication of any improvement in 2009,
on December 17, 2008, the Group announced an adaptation plan
for its global workforce, affecting 5,000 permanent jobs, in order
to maintain competitiveness.
The systematic deployment of purchasing cost reduction levers
helped offset the effects of the record inflation of raw materials
in the first half of 2008. The main levers are:
• benchmarking of the panel’s products and suppliers at Group
level,
• productivity actions common to Valeo and the suppliers,
• dynamic quota management and the allocation of new
business;
PAGE 35
2
Activity
Highlights in 2008
■
The Group continued to rationalize its supplier panel, in order to
focus on the best worldwide in each technological family. The
panel numbered around 2,573 at end December 2008, while
purchasing volume stood at around 4.8 billion euros.
■
The online request for quotation system used by Valeo to encourage
competition and optimize purchasing prices, represented a record
amount of more than 2.4 billion euros in 2008 (compared to 1.5
billion euros in 2007).
2.E.4. Awards
The Group’s technological innovation potential continued to
enjoy widespread recognition among market players. The
quality of Valeo’s products and services was recognized by its
customers and institutional partners, testifying to the Group’s
operational excellence.
2.E.4.1. Awards for innovation
■
■
In the Driving Assistance Domain, the Park4UTM park assist
system won the prestigious 2008 PACE Award in the European
Products category. This is Valeo’s fourth award of this kind after
the Blind Spot Detection System in 2007, the StARS micro-hybrid
system in 2006, and the LaneVueTM lane departure warning system
in 2005. The PACE Awards honor superior innovation through
technological advancement and business performance among
automotive suppliers. The awards are presented in partnership
with Automotive News, Microsoft, SAP and the Transportation
Research Center.
Park4UTM also won the 2008 Genius Safety Prize from the insurance
company Allianz, for its contribution to the prevention of accidents
that occur during parking, and the significant reduction in repair
costs for drivers and insurers.
■
Valeo received a Global Innovation Award from Nissan for its
contribution to their Lane Departure Prevention system, which
equips the Infiniti EX, FX, and M models.
■
The StARS micro-hybrid system received the Automechanika
2008 Innovation Award at this aftermarket show in Frankfurt in
September 2008.
PAGE 36
2.E.4.2. Awards for operational excellence
Automakers continued to recognize the exceptional standard
of the Group’s services, particularly in terms of Quality.
■
Valeo received an Excellent Quality Performance Award from
Toyota, at the OEM’s global supplier convention in Nagoya on
February 29, 2008.
■
The Prince Felipe Award for Business Competitiveness was given
to Valeo Lighting Systems’ Martos plant in Spain;
■
Valeo Wiper Systems received the Best Supplier Quality
Performance Award from Nanjing-Iveco in China; and the DAF
Quality Award;
■
Valeo received a 2007 Supplier Quality Award from Renault,
recognizing the excellent quality of European Division of Valeo
Engine Cooling;
■
At its first international supplier convention, Fiat awarded its Silver
Award to Valeo Security Systems for product quality, its contribution
to the development process and commercial performance;
■
The San Luis Potosi site in Mexico (Engine Cooling) received
Volkswagen Awards for Excellence in Development and
Entrepreneurial Achievement;
■
The GM Daewoo Appreciation Award went to the Valeo
Transmissions site in South Korea (Valeo Pyeong Hwa Co Ltd) for
its contribution to the successful launch of the HydraMatic six-gear
automatic gearbox whose unit supplies the GF6 converter;
■
Valeo Transmissions Japan (Valeo Unisia Transmissions) received
an award from Subaru for its excellent delivery rate for aftermarket
components (clutches and flexible flywheels).
Activity
■
■
Valeo Transmissions India (Amalgamations Valeo Clutch Private
Limited) was recognized by Tata Motors for its good business
relations;
■
Valeo Compressor Korea received a Zero PPM Quality award from
Renault Samsung Motors;
■
Valeo Service received a Bronze Best Supplier Award from Group
Auto Union International in May 2008.
For the second year in a row, Valeo Climate Control Hamilton
received the Daimler Trucks North America Masters of Quality
Award on May 29, 2008;
2
2.F. Recent events and outlook
■
A new Product Family was created on January 1, 2009: Engine
and Electrical Systems, combining all the activities of the former
Electrical Systems and Engine Management Systems Product
Families, except air management systems, which have been
incorporated into the Engine Cooling Product Family. The Group
now has nine Product Families instead of the original ten.
■
Park4UTM will equip the Ford Lincoln MKS and MKT models presented
at the North American International Auto Show in Detroit, which
will be the first US models featuring this technology.
■
Also in Detroit, the LED-based lighting and signaling systems
developed in close collaboration with Volvo Car Corporation were
presented on the Volvo S60 concept car.
■
On February 13, 2009, Valeo and Michelin announced their
collaboration on the development of systems for electric vehicles
and rechargeable hybrids.
■
The new BMW Series 7 will be fitted with the Valeo multicamera
system which makes it easier and safer to park in situations where
visibility is restricted or obstructed, by offering a panoramic view
of the vehicle’s environment.
■
In recent months, the global automotive market has been
severely hit by the financial crisis, which caused a collapse
in consumer credit, and by the resulting recession. In Europe,
sales of new vehicles reached their lowest level for ten years in
September 2008. The decline in automotive production gathered
pace in the last quarter of 2008, falling by over 20% worldwide,
and almost 30% in Western Europe and 38% in France. In 2009,
Valeo does not expect production to improve from the level of the
fourth quarter 2008. Given this situation, and despite the steps
already taken, the Group must adapt its permanent headcount
to preserve its competitiveness.
PAGE 37
2
Activity
PAGE 38
Management report
3.A.
Accounting methods
40
3.B.
Statement of income
40
3.C.
42
3.D.
43
3.E.
Provisions
45
3.F.
Cash flows and debt
46
3.G.
Commitments
46
3.H.
Remuneration of corporate officers, directors and other Group
executive managers
47
3.I.
57
3.J.
Factors likely to be material in the event of a public tender offer
64
3.K.
Claims, litigation, governmental, legal and arbitration proceedings
69
3.L.
Outlook
69
3.M. Subsequent events
70
3.N.
Annual financial statements
70
3.O.
Composition of the Board of Directors during the year ending
December 31, 2008
71
Environment and sustainable development: management and
performance
77
Social indicators
98
3.P.
3.Q.
3
2008 Reference document - VALEO
PAGE 39
3
Management report
Accounting methods
3.A. Accounting methods
The 2008 consolidated financial statements for the Valeo Group
were prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union. The accounting
principles are explained in detail in the notes to the consolidated
financial statements, Chapter 4, section 4.F.
Note 1.2 to the consolidated financial statements (Chapter 4,
section 4.F.1.2) explains the basis on which the accounts were
prepared and the context in which the 2008 consolidated financial
statements were closed.
3.B. Statement of income
3.B.1. Review of operations
Total operating revenues for the consolidated Group declined 9%
from 9,689 millions euros in 2007 to 8,815 million euros in 2008.
Changes in the scope of consolidation had a negative 0.7% impact
on total operating revenues. Changes in exchange rates made a
negative contribution of 1.5%. On a like-for-like basis (constant
Group structure and exchange rates), total operating revenues fell
6.8% over the period. At the same time, the Group’s automotive
production benchmark(1) declined by an estimated 6.3% (a 2.2%
gain in the first half and a 15.3% drop in the second).
Full-year net sales amounted to 8,664 millions euros, comprising
7,045 millions euros from the original equipment segment (81% of
the total) and 1,619 million euros from the aftermarket (19%),
compared with 7,865 million euros (82%) and 1,690 million euros
(18%), respectively, in 2007. On a like-for-like basis, aftermarket
sales excluding tooling decreased 3.9% over the period.
Sales in Europe were down 11.1% in 2008, to 5,685 million euros.
Like-for-like sales declined 10.4%, while light vehicle production
in the region dipped 4% (down 8.5% in Western Europe and up
8.4% in Eastern Europe: source J.D. Power). Europe accounted for
66% of sales consolidated by region in 2008, compared with 67%
in 2007.
Group sales in North America contracted 19.5% to 1,041 million euros
compared with 2007. On a like-for-like basis, sales were down
11.3%, while local light vehicle production slumped 16.2% (source:
J.D. Power). The region accounted for 12% of consolidated sales
(14% in 2007).
In Asia, the Middle East and the Pacific, Group sales were
1,276 million euros, up 2.5% relative to 2007. On a like-for-like
basis, sales increased 8.4% in Asia, including gains of 16.2% in
China and about 5.8% in Japan and in Korea. Local automotive
production rose only 1.1%, with growth rates of above 5% in China
and India offsetting respective declines of 2.2% and 5.1% in Japan
and Korea. Asia, the Middle East and the Pacific region generated
15% of Group sales, compared with 13% in 2007.
Sales in South America climbed 7% relative to 2007, to 598 million
euros. Like-for-like sales rose 8%, slightly more than local automotive
production (up 5%, source J.D. Power). In 2008 South America
represented 7% of consolidated sales (6% in 2007).
(1) Production of light vehicles in Europe, North America, South America and Asia in 2008, estimated by J.D. Power and weighted by each region’s contribution
to consolidated sales.
PAGE 40
Management report
Statement of income
3
3.B.2. Results
Consolidated gross margin amounted to 1,314 million euros
in 2008, down 12.2% relative to 2007. It represented 15.2% of
sales, against 15.7% in 2007. Raw material price hikes accounted
for the equivalent of 0.1% of net sales. The net effect of indexation
and contract renewals was positive, amounting to 0.3% of sales.
Subnormal capacity usage, which was pronounced in the fourth
quarter when business contracted 27%, had a negative impact
equivalent to 1.8% of sales. Cost savings and measures to variabilize
fixed costs generated savings equivalent to 1.1% of sales.
Research and development expenditure totaled 639 million
euros (7.2% of total operating revenues) compared with 668 million
euros in 2007 (6.9% of total operating revenues). Excluding other
operating revenues (mainly customer contributions to development
expenditure), these expenses were maintained at 5.5% of total
operating revenues. They are benefiting from the positive impact
of financing from the French government innovation agency, OSEO,
and the full-year impact of a research tax credit that enables the
Group to maintain its research efforts at a level consistent with its
strategic and profit objectives.
The three Domains(2) absorbed virtually all R&D expenditure, i.e.
639 million euros (down 3.8% on 2007), broken down between
Driving Assistance (200 million euros, up 3.6%), Powertrain
Efficiency (218 million euros, down 5.2%) and Comfort Enhancement
(221 million euros, down 8.7%).
Selling and administrative expenses totaled 177 million euros
(down 8.3% relative to 2007) and 419 million euros (down 1.2%),
respectively. Combined selling and administrative expenses as a
proportion of total operating revenues increased 0.4 point year-onyear as a result of severe below-capacity operation.
Taking into account other operating revenues, which amounted to
151 millions euros (134 millions euros in 2007), operating margin(3)
was 230 million euros, down 33.5% on 2007 (346 million euros).
Operating margin represented 2.6% of total operating revenues,
compared with 3.6% in 2007.
Other income and expenses amounted to a net expense of
282 million euros. They included a 239 million euros provision for
reorganization expenses (related mainly to the plan announced
on December 17 to reduce the Group’s permanent staff by
5,000 employees). They also include a charge of 58 million euros
linked to asset impairment, including 20 million euros for the Valeo
Compressors division in the Czech Republic. Lastly, a 25 million
euros capital gain was recorded following the sale of the Group’s
truck engine cooling business on May 30, 2008. In 2007, other
net expenses of 27 million euros comprised 37 million euros in
reorganization expenses, 26 million euros in asset impairment,
27 million euros in capital gains on real estate disposals and
non-cash income of 22 million euros upon the resolution of a
customer dispute.
As a result, consolidated operating income for the year showed
a loss of 52 million euros (-0.6% of total operating revenues),
compared with a gain of 319 million euros (3.3%) in 2007.
The cost of net debt was 45 million euros, down 6 million euros
on 2007. This change reflected a decline in the Group’s average
debt, partially offset by a 0.3 point increase in the cost of Group
debt to 4.9%.
Net other financial expenses were 59 million euros, compared
with 46 million euros in 2007. The increase stemmed mainly from
the management of commodity hedge (a negative impact of
17 million euros), as the Group found itself over-hedged when the
automobile market collapsed.
Once the contribution of investments in associates totaling 9 million
euros is taken into account (8 million euros in 2007), income before
income taxes showed a loss of 147 million euros, compared with
a gain of 230 million euros in 2007.
Income tax expense was 51 million euros in 2008, compared with
83 million euros in 2007.
(2) The objective of the Domains is to foster innovation by bringing together different technologies and Product Families in order to propose comprehensive
solutions based on safety (Driving Assistance), the environment (Powertrain Efficiency) and comfort (Comfort Enhancement).
(3) Operating income before other income and expenses.
PAGE 41
3
Management report
Non-strategic activities made a loss of 1 million euros, compared
with a loss of 59 million euros in 2007 that included a 51 million
euros post-tax loss on the disposal of the Wiring Harness business.
After taking account of minority interests (8 million euros in
2008, compared with 7 million euros in 2007), net income
attributable to equity holders of the Company came in at a
loss of 207 million euros, compared with a profit of 81 million euros
in 2007.
Basic earnings per share, computed on net attributable income,
was a negative 2.73 euros, compared with a positive 1.06 euros
in 2007 (including a 0.76 euros loss attributable to non-strategic
activities). Diluted earnings per share for the year were the same,
at minus 2.73 euros, compared with 1.05 euros in 2007.
3.C. Investments over the past three years
3.C.1. 2008
In 2008 the Group invested 468 million euros in property, plant
and equipment, or 5.3% of total operating revenues. This included
major investment in production capacity for new products, and
in several Product Families: Transmissions, with the installation of
capacity in torque converters in Mexico and China; Electrical Systems,
for future micro-hybrid StARS production; Interior Controls for the
production of ultrasonic sensors in Germany; and Security Systems,
with the completion of a plant in Slovakia that will supply door
closing systems. In Brazil, the Group has extensively upgraded its
facilities and increased space for its Thermal, Lighting and Electrical
Systems activities.
Investments in intangible assets amounted to 160 million euros, or
1.8% of total operating revenues.
For 2009, Valeo does not envisage significant new investment in R&D
relative to 2008 but will pursue the projects already underway.
3.C.2. 2007
In 2007, investments in property, plant and equipment amounted to
435 million euros, or 4.5% of total operating revenues. Investments
in intangible assets – mainly capitalized development expenditure –
amounted to 138 million euros, or 1.4% of total operating revenues.
PAGE 42
Changes in the scope of consolidation (mainly the disposal of the
Wiring Harness business) had a 208 million euro net impact on
income. The disposal of the Wiring Harness business was part of the
Group’s continuing strategy to refocus on its three Domains.
Management report
3
3.C.3. 2006
In 2006, investments in property, plant and equipment amounted to
494 million euros, or 4.9% of total operating revenues. Investments
in intangible assets (mainly capitalized development expenditure)
totaled 165 million euros, corresponding to 1.6% of total operating
revenues. Changes in the scope of consolidation (essentially the
disposal of Zexel Logitec Company and the Valeo Motors & Actuators
business) had a 124 million euro net impact on income. These
disposals signaled the launch of the Group’s strategy of focusing on
businesses with critical mass in the three Domains.
3.D. Change in stockholders’ equity
3.D.1. Stockholders’ equity
At December 31, 2008 stockholders’ equity including minority
interests amounted to 1,362 million euros, compared with
1,782 million euros at December 31, 2007. This 420 million euros
decline may be attributed mainly to a 199 million euros loss for
the year, to the payment of a 92 million euros dividend to Company
stockholders, to net actuarial losses on defined-benefit pension
plans (56 million euros) and to the purchase of 39 million euros
in treasury stock.
3.D.2. Share capital
3.D.2.1. Changes in share capital
3.D.2.2. Treasury shares
The company’s share capital was composed of 78,209,617 shares
with a par value of 3 euros each at December 31, 2008, unchanged
since December 31, 2007.
At December 31, 2008 the Company held, directly and indirectly,
3,142,499 of its own shares (4.02% of the share capital) with a unit
value based on their purchase price of 22.95 euros and a par value
of 3 euros. At December 31, 2007, Valeo held 1,432,804 of its own
shares (1.83% of share capital).
At December 31, 2008 a potential maximum of 2,350,328 shares
could be issued upon exercise of stock options awarded to the
Group’s employees and corporate officers. At that date, all of the
OCEANE bonds were outstanding and were convertible and/or
exchangeable for 10,105,439 shares(4).
(4) Following the public share buyback offer and simplified public tender offer, and in accordance with applicable regulations and the contract governing the
OCEANE bond issue, the conversion/exchange ratio applicable to the bonds was amended from 1 share per bond to 1.013 share per bond.
PAGE 43
3
Management report
In 2008 these share purchases were for the following exclusive
purposes:
■
covering stock option programs and other share allocations to
employees; and
■
implementing a liquidity agreement.
The share purchases were effected in accordance with authorization
granted by the Shareholders Meetings of May 21, 2007 and
June 20, 2008 to the Board of Directors to buy back Company
shares. In the fifth resolution of the Shareholders Meeting of
May 21, 2007, the Company’s shareholders granted the Board of
Directors (with the possibility of delegation) the power to purchase
or order the purchase of the Company’s shares, with a view to the
following:
■
implement stock option plans;
■
award shares to employees by way of profit-sharing bonuses and
in connection with company savings plans;
■
allocate shares on redemption, conversion, exercise or exchange
of share equivalents;
■
purchase shares with a view to canceling some or all of them;
■
allocate shares in exchange for shares in another entity in
connection with acquisition, merger, sale or investment;
■
ensure liquidity in the secondary market for the Company’s shares
in accordance with a liquidity agreement entered into with an
investment services provider; and
■
enable an investment services provider to carry out share
purchases, sales or transfers, including through off-market
transactions.
The sixth resolution of the Shareholders Meeting of June 20, 2008
authorized the Board of Directors (with the possibility of delegation)
to purchase or order the purchase of the Company’s shares with a
view to the above operations as well as to the allotment of bonus
shares.
At December 31, 2008 the number of treasury shares to be allocated
upon exercise of stock options stood at 2,671,869 compared
with 993,017 at December 31, 2007. This increase reflects the
acquisition of 529,528 shares on January 11, 2008 at a price of
28.36 euros each to cover the implementation of the agreement
for partial management of its share buyback program entered
PAGE 44
into with an investment services provider on December 11, 2007,
the acquisition of 488,218 shares on October 16, 2008 at 22.64 euros
each to cover the implementation of the agreement for partial
management of its share buyback program entered into with an
investment services provider on August 8, 2008, the acquisition of
911,181 shares on November 19, 2008 at 13.17 euros each to cover
the implementation of the agreement for partial management of
its share buyback program entered into with an investment services
provider on November 4, 2008 and the transfer of 250,075 bonus
shares to Group employees and corporate officers. These shares
were not reallocated to other objectives envisaged in the share
buyback program.
The remaining treasury shares (470,630 at December 31, 2008,
compared with 439,787 at December 31, 2007) are earmarked
for use under a liquidity agreement that complies with the
code of ethics issued by the French Association of Investment
Firms (Association Française des Entreprises d’Investissement),
signed with an investment services provider on April 22, 2004.
At December 31, 2008 470,630 shares and 1,182,909 euros
had been allocated to the liquidity agreement, compared with
439,787 shares and 1,665,696 euros at December 31, 2007.
On the date the liquidity contract was signed, 220,000 Valeo
shares and a sum of 6,600,000 euros were allocated to its
implementation.
Under the liquidity agreement, and via an investment services
provider, Valeo acquired 1,500,814 shares at an average price
of 21.38 euros and sold 1,469,971 shares at an average price of
25.62 euros. Trading and transaction fees incurred within the scope
of the liquidity agreement totaled 175,000 euros, compared with
282,895 in 2007 euros. These shares were not reallocated to other
objectives envisaged in the share buyback program.
3.D.2.3. Employee shareholdings
At December 31, 2008 employees held a total of 940,328 shares
under Group employee stock ownership plans, directly or through
two mutual funds, representing 1.2% of the Company’s share
capital. At December 31, 2007, employees held 962,270 shares,
representing 1.23% of the share capital.
Management report
Provisions
3.D.2.4. Transactions carried out by senior
executives involving Company shares
falling within the scope of article
L.621-18-2 of the French Monetary
and Financial Code (Code monétaire et
financier)
3
Morin, the Company’s Chairman and Chief Executive Officer, acquired
4,000 Company shares on March 26, 2008 at a price of 23.81 euros
each and 3,400 Company shares on November 5, 2008 at a price
of 14.50 euros each.
During the period, Pierre-Alain De Smedt acquired 10,000 Company
shares on March 10, 2008 at a price of 23.28 euros each, and Thierry
3.D.3. Dividends
Dividends per share paid out for the past three years are shown in the table below:
Dividend per share
Allowance
Total
(in euros)
(in euros)
(In millions of euros)
Year
2005
1.10
2006
1.10
2007
1.20
Eligible for the 40% tax allowance provided for
in article 158.3.2 of the French General Tax Code
84
85
92
3.E. Provisions
The balance sheet at December 31, 2008 showed total provisions of
1,234 million euros (including a non-current portion of 772 million
euros), against 1,102 million euros at the previous year-end
(including a non-current portion of 778 million euros).
Total provisions for reorganization expenses rose 187 million
euros relative to 2007, to 314 million euros. This change partly
reflects the cost of the restructuring plan announced on December 17,
2008 that involves a reduction in permanent Group staffing by 5,000
employees (232 million euros).
Provisions for pensions and other employment benefits totaled
611 million euros at year-end, unchanged from 2007. This item is
affected on the upside by actuarial gains (56 million euros) and on
the downside by changes in the scope of consolidation (-12 million
euros) and the writeback of 16 million euros from French pension
commitments following the announcement of the headcount
reduction plan.
Other provisions fell from 367 million euros at December 31, 2007
to 309 million euros at December 31, 2008. This decrease reflects a
31 million euros reduction in the provision for customer guarantees,
reflecting an improvement in the quality of Valeo products, and
provisions for other risks (litigation, or risks of a contractual, social,
environmental or tax nature: down 27 million euros).
PAGE 45
3
Management report
Cash flows and debt
3.F. Cash flows and debt
Net cash provided by operating activities amounted to
730 million euros (of which 623 million euros in gros operating
cash flows), compared with 638 million euros in 2007 (765 million
euros in gross operating cash flows)(5).
Financing activities generated net cash outflows of 142 millions
euros (including dividends paid to Company shareholders amounting
to 92 million euros), compared with net outflows of 154 millions
euros in 2007(6).
Excluding the impact of changes in the scope of consolidation,
net cash used in investing activities during the year totaled
623 million euros (160 million euros relating to intangible assets
and 468 million euros relating to property, plant and equipment),
compared with 529 million euros in 2007 (138 million euros relating
to intangible assets and 435 million euros relating to property, plant
and equipment). Changes in the scope of consolidation resulted in
a net inflow of 52 million euros, compared with 208 million euros
in 2007 (including 237 million euros on the disposal of the Wiring
Harness business).
In all, including the impact of exchange rate movements, net
consolidated cash and cash equivalents decreased 16 million euros
in 2008, compared with a net increase of 167 million euros in the
previous year.
Net debt (the sum of debt, net current liabilities, short-term
loans and bank overdrafts, less cash and cash equivalents) was
821 million euros at year-end, compared with 799 million euros at
December 31, 2007. The consolidated gearing ratio was therefore
60% on December 31, 2008, compared with 45% a year before.
3.G. Commitments
The Group’s main commitments break down as follows:
Lease commitments
Guarantees and deposits
Non-cancelable purchase commitments for fixed assets
2008
2007
2006
100
71
76
55
19
29
93
108
72
Other commitments given
140
124
101
TOTAL
388
322
278
These commitments are described in Note 4.F.5.4 to the consolidated financial statements (Chapter 4).
(5) From 2008 onwards, customer contributions previously classed as cash flows from financing activities are reclassified as cash flows from operating activities
within gross operating cash flows (56 million euros in 2007).
(6) Total adjusted for contributions received from customers (see Note 5).
PAGE 46
Management report
Remuneration of corporate officers, directors and other Group executive managers
3
3.H. Remuneration of corporate officers, directors
and other Group executive managers
3.H.1. Executive corporate officers
3.H.1.1. Fixed compensation and benefits
in kind
The Board of Directors sets the compensation paid by Valeo to Thierry
Morin, the Company’s Chairman and Chief Executive Officer, based
on recommendations made by the Nomination and Remuneration
Committee, which became the Nomination, Remuneration and
Corporate Governance Committee on October 20, 2008. Gross fixed
compensation for the year paid by Valeo to Thierry Morin in 2008
amounted to 1,597,440 euros, compared with 1,597,133 euros
in 2007, including gross compensation of 1,577,590 euros (the same
as in 2007) and 19,850 euros in benefits in kind (compared with
19,543 euros in 2007).
At its meeting on February 12, 2009, the Board of Directors set
Mr. Morin’s fixed compensation for FY 2009 at 1,100,000 euros
(including attendance fees), based on the recommendation of the
Nomination, Remuneration and Corporate Governance Committee.
based on economic criteria (operating revenues and margin),
strategic criteria (total business divestments, deconsolidation
transactions and acquisitions) and qualitative criteria (particularly
financial communications). Based on a proposal by the Nomination
and Remuneration Committee, the Board set the ceiling for this
compensation at 65% of fixed compensation. Mr. Morin received
no variable compensation in respect of 2008.
At its meeting on February 12, 2009, the Board of Directors
decided, as recommended by the Nomination, Remuneration
and Corporate Governance Committee, to calculate Mr. Morin’s
variable compensation for FY 2009 based on quantitative criteria,
to be assessed each half (Group net operating cash flow excluding
restructuring costs and EBITDA) and over the year as a whole (stock
performance relative to a basket of stocks from the sector), and
qualitative criteria to be assessed over the year as a whole, including
implementation of the crisis plan. Based on a proposal by the
Nomination, Remuneration and Corporate Governance Committee,
the Board set the ceiling for this compensation at 100% of fixed
annual compensation.
3.H.1.2. Variable compensation
At its meeting on March 7, 2007, the Board of Directors decided, as
recommended by the Nomination and Remuneration Committee,
that any variable compensation paid to the Chairman and Chief
Executive Officer in respect of FY 2007 would be exclusively contingent
on the level of gross margin and operating margin achieved relative
to sales. Under the selected formula, Mr. Morin’s bonus came to 15%
of his basic fixed compensation, or 236,640 euros. This was noted
by the Nomination and Remuneration Committee on March 19,
2008 and approved by the Board of Directors on March 20, 2008.
Mr. Morin did not receive any variable compensation in 2007.
At its meeting on November 15, 2007, the Board followed the
recommendation of the Nomination and Remuneration Committee in
approving a formula for determining FY 2008 variable compensation
3.H.1.3. Attendance fees
In FY 2008, Mr. Morin received 49,000 euros in attendance fees in
his capacity as a director of Valeo, as compared with 20,000 euros
in 2007, in accordance with the rules detailed in the report by the
Chairman of the Board of Directors on the composition, conditions
of preparation and organization of the Board’s work and on the
internal control and risk management procedures put in place by
the Group (see Chapter 6).
At the recommendation of the Nomination, Remuneration and
Corporate Governance Committee, the Board of Directors decided
at its meeting on February 12, 2009 that, in future, the Chairman
PAGE 47
3
Management report
and Chief Executive Officer would not receive attendance fees for
directorships he holds within the Group.
3.H.1.4. Compensation paid by companies
controlled by Valeo
Gross compensation received by Mr. Morin from companies controlled
by Valeo (as defined in Article L.233-16 of the French Commercial
Code) amounted to 45,750 euros in attendance fees from Valeo UK
(Limited). This is the same as in 2007.
at its meeting on February 12, 2009 that, in future, the Chairman
and Chief Executive Officer would not receive attendance fees for
directorships he holds within the Group.
3.H.1.5. Stock options and bonus shares
The Board of Directors did not award stock options or bonus shares
to Mr. Morin in 2008.
In 2008 Mr. Morin did not exercise any of the options granted in
previous years. However, ownership of 20,000 bonus shares was
transferred to him under the March 3, 2006 program.
In view of the prohibited periods set down by French securities
regulations, the Board of Directors did not award any stock options
or bonus shares to Mr. Morin during 2006, but did award him
200,000 stock options at its meeting on March 7, 2007. The Board
set the purchase price for the 200,000 shares underlying the stock
options at 36.97 euros (without discount), it being specified that (i)
50% of the options awarded to Mr. Morin were exercisable from
March 7, 2009, and all of the options from March 7, 2010, and
that the shares obtained upon exercise of the options could not be
sold before March 7, 2011; and (ii) options not exercised would
become null and void on March 6, 2015. Until such time as he
leaves his position as corporate officer, Mr. Morin shall continue to
hold, in registered form, 75% of the number of shares issued upon
exercise of said options (after the sale of the number of shares
necessary to finance the exercise of the options and pay the related
taxes and transaction costs). In accordance with the terms of the
stock option plan, the exercise of these stock options is contingent
on Mr. Morin holding an employment contract or corporate office
within the Valeo Group at the exercise date.
At the Board of Directors meeting held on November 15, 2007,
Mr. Morin was awarded 150,000 stock options in respect of 2007.
The Board set the purchase price for the 150,000 shares underlying
PAGE 48
the stock options at 36.82 euros (without discount), it being specified
that (i) the 50% of options that were exercisable contingent on
meeting a target operating margin for 2008 had become null and
void because the target was not achieved, and (ii) the remaining
50% of options could not be exercised before November 15, 2010
and the shares issued upon exercise of such options could not be
sold before November 15, 2011, and that options not exercised
would become null and void on November 14, 2015. Until such time
as he leaves his position as corporate officer, Mr. Morin shall continue
to hold, in registered form, 50% of the number of shares issued
upon exercise of said options (after the sale of the number of shares
necessary to finance the exercise of the options and pay the related
taxes and transaction costs). In accordance with the terms of the
stock option plan, the exercise of these stock options is contingent
on Mr. Morin holding an employment contract or corporate office
within the Valeo Group at the exercise date.
The shares underlying the options granted to Mr. Morin in
FY 2007 amounted to 0.45% of the Company’s share capital as
at December 31, 2007.
3.H.1.6. Pension
Mr. Morin is covered by the supplementary pension plan set up
for Valeo Group senior executives and by the supplementary
pension scheme arranged for senior executives who were formerly
members of the Management Board, as approved by a decision
of the Supervisory Board of October 17, 2002. These schemes are
detailed in section 3.H.3 below.
Furthermore, Mr. Morin was previously covered by a UK pension plan
that was managed internally by a UK subsidiary of the Group and
that consisted of an annual allocation of around 80,000 euros a year
to a reserve account. At the recommendation of the Nomination,
Remuneration and Corporate Governance Committee, the Board of
Directors decided at its meeting on February 12, 2009 to terminate
Mr. Morin’s UK plan as part of measures to bring his compensation
into line with AFEP/MEDEF recommendations, and to pursue efforts
to create a new supplementary pension scheme for all Group
executives, including Mr. Morin, that would replace the existing
arrangements.
3.H.1.7. Termination benefits
Based on recommendations by the Nomination and Remuneration
Committee on March 19, 2008, on March 20, 2008, the Board
of Directors took measures to ensure that the compensation and
Management report
benefits payable to Mr. Morin on termination of his corporate duties
and contingent on certain criteria were brought into compliance with
the provisions of French Act 2007-1223 of August 21, 2007.
The following benefits were concerned:
1) lump-sum termination benefit payable to the Chairman: this
benefit was equal to three times Mr. Morin’s most recent annual
compensation excluding bonuses. The amount would be payable
if the Board of Directors terminated Mr. Morin’s term of office
(except on the grounds of gross misconduct in the performance
of his duties); or if Mr. Morin left the Company of his own volition
due to (i) a change of control or (ii) a change in Valeo’s Board
of Directors that was not recommended by the Board or that
resulted in the Company implementing a new business strategy
with which Mr. Morin did not agree; and
2) the benefits payable to Mr. Morin through the pension fund for
which Valeo (UK) Limited accrued an annual reserve.
At this time, the Board of Directors decided that the following
performance-related conditions would have to be met at the time
of Mr. Morin’s departure from the Company in order for him to be
eligible for the above-mentioned benefits:
■
Mr. Morin would have to have received all or part of his exceptional
target-based bonus at least once in the last three years;
■
Valeo’s attributable net income for the last fiscal year would have
to be positive;
■
Valeo’s operating margin for the last fiscal year would have to
be above 3%;
■
Valeo’s gross margin for the last fiscal year would have to be
above 15%;
■
Valeo’s orders to OE net sales ratio would have to be above 1 on
average over the two last fiscal years.
It was also decided that the total amount received by Mr. Morin at
the time of his departure from the Company or subsequent thereto
would be determined as follows, with any reductions deducted
first from his lump-sum termination benefits and thereafter
from the pension benefits payable under the scheme set up by
Valeo (UK) Limited:
■
if 4 or 5 of the applicable conditions were met Mr. Morin would
receive 100% of the amounts concerned;
■
if 3 of the applicable conditions were met Mr. Morin would receive
70% of the amounts concerned;
■
■
3
if fewer than 2 of the applicable conditions were met Mr. Morin
would receive 0% of the amounts concerned.
The Annual General Meeting of June 20, 2008 approved the
agreement relating to these measures.
At its meeting on October 20, 2008, the Board of Directors noted
and accepted Mr. Morin’s intention not to combine benefits relating
to the termination of his corporate duties and of his employment
contract, as well as Mr. Morin’s intention to waive his contractual
non-competition benefit. The Board confirmed that, in the event of
termination of his corporate duties and of his employment contract,
Mr. Morin would be treated as follows: (i) if he received some or
all benefits relating to the termination of his corporate duties,
he would not receive any benefits relating to the termination of
his employment contract; (ii) if he did not receive any benefits
relating to the termination of his corporate duties, the benefits clause
in his employment contract would apply and he would receive
benefits equal to two years of his last salary as an employee, or
960,000 euros.
At its meeting on February 12, 2009, the Board of Directors,
acting on the recommendation of the Nomination, Remuneration
and Corporate Governance Committee, decided to follow AFEP/
MEDEF recommendations and set the lump-sum termination
benefit payable to the Chairman at two years of fixed and variable
compensation, the compensation to be taken into account being
the average of all fixed and variable compensation received during
the last three full years preceding his departure. These benefits
may be paid to Mr. Morin in the event that his termination comes
following (i) a change in control of the Company or (ii) a change
in strategy decided by the Board of Directors and, in either of
these two cases, regardless of the legal terms of a non-voluntary
departure of the Chairman & CEO; that is to say whether the Board
decides to terminate the Chairman & CEO’s tenure or should the
Chairman & CEO have no other choice than to resign after noting a
significant modification of the conditions for exercising his function.
The payment of these benefits and the setting of their final amount
are subject to validation by the Board of Directors that the abovementioned performance criteria set by the Board of Directors on
March 20, 2008 have been met.
Furthermore, the Board of Directors decided on February 12,
2009 to terminate the UK pension plan as part of measures to
bring Mr. Morin’s compensation into line with the AFEP/MEDEF
recommendations.
PAGE 49
3
Management report
3.H.1.8. Compensation paid to the Chairman and Chief Executive Officer over the last two years
The following tables show compensation payments and allocations of options and shares to Mr. Morin over the last two years.
Summary of compensation payments and allocations of options and shares to Thierry Morin
2007
2008
Compensation
€1,899,523
€1,692,190
Value of options awarded during the year
€2,853,500
€0
Value of bonus shares awarded during the year
TOTAL
€0
€0
€4,753,023
€1,692,190
Summary of compensation paid to Thierry Morin
2007
Fixed compensation
Variable compensation
Amount paid
Amount owed
Amount paid
€1,577,590
€1,577,590
€1,577,590
€1,577,590
€236,640
€0
€0
€236,640
€0
€0
€0
€0
Attendance fees
€65,750
€65,750
€94,750
€94,750
o/w fees paid by Valeo
€20,000
€20,000
€49,000
€49,000
o/w fees paid by controlled companies
€45,750
€45,750
€45,750
€45,750
Benefits in kind*
€19,543
€19,543
€19,850
€19,850
€1,899,523
€1,662,883
€1,692,190
€1,928,830
Exceptional compensation
TOTAL
*
PAGE 50
2008
Amount owed
Benefits in kind: company car and annual contribution to the unemployment insurance fund for company managers.
Management report
3
Stock options granted during the year to Thierry Morin
Plan
no. and date
Type of option
(purchase/
subscription)
Value of options
according to
method used
for consolidated
accounts
Not applicable
Not applicable
Not applicable
Number of
options granted
during the year
Strike price
Exercise period
0
Not applicable
Not applicable
Plan
no. and date
Number
of options
exercised
during the year
Strike price
Not applicable
0
Not applicable
Acquisition date
Shares
available as at
Performance
requirements
Not applicable
Not applicable
Not applicable
Stock options exercised by Thierry Morin during the year
Bonus shares granted to Thierry Morin
Bonus shares
granted by the
Annual General
Meeting during
the year to
Thierry Morin
by Valeo or any
Group company
Plan
no. and date
Number of
shares granted
during the year
Value of shares
according to
method used
for consolidated
accounts
Not applicable
0
Not applicable
PAGE 51
3
Management report
Bonus shares that became available
to Thierry Morin
Number of shares that became
available during the year
20,000 shares
Plan no. and date
Plan date: 03/03/2006
20,000 SHARES
TOTAL
*
Acquisition requirements
Not applicable*
Of the 50,000 bonus shares allocated under the plan dated March 3, 2006, only 20,000 shares without associated performance requirements were acquired; 30,000 were
subject to performance requirements (not achieved) and half of them were therefore cancelled in 2006 and half in 2007.
ALLOCATION OF STOCK OPTIONS INFORMATION CONCERNING STOCK SUBSCRIPTION/PURCHASE OPTIONS
AGM date
Date of Board
of Directors or
Management Board
meeting, as applicable
05/25/2000 05/09/2001 06/10/2002 03/31/2003 04/05/2004 05/03/2005 05/03/2005 05/03/2005
03/21/2001 12/07/2001 03/31/2003 11/06/2003 11/08/2004 03/03/2006 03/07/2007 11/15/2007
Total number of shares
available for purchase
or subscription, o/w
the number made
available for purchase or
subscription to:
80,000
600,000
700,000
1,280,000
1,404,000
187,000
250,000
1,677,000
Thierry Morin
50,000
200,000
(o/w 50%
subject to
conditions)
100,000
100,000
200,000
150,000
200,000
150,000
(o/w 50%
subject to
conditions)
Exercise period start
date
03/21/2001 12/07/2001 03/31/2005 11/06/2005 11/08/2006 03/03/2008 03/07/2009 11/15/2010
03/31/2006 11/06/2006 11/08/2007 03/03/2009 03/07/2010
Expiry date
03/20/2009 12/06/2009 03/30/2011 11/05/2011 11/07/2012 03/02/2014 03/06/2015 11/14/2015
Subscription or purchase
price
Exercise procedures (if
plan has several parts)
€55.82
€42.48
€23.51
€32.91
€28.46 and
€32.74
€33.75
€36.97
€36.82
100%
50% 50% - 2 yrs; 50% - 2 yrs; 50% - 2 yrs; 50% - 2 yrs; 50% - 2 yrs; 50% - 3 yrs;
immediately immediately; 100% - 3 yrs 100% - 3 yrs 100% - 3 yrs 100% - 3 yrs 100% - 3 yrs 50% subject
to conditions
50% subject
to conditions
Number of shares
purchased or subscribed
at 31/12/2008
0
0
0
0
0
0
0
0
Total number of
options that have been
cancelled or become null
and void
0
100,000
(subject to
conditions
0
0
0
0
0
75,000
(subject to
conditions
Outstanding options at 50,000 + 500
100,000
100,000
100,000
200,000
year-end
(public share
+ 1,000
+ 1,000
+ 1,000
+ 2,000
buyback offer/ (public share (public share (public share (public share
simplified buyback offer/ buyback offer/ buyback offer/ buyback offer/
simplified
simplified
simplified
simplified
public
public
public
public
public
tender offer)
tender offer) tender offer) tender offer) tender offer)
150,000
200,000
75,000
PAGE 52
Management report
3
Employment contract, supplementary pension schemes and benefits
Thierry Morin
Chairman and CEO
First appointed: 21/03/2001
-Term of office began: 21/05/2007
-Term of office ends: AGM called to approve
the financial statements for the period
ending 31/12/2010
Employment
contract
Supplementary
pension schemes
Yes
Mr. Morin has
been covered by
an employment
contract since he
joined the Group in
1989. This contract
has been suspended
since 21/03/2001.
Yes
The pension
schemes covering
Mr. Morin are
detailed in sections
H.1.6 and H.3.
Compensation or
benefits owed or
likely to be owed
on termination or
change of functions
Benefits relating
to non-competition
clause
Yes
See section H.1.7
for a description of
these benefits.
No
3.H.2. Other directors (non-executive corporate officers)
Directors receive attendance fees. In FY 2008, the Board of Directors
allocated attendance fees as follows: each director received a
fixed annual portion of 20,000 euros plus a variable portion of
2,000 euros per meeting, up to an overall ceiling of 40,000 euros
per annum. Directors who also sit on a Board Committee receive
an additional fixed portion of 10,000 euros a year plus a variable
portion of 2,000 euros per meeting, up to an overall ceiling of
18,000 euros p.a.
Fees are paid every six months, based on the following attendance
rules:
■
the variable portion is paid based on the number of meetings
that the director has actually attended, while the fixed portion is
paid provided that the director’s average attendance rate at Board
meetings or, where applicable, at Committee meetings is equal
to or greater than 50% during the preceding half-year. Directors
whose attendance rate has been lower than 50% during the
preceding half-year receive no attendance fees;
■
the General Shareholders’ Meeting of June 20, 2008 set the
maximum annual total of attendance fees paid to directors
at 600,000 euros.
Apart from Mr. Morin, no Board member received any other
compensation or benefits from the Company during the year.
No directors were awarded stock options or bonus shares. None of
the directors holds stock subscription options.
PAGE 53
3
Management report
Attendance fees paid to Board members, not including Mr. Morin,
amounted to 533,000 euros in 2008, compared with 290,000 euros
in 2007 (total attendance fees paid to Board members, including
Mr. Morin, amounted to 582,000 euros in 2008, compared with
310,000 euros in 2007). The attendance fees were distributed as
follows:
Summary of attendance fees and other compensation paid to non-executive corporate officers
Other compensation
(fixed, variable or exceptional
compensation, benefits in kind)
Attendance fees
2007
Behdad Alizadeh
Gérard Blanc
2008
2007
2008
-
€0*
-
€0
€20,000
€58,000
€0
€0
Daniel Camus
€35,000
€56,000
€0
€0
Pascal Colombani
€12,500
€49,000
€0
€0
Jérôme Contamine
€27,500
€58,000
€0
€0
Pierre-Alain De Smedt
€35,000
€58,000
€0
€0
Philippe Guédon
€35,000
€58,000
€0
€0
Lord Jay of Ewelme
€12,500
€47,000
€0
€0
Helle Kristoffersen
€20,000
€49,000
€0
€0
Georges Pauget
€27,500
€51,000
€0
€0
Erich Spitz
€20,000
€49,000
€0
€0
€290,000
€533,000
€0
€0
TOTAL
*
Behdad Alizadeh waived his attendance fees.
On December 16, 2008 the Board of Directors decided to modify
the distribution of attendance fees for FY 2009 as detailed in the
report by the Chairman of the Board of Directors on the composition,
PAGE 54
conditions of preparation and organization of the Board’s work and
on internal control and risk management procedures (Chapter 6,
Section 6.A.2.13).
Management report
3
3.H.3. Total compensation paid to other Group executive managers
The total gross compensation paid to Valeo’s Functional and Operational
Directors in 2008 amounted to 12,455,517.43 euros (compared
with 11,257,643 euros in 2007), of which 9,413,204.03 euros in
fixed compensation, 2,485,346.55 euros in variable compensation,
336,727.46 euros in benefits in kind, 45,735.00 euros in attendance
fees, 82,862.39 euros in profit-sharing and 91,642.01 euros in
long-service awards. Contract termination payments amounted
to 262,500 euros in 2008.
In 2008 Valeo’s Functional and Operating Directors (excluding
corporate officers) did not receive any stock options.
Group executive managers may be covered by two supplementary
pension schemes:
■
a “top-up”-style defined-benefit scheme covering all top
executives, including Mr. Morin. This scheme provides an annuity
equal to 150% of vested rights under mandatory or optional
pension schemes up to 55% of the employee’s final salary
(excluding exceptional items). The final salary is the higher of
the following: (i) the last gross annual compensation, calculated
at a specific date, paid in respect of service within Valeo, or (ii)
the average gross annual salary, not counting exceptional items,
over the last 36 months of service with Valeo.
If the beneficiary’s entire career was not with the Group,
the pension is weighted by the value of the factor N/T where
(i) N is the number of quarters spent with the Group; and (T) is
the number of quarters required to obtain a full pension under
the French social security scheme.
For this scheme to apply, the employee must end his/her career
with Valeo,
■
an “add-on”-style benefit scheme that covers Group employees
who are or were formerly members of the Management Board.
This scheme provides beneficiaries with an annuity of 2% per year
of service and is capped such that beneficiaries may not receive
a combined pension (mandatory and optional schemes) of more
than 60% of their final salary, which is the sum of their last gross
basic annual compensation earned in the Valeo Group plus their
average annual bonus over the last five years. For the scheme to
apply, the person in question must have spent at least 15 years
with the Group upon taking retirement, and Valeo, or one of
its subsidiaries, must have been the beneficiary’s last employer
before settlement of pension entitlements.
The second scheme is based solely on years of service within
the Group.
It applies to four Group executive managers, including Mr. Morin.
at its meeting on February 12, 2009 to pursue efforts to create a new
supplementary pension scheme for all Group executives, including
Mr. Morin, that would replace the existing arrangements.
3.H.4. Information concerning stock options and share grants
The policies for awarding stock options and bonus shares are
detailed in the report by the Chairman of the Board of Directors
on the composition, conditions of preparation and organization of
the Board’s work and on internal control and risk management
procedures (see Chapter 5, Section 5.A.2.12).
PAGE 55
3
Management report
3.H.4.1. Stock options granted and exercised during the year
Options granted to the ten employees receiving the highest
number of options and options exercised by the ten employees
exercising the highest number of options
Options granted in 2008 by Valeo* and/or other Group companies
to the ten employees of the issuer or other Group companies
receiving the highest number of options
Weighted
Number of options
average
granted / exercised strike price
78,000** stock purchase
options (35 beneficiaries***)
Options exercised in 2008 by the ten employees of the issuer or
other Group companies exercising the highest number of options
0
Expiration
date
Date of
Board meeting
€31.41 19/03/2016
20/03/2008
Not
applicable
Not
applicable
Not
applicable
* No Group companies other than Valeo issued stock options during the year.
** Out of a total of 426,750 options allocated.
*** 27 beneficiaries received the same number of shares in second position.
3.H.4.2. Share grants
No share grants were made in 2008.
Share grants to the ten employees receiving the highest number of
shares free of consideration
Shares granted free of consideration in 2008 by Valeo to the ten employees of Valeo
or related entities, as defined in Article L. 225-197-2 of the French Commercial Code,
who received the highest number of such shares
PAGE 56
Number of shares
received free of
consideration
Date of Board meeting
0
Not applicable
Management report
3
3.H.5. Pensions and other post-employment benefits
At December 31, 2008 the total amount of provisions set aside by
Valeo and its subsidiaries for the payment of pensions and other
post-employment benefits to members of the Board of Directors and
other members of the Group’s executive management team came
to 18 million euros, versus 15 million euros one year earlier.
At December 31, 2008 total provisions set aside and the total
amount recorded by Valeo and its subsidiaries for the payment of
these benefits to former Board members and other Group executive
managers came to 2 million euros and 89,000 euros respectively.
3.I. Risks and uncertainties
3.I.1.
Risks in relation to the current economic environment
The global automotive market has been severely affected by the
economic and financial crisis since the second half of 2008. This
has translated into a sharp decline in automotive production, in a
trend that gathered pace in the fourth quarter of 2008. Like other
companies in the sector, the Group has seen its earnings directly
impacted by these developments. Even though the Group has taken
steps to adjust its industrial facilities and cut costs, it cannot be sure
how effective these measures will be in addressing this exceptional
3.I.2.
Industrial and environmental risks
3.I.2.1.
Risks associated with the automotive
equipment industry
The Group’s sales are dependent on the level of automotive
production, especially in Europe and North America. Production
itself is affected by a number of factors, including vehicle inventory
levels, consumer confidence, employment trends, disposable
income, interest rates and consumer access to credit. The volume
of production is also influenced by government initiatives, especially
situation. The Group, its business, financial position and earnings
could be negatively impacted if the crisis continues and deepens.
If the current economic and monetary crisis were to continue, it could
undermine the ability of the Group to obtain financing at satisfactory
terms, either on the capital markets or from banks. This in turn would
affect the Group’s financial position, investment and development
policy, and growth outlook.
those designed to encourage vehicle acquisition, trade agreements,
new regulations and social issues such as strikes and walkouts.
In 2008 Valeo’s five main customers were, in decreasing order
of sales, Renault-Nissan, Volkswagen, PSA Peugeot Citroën, Ford
and General Motors. They accounted for 65% of the Group’s OE
private passenger car sales. Each of these customers accounted for
between 7% and 20% of total sales. Sales earned from the three
US automakers, Chrysler, Ford and General Motors, amounted to
1,340 million euros, or 15% of consolidated sales.
PAGE 57
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Management report
The three US firms accounted for a substantial portion of the Group’s
consolidated sales (518 million euros, or nearly 50% of consolidated
sales in North America). See section 3.I.5.3. below for a description
of credit risk. At the same time, Valeo’s balance-sheet exposure
(i.e. customer accounts, dedicated stocks, tooling and specific
capitalized research and development) to the three US firms in
North America totaled 127 million euros at December 31, 2008.
Some of Valeo’s automaker customers are experiencing severe
financial difficulties. In the event of the failure of one or more of its
customers, Valeo would need to write down the associated assets.
It could also be impacted by possible restructuring or by the closure
of sites arising from business shutdowns caused by these failures.
This could affect the Group’s financial situation.
Supply contracts take the form of open orders for all or part of the
equipment needs of a vehicle model, with no volume guarantee.
They are granted directly for the vehicle’s individual functions and
generally last for the model’s lifespan. Valeo’s sales and results can
therefore be impacted by a model’s commercial failure and/or by the
Group not being selected to work on the production of a new range
of vehicles. Sales may also be affected by its customers’ cost-cutting
programs, resulting in heavy pressure on selling prices or lower
purchase volumes. The risks are however broadly diversified, with
Valeo’s wide range of products and services used in the production
of a very large number of vehicles.
Valeo is exposed to warranty claims by customers with respect to
the products and services it sells. Sales of products and services
are covered by statistical provisions that are regularly reviewed to
reflect past return rates and that cover expected customer returns.
From time to time, the Group may have to address larger quality
or security issues necessitating a major recall campaign with
respect to a given production period. To protect itself against this
risk, the Group has an insurance policy that covers recall campaign
costs (less the deductible), i.e. the cost of returning vehicles to the
garage and dealing with the faulty part, with the Group bearing
the cost of the parts. In all, provisions for customer warranties came
to 133 million euros at December 31, 2008.
3.I.2.2.
Risks related to new product
development
Valeo’s sales and income depend on the ability of the Group to
develop new products and to achieve the technological progress
needed to stay competitive. This is because regulatory or technological
developments can render Valeo products obsolete or make them
less attractive to automakers. The Group’s competitiveness and
market share growth hinges on its ability to foresee such changes
and develop new products.
PAGE 58
To address these risks, the Group relies on technologies that
allow it to meet local regulations, especially those concerning the
environment, as well as the technical specifications of its automaker
customers. While it is not possible to give assurances regarding
the Group’s ability to respond satisfactorily to technological and
regulatory change, Valeo makes every effort to anticipate material
developments in these areas. It maintains an in-depth technology
watch and systematically reviews the product, module and systems
technology plan of each Product Family on a ten-year timeframe.
The Group is exposed to the risks inherent in developing and
manufacturing new products, in particularly the absence of positive
market response, development delays, and product malfunction.
3.I.2.3.
Supplier risk
Value is highly integrated with its suppliers, as part of the drive to
continually improve the quality of products delivered to automakers.
This does not mean, however, that there are ownership links
between Valeo and its suppliers. Valeo ensures that its supplies are
dependable by implementing a policy of not relying on a single
supplier for any given product and by constantly monitoring the
financial situation of its supplier base. The Group keeps a list of
suppliers at risk, which are identified using a multi-criteria approach.
These suppliers are monitored at all times. If necessary, emergency
inventory is put aside to ensure there are no breaks in supply.
3.I.2.4.
Environmental, technological
and natural risks
In the various countries in which Valeo operates, its business is
subject to diverse and evolving environmental regulations which
constantly raise the standard of environmental protection. Valeo’s
environmental policy is described in Section 3.P: “Environment
and sustainable development: management and performance”
section of this Chapter and is designed to control and minimize
environmental risks as far as possible. The Group Risk Insurance
Environment Department is in charge of managing environmental
risks. To carry out its duties, the Department has set up a dedicated
Healthy, Safety, Security, Environment (HSSE) organization involving
all Group departments. The Department is assisted by Coordinators
assigned within each Product Family. HSSE managers are appointed
at each Valeo site to ensure that procedures are properly applied.
The managers lend their expertise to site management and perform
internal audits to verify compliance with applicable regulations and
Valeo standards.
Management report
In 2007, a system was devised in conjunction with Product Family
HSSE Coordinators to enable sites to self assess their risk management
arrangements. Following roll-out of the system in early 2008, Valeo
used feedback to make improvements. The system, which is effective
and widely appreciated, lets each site assess its management of
environment, health and workplace safety risks.
Furthermore, independent external consultants carry out regular
inspections to verify application of the risk management policy,
at the request of the Group Risk Insurance Environment Department.
A major feature of the Valeo risk management policy is the
audit program, introduced almost 20 years ago, which involves
regular audits (at least every three years) of all sites to assess
performance and track progress in a number of areas, including
the environment.
The Group’s policy has always been to ensure the best protection for
its facilities against natural disasters and technological risks:
■
most of Valeo’s sites are classified HPR (Highly Protected against
Risk) and have an automatic sprinkler system to protect against
fire, as well as teams trained to deal with all kinds of risk
situations;
3.I.3.
■
all sites in seismic risk zones have been built or renovated in
compliance with the most recent seismic regulations;
■
Valeo sites are located in areas not liable to flooding or are
equipped with systems for protecting against flood risks;
■
new Valeo sites are located far from sites posing potentially
significant risk (Seveso sites, etc.), which could have a domino
effect and endanger Valeo sites;
■
the Valeo Risk Management Manual contains a specific directive
on the prevention of emergency situations and on situationspecific contingency plans. This directive requires each site to
implement an emergency plan with a view to preventing
potential incidents.
3
As at December 31, 2008 provisions of 20 million euros had been set
aside in respect of site upgrades or for environment-related issues.
Of this, 1.4 million euros was earmarked for work to bring facilities
into compliance with environmental regulations. No individual
provision constituted a significant material amount.
Market risks
The Group operates in an international environment in which it is
confronted with market risks, specifically foreign currency risk,
price risk and interest rate risk. It uses derivatives to manage and
reduce its exposure to changes in foreign exchange rates, raw
materials prices and interest rates. In general, foreign currency risks,
price risks in respect of base metals and interest rate risks for all
Group companies are managed centrally by Valeo. Each month,
the Group Financial Control Department provides the Chairman of
Valeo with a report on exposure to financial risks managed by the
parent company and an analysis of credit risk arising on accounts
and notes receivable. This information enables the majority of
the Group’s exposure to market, liquidity and counterparty risk to
be identified. Recommendations are submitted to the Chairman
by the Financial Affairs Department. In 2008 Valeo tightened its
liquidity management and counterparty monitoring arrangements
in response to the economic environment.
Within the Group, the Accounts function establishes and enforces
rules relating to the risk management of external financing and of
market risks relating to changes in interest rates, currency values and
raw material costs. The function relies, among other things, on a cash
management system that allows permanent monitoring of the main
liquidity indicators and of all financial instruments used at central
level (interest rates/forex). Valeo’s General Management receives
daily, weekly and monthly reports about market trends and their
impact on the Group’s liquidity, the value of the derivatives portfolio,
and details of hedging transactions and their consequences for the
fixed rate/floating rate debt mix.
PAGE 59
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Management report
3.I.3.1.
Foreign currency risk
Group entities may be exposed to transaction risk in respect of
purchases or sales transacted in currencies other than their
functional currency. (Note in this regard that the vast majority of
sales to US customers are made by the North American divisions,
which buy and sell in dollars. This limits the Group’s transactional
exposure to fluctuations in the US dollar against the euro). Hedges
of subsidiaries’ current and future commercial transactions and
investments are generally contracted for durations of less than
six months. Subsidiaries principally hedge their transactions with
Valeo, the parent company, which hedges net Group positions
with external counterparties. Hedge accounting as defined by IAS
39 is not applicable in this case, and the Group’s foreign currency
derivatives are therefore treated as trading instruments under the
financial instruments standard. However, on an exceptional basis, the
Group establishes specific hedges for major individual transactions
and applies the hedge accounting rules. Based on the net foreign
currency position at year-end, a movement in exchange rates would
have only a minor impact on the Group’s financial statements.
The Group is also exposed to foreign currency risk through
its investments in foreign subsidiaries, via exchange rate
movements against the functional currency. The Group decides
on a case-by-case basis whether to hedge the risk. No derivative
instrument of this sort was recognized in the Group balance sheet
Exposure to foreign currency risk and an analysis of sensitivity to this
risk are dealt with in Note 4.F.5.3.1 in the notes to the consolidated
financial statements.
3.I.3.2.
Swift, large volume reductions by customers at end-2008 resulted in
losses on raw materials hedges established before the sharp decline
in prices. Since the hedged amounts were no longer consistent with
the new requirements, some of the hedges were sold on the market
at prices that were lower than the buying prices.
Inventory values are not greatly affected by the rise in materials
prices because of the rapid turnover (the days-of-inventory index is
less than one month). Valeo does its best to optimize logistics flows,
notably by using pull-flow methods to reduce inventory.
Exposure to raw materials risk and an analysis of sensitivity to this
risk are dealt with in Note 4.F.5.3.1.3. in the notes to the consolidated
financial statements.
3.I.3.3.
Interest rate risk
The Group uses swaps to convert interest rates on its debt to either
a variable or a fixed rate, either as from origination or during the
term of the loan.
At year-end, 83% of long-term debt was at a fixed rate (83%
in 2007) and the Group’s financing rate was 4.9%, compared with
4.6% in 2007.
Exposure to interest rate risk and an analysis of sensitivity to interest
rate risk are dealt with in Note 4.F.5.3.1.3 in the notes to the
consolidated financial statements.
Raw materials risk
The Group uses a wide range of raw materials in the course of its
industrial activity, including steel, non-ferrous metals and resins,
worth a total 1 billion euros in 2008. Some raw materials, such as
steel and plastics, are not hedged because they are not quoted on an
official market. In such cases, the Group negotiates with its suppliers
on the basis of contracts, typically on an annual basis, to ensure that
selling prices are indexed as far as possible to the change in buying
prices for these materials.
Exposure to non-ferrous metals, such as aluminum, processed
aluminum, copper and zinc, is hedged through future purchases
of base metals on official markets, over a period that is generally
less than six months. The Group hedges volumes not covered by
PAGE 60
a matching price escalation clause in agreements with customers.
The Group favors hedging instruments which do not involve the
physical delivery of the underlying commodity. At December 31, 2008
the Group’s balance sheet showed an unrealized loss of
13 million euros with respect to cash flow hedges.
3.I.3.4.
Equity risk
At December 31, 2008 the Group’s balance sheet showed cash
and cash equivalents of 661 million euros (771 million euros at
December 31, 2007). Cash comprises bank deposits for an amount of
308 million euros. Cash equivalents comprise marketable securities
for an amount of 353 million euros, including money market mutual
funds invested in very short-term negotiable debt securities with
very low capital risk issued or backed by euro zone member states,
in line with the Group’s cash management policy. In accordance with
applicable accounting standards, these instruments are measured at
market value, which is very close to their accounting value.
Management report
Under IAS 32, treasury stock is deducted from stockholders’ equity
at the date of acquisition. Changes in the value of treasury stock are
not recorded. When treasury stock is acquired or sold, stockholders’
equity is adjusted to reflect the fair value of the shares purchased
or sold. The acquisition of 3,429,741 treasury shares and the
disposal of 1,720,046 treasury shares in 2008 led to a decrease
of 39 million euros in stockholders’ equity at December 31, 2008
compared with December 31, 2007.
3.I.4.
Legal risks
3.I.4.1.
Intellectual property risk (patents)
As far as possible and when necessary, Valeo’s industrial expertise
and the innovations generated by the Group’s research are covered
by patents designed to protect intellectual property. Valeo files a
large number of patents in its field, which constitute an effective
weapon in the fight against counterfeiting. Patents and external
licenses account for less than 4% of Group sales.
3
Assets representing pension-financing funds comprised shares
worth 140 million euros at December 31, 2008, or 63% of plan
assets (see Note 4.F.4.9.2 of the notes to the consolidated financial
statements).
3.I.4.2.
Product and service liability
Valeo is also exposed to liability claims for damage caused by
defective products or services sold by the Group. To protect itself
from this risk, Valeo has taken out an insurance policy to cover the
financial impact of these claims. However, it is uncertain whether
this insurance policy would be adequate to cover the full financial
impact of such claims.
Valeo also earns royalties in the normal course of its business from
patent licenses granted to third parties.
3.I.5.
Other risks
3.I.5.1.
Counterparty risk
The Group is exposed to counterparty risk on transactions conducted
on financial markets for the purposes of financial risk and cash
management. Limits have been set by counterparty, taking account
of the ratings of the counterparties with ratings agencies. This
also has the effect of avoiding excessive concentration of market
transactions with a limited number of banks. The Group invests its
surplus liquidity, according to the objectives set out in Section 3.I.3.4,
with investment management companies that are in many cases
subsidiaries of large lending banks from the Group’s bank consortium.
In the event that the parent bank or management company defaults,
the securities are separately held by custodians, ensuring that
investors retain ownership thereof.
3.I.5.2.
Liquidity risk
As well as maximizing its operating cash flows to finance its
development and pay dividends to stockholders, the Group takes
care to maintain broad access to liquidity so that it can meet its
commitments and investment needs.
PAGE 61
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Management report
At December 31, 2008 Valeo had 661 million euros in cash. Additional
sources of access to liquidity were as follows:
■
■
confirmed bank credit lines totaling 1.2 billion euros, with an
average maturity of 2.3 years. These credit lines, none of which
had been drawn down as at December 31, 2008, have been
negotiated with ten highly rated international banks (Aa2 on
average from Moody’s). Under covenants negotiated with the
banks, Group’s net debt must not exceed 120% of stockholders’
equity excluding minority interests and after appropriation of
income. Non-compliance with the ratio could result in accelerated
repayment of prior drawdowns and/or the cancellation of the
credit lines;
a short-term commercial paper financing program capped at
1.2 billion euros. For Valeo, however, access to the commercial
paper market is restricted since Moody’s downgraded its
credit rating to speculative (i.e. non-investment grade) on
January 7, 2009 (see section 3.I.5.4.).
Group gross debt stood at 1,491 million euros at December 31, 2008,
including short-term debt of 166 million euros and long-term debt
of 1,325 million euros (89% of the total). The average maturity of
long-term debt was 3.5 years at year-end. Financial debt with a
maturity of over one year included the following:
■
463 million euros worth of bonds convertible for new shares and/or
exchangeable for existing shares, maturing on January 1, 2011;
■
two syndicated loans worth a total 225 million euros maturing
on July 29, 2012. These two loans are subject to the Group debt
ratio covenant that applies to the credit lines;
■
600 million euros worth of notes, maturing on June 24, 2013 and
issued as part of a medium and long-term Euro Medium Term Note
financing program capped at 2 billion euros. The Euro Medium
Term Notes include an option allowing bondholders to request
early redemption of their bonds in the event of a change of control
of Valeo which leads to the bond’s rating being downgraded to
below investment grade, assuming it was previously rated in that
category, or, if the previous rating was below investment grade,
to a reduction of one rating category (e.g. from Ba1 to Ba2).
Credit lines with banks and the Group’s long-term debt include a
cross default clause whereby if a specified amount of financial debts
is likely to be called for early repayment, the remaining financial
debt could also become repayable.
PAGE 62
3.I.5.3.
Credit risk
Valeo is exposed to credit risk, particularly to risk of default by its
automotive customers.
Valeo works with all automakers in the sector. At December 31, 2008
Valeo’s largest customer accounted for around 18% of the Group’s
accounts and notes receivable. Approximately 12% of accounts and
notes receivable are with the American automakers, Chrysler, Ford
and General Motors, as part of their worldwide activities, while just
5% are with these customers in North America. The downturn in
the automobile sector business environment in recent years has led
the Group to strengthen control of customer risks and settlement
periods which may, on a case-by-case basis, be subject to bilateral
negotiations with customers. The average settlement period
at December 31, 2008 was 69 days, stable on 2007.
Valeo also generates more than 16% of its net sales in the
aftermarket. The Group’s large, dispersed customer base in this
market is constantly monitored and the risk of default is covered
by a credit insurance policy. These customers represented
slightly more than 10% of Group accounts and notes receivable
3.I.5.4.
Credit rating
Moody’s downgraded the Group’s long-term debt to Ba1 with a
negative outlook on January 7, 2009. Short-term debt has been rated
“not prime” since that time. Ratings for the Group’s long-term and
short-term debt were previously reduced on October 22, 2008 from
Baa2/ negative outlook to Baa3/ stable outlook and from Prime 2 to
Prime 3 respectively. Valeo’s access to the commercial paper market
has been restricted since the Group’s debt rating was downgraded to
non-investment grade. This downgrade also raises the Group’s cost
of financing and could impact refinancing for maturing debt.
Management report
3.I.6.
3
Insurance and risk coverage
The Group’s insurance strategy is combined with a policy of risk
prevention and protection, and is aimed at covering the major risks
to which the Group is exposed. The Group self-insures recurring risks
with a view to optimizing insurance costs.
All Group companies have taken out insurance policies with firstrate insurance companies for all major risks which could have a
material impact on their business, results, or assets and liabilities.
The risks covered include property damage, business interruption,
merchandise and equipment transportation, business interruption
following transportation incidents, third party liability, and
occupational illnesses and accidents.
The table below provides details of the coverage limits by type of risk:
Type of insurance
Property damage/business interruption
General liability and product and environmental liability
Coverage limit (in euros)
1 billion per event
200 million per event
Merchandise and equipment transportation
7.5 million per event
Directors’ and officers’ liability
Employee-related liability claims
Property damage cover is based on replacement value and business
interruption cover on the margin lost over one year.
In 2008 insurance premiums paid out by the Group in connection
with its insurance coverage totaled 10.1 million euros.
PAGE 63
3
Management report
3.J. Factors likely to be material in the event
3.J.1.
Direct or indirect stockholdings in the Company, brought to the Company’s
attention (Articles L.233-7 and 233-12 of the French Commercial Code)
As far as the Company is aware, the following stockholders held
more than 2% of the Company’s share capital or voting rights at
February 12, 2009. Details of the number of shares and voting
rights, presented below, were prepared based on data brought to
the attention of the Company in accordance with articles L.233-7
and L.233-12 of the French Commercial Code, and where applicable,
on information voluntarily provided by Company stockholders.
Details concerning the number of shares and voting rights per
stockholder were calculated based on the Company’s share capital
at January 31, 2009, i.e. 78,209,617 shares representing 81,362,084
voting rights, excluding treasury stock.
Stockholders
Pardus Investment Sàrl
% ownership
% voting rights
19.75%
18.99%
Caisse des Dépôts et Consignations Group
5.99%
8.29%
Brandes Investment Partners LP
4.57%
4.39%
The Goldman Sachs Group, Inc.
4.93%
4.74%
Morgan Stanley & Co. International
M&G Investment Management Limited
3.77%
2.28%
3.63%
2.19%
3.J.2.
■
PAGE 64
Agreements entered into by the Company that would change or terminate
if there were a change in control of the Company, with the exception
of those agreements whose disclosure would seriously harm its interests
(except in the event of a legal obligation to disclose)
As specified above in “Risks and uncertainties”, section 3.I.5.2.
“Liquidity risk”, the 2013 euro Medium Term Notes, in an amount
of 600 million euros, include an option allowing bondholders
to request early redemption of their bonds in the event of a
change of control of Valeo which leads to a downgrade in the
bond’s rating.
■
Some of Valeo’s customers have a clause in their general
purchasing conditions allowing them to terminate their contract
with Valeo in the event of a change in control.
■
One joint venture of small importance in terms of the Group’s
overall operations (Valeo Systems South Africa) is subject to
a change of control clause that could be activated in the event of
a takeover by one of the other partners’ competitors.
Management report
■
The agreement concluded with Pardus on May 21, 2008 contains
a clause whereby Pardus may choose to terminate the agreement
in the event that a third party not acting in concert with Pardus
makes a tender offer for the shares of the Company, where this bid
3.J.3.
in the event of a change of opinion concerning the strategy pursued
by the Board further to a public tender offer. Payment of these
termination benefits is contingent on meeting certain performance
targets (see section 3.H.1.7. above).
Agreements that could restrict the transfer of shares and the exercise
of voting rights
On May 21, 2008, the Company signed an agreement with Pardus
Capital Management L.P. (hereafter, “Pardus”) and Mr.Behdad
Alizadeh, which was submitted to and approved by the AGM of
June 20, 2008. The entire agreement is posted on the Company’s
website (www.valeo.com). Its main provisions are summarized
below.
3.J.4.1.
is approved by the Autorité des marchés financiers, and provided
Pardus’s representative, Behdad Alizadeh, resigns from the Board
of Directors. This agreement is detailed in section 3.J.4. below.
Agreements providing for indemnities payable to employees or members
of the Board of Directors if they resign or are dismissed without real
or serious cause or if their employment contract is terminated as a result
As specified above in “Remuneration of corporate officers, directors
and other Group executive managers”, section 3.H.2. “Other directors
(non-executive corporate officers)”, Thierry Morin, Chairman of the
Board of Directors, is entitled to termination benefits set at two times
his annual salary (including bonuses) if he should leave the Company
following a decision of the Board of Directors or of his own volition
3.J.4.
3
Appointment of a Pardus
representative to the Board
of Directors
Under the agreement, the Company shall recommend to the AGM
of June 20, 2008 that Behdad Alizadeh, representing Pardus, be
appointed as a director for a four-year term. The Company shall
ensure that the Board appoints the Pardus representative to the
Nomination, Remuneration and Corporate Governance Committee
no later than October 31, 2008. Also, in the event that the Board of
Directors creates a new committee, the Company shall use its best
effort to appoint the representative to such committee.
In accordance with the agreement, the Board recommended
to the AGM of June 20, 2008 that Mr.Alizadeh be appointed as
a director of the Company. The AGM of June 20, 2008 elected
Mr. Alizadeh as a director. On July 28, 2008, the Board appointed
him to the Nomination and Remuneration Committee, which
became the Nomination, Remuneration and Corporate Governance
Committee on October 20, 2008. Mr. Alizadeh was also made a
member of the new Strategy Committee created by the Board
on October 20, 2008.
PAGE 65
3
Management report
Under the agreement, if the office of the Pardus representative
becomes vacant as a result of death or resignation due to the
termination of his employment at Pardus (other than in the case
of the termination of the agreement), the Company shall cause
the Board of Directors to appoint an individual proposed by Pardus,
it being understood that (i) the proposed candidate must satisfy
the reasonable criteria relating to the election of directors set by the
of the Company, and (ii) that this candidate may be an employee
or manager of Pardus. If the Board of Directors does not approve
the proposed candidate, the agreement provides that Pardus shall
propose another candidate.
Furthermore, it is agreed that the Pardus representative shall resign
from the Board of Directors if Pardus’s interest in the Company
decreases to less than 8% of the Company’s share capital.
3.J.4.2.
Loyalty of the Pardus representative
and Pardus towards Valeo and
its Board of Directors
Pardus and its representative on the Board agree to comply with
certain rules of conduct. In particular, they undertake to:
for issuance in the event of a capital increase with or without
pre-emptive subscription rights,
as well as, more generally, resolutions relating to the incentive
policy for Group corporate officers and employees (consistent with
those applied in the last five years);
■
refrain from requesting, in their capacity as stockholder, the
addition of resolutions to the agenda of AGMs without first
receiving the approval of the majority of the Board members.
Pardus shall refrain from interfering in any way in relationships
between the Company on the one hand, and its customers,
suppliers, or employee constituencies and representatives on the
other, without the prior consent of the Company’s management,
without prejudice to Pardus’s right to carry on discussions with such
persons in a manner consistent with the principle that Company
management has responsibility in this area.
Pardus also undertakes not to act in concert with a third party with
regards to the Company, nor to solicit a third party or conclude any
agreement relating to the Company or its securities.
The Company shall refrain, and shall cause any member of the Board
of Directors and any employee of the Company or of a company
controlled by it to refrain, from criticizing or denigrating Pardus
outside of the Board of Directors.
■
refrain from publicly criticizing Company strategy;
■
comply with the operating rules of the Board of Directors;
3.J.4.3.
■
support the resolutions proposed by the Board of Directors to be
voted on by Ordinary General Stockholders’ Meetings that do not
affect the election and the duties of the Pardus representative
on the Board as well as the resolutions that are proposed by
the Board of Directors to be voted on by Extraordinary General
Stockholders’ Meetings and that are of the same type as the
following resolutions presented to the Extraordinary General
Stockholders’ Meeting of May 21, 2007:
Pardus shall not seek the appointment of individuals to the
management or administrative bodies of 32 companies that are
listed in a schedule attached to the agreement and that exercise
an activity that is similar to or competes with that of the Company,
or any entity controlled by or that controls those companies, and
specifically Visteon and Delphi.
• the 18th resolution, namely a resolution delegating authority to
the Board of Directors to increase the Company’s share capital
by issuing, with pre-emptive subscription rights, shares and/or
share equivalents and/or securities giving the right to be allocated
debt securities (up to a maximum nominal capital increase of
40 million euros),
• the 21st resolution, namely a resolution delegating authority to
the Board of Directors to increase the Company’s share capital
by capitalizing income, retained earnings or additional paid-in
capital, and
• the 22nd resolution, namely a resolution delegating authority
to the Board of Directors to increase the number of securities
PAGE 66
Relations between Pardus
and the Company’s competitors
Pardus shall not acquire more than a 10% interest in the share
capital or the voting rights of companies that are in competition
with the Company (listed in a schedule attached to the agreement),
Visteon being excepted given Pardus’s interest in its share capital.
Pardus shall cause its Board representative to refrain from
participating in the deliberations and votes of the Board of Directors
relating to the relationship between the Company and Visteon and
to refrain from participating in the votes of the Board of Directors
concerning relations between the Company and any company in
which Pardus holds or comes to hold more than 5% of the share
capital or voting rights.
Management report
3.J.4.4.
Pardus’s interest in the Company
Pardus shall limit its interest, individually or in concert, to 20% of
the share capital and voting rights of the Company, unless a third
party not acting in concert with Pardus acquires an interest in the
Company in excess of 15% of the share capital or voting rights.
In this case, Pardus shall have the right to increase its interest above
20% by the same number of percentage points above 15% held
by such third party.
Accordingly, Pardus shall refrain from, individually or in concert,
(i) subscribing or acquiring, directly or indirectly or through an
intermediary, any share or other security or instrument that may grant
access, immediately or in the future, to the share capital or voting
rights of the Company (“Company Securities”) or (ii) concluding any
agreement (including through any derivative instrument) relating to
the purchase or the subscription of Company Securities, if in each
case these transactions are likely to cause Pardus’s interest in the
Company to exceed 20% of the share capital and voting rights.
Pardus shall also refrain from acquiring any new financial instrument
that is not issued by the Company but which has a Company Security
underlying it without the prior approval of the Board of Directors. In
this regard, Pardus has provided a list to the Company disclosing all
agreements concluded by it relating to financial instruments with
underlying Company Securities. Pardus shall have the right to renew
or modify the provisions of such agreements, notably the term of
such agreements, provided that (i) the payment of these financial
instruments be in cash only, (ii) that these financial instruments do
not apply to a number of underlying Company Securities greater than
the number stipulated in the current agreements and (iii) that Pardus
first consult with the Company and take into account its legitimate
observations relating to the maintenance of its stock price and the
collective interests of its stockholders.
Pardus shall have the ability to acquire double voting rights for its
shares in accordance with the Company’s by-laws. However, Pardus
may not exercise the voting rights corresponding to the portion that
is above 20% during Company AGMs.
In the event that Pardus acquires over 20% of the Company’s share
capital or voting rights following a capital reduction, a repurchase
by the Company of its own shares or a stockholder’s loss of double
voting rights, Pardus shall not be deemed to have violated its
obligations under the agreement. Nonetheless, it shall not be able
to exercise its voting rights corresponding to the portion that is above
20% during Company AGMs.
3.J.4.5.
3
Voting in AGMs
Pardus shall participate in every AGM or cast a mail-in vote.
It undertakes to vote in favor of all of the ordinary and extraordinary
resolutions described in section 3.J.4.2 above presented by the Board
of Directors and included in the AGM agenda. Under the agreement,
Pardus shall vote at every meeting against any resolution that is not
recommended by the Board of Directors.
3.J.4.6.
Sale of Valeo shares
Pardus may freely sell Valeo shares, on- or off-market, provided that
(i) these sales relate to a number of shares that does not exceed 3%
of the Company’s share capital, (ii) these sales are not reasonably
likely to significantly negatively impact the price of Valeo shares, and
(iii) the securities sold in this manner below the 3% threshold do
not represent more than 10% of the Company’s share capital over
a period of six consecutive months.
Pardus shall inform the Company prior to any proposed sale relating
to a number of shares exceeding 3% of the Company’s share
capital:
1) In the event that Pardus wishes to sell a block of shares
exceeding 3% of the Company’s share capital other than
through an organized offer of Valeo shares:
■
the Company shall have seven trading days from the notification
of this proposed sale to offer to acquire or cause to be acquired
by a third party, for a set price, all or a reasonable portion of such
shares. In the event of an exercise of this right of first offer, Pardus
shall have the option, upon notification to the Company within
five trading days of the receipt by Pardus of the notice of the
Company’s exercise of its right of first offer, either:
i. to sell the relevant securities to the Company or a third party
designated by the Company for the price proposed by the Company
(in this case the Company shall have three trading days from the
notification by Pardus of its acceptance of the offer, to acquire or
cause to be acquired by a third party, the relevant securities under
the same terms as the offer notified to Pardus); or
ii. to sell them to one or several third parties, provided that this
sale be for a price that exceeds the one offered by the Company
and be made within 60 days of the notification of the proposed
transaction.
Pardus shall not be involved in or favor a transaction that is not
recommended by the Board of Directors.
PAGE 67
3
Management report
■
Otherwise, Pardus will be required to recommence the procedure
described in this paragraph and in the following paragraph. Should
the Company fail to exercise its right of first offer in accordance
with the terms set forth in this paragraph, Pardus shall be free to
sell the Valeo shares referred to in the notification without any
price restrictions within the 60-day period mentioned above,
2) In the case of an organized offering of Valeo shares by
Pardus (e.g. an accelerated book building procedure)
representing more than 3% of the Company’s share capital,
Pardus shall inform the Company of the proposed offering.
The Company shall use its best effort to contribute to the
success of this transaction. This sale must take place either
through a financial intermediary of international repute
designated jointly with the Company or through two
financial intermediaries, one of which shall be designated
by the Company and will act as a joint-bookrunner under
the same commitment terms (including financial) as the
one designated by Pardus.
If a competitor of the Company listed in the schedule attached
to the agreement offers to acquire a block of shares from Pardus
representing more than 3% of the Company’s share capital, Pardus
must inform the Company of the proposed transaction, including the
sale price as well as the identity of the purchaser or purchasers. The
Company shall then have twelve trading days from its notification
of the proposed transaction to notify Pardus of its decision to cause
the acquisition of the shares referred to in the notice of sale by a
third party or the Company for the price indicated by Pardus. If the
Company has not provided notice of its decision at the expiration of
a period of twelve trading days or has not repurchased or caused
to be repurchased the shares for the proposed sale price at the
expiration of a period of five trading days from the notification of the
exercise of its pre-emptive right, Pardus may conduct the sale for
the price mentioned above (or for a higher price). Pardus may not
sell such Valeo shares for a price that is less than the one notified
to the Company without recommencing the procedure described in
this paragraph. In any event, if no sale of Valeo shares has occurred
within a period of 45 days from the notification of the proposed
transaction, Pardus must recommence the procedure described in
this section 3.J.4.6 (except the first paragraph). This pre-emption
procedure may not be combined with the right of first offer,
and prevails over the latter.
PAGE 68
3.J.4.7.
Scope of commitments
Pardus shall cause the provisions of the agreement to be respected
(i) by any and all companies that it controls or comes to control,
(ii) by any and all funds managed by Pardus Capital Management L.P.
or by any entity the majority of whose partners are those of Pardus
Capital Management L.P., (iii) by any and all entities or persons
controlling it or under common control with it and (iv) by any and
all persons related to it (in particular its employees or managers).
The Company shall cause the provisions of the agreement to be
complied with by any company under its control or that it should
come to control and by its employees and managers.
It is specified that any breach of the provisions of the agreement
by any of the persons mentioned above shall be deemed to be a
direct breach of such provisions by Pardus and/or its representative
or by the Company, respectively.
3.J.4.8.
Term of the agreement and case of
a public tender offer by a third party
not acting in concert with Pardus
The agreement will expire at the close of the AGM called
to approve the financial statements for the period ending
December 31, 2011.
Pardus may terminate the agreement at any time by providing
at least four months’ prior notice. If Pardus or its representative
breaches any obligations under the agreement, the Company may
terminate the agreement if Pardus fails to meet its obligations within
eight days of receiving notice from the Company. If Pardus or the
Company terminates the agreement, the Pardus representative must
resign from his office as director.
During the notice period, regardless of which Party terminates
the agreement, Pardus shall be required to comply with all of its
obligations under this agreement. However, it is allowed to organize
a proxy fight against the adoption of any resolution presented to
the Extraordinary General Meeting other than the type of resolution
mentioned in section 3.J.4.2. above.
In the event that a third party not acting in concert with Pardus
makes a public tender offer, and if the offer is approved by the
Autorité des marchés financiers, the provisions of the agreement
shall cease to apply and Pardus may submit a competing offer as
soon as the offer initiated by such third party opens, provided the
Pardus representative resigns from his office as director.
Management report
Outlook
3
3.K. Claims, litigation, governmental, legal
and arbitration proceedings
Known claims and litigation involving Valeo and Group companies
were reviewed as of the issuance date of the financial statements and
all necessary provisions made to cover the estimated contingencies
and potential losses. The amount of these provisions is disclosed
in the notes to the consolidated financial statements, Chapter 4,
section 4.F.4.9. To the best of Valeo’s knowledge, during the past
twelve months there were no governmental, legal or arbitration
proceedings, including proceedings in process, pending or expected,
that may have, or have had in the recent past, a significant impact on
the financial position or profitability of the Company or the Group.
3.L. Outlook
In view of the recession in the world’s main economies and the
ongoing financial crisis, the Group expects global automotive
production to decline by around 30% in the first half of 2009 and
by around 20% over 2009 as a whole. Accordingly, the Group is
forecasting negative operating margin for the first six months
of 2009.
Provided no further significant deterioration occurs, Valeo does not
expect its net debt to exceed 120% of stockholders’ equity excluding
minority interests, the ratio agreed under its financing covenants
(see 3.I.5.2.).
The Group has begun implementing a plan to reduce its permanent
headcount by 5,000 people worldwide. It is also pursuing other
measures to cut operating costs, with a view to significantly lowering
its breakeven point by the end of 2009. These measures, coupled
with an approximately 33% reduction in capital expenditure and
optimized inventory management, are designed to preserve the
Group’s liquidity.
Valeo does not expect the crisis to end before 2011. For this
reason, its previous medium-term objectives have now become
obsolete. The Group is concentrating on successfully implementing
its short-term action plan to be strongly positioned when the market
recovers.
PAGE 69
3
Management report
Subsequent events
3.M. Subsequent events
To the best of Valeo’s knowledge, no other event has occurred since
December 31, 2008 that is likely to have a material impact on
the business, financial position, results or assets and liabilities of
the Group.
3.N. Annual financial statements
Having incorporated its activities as operating subsidiaries in
2002, Valeo SA is now the Group’s holding and cash management
company only.
Valeo SA’s net financial income for the year amounted to 62 million
euros, up from 232 million euros in 2007. The sharp decrease is due
mainly to an increase of 169 million euros in charges for impairment
on non-consolidated investments. Net exceptional items were a loss
of 12 million euros in 2008 compared with a loss of 145 million
euros in 2007. Net exceptional items in 2007 included 100 million
euros in losses on disposal of investments in Valeo Vision Belgique
and Valeo Systèmes de Liaison and 45 million euros in non-recurring
charges, mainly on outlays for strategic transactions, disposal costs,
and provisions for labor litigation.
PAGE 70
Income tax in 2008 yielded a net tax benefit of 1 million euros,
compared with a benefit of 15 million euros in 2007. In 2008 Valeo
SA booked an additional provision of 14 million euros to cover the
risk of having to pay tax benefits over to tax-consolidated entities.
Valeo SA’s net income for the year amounted to 40 million euros,
compared with 44 million euros in 2007.
Valeo SA stockholders’ equity stood at 3,210 million euros at
December 31, 2008, compared with 3,258 million euros one year
earlier. The variation in equity reflects primarily net income for the
year less dividends declared.
Management report
Composition of the Board of Directors during the year ending December 31, 2008
3
3.O. Composition of the Board of Directors
during the year ending December 31, 2008
Number
of Valeo
shares
Name
held
Thierry Morin 31,295
57 yrs
First
appointed
March 21,
2001
Start of
current term
of office
May 21,
2007
Main
position
End of current with the
term of office Company
General
Chairman
Shareholders’ and Chief
Meeting to
Executive
be called to
Officer
approve the
2010 financial
statements
Behdad
Alizadeh
47 yrs
100
June 20,
2008
June 20,
2008
General
Shareholders’
Meeting to
be called to
approve the
2011 financial
statements
Gérard Blanc
66 yrs
150
May 21,
2007
May 21,
2007
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Other directorships and positions
held in companies other than
Main position(s)
Valeo subsidiaries during the past
outside the Company five years
▪ Chairman, Valeo
▪ Chairman of the Board of
Service, Valeo
Directors, INPI*
▪ Director, CEDEP*
Finance, Valeo
▪ Director, Arkema*
Thermique
Habitacle, Valeo
SPA, Valeo
Japan Co. Ltd,
and Valeo (UK)
Limited
▪ Legal Manager,
Valeo
Management
Services, Valeo
Auto-Electric
Beteiligungs
GmbH, Valeo
Germany Holding
GmbH, Valeo
Grundvermögen
Verwaltung
GmbH, and
Valeo Holding
Deutschland
GmbH
▪ Director, Valeo
Service España
SA, Valeo
Iluminacion
SA, and Valeo
Termico SA
President, Pardus
▪ Partner, Pardus Capital
Europe SAS
Management LP
▪ Member of the Supervisory
Board of Atos Origin*
▪ Member of the Board
of Directors, Governor’s
Committee on Scholastic
Achievement *
▪ Head of Merchant Banking,
Bank of New York
▪ Member of the Board of
Directors, Caliber Collision
Centers
▪ Member of the Board of
Directors, Mid West Wholesale
Distribution
▪ Director, Sogeclair*
▪ Executive Vice President,
Programmes, Airbus
▪ Executive Vice President,
Operations, Airbus
* Current directorships and positions.
PAGE 71
3
Management report
Number
of Valeo
shares
Name
held
Daniel Camus 200
57 yrs
Pascal
Colombani
63 yrs
100
First
appointed
May 17,
2006
Start of
current term
of office
May 17,
2006
May 21,
2007
May 21,
2007
PAGE 72
Main
position
General
Shareholders’
Meeting to
be called to
approve the
2009 financial
statements
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Main position(s)
EDF Group
Chief Operating
▪ Chairman of the Board
Officer in charge
of Directors, EDF Energy
of finance and
(United Kingdom)* and EDF
international
International*
development,
▪ Director, Edison (Italy)* and
EDF Group
Transalpina di Energia (Italy)*
Board of EnBW (Germany)*
Outside the EDF Group
Board of Dalkia SA*,
Morphosys (Germany)*, and
SGL Carbon (Germany)*
Senior Advisor,
▪ Chairman of the Supervisory
AT Kearney
Board, Areva
Directors, ENS Cachan
▪ Chairman, the Association
Française pour l’Avancement
des Sciences
▪ Director, British Energy Group
Plc*, Alstom SA*, Rhodia SA*,
Technip SA*, EDF, IFP, Cogéma,
Fondation C-Génial*, and
Fondation « Pour le Partage du
Savoir »*
▪ Senior Advisor at Detroyat et
Associés, and Arjil Banque
▪ Member of the Académie des
Technologies*
Management report
Name
Jérôme
Contamine
51 yrs
Pierre-Alain
De Smedt
65 yrs
Number
of Valeo
shares
held
2,000
10,000
First
appointed
May 17,
2006
Start of
current term
of office
May 17,
2006
March 07,
2005
May 21,
2007
Main
position
General
Shareholders’
Meeting to
be called to
approve the
2009 financial
statements
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Main position(s)
outside the Company
Senior Executive
Vice-President, Veolia
Environnement (until
1/16/2009)
Chairman, FEBIAC
(Belgian Federation
of the Car and Twowheeler Industries)
and director of various
companies
3
five years
Veolia Group
Directors, VE Services-Ré
▪ Chairman, VE Europe Services
(Belgium)*
▪ Director, Veolia Transport*,
Veolia Propreté*, VE
Services-Ré*, Veolia UK
(United Kingdom)*, Veolia
Environmental Services Plc
(United Kingdom)*, Veolia
ES Holdings Plc (United
Kingdom)*, Veetra*, and Venac
(United States)
▪ President, Venao (United
States)
▪ Chairman, Venao (United
States)*
▪ Managing Director, Veolia UK
(United Kingdom)*
▪ Chairman, VE IT*
▪ Member of the Management
Board, Vivendi Environnement
Board of Veolia Eau* and
Dalkia France*
▪ Member of Dalkia’s A and B
Supervisory Boards*
Outside the Veolia Group
▪ Director, Rhodia*, FCC Espagne,
and Cementos Portland
Espagne
▪ Director, Belgacom*, CNP
(Compagnie Nationale à
Portefeuille/Albert Frère
Group)*, Deceuninck Plastics*,
Alcopa*, and Avis Europe Plc*
▪ Member of the Executive
Committee and Director,
FEBIAC (Belgian Federation
of the Car and Two-wheeler
Industries)*
Committee, FEB (the Belgian
Business Federation)
PAGE 73
3
Management report
Name
Philippe
Guédon
75 yrs
Number
of Valeo
shares
held
100
First
appointed
March 31,
2003
Start of
current term
of office
May 21,
2007
Lord Jay of
Ewelme
62 yrs
100
May 21,
2007
May 21,
2007
Helle
Kristoffersen
45 yrs
100
March 22,
2007
May 21,
2007
PAGE 74
Main
position
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Main position(s)
Managing
▪ Chairman and Chief Executive
Partner, Espace
Officer,Matra
Développement
Board, Matra Automobile
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Senior Vice President
Vertical Markets,
Alcatel-Lucent
(from 1/1/2009)
Member of the House
of Lords
▪ Director, Crédit Agricole*
▪ Non-executive Director,
Associated British Foods (ABF)*
and Candover Investments Plc*
▪ Independent member of the
House of Lords*
▪ Chairman, House of Lords
Appointment Commission*
▪ Vice-Chairman, Business for
New Europe*
▪ Chairman, Merlin
(international medical
charity)*
▪ Permanent Under Secretary to
the Foreign & Commonwealth
Office
▪ Trustee of the British Council
▪ Vice President, Economic
Analysis, Alcatel group
▪ Vice President Corporate
Strategy, Alcatel-Lucent (until
12/31/2008)
Management report
Name
Georges
Pauget
61 yrs
Number
of Valeo
shares
held
100
First
appointed
April 10,
2007
Start of
current term
of office
May 21,
2007
Main
position
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
3
Main position(s)
Crédit Agricole Group
Chief Executive
▪ Chairman of the Board
Officer, Crédit
of Directors and of the
Agricole SA
Remuneration Committee of
Calyon*
▪ Chairman of the Executive
Committee, Crédit Agricole SA*
Directors, LCL – Le Crédit
Lyonnais*
▪ Chairman, CEDICAM
▪ Chairman and Member of the
Executive Committee, TLJ SAS
▪ Chairman, Uni-Editions
▪ Chief Executive Officer and
Chairman of the Executive
Committee, LCL – Le Crédit
Lyonnais
▪ Chief Operating Officer,
Member of the Executive
Committee and Director of the
Regional Bank Division, Crédit
Agricole SA
▪ Director, Bankoa, Foncaris,
Mercagentes SA, SVB, SACAM,
SAPACAM, SCI CAM, Crédit
Agricole Indosuez, Crédit
Agricole Indosuez Cheuvreux,
Crédit Agricole Indosuez
Cheuvreux Gestions, Crédit
Lyonnais, Banca Intesa,
Banque Gestion Privée
Indosuez, Europay France, and
Holding Eurocard
▪ Director and Vice-Chairman,
Pacifica
▪ Director and Vice-Chairman,
Predica
▪ Member of the Executive
Committee, FNCA
Outside the Crédit Agricole Group
▪ Chairman, French Banking
Federation (Fédération
Bancaire Française)*
▪ Chairman, Servicam
▪ Chairman, Union des
Assurances Fédérales
▪ Vice-Chairman and Member
of the Executive Committee,
French Banking Federation
(Fédération Bancaire
Française)*
▪ Permanent representative
of Crédit Agricole SA as a
member of the Supervisory
Board, Fonds de Garantie des
Dépôts
▪ Permanent representative of
LCL – Le Crédit Lyonnais as a
Director, Fondation de France*
▪ Member of the Board, Danone
Communities Sicav*
▪ Representative of Crédit
Agricole SA, Member of the
Partners Club, TSE*
PAGE 75
3
Management report
Name
Erich Spitz
78 yrs
Number
of Valeo
shares
held
144
First
appointed
June 24,
1987
Start of
current term
of office
May 21,
2007
PAGE 76
Main
position
General
Shareholders’
Meeting to
be called to
approve the
2010 financial
statements
Main position(s)
Thales Group
Advisor
▪ Chairman, Thales Avionics Lcd*
▪ Director, Thales Corporate
Ventures*
Outside the Thales Group
Board, Novaled* and Riber
Board, eERA
Board of Riber*
▪ Correspondent member of the
Académie des Sciences*
▪ Member of the Académie des
Technologies*
▪ Honorary Chairman of the
European Industrial Research
Management Association
(EIRMA)*
Management report
Environment and sustainable development: management and performance
3
3.P. Environment and sustainable development:
management and performance
In 2007 awareness of the major environmental challenges facing our
planet mounted considerably across all stakeholder groups. In 2008
constraints stemming from the disruption of financial systems and its
impact on our economic and social organizations came to the fore.
The automotive industry is one of the sectors most affected.
These events confirm the relevance of the strategic choices Valeo
has made, especially investing in technological innovations and
developing a range of environmentally friendly products and
systems. In 2008 these future-oriented solutions generated more
than 30% of Valeo’s sales.
This chapter presents Valeo’s commitments on the environment and
sustainable development. These are illustrated by the results the
Group has achieved in preserving the environment and managing
natural resources in a sustainable way. To measure its environmental
performance, Valeo focuses on its production sites and looks at
performance from a life cycle standpoint, covering products all the
way from the design phase through the manufacturing, use, and
end-of-life phases. The environmental indicators presented in this
chapter were established on the basis of the provisions of Articles
L225-102-1 and R225-105 of France’s Commercial Code.
Valeo is thus more than ever determined to follow a proactive policy
on environment, health, and safety issues. Valeo has set the same
objectives for its subsidiaries in France and abroad.
3.P.1.
Environment and sustainable development: strategy
and performance management
3.P.1.1. Valeo and worldwide environmental
and sustainability challenges
Like other automotive equipment suppliers, Valeo must seek to
reduce its consumption of raw materials, natural resources, hazardous
substances and energy, as well as to decrease its emissions of CO2.
Valeo must rise to the challenge of making its processes and its
buildings more energy-efficient and seek to make growing use of
renewable energy sources. These challenges apply just as much in
the product design phase as they do in the upstream production
and transport phases.
PAGE 77
3
Management report
By joining the UN Global Compact in 2003, Valeo reaffirmed its earlier
commitment to a sustainable development approach that integrates
environmental and social responsibility with corporate engagement.
That commitment was first enshrined in the Environment Charter
that the company drew up more than ten years ago.
At each Valeo site, a Health, Safety, Security, Environment (HSSE)
manager is responsible for practical application of Group HSSE
procedures. The HSSE manager brings his or her expertise to operating
managers at the site and monitors compliance with regulations and
Valeo standards by means of internal audits.
Internally, the Environment Charter is part of an integrated risk
management system covering the environment, health and safety
at work, personnel and property security, and security of information,
buildings and equipment.
All of the Group’s directives in these areas are gathered in the
Valeo Risk Management Manual, and all of them apply with the
same degree of rigor at every site. For nearly 20 years, the Group
has tracked its performance under this continuous improvement
approach by having regular inspections performed by outside
consultants. In 2008 the Manual was expanded to address safety
and other issues relating to heavy vehicle traffic at Group sites.
Also in 2008 a Sustainable Development Charter was drawn up to
respond to the human, environmental and economic issues that
involve the various Group stakeholders: employees, customers,
shareholders, suppliers, local communities and public authorities.
This Sustainable Development Charter sets out Valeo’s commitments
on fifteen points, ranging from improving its environmental
performance to disseminating and observing its code of ethics,
deploying management systems and promoting the same approach
among all stakeholders.
Reconciling the car and the city
Quarterly performance monitoring
Valeo is also contributing to the debate on reconciling the
automobile and society. For several years Valeo has been
engaged alongside those who are working to bring forth new,
socially responsible approaches to the automobile. In 2008
the first two Valeo forums brought together car makers, parts
suppliers, public authorities, urban planners and users for
discussions on the topics «Cars and cities» and «Safety: can
technology do everything?». Other forums will be scheduled
on a regular basis in the future (www.forumvaleo.com).
In 2006 the Group implemented quarterly reporting on environmental
indicators, which has since become a useful tool for managing
environmental performance at the Group’s sites.
3.P.1.2. A dedicated Health Safety Security
Environment organization
The Group’s Risk Insurance Environment department has established
a dedicated organization that spans all Group departments.
This organization is assisted by a designated coordinator for each
product family.
PAGE 78
The coordinators provide technical support to the HSSE manager
at each site and report what they learn to the Group’s Risk
Management Committee, the central oversight body within the
Risk Insurance Environment Department.
Results by site and by Product Family are submitted annually to
general management and Product Family management in order to
identify best practices and determine improvement plans. Detailed
consolidated performance data is presented in the Environmental
Performance section (3.P.2).
In January 2008 Valeo’s senior managers examined the Group’s
environmental responsibilities on the occasion of their half-yearly
meeting. Concrete performance targets in sustainable development
were set for a three-year period, 2008–2010. These targets resulted
from the Risk Management Committee’s work on consolidating and
comparing performance at the Group’s sites. Group senior managers
were made to understand the importance of achieving four major
objectives: reducing consumption of water and energy, reducing use
of packaging materials, and producing less waste. The performance
targets are very ambitious; they are presented below in comparison
with actual performance in 2007.
Management report
Energy consumption (MWh/€m)
Packaging materials consumption (kg/€m)
Water consumption (M3/€m)
Waste reuse rate (%)
3
Analysis of the 2008 indicators shows that these objectives have been partly achieved: approximately half of the sites met their target
for the year.
Even so, having ambitious targets in these four areas is helping Valeo to improve its overall performance compared with 2007.
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Management report
Compliance with the REACH Regulation
■
European Regulation 1907/2006/EC of December 18, 2006,
commonly known as REACH, established a single system of
Registration, Evaluation and Authorization of CHemicals. It came
into force on June 1, 2007, replacing more than forty directives and
regulations.
Implementation of the REACH organization
The REACH Regulation is aimed at increasing knowledge and
awareness of the properties of chemicals manufactured or marketed
in the European Union so as to understand and contain the risks of
using them and, where necessary, restrict or ban their use.
For the purposes of the REACH Regulation, the Valeo Group is
considered primarily a downstream user of the chemicals employed
in its operations. As such, Valeo must take steps to ensure safety
along its supply chain and in its business. It must make an
inventory of chemicals used as ingredients of the products that it
makes or needed to keep its industrial plants working. It must also
communicate with participants in its supply chain, get information
from its suppliers, and comply with applicable control measures.
To meet the requirements of the REACH Regulation, Valeo followed
the recommendations of the Automotive Industry Guideline
published in 2007 and set three objectives for 2008:
■
implement a dedicated REACH organization;
■
ensure that Group procurement is compliant;
implement special handling of chemicals identified as “substances
of very high concern” in the list published by the European
Chemicals Agency on October 28, 2008.
A REACH correspondent has been designated in each Valeo entity
and at each Valeo factory. The Valeo Group has thus set up a
network of 242 REACH Managers. The R&D, Procurement and Quality
departments at Valeo have been given responsibility for ensuring
full knowledge on the product side and for communicating on the
subject with outside actors.
REACH Managers have been identified at all of the Group suppliers
involved.
Tools for training in REACH requirements have been made available
to all those involved within the Group.
Ensure that Group procurement is compliant
Efforts in 2008 were devoted to identifying chemical substances and
preparations purchased, or contained in products purchased, in the
European Union or imported from countries outside the European
Union. Also identified and listed were all Valeo products containing
chemicals that could be emitted into the environment under normal
conditions of use.
Lastly, all suppliers affected by the REACH Regulation were contacted by mail and asked to state their intentions regarding registration of the
chemicals identified by Valeo.
A tracking system was set up within the Group to monitor all of this data comprehensively and in full detail across the entire relevant scope.
The table below shows the good results achieved by the Group in this stock-taking phase:
Action
Implementation of the Global REACH Indicator Tool
% covered
100%
Result
Tool fully operational (June 2008)
100%
707 substances
7,945 preparations
None identified
Identification of chemical substances and preparations purchased in
the EU (72 plants)
Identification of chemical substances potentially emitted by Valeo
products
Identification of chemicals imported from outside the EU
100%
Letter of intent to register sent to the suppliers concerned
100%
Identification of suppliers’ intentions
100%
PAGE 80
100%
4 substances / 17 preparations
All suppliers of these products have
declared appointment of an exclusive
representative based in the EU
1,676 suppliers
1,676 responses
Management report
Handling of «substances of very high concern» (SVHC)
Valeo’s objective is to be able to trace the presence of these
substances in any products bought or sold by the Group. To this end,
in 2008 Valeo proactively asked questions of its suppliers regarding
SVHCs. Thus, when the list of substances requiring authorization is
released, Valeo will have a head start on drawing up action plans for
satisfying the requirements of the Regulation and the requirements
of its customers.
In 2009 the Valeo Group will introduce the new measures
necessary for stringent management of SVHCs, in compliance with
regulatory and customer requirements. Valeo will enhance safety
and environmental protection in its supply chain by making sure
that suppliers fulfill their obligations, in particular the obligation to
register chemicals where required. Valeo will also incorporate REACH
Regulation requirements as part of its internal procedures for R&D,
Purchasing, Quality, etc.
3.P.1.3. Life cycle environmental management
Valeo’s comprehensive environmental approach covers the entire life
cycle of the product up to and including end-of-life disposal.
Product innovation: priority given to CO2 reduction
and lightweight design
Valeo’s research and development programs are oriented along two
main lines:
■
anticipating technological breakthroughs, in particular with work
on electric vehicles;
■
continuously enhancing performance of combustion-engined
vehicles. For these purposes, Valeo develops innovative products
to optimize flows of electric current, heat and mechanical energy
within the vehicle.
Improving the environmental performance of products over the
various stages of their life cycle, especially during the in-service
phase, has to begin with the design phase. For this reason, Valeo
has long included energy consumption, weight, choice of materials
(recycled/recyclable) and elimination of undesirable substances
among its project evaluation criteria.
Since 2007 Valeo has gone even further by adopting a written
Eco-design Standard drawn up by a cross-functional eco-design
committee. This directive guides designers in assessing the full
3
range of environmental impacts during the full life cycle of the
product being designed: type, number and quantity of raw
materials, production, packaging, transport and distribution, use and
maintenance, disassembly, recycling, reuse, reclamation, elimination.
The designers are provided with a checklist-type tool to help them
include all these dimensions in a new product development project.
In 2008 the Eco-design Standard was used as a product development
guide. Today, all projects in the development phase can be conducted
in accordance with the recommendations of this Standard.
In addition to internal development programs, Valeo is also
participating in numerous collaborative European R&D programs.
Among these 47 projects, 30 are devoted to developing all-electric
vehicles and associated electronics.
Optimized logistics and packaging
Valeo’s business operations are highly transport- and packagingintensive, with inbound supplies of raw materials and parts from
suppliers or other Valeo sites, and outbound deliveries to dealer
networks and automaker customer sites.
On the transport front, Valeo has initiated a fundamental study
aimed at identifying new solutions for logistic and environmental
optimization: managing the (upstream) subcontracting chain,
optimizing flows between sites, coordinating with order givers. The
transport study conducted in 2007 compiled results for 30% of the
sites. Valeo found that 50% of its sites’ CO2 emissions came from
transport.
In 2008 Valeo followed up on this finding by working directly with
the transport companies, some of whom had systems to calculate
their emissions. Carriers were sent a Valeo questionnaire on this
subject. The twenty or so questions asked carriers to indicate their
objectives and practices as to choices of mode (road, rail, inland
waterway, air, sea); compliance with the EU’s Euro standards, which
set limits on pollutants emitted by vehicles; policies on driving
and fuel consumption; internal organization; training; use of new
technologies and innovation.
It has proved to be quite difficult, however, to get precise quantitative
information on emissions attributable to transport of Valeo products
alone. In any case, Valeo continues to work with the carriers so that
ultimately it will be able meet its objective of knowing where it
stands in the fight against climate change.
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Management report
The Valeo generic plant: Sustainable
development applied to the production site
The life cycle of a site consists in finding a suitable location, building
the site, operating the site, and ultimately closing or selling it. Since
1996 Valeo has been developing and extending its generic plant
concept covering all these phases. It has issued the Valeo Factory
Design guide setting out precise design rules.
Some of these rules are:
equipment safety and general security. If soil or groundwater
pollution is suspected during this phase, it is investigated and
appropriate action is taken.
■
When a business is sold or shut down, Valeo systematically
performs an audit, usually along with an investigation of the
soil and groundwater, to determine whether any pollution has
occurred during the operational phase. Any pollution detected is
treated immediately. If a site is closed permanently without being
transferred to another owner, all waste, raw materials, products
and equipment are removed, and site maintenance continues
pending the arrival of a new occupant.
■
plants are usually located close to customer sites. Plants are sited
in existing industrial zones or ones that are under construction, to
benefit from local infrastructure and skilled subcontractors ;
■
when choosing plant locations, the Group systematically
performs audits to determine (i) whether there are any potential
environmental liabilities such as soil or groundwater pollution;
(ii) whether the surrounding area is hazardous or particularly
sensitive; and (iii) whether there are risks of natural disasters
such as floods or earthquakes ;
Continuous improvement at all plants
construction or rehabilitation of plant facilities is done according
to the specifications set out in the Valeo Factory Design guide.
These specifications include sustainable development criteria
relating to factory construction, working conditions for employees,
plant operating conditions, compliance with regulations, Valeo
risk prevention standards, optimization of resource consumption,
and reduction of emissions and solid waste.
Since 1998 Valeo has been expanding ISO 14001 certification to all
of its majority-owned sites as well its R&D and distribution facilities.
At year-end 2008, 108 sites, or 88% of all Valeo sites, were ISO
14001 certified.
■
Over and above the constraints and specifications set out in this
guide (architectural, environmental, organizational, etc.), the key
requirement is formation of a “project team”, which from the
outset includes consultants in environmental and equipment safety
matters. The project team is tasked with applying the best possible
sustainable development solutions at each stage in the life cycle of
the site (construction, operation, expansion, closure).
In 2008 the Group built two new factories based on this generic
plant concept, one in Nanjing, China, for the Transmissions Product
Family, the other in Kosice, Slovakia, for the Security Systems Product
Family. Another new plant is under construction in San Luis Potosi,
Mexico, for the Transmissions Product Family.
■
PAGE 82
The operational phase of each site is governed by Group directives
concerning employee health and safety, the environment,
To demonstrate its commitment to do better every year on reducing
its environmental impact and improving the health and safety of
its employees, Valeo has introduced a number of independently
certified management systems.
The deployment process for OHSAS 18001 certification was begun
during 2005. Expanding this certification to all sites has been one of
the Group’s landmark projects in this area. In 2008 the project gained
scale as 11 new sites became OHSAS 18001 certified, raising the
total to 76% of all sites and putting Valeo in the forefront in terms
of workplace health and safety management.
To foster continuous improvement, Valeo provides sites with intranet
access to various tools. A risk management self-assessment tool
for sites was developed with the Product Family HSSE coordinators in
2007. It was rolled out in early 2008, and Valeo has been gathering
feedback in order to improve it. This effective, well-received site
management tool provides each site with an assessment of how
well it is containing its environmental, health and safety risks. In
2009 Valeo plans to extend this tool to areas beyond environment,
health and safety, in particular for site self-assessment in terms of
equipment safety and security.
Management report
Percentage of ISO 14001
and OHSAS 18001 certified sites
3
Safety Awareness Days are organized every year in every country
at selected Group sites. At these one-day events, HSSE managers
from all sites in the country are brought together to be made aware
of issues relating to the environment, workplace health and safety,
and equipment and building safety and security. They are focused
mainly on practical tasks at the production sites, to show concretely
how to apply Group directives on these matters.
Ensuring operations safety and equipment security
Group policy has always been to assure the highest possible levels
of protection at its sites against natural disasters and technological
risks. This is why:
The decrease in the percentage of ISO 14001 certified sites is
explained by changes in scope of the Valeo Group (four certified
sites were deconsolidated in 2008) and by a calculation error in
the 2007 indicator (three certified sites had been deconsolidated
but were wrongly included).
The percentage of OHSAS 18001 certified sites increased to
76%.
The total number of certified sites increased, with one new
ISO 14001 certification obtained by the Osny site (France) and
eleven new OHSAS 18001 certifications: Chonburi and Rayong
(Thailand), Mioveni (Romania), Kosice (Slovakia), Toluca, Rio
Bravo and Queretaro (Mexico), Osny (France), Sainte-Florine
(France), Ben Arous (Tunisia), Atsugi (Japan).
The total number of hours of environmental training increased
in 2008. It had been declining gradually for three years as the
ISO 14001 management systems matured and priority was
given to training in workplace health and safety. The increase is
attributable to the environment component of training in sustainable
development. In 2008 the number of hours of environmental
training was 41,313.
■
the great majority of Valeo’s sites are classified HPR (Highly
Protected against Risk) and have an automatic sprinkler system
to suppress fire as well as teams that receive regular training in
dealing with all kinds of risk situations;
■
all sites in seismic risk zones have been built or retrofitted to
comply with the most recent seismic regulations;
■
Valeo sites are located in areas not susceptible to flooding or are
equipped with systems for protecting against flood risks;
■
new Valeo sites are located far from sites representing a significant
potential risk (such as the plant in the 1976 Seveso disaster) that
could have a domino effect on them;
■
the Valeo Risk Management Manual contains a special directive
on crisis prevention and emergency plans for different situations.
This Group directive requires each site to have drawn up an
emergency plan for dealing with foreseeable disasters.
As part of its comprehensive risk management policy, Valeo in 2007
issued the finalized version of the Valeo Emergency and Recovery
Management (VERM) tool devoted to preventing emergency
situations and managing them when they do occur. This is a
framework tool to help design and implement emergency, crisis
management plans and recovery plans as an integral part of any
Valeo site’s risk management system.
The VERM approach unifies procedures for managing the emergency
situations anticipated in the Group’s reference lists and thereby
bolsters the site’s ability to act in any kind of crisis.
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Management report
In 2008 this tool was deployed at all sites in France and was
translated into English for deployment worldwide in 2009. Sites
will be audited to verify compliance.
On the security front, Valeo pushed ahead with site security measures
in 2008 (access control, videosurveillance, intrusion detection)
to improve the quality of its security systems, and physical and
virtual intrusion tests were conducted to verify effectiveness. The
fundamental aspects of health, safety and security performance at
the sites are tested on an ongoing basis in order to keep making
improvements.
In 2008 the Risk Insurance Environment department finalized an
external audit report format called the Sustainable Development
Report. This format combines the subjects of the environment
and workplace health and safety reports and adds to them the
social and societal aspects of sustainable development. This report
format will be developed in 2009. Numerous societal initiatives
have been undertaken at Valeo Group sites. A few of these are
described below:
Health, prevention and education:
■
Regular checks on compliance
with regulations and Valeo standards
Valeo’s risk management policy is set out in the Group’s Risk
Management Manual and in Application Guides for use at the
sites. The risk management procedures are focused on ensuring
that operations comply with Group standards and the regulations
in force in each country.
This entails regular inspections by independent external consultants,
at the request of the Risk Insurance Environment department.
In existence for nearly 20 years, Valeo’s audit program is a major
component of its risk reduction policy. Every site is audited at least
once every three years.
The purpose of these on-site audits is to evaluate the site’s
performance and progress in the following four areas:
■
environment;
■
workplace health and safety;
■
safety of buildings and equipment;
■
security of equipment and data.
Based on audit findings and a ranking of risks, sites draw up action
plans to improve their performance. Progress on action plans is
reported semiannually to the Group’s Risk Insurance Environment
department.
After every external audit, each site is graded on objective criteria
in the four areas. The four grades are then aggregated to give a
rating for each site.
PAGE 84
The Itatiba site in Brazil (Valeo Climate Control, Valeo Engine
Cooling) has established a medical center offering employees
periodic general medical examinations.
Humanitarian aid
■
The San Luis Potosi site in Mexico and the Troy site in the United
States (Valeo Wiper Systems) organize drives to collect clothing
and toys for orphans. Collections are also organized to provide
food and water aid to communities stricken by natural disasters
and to schools with limited resources.
Environmental protection awareness
■
The Créteil site in France (Valeo Security Systems) distributes
the green paper produced by the French environmental agency,
ADEME, to all employees in order to raise awareness of everyday
actions, at work and at home, to protect the environment.
■
The Sao Paulo site in Brazil (Valeo Security Systems) is one of many
Valeo sites that has planted trees in observance of international
nature protection week. Employees planted trees all around the
plant to help maintain a balanced environment.
■
The Amiens site in France (Valeo Transmissions) has partnered
with the Kangoroule Community to develop a car-pooling program
in which several local employers are participating. Employees of
the participating companies can go to the Community’s website
to find and connect up with others seeking to share the commute
to work.
Management report
3
2009 Group objectives
The Group has set new objectives for 2009 regarding sustainable development performance management, taking into account all parameters
of the life cycle.
The table below presents the 2009–2010 action plan in this regard.
Key:
■ objective achieved,
■ on track,
2008 objective
■ behind schedule
Status
Accomplished
2009–2010 projected
Eco-design Standard written and
distributed
At December 31, 2008, 88% of
sites were ISO 14001 certified
At December 31, 2008, 76% of
sites were OHSAS 18001 certified
Report format established for an
external sustainable development
audit, tested with a pilot audit
Deploy use of the Eco-design Standard to all
products in the development phase
Achieve certification for all Valeo sites
Finalize Group standards on product
eco-design
Obtain ISO 14001 certification at all sites
■
Continue expansion of OHSAS 18001
certification to all sites
Develop an integrated audit approach for
environmental, workplace health and safety,
and societal issues
■
Expand the scope of data gathering on
transport to encompass the entire Group
and organize a task force to come up
with action plans for reducing transportrelated emissions
■
20-item questionnaire developed
and set to transport companies
Gather data on carriers’ objectives
and achievements in reducing
greenhouse gas emissions
Draw up site-specific action plans to align
performance with the results of sites posting
the lowest impact/net sales ratios.
■
Record best practices at sites
■
■
Achieve certification for all Valeo sites
Deploy the report format and gather data
on sustainable development initiatives at
Group level
Use this report as a management tool on
which to base continuous improvement
process
Continue gathering data and refine the
compilation of carriers’ initiatives to limit
their impact on the climate
Continue actions to reduce transport-related
CO2 emissions and improve transport
efficiency (reduce road transport, expand
accompanied intermodal)
Map strengths and weaknesses so as to
develop clear policy and guidelines for
coordinated action
Starting in 2009, the Group intends to conduct reviews on purchases of durables and on carpooling.
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Management report
3.P.2.
Environmental Performance
3.P.2.1. Reporting on environmental
performance
Reporting scope
The environmental data published in this report is for all Valeo Group
production and distribution sites worldwide, excepting those of the
minority-owned affiliates. The financial data reported by the Group
(sales, research and development expenditure, etc.) is checked for
consistency against the data reported by the sites.
The environmental indicators for 2008 cover a total of 119 sites,
including eight advanced supplier sites, eight Valeo Service sites
and one storage site:
■
advanced supplier sites are manufacturing sites located at an
automaker customer site;
■
sites devoted exclusively to research and development or to office
work and sites acquired, sold or closed during the year are not
included;
■
companies 50% controlled by Valeo are included proportionately,
at 50%. Companies in which Valeo has more than 50% control
are included in full, at 100%.
Presentation of indicators
Most indicators are expressed in terms of total quantity as well as
quantity consumed or emitted per million euros. Quantity per million
euros is calculated by dividing total quantity by total sales for the
relevant sites.
The unusual time pattern of activity in 2008 – marked by a steep
fall-off in activity and sales in the fourth quarter – necessarily affected
in the environmental indicators in diverse ways:
■
decreases in “gross” indicators (total quantities) more or less in
proportion to the decrease in activity;
■
deterioration of environmental performance ratios: in terms of
equivalent absolute performance (constant total consumption of
water, energy, etc.), the sharp contraction in sales does not reduce
environmental impacts in the same proportions, because industrial
production remains in operation. Ratios of absolute performance to
sales are therefore affected negatively, if somewhat artificially.
PAGE 86
The representativeness of each indicator is measured by a response
rate. This rate is expressed as total sales of sites responding for that
indicator divided by total sales of all sites in the reporting scope.
As in previous years, the responses from the sites were consolidated
and checked for consistency by an external body in order to ensure
quality and representativeness.
The Valeo Group’s environmental performance in 2008 is presented
subject by subject in the following pages. In each subject area,
the strategy adopted by Valeo on product design and site
management is outlined. Charts with comments are presented to
give an at-a-glance view of Group performance and trends over the
past five years. Details are also given for the resources applied at
Group level and local level. Lastly, text boxes outline the forthcoming
measures that Valeo has chosen in order to keep making progress
on its environmental endeavors.
3.P.2.2. Energy consumption and global
warming
Carbon dioxide (CO2) is one of the six greenhouse gases (GGs) that
are building up in the atmosphere and causing global warming.
The transport sector accounts for about a quarter of GG emissions
worldwide, with road transport contributing 18%. This figure is
for vehicle usage alone and does not include emissions arising
from energy consumed in producing components and assembling
vehicles at the factory. With the population growth and economic
growth expected over the coming decades, strong demand for
individual mobility will have to be balanced against increasing
scarcity of fossil fuels and the ever more pressing need to combat
global warming.
Valeo contributes in two ways: (i) by developing products and
technologies to reduce vehicle fuel consumption, and thereby
CO2 emissions; and (ii) by implementing cleaner, energy-saving
manufacturing processes at its production sites.
Management report
Developing products to reduce
vehicle fuel consumption
One expression of Valeo’s long-standing commitment to
environmental protection and the fight against global warming is
3
its deliberate choice to develop environmentally friendly products
and systems. Taken together, recent Valeo innovations can reduce
vehicle fuel consumption, and thus CO2 emissions, by up to 40%.
Up to 40% reduction in fuel consumption
Power on demand
Technology
Reduction
High-performance air-conditioning system
3%
TM
3–5%
THEMISTM valve
Dual-clutch transmission
with electromagnetic actuators
2–4%
Exhaust gas recirculation (EGR) cooler
StARS micro-hybrid system (stop-start
with regenerative braking)
5–7%
6–15%
e-Valve system
15–20%
UltimateCooling
Thermal management
Transmission automation
Air intake
Hybridization
Engine control
The Valeo e-Valve technology is based on a variable electromagnetic
valve control system that replaces the conventional mechanical
system. It yields fuel savings of up to 20%, improved engine
performance and enhanced driving comfort.
The principle of the StARS starter-alternator is the system’s
ability to stop and restart the engine instantly and silently. StARS
saves fuel (from 6% to as much as 15%) and significantly reduces
pollutant emissions when the vehicle is stopped at a red light or
in a traffic jam.
The main function of EGR cooling systems is to reduce the formation
of nitrogen oxides in diesel engines. Recently, EGR cooling systems
have been developed for gasoline engines to achieve fuel savings
of 5% to 7% through higher compression ratios.
An alternative to hydraulic automatic transmissions, the dual dry
clutch has separate clutches for odd and even gears. This solution
combines the comfort of an automatic transmission with the lower
fuel consumption of a manual transmission (4% to 6% reduction
in CO2 emissions).
4–6%
The THEMISTM valve, part of the engine cooling system, manages the
flow of coolant through the engine, the radiator and the passenger
compartment heating system. Fuel savings of 2% to 4%, reduced
pollutant emissions and improved performance of climate control
systems are a few of the many advantages of the THEMISTM valve.
UltimateCoolingTM is a new cooling system that optimizes
thermal energy management by having all fluids transit through
a single cooling circuit. Besides fuel savings of 3% to 5%,
the UltimateCoolingTM system also enables improved vehicle body
design by reducing front overhang (by 20% to 40% compared with
conventional cooling systems).
Valeo’s high-efficiency air-conditioning system features
innovative lightweight components with a computerized control
algorithm for optimum efficiency at all times. This reduces energy
consumption by around 3% and leads to significant fuel savings.
In the years ahead, the Valeo Group will continue to pursue
product innovation of the kind favored by the European
environment. Automotive components that can reduce vehicles’
CO2 emissions are set to become increasingly widely adopted.
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Management report
Energy optimization at Valeo sites
In contrast to the rising trends of recent years, 2008 shows a
marked reduction in energy consumption, both absolutely (GWh)
and relative to sales (MWh/€m). These results are a reflection of
the Group’s strong commitment to curb its energy consumption,
as manifested in the three-year targets set for each of its sites.
Energy consumption
The energy mix is relatively steady, with use of electricity holding
around 65% and gas around 32%. This reflects the Group’s policy
of using primarily these two energy sources, leaving fuel oil to
play only a marginal role.
Actions to reduce greenhouse gas emissions are taken at Group level
and by each site. Valeo has been measuring fossil fuel combustion
emissions since 2001. Energy optimization is specifically included
in the Valeo Group generic plant concept. Building climate control,
ventilation, lighting and process energy requirements are planned
from the initial plant design stage to achieve control over operating
energy expenditure. Progress has also been made in the design of
combined heat and power (CHP) cogeneration systems. But since
processes and resources vary considerably from site to site, each site
must develop its own solutions.
CO2 Emissions (direct emissions only)
Response rate
2003
2004
2005
2006
2007
2008
98.3%
97.1%
98.7%
96.2%
99.7%
98.9%
Breakdown of energy consumption by source
Response rate
Response rate
2003
2004
2005
2006
2007
2008
Electricity
98.7%
98.0%
99.7%
97.8%
99.7%
98.9%
Gas
98.1%
97.4%
99.6%
96.8%
99.7%
98.9%
Fuel oil
97.9%
98.2%
99.8%
98.1%
99.6%
98.9%
PAGE 88
2003
2004
2005
2006
2007
2008
91.1%
94.7%
100%
96.9%
99.7%
98.9%
Management report
Direct emissions are emissions generated by combustion of gas
and fuel oil at Valeo sites (as opposed to indirect emissions,
generated elsewhere by the production of the electricity
consumed at Group sites).
After holding relatively steady for three years, direct emissions
of CO2 equivalent decreased by 12% during 2008. This result is
the fruit of the Group’s energy conservation efforts in 2008. The
decrease relative to sales is smaller, since the fall-off in activity
late in the year pulled this ratio down.
In 2008 the Meslin l’Evêque site in Belgium (Valeo Lighting Systems)
entered into an agreement with the Wallonia regional government
on reducing its emissions of greenhouse gases and improving
its energy efficiency. The site commits to increase its energy
performance and in return will receive financial and administrative
benefits from the Region. The agreement targets a 14% reduction in
the index of greenhouse gas emissions by 2012. The site achieved
savings of more than 100,000 euros in 2008.
Numerous sites took action in 2008 to conserve energy by regulating
illumination. At Angers in France (Valeo Lighting Systems), interior
lighting is regulated according to the level of natural daylight, saving
8,000 euros a year. This site is also recovering heat energy emitted
by a production line incinerator, for savings of 47,000 euros a year.
The Sainte Florine site in France (Valeo Engine and Electrical Systems)
switches work areas to low-energy lighting depending on activity. At
the Toluca site in Mexico (Valeo Climate Control), 30% of shop floor
lighting has been replaced by low-wattage lighting, reducing unit
consumption from 1,000 watts to just 300 watts. The Daegu site in
South Korea (Valeo Transmissions) has installed translucent panels
on the roof, an innovative solution that enhances visual comfort and
reduces the need for artificial lighting.
At all Valeo sites, employees are made aware of everyday, common
sense things they can do to save energy.
Looking ahead, Valeo will continue to optimize energy efficiency
in its processes and at its sites and promote use of renewable
energy sources at Group level.
In 2009 Valeo intends to run tests at pilot sites of a tool to
calculate energy efficiency and an action plan to improve it.
The Group would then hope to be able to deploy such a tool at
all of its sites.
3
Reducing transport-related energy
consumption and emissions
A first study of CO2 emissions generated by transport was conducted
in 2007. On the basis of data collected for 35 sites, it was established
that transport-related emissions were equivalent to emissions from
the Group’s industrial sites. The main mode of transport used by
the Group, responsible for three-quarters of emissions, is trucking.
Sea freight is responsible for nearly a quarter of CO2 emissions, and
air freight, used only occasionally, is responsible for about 2%.
In 2008 Valeo expanded the scope of its data gathering to the entire
Group in order to have more reliable data. Aggregate results were
collected from carriers by means of a questionnaire sent to them.
In 2009 Valeo will pursue efforts to obtain precise quantitative
information from carriers on emissions attributable to transport
of Valeo products alone. When this work is done, the Group
will be in a position to develop a full action plan for reducing
transport-related emissions.
The Campinas site in Brazil (Valeo Wiper Systems) has focused on
treating and recycling its effluents on-site and on drawing water
from local artesian wells. These efforts help to limit the volume of
effluents to be transported to treatment facilities and the volume of
water that must be brought in by truck, yielding an expected 90%
reduction in transport-related emissions.
The Breuilpont site in France (Valeo Service) has expanded its
use of accompanied intermodal (road/rail) transport to the south
of France.
3.P.2.3. Use of natural resources
Consumption of natural resources such as water, minerals and
oil increases with human activity in general. But the limited and
non-renewable nature of some of these resources raises the threat
that global economic development will deplete supply and threaten
the capacity of future generations to enjoy an environment as diverse
as today’s. The soaring prices of raw materials (metals, petroleum,
and thus plastics) on world markets in recent years also show that
utilization of natural resources now raises essential economic as well
as environmental challenges.
PAGE 89
3
Management report
Because of the products it makes and the packaging and industrial
processes it uses, Valeo uses natural resources such as metals, plastics
and water. In order to limit its impact on the environment, Valeo is
taking action along two lines: limiting consumption of raw materials
and making greater use of recyclable and recycled materials.
Breakdown of packaging materials used
Limiting the quantity of packaging materials
Packaging is essential to the handling of Valeo products. Packaging
is required for transport. It facilitates storage, protects products, and
in the case of aftermarket products, helps to sell them. To serve all
these various functions, Valeo uses many different kinds of packaging
materials, mainly paper and paperboard, wood, plastic and metal.
Consumption of packaging materials
Response rate
2003
2004
2005
2006
2007
2008
Plastics
87.9%
82.8%
93.1%
92.1%
99.1%
98.9%
Paperboard
87.9%
87.0%
92.6%
92.9%
99.1%
98.9%
Wood
87.9%
85.4%
94.3%
94.4%
99.1%
98.9%
The 2008–2010 targets set for Valeo sites for their consumption
of packaging materials reverse the rising trend of the past few
years. Already, the sites’ efforts are reflected in a reduction of
more than 11% in packaging consumption. The shift from plastic
to paperboard continues, increasing the likelihood that packaging
materials will be recycled after use.
Valeo promotes the use of reusable packaging (through the use of
non-disposable packs, now widespread at Valeo sites), recyclable
materials (plastics) and recycled materials (plastics, paper and
paperboard). Several Valeo sites have taken initiatives to minimize
the environmental impact of their packaging.
Response rate
PAGE 90
2003
2004
2005
2006
2007
2008
95.7%
80.1%
92.5%
90.4%
99.1%
98.9%
In 2008 Valeo sites took a number of actions to reduce their use
of packaging and increase reuse of materials. The Martos site in
Spain (Valeo Lighting Systems) organized reuse of packaging in ways
forecast to yield a saving of 620 thousand euros in the first year. The
Sainte Florine site in France (Valeo Engine and Electrical Systems)
chose to get more value from its wooden pallets and to increase
fill rates on its packages.
Management report
Many sites turn to businesses providing work for the disabled and
disadvantaged to restore their wooden pallets for reuse. The sites
send pallets in unusable condition to these businesses, which
undertake to repair them. The repaired pallets are either sold or
taken back into service. Extending pallet service life helps to conserve
timber resources.
The 3-year environmental objectives set for the sites include a
target for controlling water consumption. Approximately onehalf of the sites achieved their 2008 targets, yielding an overall
reduction in the total volume of water consumed. Many sites
undertook actions in 2008 to optimize their use of water, such
as by finding and stopping leaks, saving water in non-production
uses, tuning processes to use less water, and so on. These efforts
were partially offset, however, by the first inclusion in the
reporting scope of a large-scale water user, the Timisoara site
in Romania, which uses an open-circuit cooling system.
Valeo will continue its efforts in 2009 with a view to reducing
its use of packaging materials and increasing reuse and
reclamation at its sites.
Reducing water consumption at the sites
3
Although further water savings will be more difficult to achieve,
newer, more water-efficient processes are gradually being
implemented. The Campinas site in Brazil (Valeo Wiper Systems) has
to cope with scarce local water supplies as well as limits on effluent
discharges. It has installed a system to treat effluents on site and
recycle wastewater by spraying it on roofs to cool building interiors.
This integrated approach stands to reduce total water consumption
by 30% and effluent discharges into the environment by 90%.
Water consumption
Numerous efforts to find and stop leaks, coupled with actions to
reduce consumption, achieved significant results in 2008. A few
examples are given below:
■
the Sao Paulo site in Brazil (Valeo Service) installed automatic taps
in the washrooms, cutting water consumption by 40%;
■
the Amiens site in France (Valeo Transmissions) has installed
waterless urinals and expects to save 70 cubic meters of water.
In line with the objectives sought via the generic plant concept,
each Group site is encouraged to implement techniques to
reduce water consumption further in the years ahead: controlling
leaks, changing individual behavior, replacing open-circuit cooling
systems. Reclamation of rainwater and wastewater is another
avenue to be explored on a case by case basis.
Response rate
2003
2004
2005
2006
2007
2008
98.7%
98.0%
99.7%
96.9%
99.7%
98.7%
PAGE 91
3
Management report
3.P.2.4. Waste production and reuse
An effective waste management policy has four components:
at-source waste reduction (the best way to manage waste is by not
producing any), sorting (indispensable for recycling), recycling, and
disposal under environmentally sound conditions. Valeo addresses
all four issues, both in managing its sites and in designing products,
which will inevitably become waste at the end of their useful lives.
The Group adheres to the objectives set by the EU directive on
end-of-life vehicles (Directive 2000/53/EC), which calls for reuserecovery rates to reach 95% and reuse-recycling rates to reach 85%
by January 1, 2015.
Waste generation and reuse rate/
Production of hazardous waste
Waste production/Reclamation rate
'%
&*
&%
Low-waste product design
Valeo’s Eco-design Standard, pending final validation, seeks to
minimize the environmental impact of products throughout their life
cycle. It sets out requirements on three aspects of end-of-life impact:
heavy metal content, recyclability and reusability. Thus, in the initial
product design stage, the Valeo Group aims to minimize the number
of parts, use fewer different metals, facilitate disassembly and favor
products that are reusable.
Reducing waste production at the sites
The Group’s main waste products are, in descending order of volume,
metal, wood and plastics. Almost all metal waste is sold for recycling.
Some 75% of wood scrap is recycled, and the remainder is used for
heating. Two-thirds of the plastic is sold for recycling.
*
%
*
%
Response rate
2003
2004
2005
2006
2007
2008
96.5%
98.5%
99.9%
97.4%
99.7%
98.9%
97.9%
95.4%
99.4%
96.8%
94.7%
98.9%
Total waste production decreased in 2008.
The recycling rate has been steadily increasing since 2002.
That rise gained new momentum in 2008 when sites were
given reclamation targets.
Hazardous waste Production
Production of hazardous waste is holding steady around
21,000 tonnes.
Response rate
PAGE 92
2003
2004
2005
2006
2007
2008
98.7%
98.7%
100%
97.4%
100%
98.9%
Management report
In 2008 all Group sites were ISO 14001 certified or, in the case of
newly acquired sites, in the process of becoming certified. This entails
continuous improvement of performance through concrete measures
to increase recycling, established locally based on activity at each
site. Furthermore, the generic plant concept developed by the Group
aims for minimum waste and higher recycling rates.
3
In one case, solutions developed in the laboratory are now in the
industrialization phase. In the other case, industrial application has
already been proven, and the solution is currently being deployed
at the relevant Group sites.
Consumption of heavy metals
The Madrid site in Spain (Valeo Wiper Systems) has cut its lumber
consumption by specifying thinner boards for pallet tops (80mm
rather than 100mm). This change has cut pallet weight by 25%.
)&*
The Wenling site in China (Valeo Wiper Systems) uses packaging
made of steel and recyclable plastics.
'.+
'.)
',)
The Group’s objective for the years ahead is to continue these
efforts to improve on all fronts: reduce waste production
by improving processes, increase recycling and increase reuse
of materials.
&(&
.+
%(
Exposure to hazardous substances is an issue in terms of products
as well as production processes. Elimination of such substances is a
challenge on two counts, both for the environment and for human
health:
■
■
%*
%+
%,
&&
%-
Response rate
hazardous substances generally have toxic properties (carcinogenic,
mutagenic, etc.) that can harm the health of any person exposed
to them: a factory worker, a vehicle repairman, etc.
2003
2004
2005
2006
2007
2008
96.1%
97.2%
99.6%
97.5%
100%
98.9%
Since the inception of the database of banned and regulated
substances in 2001, Valeo’s use of heavy metals has fallen
dramatically. Between 2007 and 2008, it declined by 21%
measured in proportion to sales. Technical solutions to further
restrict the use of heavy metals continue to be identified and
implemented. For example, the San Luis Potosi site (Valeo Wiper
Systems) has limited its use of leaded solder, and the Madrid site
(Valeo Wiper Systems) no longer uses chromium 6.
Compliance with the EU Directive on end-of-life
vehicles: products free of heavy metals
Updated in August 2008, Annex II of the ELV Directive tightens the
requirements by prohibited the use of leaded solder in electronics
starting in 2010. To meet these new challenges, Valeo is currently
developing new solutions for two technical processes used at its sites.
%)
&)
'.
'-
8dchjbei^dcd[]ZVknbZiVa$hVaZh`\$€bâa^dch
8dchjbei^dcd[]ZVknbZiVaidccZh when products are being serviced or dismantled at the end of
their life, environmentally toxic substances may be released into
the air, soil or water, causing local pollution;
The end-of-life vehicle directive includes provisions relating to vehicle
design and thereby applies to the business of a parts maker such
as Valeo. The Directive aims to prohibit, except where technically
infeasible, the use of heavy metals such as mercury, lead, cadmium
and hexavalent chromium and to favor recycling when these metals
are used. A December 24, 2004 order sets down conditions on which
such substances may still be used.
'-
)(
3.P.2.5. Hazardous substances
To achieve results like these, the Product Families followed a number
of paths over the years:
■
eliminating lead in soldered electronic components;
■
changing surface treatment process to switch from chromium 6
to chromium 3;
■
eliminating cadmium as a coloring agent.
PAGE 93
3
Management report
In the years ahead, the Group will continue to go beyond the
initial scope of the Directive’s strictures, with the eventual goal
of reaching zero heavy-metal content in its products. The goal
will drive ongoing technological efforts by the Product Families’
R&D departments.
Consumption of chlorinated solvents/
Consumption of Carcinogenic, Mutagenic
and Reprotoxic (CMR) substances
Consumption of chlorinated solvents
&!)+.
Eradication of hazardous substances used at the sites
In parallel with its actions on the product side to come into
compliance with the REACH Regulation, the Group makes a policy of
eradicating all substances used at its industrial sites that are deemed
hazardous.
To this end, sites follow a procedure that involves identifying
prohibited substances, seeking out replacement substances (on
economically acceptable terms), testing them, and having them
approved by customers. The majority of hazardous products now
present at Valeo sites are either products still in use because
substitutes for them are awaiting certification or products for which
substitutes are currently available only at excessively high cost.
&!%.+
&!&,&
,&%
-),(.
--
%(
&%.
&*(
%)
%*
-%
&%,
%+
%,
-)
%-
8dchjbei^dcd[X]adg^cViZYhdakZcih$hVaZh`\$€ bâa^dc
8dchjbei^dcd[X]adg^cViZYhdakZcihidccZh
Response rate
PAGE 94
2003
2004
2005
2006
2007
2008
93.3%
95.8%
99.3%
98.2%
100%
98.9%
Management report
Actions have already been taken to curtail the use of hazardous
substances. A “hazardous products” campaign has significantly
reduced the number of Group sites still using chemicals of this
type. At the Skawina site in Poland (Valeo Wiper Systems), the
new painting line complies with the provisions of the EU directives
on end-of-life products concerning recycling and elimination of
prohibited substances. Furthermore, solvent-based paint has been
replaced by water-based paint, reducing atmospheric emissions of
solvent vapor by 20 tonnes.
Consumption of Carcinogenic, Mutagenic
and Reprotoxic (CMR) substances
&!&(&!%+'
&!%).
),)
At the Amiens site in France (Valeo Transmissions), a zinc phosphating
line has been replaced by an oil-based protectant technique using
recyclable oil. Implementing this new technique has cut the cost of
the process by 87%.
)%*
.-
&%,
*+
))
&&&
C9
%(
%)
%*
%+
3
%,
%-
8dchjbei^dcd[8BGhjWhiVcXZh$hVaZh`\$€ bâa^dc
8dchjbei^dcd[8BGhjWhiVcXZhidccZh
Response rate
2003
2004
2005
2006
2007
2008
NA
94.9%
98.8%
98.2%
99.4%
98.9%
After dropping sharply in past years, Valeo’s consumption of
chlorinated solvents and CMR products has now stabilized.
Fourteen sites are still using chlorinated solvents, but only four
of them use them in significant quantity (more than 20 tonnes
per year). Sixteen sites report using CMR products, but only
the Queretaro site in Mexico (Valeo Transmissions) uses more
than 10 tonnes per year. The increase in consumption of these
two types of product at Queretaro – required to meet customer
requirements – explains the increases at Group level in 2008.
The number of listed chemicals has fallen at all sites, and limitations
have been set on the quantities of chemicals used.
In the years ahead, Valeo will forge ahead with such measures
to reach the goal of eradicating all hazardous substances from
its production sites. The sites will also continue their compliance
efforts relating to the REACH Regulation.
3.P.2.6. Reducing noise and other forms of
pollution
Minimizing all forms of pollution, to ensure that its industrial activities
are properly integrated into their environment, is another of the
Group’s ongoing environmental objectives. This objective applies just
as much to the performance of products developed by the Group as
it does to the processes used to make them.
On the product side, Valeo has developed the StARS starter-alternator
that allows an engine to be stopped and restarted instantly and
silently, resulting in a notable reduction in noise pollution in
urban areas.
Operations at Valeo sites are not particularly noisy, and the Group
is careful to locate new sites far from residential areas. Valeo has
issued a Group directive describing practices and processes to limit
noise inside the factories.
PAGE 95
3
Management report
For several years, the Valeo Group has been developing a policy of
favoring installation of collective protection systems (noisy machines
are isolated from their surroundings) while continuing to impress
upon employees the importance of wearing individual hearing
protection equipment.
The visual impact of sites is taken into account at the time of their
construction, by following the Valeo Factory Design guide, and a
large portion of each site is given over to green space.
Odor pollution, usually associated with emissions of volatile organic
compounds (VOCs), can be particularly unpleasant for others in the
vicinity of the site. Processes have been altered to reduce emissions
at the source. For example, solvent-based paints have been replaced
by water-based alternatives, and trichloroethylene has been phased
out of the manufacturing process for clutch facings. The Valeo sites
where odorous emissions are an issue are equipped with treatment
systems to keep emissions below the threshold of perceptibility:
bio-filtration, absorption, condensation and incineration, the lastmentioned being the most widely used.
PAGE 96
Valeo is also highly aware of the need to protect the health of people
living or working near its sites. In 2005 the Group issued a directive
on the Legionella bacterium based on the regulations that apply in
France, which are some of the strictest in this field. This directive
is imposed at all Valeo sites worldwide. Under this directive, the
sites must:
■
wherever possible, replace wet cooling towers with dry towers;
■
install preventive treatment systems to suppress proliferation of
Legionella bacteria;
■
perform frequent checks to ensure that the treatments are
effective.
Management report
3.P.3.
3
Table of environmental indicators
2002
2003
2004
2005
2006
2007
2008
11,373
125
39
0
29,229
6,334
9,632
114
59
2
34,907
5,201
9,940
137
65
4
38,979
5,032
10786
137
70
11
36,938
3,262
10486
138
77
52
37,386
3,463
9,222
119
94
74
33,458
3,377
8,555
119
88
76
41,313
3,106
Total volume of water consumption/sales (m3/€m)
Total energy consumption (GWh)
579
1,758
540
1,678
514
1,739
303
1,814
341
1,868
367
1,861
368
1,682
Total energy consumption/sales (MWh/€m)
Electricity (%)
Gas (%)
Fuel oil (%)
Other energy sources (%)
Consumption of chlorinated solvents (tonnes)
158
60
31
4
5
2,288
174
60
32
2
6
848
179
58
33
6
3
1,469
171
63
34
2
1
1,171
185
64
34
2
0
1,096
202
64
32
1
0
739
199
66
32
2
0
710
Consumption of chlorinated solvents/sales (kg/€m)
Consumption of heavy metals (tonnes)
212
1,396
88
415
153
274
109
296
107
294
80
131
84
96
133
1,947
192
59,301
7,293
11
49
40
0
10,026
1,174
104
859
0
2,473
329
1,740
178
167
19
122,011
11
139,707
13
29,975
109,495
62
NA
NA
NA
43
NA
NA
51,903
5,389
7
60
33
0
10,420
940
98
1,196
0
2,931
304
917
92
270
27
107,035
11
112,054
12
30,121
80,854
62
NA
NA
NA
28
1,062
107
48,606
5,503
8
48
44
0
6,219
1,009
102
365
0
1,242
143
536
54
130
13
112,195
12
123,216
13
20,924
102,755
59
5
25
7,580
28
1,049
98
67,239
6,741
17
53
29
1
5,020
695
65
208
0
1,708
162
465
44
72
7
121,157
11
132,725
12
23,102
109,628
71
5
16
8,054
29
1,138
111
63,248
6,669
10
57
32
1
6,150
748
76
278
0
1,489
153
327
32
52
5
123,971
12
138,772
14
23,296
115,498
72
3
4
3,091
14
406
44
72,065
7,882
10
58
31
2
7,184
918
103
242
0
1,296
141
51
6
173
20
122,151
13
159,223
17
20,485
138,738
74
1
1
4,289
11
474
56
63,839
7,546
5
64
30
2
6,751
809
96
142
0
1,107
132
89
10.5
137
16.5
107,338
13
146,543
17
21,195
125,347
77
10
4.1
1,386
NA
NA
14,140
13,861
16,417
19,789
19,930
NA
NA
NA
NA
5,624
869
7,205
1,467
4,244
1,240
3,552
1,427
4,898
1,217
Total sales across all sites in reporting scope (gross in millions of euros)
Number of sites in reporting scope
ISO 14001 certified sites (%)
OHSAS 18001 certified sites (%)
Number of hours of environment training (plant total)
Total volume of water consumption (thousand m3)
Consumption of heavy metals/sales (kg/€ million)
Consumption of CMR substances (tonnes)
Consumption of CMR substances/sales (kg/€ million)
Consumption of packaging materials (tonnes)
Consumption of packaging materials/sales (kg/€m)
Proportion of plastic packaging (%)
Proportion of paperboard packaging (%)
Proportion of wood packaging (%)
Proportion of other packaging materials (%)
Consumption of recycled plastics (tonnes)
Volume of industrial effluents (thousands of m3)
Volume of industrial effluent emissions/sales (m3/€m)
Heavy metal content in effluents (kg)
Heavy metal content in effluents/sales (kg/€ million)
VOC atmospheric emissions (tonnes)
VOC atmospheric emissions/sales (kg/€m)
TCE atmospheric emissions (tonnes)
TCE atmospheric emissions/sales (kg/€m)
Lead atmospheric emissions (kg)
Lead atmospheric emissions/sales (g/€m)
Greenhouse gas emissions (tonnes CO2equiv.)
Greenhouse gas emissions/sales (tonnes CO2 equiv./€m)
Total waste generated (tonnes)
Total waste generated/sales (tonnes/€m)
Hazardous waste (tonnes)
Non-hazardous waste (tonnes)
Waste reuse rate (%)
Number of fines and compensation awards
Amount of fines and compensation awards (€ thousands)
Provisions and guarantees for environmental risks (€ thousands)
Functional expenditure to prevent environmental consequences
of operations (€ thousands)
Capital expenditure to prevent environmental consequences
of operations (excluding decontamination work) (€ thousands)
Decontamination costs (€ thousands)
PAGE 97
3
Management report
Social indicators
3.Q. Social indicators
The social indicators presented below were established on the basis
of the provisions of Articles L225-102-1 and R225-104 of France’s
Commercial Code.
The Valeo Group has chosen to base its social indicators on data from
all of its companies worldwide. There are some exceptions to this,
which are listed on a case-by-case basis.
Valeo continued the step-by-step improvement of its indicator
system in 2008 across all ten of its product families, its Service
division activity and the Group holding companies. The reporting
scope covers a total of 121 production sites, 61 R&D centers and 10
distribution platforms spread across 27 countries.
3.Q.1. Employment
3.Q.1.1. Number of employees
3.Q.1.1.1. Change in employment over 3 years
2006
2007
2008
Engineers and managers
12,134
11,294
11,468
Administrative staff, technicians and supervisors
11,198
9,307
8,243
Operators
41,126
34,303
29,899
Registered headcount
64,458
54,904
49,610
Temporary staff
5,206
6,148
1,531
69,663
61,051
51,140
Permanent staff
59,969
51,791
48,631
Temporary staff
9,695
9,260
2,509
Total headcount
including:
At December 31, 2008 the Group employed 51,140 people
worldwide, down 16.2% from 2007 and down 26.6% from 2006.
The reduction in headcount results primarily from the sale of the
wiring harness business (Valeo Connective Systems Product Family)
in late 2007, disposal of the truck engine cooling business, and
preliminary measures to redimension the workforce in response to
the first effects of the crisis in the fourth quarter of 2008.
Temporary staffing levels (fixed-term contracts and agency
personnel) continue to decline significantly. In 2008 they were down
PAGE 98
72.9% compared with 2007, reflecting the Group’s efforts to cut the
number of jobs with little stability and Valeo’s initial measures to
deal with the downturn in activity in late 2008. On a consolidated
basis, temporary staffing declined sharply to 5% of total headcount
In 2008 compared with 15% in 2007 and 14% in 2006.
The percentage of engineers and managers continues to rise.
At year-end 2008 it stood at 23.1% of registered headcount,
compared with 20.6% in 2007 and 18.8% in 2006.
Management report
Social indicators
3.Q.1.1.2. International composition
of Group workforce
with 47.8% in 1995. This percentage has held fairly stable in the past
years, however (71.2% in 2007 and 71.5% in 2005).
The Group’s growing worldwide presence is reflected in the
increasingly international composition of its workforce: Today, 70.8%
of employees are based in a country other than France, compared
The disposal of the truck engine cooling business in Sweden and
the United States (approximately 900 employees) accounts for part
of the decrease from 2007 to 2008.
3
Total headcount outside France
1995
14,125
2000
2005
2007
2008
50,002
50,273
43,484
36,220
Total headcount at December 31, 2008
Western
Europe
Eastern
Europe
Africa
North
America
South
America
Asia
24,684
48.3%
8,312
16.3%
1,087
2.1%
4,670
9.1%
3,904
7.6%
8,484
16.6%
Compared with 2007, headcount increased by 0.3 point in Western Europe, 0.7 point in South America, and 2.2 points in Asia but decreased
by 0.9 point in Eastern Europe, 0.4 in Africa, and 2.1 points in North America.
3.Q.1.1.3. Generational turnover
Registered headcount by age bracket
'%!%%%
&*!%%%
&%!%%%
*!%%%
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PAGE 99
3
Management report
Social indicators
At December 31, 2008, the breakdown of the Group’s permanent
workforce was as follows:
■
0.6% aged under 20;
■
25.2% aged 20 to 29;
■
36% aged 30 to 39;
■
23.2% aged 40 to 49;
■
14.3% aged 50 to 59;
■
0.7% aged 60 or over.
Because of the large numbers of new staff recruited each year,
generational turnover is significant.
3.Q.1.2. New hires
42% of engineers and managers are in the 30–39 age bracket,
compared with only 35% of administrative staff, technicians and
supervisors and 34% of operators. 25% of operators are in the
20–29 age bracket.
With its strong corporate image and experience, the Group did not
encounter any particular problems with recruitment during the year,
apart from certain highly localized difficulties concerning positions
requiring advanced specialization or specific language skills and in
catchment areas where competition for skilled labor is tough.
3.Q.1.2.1. Permanent contracts
Number of hires on permanent contracts
2006
2007
2008
1,890
1,207
1,724
849
484
540
Operators
5,581
5,360
3,430
TOTAL
8,320
7,051
5,694
In 2007 Valeo imposed strict limits on external hires of structural
personnel (engineers, managers, supervisors) in order to favor
internal mobility. The lifting of these limits during almost all of 2008
was followed by a rise in the number of such hires. However, in the
last quarter of 2008, in response to the first effects of the crisis, Valeo
again imposed a nearly complete freeze on external hires, requiring
jobs to be filled when necessary via internal mobility. As a result, the
number of new hires on permanent contracts decreased by 19%
across all socioprofessional categories.
Hiring of engineers and managers increased considerably, rising to
30% of new hires in 2008 from 17% in 2006 and 23% in 2006.
In contrast, hires of production operators were not affected by
the hiring freeze in 2007 but were heavily impacted by declining
production volumes in late 2008. New hires of operators declined
significantly as a proportion of total hires, falling from 76% in 2007
to 60% in 2008.
Breakdown of hires on permanent contracts by geographic area
Total permanent hires, 2008
Western
Europe
Eastern
Europe
Africa
North
America
South
America
Asia
1,140
20.0%
1,548
27.2%
143
2.5%
632
11.1%
1,002
17.6%
1,230
21.6%
The primary focus of the Group’s recruitment efforts was in the high-growth areas: Eastern Europe and Asia.
PAGE 100
Management report
Social indicators
3
3.Q.1.2.2. Fixed-term contracts
Number of hires on fixed-term contracts
2006
2007
2008
239
73
131
239
82
93
Operators
6,876
3,980
1,616
TOTAL
7,354
4,135
1,840
A total of 1,840 new hires on fixed-term contracts were made during the year, a decrease of 55.5% compared with 2007 and 75% compared
with 2006.
Employees on fixed-term contracts occupied 978 posts at December 31, 2007, compared with 3,112 in 2007 and 4,489 in 2006.
Breakdown of hires on fixed-term contracts by geographic area
Total fixed-term hires, 2008
Western
Europe
Eastern
Europe
Africa
North
America
South
America
Asia
1,136
61.7%
286
15.6%
32
1.7%
155
8.4%
1
0.1%
230
12.5%
Compared with 2007, the number of new hires on fixed-term contracts increased by 7 points in Western Europe, 8 points in Eastern Europe,
and 1.6 points in Asia but decreased by 7.7 points in North America and 9.1 points in Africa.
3.Q.1.3. Departures
2006
2007
2008
Contract terminations
3,153
2,007
4,167
of which layoffs
1,017
607
2,238
Resignations
4,723
4,029
3,937
Early retirement
162
160
191
Retirement
640
668
417
Valeo terminated 4,167 contracts in 2007, representing 8.6% of
permanent staff (3.9% in 2007, 5.3% in 2006).
Early retirements and retirements amounted to 1.2% of the
permanent headcount (1.6% in 2007, 1.3% in 2006).
Layoffs for economic reasons accounted for slightly more than half
of total contract terminations in 2008 versus less than one-third
in 2007, 2006 and 2005.
Resignations remain one of the principal reasons for departures,
representing 8.1% of the permanent headcount in 2008
(7.8% in 2007, 7.9% in 2006). By socioprofessional category,
resignations represented 10.5% of engineers and managers on
permanent contracts, 5.7% of administrative staff, technicians and
supervisors on permanent contracts, and 7.6% of operators on
permanent contracts.
The rise in layoffs reflects the first workforce redimensioning
measures taken by Valeo in response to the worldwide automotive
industry crisis and the closure of one of Valeo Wiper Systems’ sites
in the United States.
PAGE 101
3
Management report
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Breakdown of 2008 Departures by geographic area
Western
Europe
Layoffs
Dismissals
Resignations
Early retirement
Retirement
Eastern
Europe
Africa
North
America
South
America
Asia
394
385
22
890
540
8
17.6%
17.2%
1.0%
39.8%
24.1%
0.3%
610
351
2
347
503
117
31.6%
18.2%
0.1%
18.0%
26.1%
6%
1,032
1,345
112
672
221
555
26.2%
34.2%
2.8%
17.1%
5.6%
14.1%
150
1
0
30
0
10
78.7%
0.5%
0.0%
15.7%
0.0%
5.1%
279
36
2
33
1
66
66.9%
8.6%
0.5%
7.9%
0.2%
15.8%
Information on headcount reduction and employment
protection plans, transfers, rehiring and assistance
measures
Valeo is firmly committed to a forward-looking employment
and skills management policy. When the necessity of optimizing
its industrial facilities is manifest, Valeo undertakes restructuring
operations. When it does so, the Group works in concert with its
labor organizations and uses all available mechanisms for finding
alternative employment, including internal transfer, outplacement,
takeover of the plant by another owner, and reindustrialization of
local labor pools.
The headcount reduction programs launched in 2008 involved seven
of the Group’s ten Product Families (compared with six in 2007)
as well as the Service activity, for a total of 1,248 persons (679 in
2007). In addition to the Service activity, the Product Families
concerned in 2008 are: Valeo Climate Control, Valeo Engine Cooling,
Valeo Compressors, Valeo Lighting Systems, Valeo Interior Controls,
Valeo Wiper Systems and Valeo Security Systems.
Under restructuring plans that were completed In 2008, 758 of the
799 employees affected found other work or departed voluntarily,
a success rate of 94.8% (compared with 70.8% in 2007). Of these,
12.6% were internal transfers, 6.5% were outplacements, 30.2%
were retirements or early retirements, 22.7% were voluntary
departures, and 22.9% fell into other categories.
3.Q.2. Organization of the work week
3.Q.2.1. Length of the work week
basis of statutory work weeks, which vary between countries and
range from 35 to 48 hours.
Full-time employees
The most widespread statutory work week is 40 hours.
The work of employees within the Group’s 121 production sites,
61 R&D centers and 10 distribution platforms is organized on the
PAGE 102
Management report
Social indicators
3
In France, the agreement on reduction in working time, signed with labor unions on April 20, 2000, sets the applicable work week
as follows:
215 days per year
35 hours per week
Employees without paid overtime hours
37.5 hours per week
Operators
35 hours per week
Part-time employees
Part-time work is considered to be any work schedule with fewer hours than the standard work week at the entity in question. Average work hours
for part-time employees consequently varies from 16 to 36 hours per week, depending on the country and the socioprofessional category.
3.Q.2.2. Shift patterns
Distribution of personnel by work schedule,%
2006
2007
2008
Day workers
43%
44%
48%
Two 8-hour shifts (2x8)
30%
24%
23%
Three 8-hour shifts (3x8)
20%
24%
23%
Night workers
5%
6%
5%
Weekend workers
2%
2%
0%
Most production employees work in teams assigned to 2x8, 3x8,
or night shifts in order to optimize plant utilization. In 2008 there were
25,770 shift workers, representing 51.9% of total headcount.
These part-time employees were distributed as follows: Engineers
and managers: 8.3%; Administrative staff, technicians and
supervisors 17.3%; Operators: 74.4%.
3.Q.2.3. Overtime
3.Q.2.5. Absenteeism
In 2008, 4,897,136 hours of overtime were paid (5,596,662 in 2007,
6,554,338 in 2006), 82.5% to production workers (84% in 2007,
81% in 2006).
In 2008 the Group-wide absenteeism rate (ratio of hours of
absence to total possible work hours) was 2.71%. The reasons for
absences broke down as follows: absence due to illness, 82.9%
(82.1% in 2007), unauthorized absence, 4.0% (5.5% in 2007),
authorized absence such as unpaid leave, 4.0% (4.2% in 2007),
accident at the workplace or during travel, 3.7% (4.0% in 2007),
strike, 2.7% (1.5% in 2007), suspension, 0.3% (0.4% in 2007),
other reasons, 2.3%.
This paid overtime corresponds to a bit less than 5% of total possible
work hours (i.e., the maximum number of hours that could be
worked by all Group employees).
3.Q.2.4. Part-time
1,204 employees were working part-time in the Group in 2008
representing 2.4% of the registered headcount (2.5% in 2007,
1.9% in 2006 and 2005).
Absenteeism in France ranks at the median for the Group with a
rate of 2.86%.
Women accounted for 79% of this number (74% in 2007,
75% in 2006).
PAGE 103
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Management report
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3.Q.3. Equality between men and women in the workplace
3.Q.3.1. Male–female breakdown
Valeo places great importance on equality between men and women
in terms of career development, training possibilities, wages and
salaries, and rank within the company.
Valeo draws up a comparative male–female status report for the
Group’s French companies every year. This report serves as a basis
for annual negotiations between labor and management on targets
for male–female equality in the workplace and on measures to
achieve these targets.
The proportion of women among engineers and managers in the
Group has been rising: In 2008 it was up 0.9 point from 2007 and
up 1.2 points from 2006.
Breakdown of women by socioprofessional category
2006
2007
2008
17.1%
17.4%
18.3%
26.5%
26.3%
25.5%
Operators
46.0%
39.2%
38.9%
Through partnerships with leading French business schools and associations such as Elles Bougent, Valeo is striving to increase the percentage
of women among its employees. As the table below shows, however, the proportion of women among recruitments on permanent contracts
declined in 2008 taking all socioprofessional categories together.
Proportion of women among recruitments on permanent contracts over 3 years
Administrative staff,
technicians and supervisors
Operators
Total
Women
%
Women
%
Women
%
Women
%
2006
414
21.9%
184
21.7%
2,268
40.6%
2,866
34.4%
2007
337
27.9%
146
30.1%
2,298
42.9%
2,781
39.4%
2008
419
24.2%
179
33.2%
1,205
35.1%
1,205
31.7%
3.Q.3.2. Diversity
The Valeo Group operates plants in 27 countries and is thus highly
diversified.
In 2008 the Group’s workforce comprised employees of 92 different
nationalities.
The ten most prevalent nationalities in Valeo divisions are French,
German, Brazilian, Polish, Chinese, Mexican, Spanish, Korean, Czech,
and American.
PAGE 104
The countries where Valeo has the largest number of nationalities
are France (63 nationalities), Germany (45), Czech Republic (26),
United States (22) and Italy (21).
The two most diversified divisions are Valeo Wiper Systems in
Germany, with 24 nationalities represented in a workforce of
1,447 employees, and Valeo Interior Controls in Germany, with 20
nationalities in a workforce of 873 employees.
Management report
Social indicators
3
3.Q.4. Labor relations and collective bargaining agreements
Valeo has developed an active contract labor relations policy.
In 2008 Valeo entities entered into a total of 267 labor agreements
in 16 countries (compared with 213 in 2007 and 359 in 2006).
These agreements addressed various subjects and were negotiated
under national laws.
Among these agreements, 94 (35.2%) related to working time,
72 (27.0%) to salaries, 17 (6.4%) to profit-sharing and incentive
plans, and 36 (13.5%) to premiums or bonuses.
In some countries, such as France, Italy, Germany, and Mexico, many
meetings took place with labor unions, leading not only to formal and
informal exchanges but also to the signing of multiple agreements.
Examples of some of these agreements are described below.
Western Europe
■
■
France: 2008 wage agreements, agreements on profit-sharing
and incentive plans, agreements on forward-looking job and
career management, agreements on organization of work hours
and leaves, agreements on male–female equality, agreements
on pensions, health, insurance benefits, and labor provisions in
company bylaws;
Italy: agreements on organization of work hours and leaves,
unemployment benefits and long-distance mobility;
■
Germany: agreements on organization of work hours and leaves,
agreements on payments of premiums;
■
Spain: collective bargaining agreements, agreements on
organization of work hours and leaves.
Eastern Europe
■
Czech Republic: collective bargaining agreements, wage
agreements;
■
Romania: collective labor agreement;
■
Hungary: wage agreements and agreements on cost reduction
plans;
■
Turkey: collective bargaining agreements.
North America
■
Mexico: wage agreements, agreements on organization of work
hours and leaves.
South America
■
Brazil: wage agreements, collective bargaining agreements on
employee profit-sharing and incentive schemes;
■
Argentina: wage agreements, collective bargaining agreements.
Asia
■
Japan: wage agreements, agreements on payments of premiums,
agreements on organization of work hours and leaves;
■
China: agreement on employment contracts;
■
Korea and Thailand: wage agreements.
Africa
■
Tunisia: agreements on organization of work hours and leaves.
The European Works Council includes representatives from the
following countries: Belgium, Czech Republic, France, Germany,
Hungary, Ireland, Italy, Poland, Romania, Slovakia, Spain and the
United Kingdom. The enterprise agreement on the European Works
Council was revised in July 2008.
The Council met six times in 2008.
The countries in which employees are fully or partially covered by
a collective bargaining agreement are the following: Argentina,
Belgium, Brazil, Czech Republic, France, Germany, Hungary, India,
Italy, Japan, Mexico, Romania, South Africa, South Korea, Spain,
Thailand, Tunisia, Turkey, and the United States.
PAGE 105
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Management report
Social indicators
3.Q.5. Health and safety in the workplace
In matters of safety and working conditions, the objective is to come
ever closer to a zero accident rate.
In addition to systematic audits, Valeo uses three indicators to gauge
the effectiveness of the measures taken:
Valeo makes workplace health and safety a top priority. Systematic
audits are performed by external consultants to assess and control
risks better and to improve the quality of Valeo’s Group-wide
standards.
■
number of all work-related accidents (with or without lost work
time) and accidents involving potential risk of bodily injury
(indicator implemented in 2006);
■
frequency rate (number of accidents causing lost work time
per million hours worked);
■
severity rate (number of days lost because of work-related
accidents per thousand hours worked).
In 2008 in keeping with its principles of continuous improvement,
Valeo expanded deployment of its tools for analyzing each workrelated accident or incident. These tools were introduced in 2006
and fine-tuned in 2007.
The relevant information system, supplemented in 2007 to share
knowledge of best practices and improve risk eradication, was
likewise deployed at all Group sites in 2008.
In addition, Valeo strengthened its safety training program with a
preventive safety module aimed at raising employees’ awareness of
the risks associated with certain behaviors. Preventive safety training
was introduced at pilot sites in 2008.
In 2008 the number of work-related accidents (with and without
lost work time) and accidents involving potential risk of bodily injury
was 3,225, down almost 35% compared with 2007. There were 515
accidents leading to lost work time, a 7% decrease compared with
555 in 2007 (763 in 2006).
Generally speaking, the main causes of accidents leading to lost work
time were bodily injury associated with machinery or processes,
47.4%, or with ergonomics, 22.4%.
Lastly, Valeo maintained its preventive program for musculo-skeletal
disorders and other occupational illnesses, initiated in 2007 with its
“Well-being and efficiency at the workstation” project that applies to
both production and administrative jobs. The method of identifying
high-risk work positions and dangerous situations that was formalized
in 2007 is now being deployed across all Group sites.
Group
2006
2007
2008
Frequency rate*
5.55
5.47
5.24
Severity rate**
0.15
0.14
0.13
2006
2007
2008
11.35
8.94
9.72
0.28
0.21
0.21
* Frequency rate: number of accidents leading to lost work time per million hours worked.
** Severity rate: number of days lost because of work-related accidents per thousand hours worked.
France
Frequency rate
Severity rate
PAGE 106
Management report
Social indicators
In France the frequency and severity rates for work-related accidents
are lower than the industry average by 15.08 and 0.84 points
respectively (source: CNAMTS 2007 – latest survey).
3
In 2008 14.6% of training hours provided within the Group were
devoted to safety, up 1.6 points compared with 2007.
The percentage of people who have received at least one safety
training session rose from 48% in 2007 to 53% in 2008.
3.Q.6. Remuneration
3.Q.6.1. Changes in remuneration and social charges
2006
2007
2008
Payroll excluding social charges
1,532
1,517
1,496
402
399
367
Social charges
Pension expenses for defined contribution plans
Total loaded payroll cost
Loading rate
Personnel costs (including temporary staff)
105
96
88
2,039
2012
1,951
33.1%
32.6%
30.41%
2006
2007
2008
1,699
1,686
1,625
18.0%
17.6%
18.8%
France
Europe
excluding France
Outside Europe
Payroll excluding social charges
607
512
377
Social charges
204
90
73
Total loaded payroll cost
811
602
450
33.6%
17.6%
19.4%
% of sales
Breakdown by geographic area in 2008
Loading rate
The highest headcount is in France, with more than 14,921
employees.
Wage and salary increases in 2008 averaged 2.8% against a
backdrop of a 1% inflation rate.
Twelve wage agreements were signed in 2008 in the 15 French
companies of the Group with employee representative bodies and
unions (80% of compulsory annual bargaining agreements signed).
Seven agreements (47%) were signed by the majority of the unions
and four (27%) were agreed unanimously.
PAGE 107
3
Management report
Social indicators
3.Q.6.2. Profit-sharing, incentive plans
and employee savings schemes
3.Q.6.2.1.
Profit-sharing
Three of the Group’s 15 French companies set aside a special
profit-sharing reserve in respect of 2008 in the amount of
1,622,000 euros.
3.Q.6.2.2.
Incentive plans
Incentive plans at three of the Group’s 15 French companies entitled
employees of those companies to receive a total of 817,000 euros
in incentive payments in respect of 2008.
At December 31, 2008, 11,291 employees were members of the
Valeo PEG (down 3.8% compared with December 31, 2007). Note that
over the same period, the Valeo’s workforce in France decreased by
9.6%, dropping from 54,904 employees at December 31, 2007 to
46,609 employees at December 31, 2008. At December 31, 2008,
employee members of the Valeo PEG accounted for 76.2% of
the registered French headcount (14,815 registered employee at
December 31, 2008), compared with 75.3% in 2007.
In total, assets invested by employees in the Valeo PEG amount to
33,356,478.98 euros spread across six common funds of the PEG.
Investment management of these common funds was entrusted
in 2008 to Crédit Agricole Asset Management and BNP Paribas Asset
Management.
Employee stock ownership plan
3.Q.6.2.3.
Employee saving plans
Group savings plan
French employees can invest sums awarded under profit-sharing
and incentive schemes, as well as voluntary contributions, in a
Group Savings Plan (PEG) set up on November 13, 2001, under a
collective agreement signed by Group Management and four labor
unions. Voluntary contributions are matched by Valeo up to a limit
of 250 euros per year per employee. A rider to this agreement was
agreed on September 17, 2008.
This agreement applies only to the French companies of the
Group.
In late 2004 the Group introduced an employee stock ownership
plan, Valeorizon, and 14% of employees in sixteen of the countries
where Valeo operates have subscribed.
At December 31, 2007, the Valeorizon fund held 133,626 shares, and
the Valeorizon + fund held 806,702 shares. At December 31, 2008,
Valeo employees who owned units of the Valeorizon or Valeorizon
+ Funds held 1.2% of the shares of Valeo SA.
In 2008 the account-keeping function for employee savings accounts
was subcontracted to a single service provider, CREELIA, a subsidiary
of Crédit Agricole Asset Management. (Previously, account-keeping
was performed by Natixis Interépargne for the PEG and by Société
Générale for the Valeorizon and Valeorizon + funds.)
3.Q.7. Training
Trends in training over the past three years
In 2008 expenditures for training amounted to 25,223,395 euros,
up 1.2% from 2007 but virtually unchanged as a percentage of
payroll excluding social charges (1.7% in 2008 1.6% in 2007).
In keeping with its training policy, the Group also maintains the level
of its outlays so as to benefit the greatest number of employees.
Thus, 82% of its employees participated in at least one training
program during the year (81% in 2007), for an average of 26 hours
per person.
PAGE 108
Training hours continue to be split in roughly stable proportions
between training for particular job positions (64%) and training to
develop new skills in the same discipline or to acquire broader skills
in preparation for internal mobility (36%).
Average expenditure per person trained increased by 10.5%, from
560 euros to 619 euros, despite a slowdown late in the year.
The Group also stepped up its contribution to youth training,
taking on 1,272 interns (40.3% women) and 877 apprentices
(29.6% women). In addition, 282 trainees (33% women) were
taken on under France’s international internship program (VIE).
Management report
Social indicators
Number of training hours given
Training expenditure
Number of employees trained
2006
2007
2008
1,696,645
1,172,356
1,065,792
€31,249,239
€24,922,581
€25,223,395
56,116
44,523
40,730
% of total employees trained
85%
81.1%
82.1%
▪ Engineers and managers
90.4%
87.0%
87.6%
▪ Administrative staff, technicians and supervisors
87.5%
78.5%
85.7%
▪ Operators
82.7%
79.9%
79.0%
2006
2007
2008
44
41
38
33
37
38
Operators
25
18
18
TOTAL
30
26
26
3
Breakdown of training hours by subject category, 2008
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PAGE 109
3
Management report
Social indicators
The Group remains committed to deploying training through various
means of instruction. A variety of training formats are used not only
to accommodate time and geographic mobility constraints but also
to provide means suited to the topics covered and to the mode and
pace of individual learning. These means include:
■
face-to-face or remote sessions (by videoconferencing, telephone,
etc.) conducted by outside specialists or Valeo experts, where
exchanges of experiences and best practices can take place
between participants;
■
internal on-site training efforts involving local management,
particularly for enhancing operators’ flexibility and multi-skilling;
■
online self-training modules (Valeo C@mpus), with or without
tutoring, either to acquire theoretical basics before a session in the
classroom in the field or as part of a more individualized training
curriculum, in stages over time with intervening periods of actual
practice or even coaching.
The Group also covers all categories of training.
In 2008 Valeo emphasized training in safety and ergonomics with
its “Well-being and efficiency at the workstation” project (14.6% of
total training hours for 53% of registered employees). This project
is deployed as an e-learning course (currently available in ten
languages) and then as practical exercises at the workstation. The
sessions are led jointly by line managers and safety managers and
entail a high degree of participation by the staff involved. They are
aimed at preventing musculo-skeletal disorders arising from strain
injuries and reducing the risk of accidents.
Valeo also gave priority to training in quality assurance methods and
tools, including “QRQC” (Quick Response Quality Control). QRQC is a
technique for detecting, analyzing, and treating quality deficiencies
of all kinds, not just in products but also in terms of purchases,
accidents, and so on. This explains the increase in the “other business
topics” category, which rose from 21.3% of training hours in 2007
to 25.3% in 2008.
At the aggregate level, across all countries and business lines,
training in integration and corporate culture remains substantial
(12.8%), as does training in languages and cross-cultural relations
(11%) given the Group’s worldwide presence and the growth in
cross-entity relationships.
To support the Group’s innovation and technological development
policy, programs to convey knowledge of materials, products,
production systems and manufacturing processes continue to rank
highest in number of training hours given, accounting for close to
22% of the total. These programs, led by Group technical experts
or outside specialists, are constantly evolving under the guidance
of the R&D department and the Valeo Technical Institutes of the
Product Families.
Training requirements are analyzed to ensure consistency with
assessments of the skills needed to perform the job, business
developments and internal mobility. Individual Career Development
Plans are constructed in three stages: training, practical application
and experience.
3.Q.8. Employment of persons with disabilities
When it revised its Code of Ethics in 2004, Valeo reaffirmed its
commitment to promoting respect for human dignity and value in
the workplace as well as equal rights for all workers. Accordingly,
the Valeo Group participates in programs to foster employment and
training of workers with disabilities.
A total of 756 employees with disabilities were working for
the Group at December 31, 2008, a decrease of 2.7% from the
previous year.
PAGE 110
In France there were 428 employees with disabilities at
December 31, 2008 (466 at year-end 2007 and 608 at
year-end 2006), representing 2.9% of registered headcount.
The total value of subcontracting and service contracts with work
aid centers and organizations employing workers with disabilities
was close to 1.4 million euros in 2008 (3.7 million euros
in 2007).
Management report
Social indicators
3
3.Q.9. Social and cultural activities
In most of the countries in which it operates, the Group makes
financial contributions to sports, educational, cultural and charity
organizations. In 2008 33.6 million euros, or 2.3% of total payroll
excluding social charges, was channeled to social benefits
programs.
In France, Valeo devoted 10.3 million euros, or 1.7% of total payroll
excluding social charges, to social benefits programs in 2008
(11.8 million euros in 2007, 11 million euros in 2006). These amounts
break down as follows: 25% on cafeteria facilities and restaurant
vouchers, 12% on cultural outings, 8% on transport subsidies, 5%
on sports clubs and recreational activities, 7% on medical services
and vaccination campaigns, 3% on daycare and holiday camps for
employees’ children, 0.25% on charitable works, 1% on libraries,
and 39% on other kinds of activities.
In addition, Valeo has a sustainable development culture that involves
it in a number of social, societal and environmental initiatives.
To measure the progress and the reach of these efforts, the Group
in 2008 implemented special reporting on relevant local, national
and international initiatives. The information in the first set of these
reports demonstrates that Valeo is a major player in the life of
local communities, especially as a provider of institutional support,
a promoter of culture and education, an organizer of transport, a
contributor to employee health and a provider of housing aid.
As part of its spending for sustainable development, each Group site
may have reason to interact with the local population.
A majority of the people employed at Valeo sites are drawn from
the surrounding labor pools.
The plants forge relationships with local authorities and government
departments in order to integrate themselves into the regional
economy to the greatest extent possible. Ties are also developed
with educational institutions, universities and professional schools
with a view to fostering interchanges, training and recruitment of
future employees.
3.Q.10. Subcontracting
Valeo engages subcontractors to perform specific services at its sites,
such as cleaning, maintenance, IT and administrative support, and
security guard services.
Subcontracting expenditures amounted to 192.6 million euros in
2008 or 12.9% of Group payroll costs excluding social charges.
In France, this line item amounted to 98.8 million euros, or 16.2%
of total payroll excluding social charges.
Valeo has undertaken to require all of its suppliers worldwide to adopt
the same kind of commitments to sustainable development that the
Group has made. To this end, a document titled “Valeo Requirements
for Suppliers” was drawn up and translated into 15 languages
in 2007. This document was sent to 2,750 Valeo suppliers throughout
the world, with the request that they accept the requirements set
forth in it and agree to be audited by Valeo on these matters.
The Group is vigilant in ensuring that its subsidiaries comply with
fundamental principles of national and international labor law in
their dealings with subcontractors and also that subcontractors and
suppliers observe the provisions of the Valeo Code of Ethics relating
to fundamental human rights.
PAGE 111
3
Management report
Social indicators
3.Q.11. Company role in youth training and employment
3.Q.11.1. International perspective
■
ESTACA, by sponsoring the activities of the Elles Bougent
association;
Valeo is maintaining and strengthening its policy of relationships with
higher education institutions, notably by developing partnerships
with internationally known universities and engineering schools and
fostering diversity within its teams.
■
Audencia Nantes, through a partnership set up to help create an
engineering program;
■
ESIGELEC engineering school, under a new partnership agreement
between Valeo and the school.
In 2008 the Group participated in a large number of forums and
events where it could make contact with future graduates: the Atuge
forum in Tunisia, the Best forum in Cracow (Poland), the Athens
forum, Women in Leadership (France), as well as gatherings
organized at the universities of Wuhan and Changchun (China).
Valeo has also participated actively in numerous school forums,
including those organized by ENSAM Paris, Supélec, Centrale Paris,
Mines de Paris, ESEO Angers, Ecole des Pétroles et Moteurs, ESO,
Supméca, ENSEA, HEC, ESSEC, ESCP-EAP, IEP Paris, EM Lyon, Audencia
Nantes, and EDHEC. The Group took part in the Ouest Avenir forum
in Brest, the UTC in Compiègne, the one-day procurement trades
conference in Grenoble and the Rencontre forum in Lille.
Valeo also sponsors ShARE, an association comprising students from
Asia’s top-rated universities, and took an active part in organizing its
global seminar in Beijing last December.
3.Q.11.2. In France
To help meet its recruitment requirements in France, Valeo
has strengthened its partnerships with educational institutions,
including:
■
Supélec, in connection with the PERCI program for teaching and
research in cooperation with industry;
■
UTC (Compiègne) and ENS (Cachan), thanks to development of
scientific collaboration programs;
PAGE 112
In addition, Valeo sponsors the Elles Bougent association, through
which it is able to promote careers in transport among secondary
school students, and participated actively in the apprenticeship
promotional campaign conducted by FIEV (the French trade
association of vehicle component suppliers) and the apprenticeship
forum organized by CEFIPA in Bagneux.
At the same time, Valeo strengthened its relations with the ParisTech
network by participating in two Athens meetings open to non-French
students at leading Paris engineering schools.
Management report
3
PAGE 113
3
Management report
PAGE 114
2008 Consolidated
financial statements
4.A.
117
4.B.
118
4.C.
Consolidated statements of cash flows
119
4.D.
Statements of recognized income and expenses
120
4.E.
Consolidated statement of changes in stockholders’ equity
121
4.F.
Notes to the consolidated financial statements
122
4.G.
Statutory Auditors’ report on the consolidated financial statements 174
4
PAGE 115
4
2008 Consolidated financial statements
PAGE 116
4
4.A. Consolidated statements of income
NET SALES
Notes
2008
2007
3.1
8,664
9,555
151
134
Other operating revenues
TOTAL OPERATING REVENUES
Cost of sales
3.2
8,815
9,689
(7,350)
(8,058)
GROSS MARGIN (1)
1,314
1,497
% of net sales
15.2%
15.7%
(639)
(668)
Selling expenses
(177)
(193)
Administrative expenses
(419)
(424)
(282)
(27)
(52)
319
-0.6%
3.3%
(68)
(82)
Other income and expenses
3.4
OPERATING INCOME (LOSS)
% of total operating revenues
Interest expense
3.5
Interest income
3.5
23
31
Other financial income and expenses
3.6
(59)
(46)
Equity in net earnings of associates
INCOME (LOSS) BEFORE INCOME TAXES
Income taxes
3.7
9
8
(147)
230
(51)
(83)
INCOME (LOSS) FROM CORE ACTIVITIES
(198)
147
% of total operating revenues
-2.2%
1.5%
Income (loss) from non-strategic activities
(1)
(59)
NET INCOME (LOSS) FOR THE YEAR
(199)
88
Net income (loss) attributable to equity holders of the Company
(207)
81
8
7
▪ basic earnings (loss) per share (in euros)
(2.73)
1.06
▪ diluted earnings (loss) per share (in euros)
(2.73)
1.05
Minority interests
Earnings (loss) per share:
3.8
(1) Gross margin represents net sales (excluding other operating revenues) less cost of sales.
The notes are an integral part of the consolidated financial statements.
PAGE 117
4
4.B. Consolidated balance sheets
Notes
2008
2007
Goodwill
4.1
1,154
1,165
Other intangible assets
4.2
525
514
Property, plant and equipment
4.3
1,739
1,790
4.4
133
103
5.2.1
24
18
ASSETS
Investments in associates
Non-current financial assets
Deferred tax assets
4.5
Non-current assets
103
99
3,678
3,689
Inventories
4.6
543
622
Accounts and notes receivable
4.7
1,168
1,699
248
292
30
72
15
4
5
7
661
771
Current assets
2,670
3,467
TOTAL ASSETS
6,348
7,156
235
235
Additional paid-in capital
1,402
1,402
Retained earnings
(326)
101
Stockholders’ equity
1,311
1,738
51
44
Other current assets
Taxes recoverable
Other current financial assets
5.2.2
Assets held for sale
Cash and cash equivalents
4.10.4
LIABILITIES AND EQUITY
Share capital
Minority interests
Stockholders’ equity including minority interests
4.8
1,362
1,782
Provisions - non-current portion
4.9
772
778
4.10
1,299
1,283
Long-term debt
Deferred tax liabilities
4.5
Non-current liabilities
Accounts and notes payable
Provisions - current portion
4.9
Taxes payable
Other current liabilities
16
21
2,087
2,082
1,454
1,836
462
324
50
72
703
750
Current portion of long-term debt
4.10
26
29
Other current financial liabilities
5.2.2
38
21
4.10.3
166
260
Current liabilities
2,899
3,292
TOTAL LIABILITIES AND EQUITY
6,348
7,156
Short-term debt
PAGE 118
Consolidated statements of cash flows
4
4.C. Consolidated statements of cash flows
Notes
2008
2007
(199)
88
(9)
(8)
3
2
732
535
45
57
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the year
Equity in net earnings of associates
Net dividends received from associates
Other expenses (income) with no cash effect
4.11.1
Cost of net debt
Income taxes (current and deferred)
51
91
623
765
(71)
(85)
178
(42)
730
638
Outflows relating to acquisitions of intangible assets
(160)
(138)
Outflows relating to acquisitions of property, plant and equipment
(468)
(435)
15
47
Gross operating cash flows
Income taxes paid
4.11.2
Changes in working capital
Net cash provided by operating activities
(1)
CASH FLOWS FROM INVESTING ACTIVITIES
Inflows relating to disposals of property, plant and equipment
Net change in non-current financial assets
Impact of changes in scope of consolidation
Net cash used in investing activities
4.11.3
(10)
(3)
52
208
(571)
(321)
(92)
(85)
(7)
(4)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to parent company stockholders
Dividends paid to minority interests in consolidated subsidiaries
Dividend equalization tax
(2)
Issuance of share capital
Sale (purchase) of treasury shares
27
-
3
20
(39)
(26)
Issuance of long-term debt
8
22
Grants
1
1
Net outflows related to capital reductions
Net interest paid
Repayments of long-term debt
Net cash used in financing activities
-
-
(34)
(47)
(9)
(35)
(142)
(154)
Effect of exchange rate changes on cash
(33)
4
NET CHANGE IN CASH AND CASH EQUIVALENTS
(16)
167
Net cash and cash equivalents at beginning of year
511
344
NET CASH AND CASH EQUIVALENTS AT END OF YEAR
495
511
661
771
(166)
(260)
Of which:
▪ Cash and cash equivalents
▪ Short-term debt
(1) Including contributions received.
(2) This amount relates to the refund by the State of the dividend equalization tax paid by Valeo in 2000, further to the December 2007 administrative court ruling.
PAGE 119
4
Statements of recognized income and expenses
4.D. Statements of recognized income and expenses
2008
2007
Translation adjustment
(28)
(17)
Actuarial gains (losses) on defined benefit plans
(56)
79
(13)
(12)
9
(6)
Cash flow hedges:
▪ gains (losses) taken to equity
▪ (gains) losses transferred to income (loss) for the year
Net investment hedges
▪ gains (losses) taken to equity
Remeasurement of available-for-sale financial assets
Income taxes on items recognized directly in equity
-
-
-
(5)
(4)
(11)
(92)
28
Net income (loss) for the year
(199)
88
TOTAL RECOGNIZED INCOME AND EXPENSES FOR THE YEAR
(291)
116
(303)
109
12
7
Income and expenses recognized directly in equity
Of which:
▪ attributable to equity holders of the Company
▪ attributable to minority interests
PAGE 120
Consolidated statement of changes in stockholders’ equity
4
4.E. Consolidated statement of changes
in stockholders’ equity
Number of
shares
76,893,913
Stockholders’ equity at
December 31, 2006
Dividends
(746,100)
629,000
76,776,813
75,067,118
Translation
adjustment
233
1,387
74
20
-
-
-
(85)
Minority
interests
Stockholders’
equity including minority
interests
1,714
38
1,752
(85)
(4)
(89)
Retained Stockholders’
earnings
equity
Treasury stock
-
-
-
(26)
(26)
-
(26)
Capital increase
Share-based
payment
Income and
expenses
recognized directly
in equity
Net income (loss)
for the year
-
-
-
-
-
3
3
2
15
-
10
27
-
27
-
-
(17)
45
28
-
28
-
-
-
81
81
7
88
-
-
-
(1)
(1)
-
(1)
235
1,402
57
44
1,738
44
1,782
-
-
-
(92)
(92)
(7)
(99)
Other movements
Stockholders’
equity at
December 31, 2007
Dividends
(1,709,695)
Share
capital
Additional
paid-in
capital
Treasury stock
-
-
-
(39)
(39)
-
(39)
Capital increase
Share-based
payment
Income and
expenses
recognized directly
in equity
Net income (loss)
for the year
-
-
-
-
-
3
3
-
-
-
8
8
-
8
-
-
(32)
(64)
(96)
4
(92)
-
-
-
(207)
(207)
8
(199)
-
-
-
(1)
(1)
(1)
(2)
235
1,402
25
(351)
1,311
51
1,362
Other movements
Stockholders’ equity
at December 31,
2008
PAGE 121
4
Notes to the consolidated financial statements
4.F. Notes to the consolidated financial statements
4.F.1.
Accounting policies
The consolidated financial statements of the Valeo Group for the
year ended December 31, 2008 include the accounts of Valeo, its
subsidiaries, and the Group’s share of associates and jointly controlled
entities.
Valeo is an independent Group fully focused on the design, production
and sale of components, systems and modules for the automobile
sector. It is one of the world’s leading automotive suppliers.
■
This standard requires operating segments to be identified on the
basis of internal reports that are regularly reviewed by the Group’s
chief operating decision maker in order to allocate resources to
the segment and assess its performance. Work on the impact of
IFRS 8 is currently being finalized.
■
Valeo’s consolidated accounts were authorized for issue by the Board
of Directors on February 12, 2009.
■
4.F.1.1.1.
Revised IFRS 3 – Business Combinations and revised IAS 27 –
Consolidated and Separate Financial Statements
These two revised standards are effective for reporting periods
beginning on or after July 1, 2009, and will be adopted
prospectively. They will impact the accounting treatment for
acquisitions as from January 1, 2010.
4.F.1.1. Accounting standards applied
The financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as endorsed by
the European Union.
Revised IAS 23 – “Borrowing Costs”
This revised standard is effective as of January 1, 2009 and requires
borrowing costs relating to investment projects undertaken after
that date to be capitalized as part of the carrying amount of the
assets to which they relate. IAS 23 is to be adopted prospectively,
and will not result in any restatement of 2008 figures in 2009.
Valeo is a French legal entity, listed on the Paris Stock Exchange,
whose head office is located at 43, rue Bayen, 75017 Paris.
They will be submitted for approval to the next Annual General
Meeting of shareholders.
IFRS 8 – “Operating Segments”
■
IFRIC 14: “IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction”
This interpretation, which was not adopted by the Group ahead
of its effective date, will have a negative impact of around
7 million euros on equity at January 1, 2009. This results from
the remeasurement of pension obligations in Japan to reflect
local legislation and the characteristics of pension plans in terms
of minimum funding requirements.
Standards, amendments and
interpretations adopted by the European
Union and effective for reporting periods
beginning on or after January 1, 2008
New standards, amendments and interpretations effective as of
January 1, 2008 do not have a material impact on the consolidated
financial statements for the year ended December 31, 2008.
4.F.1.2. Basis of preparation
4.F.1.1.2.
Standards, amendments and
interpretations published by the
International Accounting Standards Board
(IASB) and effective for reporting periods
beginning on or after January 1, 2009
The following standards, amendments and interpretations, which
were not early adopted by the Group, may have an impact on
financial statements published after January 1, 2009:
PAGE 122
The financial statements are presented in euros and are rounded
to the closest million.
They have been prepared in accordance with the principal
assumptions of IFRS:
■
true and fair view;
■
going concern;
■
accrual basis of accounting;
■
consistency of presentation;
■
materiality and aggregation.
Preparation of the financial statements requires Valeo to make
estimates and assumptions which could have an impact on the
reported amounts of assets, liabilities, income and expenses.
These estimates and assumptions concern both risks specific to
the automotive supply business such as those relating to quality
and safety (see management report on Note 3.I.2.1), as well as
more general risks to which the Group is exposed on account of
its industrial operations across the globe. In recent months, the
international climate has been severely affected by the financial crisis
and resulting economic turmoil. Valeo has to contend with a sharp
decline in the global automotive industry which deepened over the
last quarter of 2008. To counter this situation, in December 2008
the Group announced its plan to cut around 5,000 jobs worldwide.
It also stepped up plans to cut costs. The financial statements for
the year ended December 31, 2008 take into account the impact
of these different measures which affect operating income (see
Note 3.4), and in particular balance sheet captions relating to
restructuring provisions (see Note 4.9.1) and fixed assets on which
additional write-downs are taken to reflect impairment losses (see
Note 3.4.3).
The global automotive industry crisis and the serious difficulties
encountered by North American car manufacturers have also led
the Group to enhance the monitoring of its risk exposure (see
Note 5.3).
The Group must exercise its own judgment as regards all such risks,
and does so based on past experience and other factors considered
to be decisive given the circumstances. Valeo’s estimates and
assumptions have been made at a time when the outlook for the
auto industry going forward is difficult to assess. The estimates and
assumptions used are reviewed on a continuous basis. The amounts
that will be stated in Valeo’s future financial statements may be
different from the amounts currently estimated. At year-end, Valeo
expects that it will be able to meet its financial obligations over the
following 12 months.
As explained above, details of the main risks to which the Group
is exposed, along with the associated assumptions and judgments
underlying the accounting methods applied, are provided in the
following notes:
■
3.4 Other income and expenses;
■
4.9 Provisions for other liabilities;
■
5.3 Risk management policy.
4
4.F.1.3.Consolidation methods
The consolidated financial statements include the accounts of Valeo
and companies under its direct and indirect control.
The proportionate consolidation method is used when the contractual
arrangements for control of a company specify that it is under the
joint control of the two venturers. Companies of this type are called
joint ventures. In this case, the Group’s share of each asset and
liability and each item of income and expenses is aggregated, lineby-line, with similar items in its consolidated financial statements.
All significant inter-company transactions are eliminated (for joint
ventures the elimination is made to the extent of the Group’s
ownership interest in the company), as are gains on inter-company
disposals of assets, inter-company profits included in inventories and
inter-company dividends.
Companies over which Valeo exercises significant influence
(associates) are accounted for by the equity method. Valeo is
considered to exercise significant influence over companies in which
it owns more than 20% of the voting rights. The equity method
consists of replacing the book value of the investments by the
Group’s equity in the associate’s underlying net assets, including
goodwill.
Companies acquired during the year are consolidated as from
the date the Group exercises (sole or joint) control or significant
influence.
4.F.1.4. Foreign currency translation
Each Group company maintains its accounting records in its
functional currency. A company’s functional currency is the currency
of the principal economic environment in which it operates, and is
generally the local currency.
Transactions carried out in a currency other than the company’s
functional currency are translated using the exchange rate prevailing
at the transaction date. Monetary assets and liabilities denominated
in foreign currency are translated at the year-end exchange rate.
Non-monetary assets and liabilities denominated in foreign currency
are recognized at the historical exchange rate prevailing at the
transaction date. Differences arising from the translation of foreign
currency transactions are recognized in income, with the exception of
differences relating to loans and borrowings which are in substance
an integral part of the net investment in a foreign subsidiary. These are
recorded, for their net-of-tax amount, in consolidated stockholders’
equity under translation reserves until the net investment is disposed
of, at which time they are recognized in income.
PAGE 123
4
The financial statements of foreign subsidiaries whose functional
currency is not the euro are translated into euros as follows:
■
assets and liabilities are translated at the year-end exchange
rate;
■
income statement items are translated into euros at the
exchange rates applicable at the transaction dates or, in practice,
at the average exchange rate for the period, as long as this is
not rendered inappropriate as a basis for translation by major
fluctuations in exchange rates during the period;
■
unrealized gains or losses arising from the translation of the
financial statements of foreign subsidiaries are recorded through
stockholders’ equity.
4.F.1.5.Operating revenues
Operating revenues are comprised of net sales and other operating
revenues.
Net sales primarily include sales of finished goods and also include
all tooling revenues. Sales of finished goods and tooling revenues
are recognized at the date on which the Group transfers substantially
all the risks and rewards of ownership to the buyer and retains
neither continuing managerial involvement nor effective control over
the goods sold. In cases where the Group retains control of future
risks and rewards related to tooling, any customer contributions
are recognized over the duration of the project over a maximum
period of four years.
Other operating revenues consist of all revenues for which the
associated costs are recorded below the gross margin line. They
mainly comprise sales of prototypes and contributions received from
customers to development costs. Such contributions are deferred as
appropriate and are taken to income over the period during which
the corresponding products are sold, within a maximum period of
four years.
4.F.1.6. Gross margin and operating income
Gross margin is defined as the difference between net sales and
cost of sales. Cost of sales primarily corresponds to the cost of goods
sold.
Operating income includes all income and expenses other than:
■
interest paid on debt and interest earned on cash and cash
equivalents;
■
other financial income and expenses;
■
equity in net earnings of associates;
■
income taxes;
PAGE 124
■
income/(loss) from non-strategic activities (“discontinued
operations” under IFRS 5).
In order to facilitate interpretation of the statement of income
and Group performance, unusual items that are material to the
consolidated financial statements are presented separately within
operating income under “Other income and expenses”.
4.F.1.7. Financial income and expenses
Financial income and expenses comprise the cost of net debt and
other financial income and expenses.
The cost of net debt corresponds to interest paid on debt less interest
earned on cash and cash equivalents.
Other financial income and expenses notably include:
■
gains and losses on currency and interest rate hedges;
■
gains and losses on foreign exchange or commodity transactions
that do not meet the definition of hedges under IAS 39 – Financial
Instruments: Recognition and Measurement;
■
charges to provisions for credit risk as well as the cost of credit
insurance;
■
the effect of unwinding discounts on provisions to reflect the
passage of time, including the discount on provisions for pensions
and other employee benefits; and
■
the expected return on pension and other employee benefit plan
assets.
4.F.1.8. Earnings per share
Basic earnings per share are calculated by dividing consolidated net
income by the weighted average number of shares outstanding
during the year, excluding the average number of shares held in
treasury stock.
Diluted earnings per share are calculated by including equity
instruments such as stock options and convertible bonds when these
have a potentially dilutive impact. This is particularly the case for
stock options when their exercise price is below the market price
(average Valeo share price over the year). When funds are received
on the exercise of these rights (such as on the subscription of shares),
they are deemed to be allocated in priority to the purchase of shares
at market price. This calculation method – known as the treasury
stock method – serves to determine the “unpurchased” shares to be
added to the shares of common stock outstanding for the purposes
of computing the dilution. When funds are received at the date of
issue of dilutive instruments (such as for convertible bonds), net
income is adjusted for the net-of-tax interest savings which would
result from the conversion of the bonds into shares.
4.F.1.9. Business combinations
All identifiable assets acquired and liabilities and contingent liabilities
assumed are recognized at their fair value at the date of transfer
of control to the Group (acquisition date), independently of the
recognition of any minority interests.
The cost of a business combination is equal to the acquisition price,
plus any costs directly attributable to the acquisition. Any excess of
the acquisition cost over the fair value of the net assets acquired and
liabilities and contingent liabilities recognized, is recorded in assets
as goodwill. Goodwill is not amortized but is tested for impairment
at least once a year.
Adjustments to the fair value of assets and liabilities acquired
or assumed within the scope of business combinations and
accounted for on a provisional basis (i.e., pending expert appraisals
or complementary analyses) are recognized as a retrospective
adjustment to goodwill if they occur within 12 months of the
acquisition date. Adjustments made after the initial accounting
is complete are taken directly to income unless they correct an
accounting error.
4.F.1.10. Intangible assets
Innovation can be analyzed as either research or development.
Research is planned investigation undertaken with the prospect of
gaining new scientific or technical knowledge and understanding.
Development is the application of research findings with a view to
creating new products, before the start of commercial production.
Research costs are recognized in expenses in the year in which
they are incurred.
Development expenditure is capitalized where the Group can
demonstrate:
■
that it has the intention, and the technical and financial resources
to complete the development;
■
that the intangible asset will generate future economic benefits;
and
■
that the cost of the intangible asset can be measured reliably.
Capitalized development costs therefore correspond to projects
for specific customer applications that draw on approved generic
standards or technologies already applied in production. These
projects are analyzed on a case-by-case basis to ensure they meet
the criteria for capitalization as described above.
Capitalized development costs are amortized over a maximum
period of four years from the start of volume production. Impairment
losses may, as required, be recognized in respect of capitalized
development costs.
4
Other intangible assets are carried at cost less any amortization and
impairment losses recognized. They are amortized on a straight-line
basis over their expected useful lives:
■
Software
■
Patents and licenses
■
(excluding customer relationships)
5 years
Customer relationship intangibles
25 years
■
3 years
based on their useful lives
Intangible assets are tested for impairment using the methodology
described in Note 1.12.
4.F.1.11. Property, plant and equipment
Property, plant and equipment are carried at cost excluding interest
expense, less accumulated depreciation and impairment losses.
Material revaluations, recorded in accordance with laws and
regulations applicable in countries in which the Group operates,
have been eliminated in order to ensure that consistent valuation
methods are used for all fixed assets in the Group.
Tooling specific to a given project is subjected to an economic
analysis of contractual relations with the automaker in order to
determine which party has control over the associated future risks
and rewards. Tooling is capitalized in the balance sheet when Valeo
has control over these risks and rewards, or carried in inventories
until it is sold if no such control exists. A provision is made for any
resulting loss on the tooling contract (corresponding to the difference
between the automaker’s contribution and the cost of the tooling)
as soon as the amount of the loss is known.
When a lease entered into by the Group as lessee transfer
substantially all the risks and rewards related to ownership of an
asset to the Group by the end of the lease term, the corresponding
asset is recognized in property, plant and equipment in the Group’s
balance sheet at an amount equal to the lower of its fair value
and the present value of future minimum lease payments. This
amount is subject to depreciation and, if necessary, impairment. The
corresponding obligation is recorded in debt under liabilities.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets concerned:
■
buildings
20 years
■
fixtures and fittings
■
machinery and tooling
4 to 8 years
■
other fixed assets
3 to 8 years
8 years
Land is not depreciated.
Capital grants received are recognized in liabilities and are written
back to income proportionately to the recognition of depreciation
on the corresponding assets.
PAGE 125
4
4.F.1.12. Impairment of assets
4.F.1.13. Financial assets and liabilities
At each balance sheet date, the Group assesses whether there is
an indication that an asset (other than a financial asset), a cashgenerating unit (CGU – as defined by IAS 36), or a group of CGUs
may be impaired.
Recognition and measurement principles regarding financial assets
and liabilities are defined in IAS 32 and IAS 39.
CGUs are largely autonomous management entities representing
the level at which resources are allocated and performance is
measured. They generally correspond to production sites or to groups
of production sites.
Intangible assets with indefinite useful lives and intangible assets
which are not yet ready to be brought into service are systematically
tested for impairment at least once a year. If the asset’s carrying
value is greater than its recoverable amount, it is written down to
its recoverable amount.
The recoverable amount of an asset or a CGU is the higher of its
fair value less costs to sell and its value in use. In practice, since the
fair value less costs to sell of Group CGUs can seldom be reliably
estimated, Valeo applies value in use (unless otherwise specified)
to calculate the recoverable amount of a CGU in accordance with
paragraph 20 of IAS 36. Value in use corresponds to the present
value of future cash flows expected to derive from the use of an
asset or CGU. The discount rate used is the rate that reflects both the
current assessment of the time value of money and risks specific to
the asset (or group of assets) for which future cash flow estimates
have not been adjusted.
Impairment losses taken against CGU assets are allocated first to
reduce the carrying amount of any goodwill, and then to the other
CGU assets in proportion to their carrying amounts.
Goodwill within the Group are mainly tested at the level of Product
Families, which comprise the main groups of CGUs to which goodwill
has been allocated. Impairment losses recognized on goodwill
balances are never reversed. For other assets, when an indicator
shows that the asset may no longer be impaired, the amount of the
impairment loss to be reversed is based on the revised recoverable
value of the asset but cannot exceed the carrying amount of the
asset that would have been determined had no impairment loss
been recognized.
4.F.1.13.1
Available-for-sale financial assets
This category includes shares in non-consolidated companies.
Available-for-sale financial assets are recognized at fair value
upon initial recognition, with any subsequent changes in fair value
recognized through equity or income in the event of a significant,
prolonged decline in fair value.
Investments whose fair value cannot be estimated reliably are
carried at cost, and are classified in non-current financial assets.
4.F.1.13.2
Long-term loans and receivables
This category consists essentially of long-term loans, which are
measured on an amortized cost basis using the effective interest
rate. They are shown on the balance sheet as non-current financial
assets.
4.F.1.13.3
Other non-current financial assets
Other non-current financial assets are subsequently measured at fair
value, with changes in fair value recognized in income.
4.F.1.13.4
Current financial assets and liabilities
Current financial assets and liabilities include trade receivables
and payables, derivative financial instruments, and cash and cash
equivalents.
■ Cash and cash equivalents
Cash and cash equivalents are comprised of marketable securities
such as money-market funds with a low price volatility risk; deposits
and very short-term risk-free securities maturing within three
months which can be readily sold or converted into cash; and cash
at bank.
These current financial assets are carried at fair value through income
and are held with a view to being sold in the short term.
■ Trade receivables and payables
Trade receivables and payables are initially recognized at fair value
and subsequently at amortized cost. The fair value of accounts
receivable and accounts payable is deemed to be their nominal
amount, since periods to payment are generally less than three
months.
Accounts receivable can be subject to provisions for impairment in
value. If an event triggering a loss is identified during the financial
year subsequent to initial recognition of the receivable, the required
PAGE 126
provision will be calculated by comparing the estimated future
cash flows discounted at the original effective interest rate to the
carrying amount in the balance sheet. Provisions are recognized
in other financial expenses if they relate to a risk of insolvency of
the debtor.
■ Derivative financial instruments
Derivatives are recognized in the balance sheet at fair value under
other current financial assets or other current financial liabilities. The
accounting impact of changes in the fair value of derivatives depends
on whether or not hedge accounting is applied.
When hedge accounting is applied:
■
for fair value hedges of recognized assets and liabilities, the
hedged portion of these items is stated at fair value. So changes
in fair value are recognized through income and are offset (for
the effective portion) by symmetrical changes in the fair value of
the hedging instrument;
■ Interest rate derivatives
The Group generally applies fair value hedge accounting when it uses
interest rate derivatives swapping fixed-rate debt for variable-rate
debt. Changes in the fair value of debt attributable to changes in
interest rates, and symmetrical changes in the fair value of the
interest rate derivatives, are recognized in other financial income
and expenses for the year.
Certain interest rate derivatives are not designated as hedging
instruments within the meaning of IAS 39. Changes in fair value
of these derivatives are recognized in other financial income and
expenses for the period.
4.F.1.13.5
Debt
■
for cash flow hedges, the effective portion of the change in fair
value of the derivative is recognized directly through equity, while
the ineffective portion is taken to other financial income and
expenses;
■ Bonds and other loans
Bonds and loans are valued at amortized cost. The amount of interest
recognized in financial expenses is calculated by applying the loan’s
effective interest rate to its carrying amount. Any difference between
the expense calculated using the effective interest rate and the
actual interest payment impacts the value at which the loan is
recognized.
■
for hedges of net investments in foreign subsidiaries, the change
in fair value of the hedging instrument is taken to equity (for the
effective portion) until the disposal of the net investment.
Hedge accounting is generally applied to financial debt hedged by
interest rate swaps. The debt is remeasured to fair value, reflecting
changes in interest rates.
Changes in the fair value of derivatives that do not qualify for hedge
accounting are recognized in other financial income and expenses.
■ Foreign currency derivatives
Although they act as hedges for the Group, foreign currency
derivatives do not always meet the criteria for hedge accounting.
Changes in the fair value of derivatives are recognized in financial
items and are offset, as applicable, by changes in the fair value of
the underlying receivables and payables.
The Group applies hedge accounting to a limited number of
transactions generally considered significant. In these cases, changes
in the fair value of the derivatives are recognized in equity for the
effective portion of the hedge, and subsequently taken to operating
income when the hedged item itself affects operating income. The
ineffective portion of the hedge is recognized in other financial
income and expenses.
■ Metals derivatives
In principle, the Group applies cash flow hedge accounting.
The effective portion of the hedge is reclassified from equity to
operating income when the hedged position itself affects income.
The ineffective portion of the hedge is recognized in other financial
income and expenses. Where a forecast transaction is no longer
highly probable, the cumulative gains and losses carried in equity
are transferred immediately to financial items.
4
■ OCEANE bonds
Bonds convertible into new shares and/or exchangeable for
existing shares (“OCEANE”) grant bearers an option for conversion
into common Valeo shares. These bonds constitute a hybrid
financial instrument which must be split into its two components in
accordance with IAS 32:
■
the value of the debt component is calculated by discounting the
future contractual cash flows at the market rate applicable at the
bond issue date (taking account of credit risk at the issue date)
for a similar instrument with the same characteristics but without
a conversion option;
■
the value of the equity component is calculated as the difference
between the proceeds of the bond issue and the amount of the
debt component.
■ Short-term debt
This caption mainly includes credit balances with banks and
commercial paper issued by Valeo for its short-term financing needs.
Commercial paper has a maximum maturity of three months and is
valued at amortized cost.
PAGE 127
4
4.F.1.14. Inventories
Inventories are stated at the lower of cost or net realizable value.
Cost includes the cost of raw materials, labor and other direct
manufacturing costs on the basis of normal activity levels. These
costs are determined by the “First in-First out” (FIFO) method which,
due to the rapid inventory turnover rate, approximates the latest cost
at the balance sheet date.
Provisions for impairment in value are recorded on the basis of the
net realizable value.
4.F.1.17. Pensions and other employee
benefits
Pensions and other employee benefits cover two categories of
employee benefits:
■
post-employment benefits which include statutory retirement
bonuses, supplementary pension benefits and coverage of certain
medical costs for retirees and early retirees;
■
other long-term benefits payable (during employment),
corresponding primarily to long-service bonuses.
These benefits are broken down into:
4.F.1.15. Income taxes
Income tax expense includes current income taxes and deferred
taxes of consolidated companies. Deferred taxes are accounted for
using the liability method for all temporary differences between
the tax base and the carrying amount of assets and liabilities in the
consolidated financial statements and for all tax loss carry forwards.
The main temporary differences relate to provisions for pensions and
other employee benefits and to other temporarily non-deductible
provisions. Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply when the temporary differences
reverse, based on tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax assets are only recognized to the extent that it appears
probable that the Valeo Group will generate future taxable profits
against which these tax assets will be able to be recovered.
The Group reviews the probability of future recovery of deferred
tax assets on a periodic basis. This review can, if necessary, lead
the Group to no longer recognize deferred tax assets that it had
recognized in prior years.
Taxes payable and tax credits receivable on planned dividend
distributions by subsidiaries are recorded in the statement of
income.
■
defined contribution plans, under which the employer pays fixed
contributions on a regular basis and has no legal or constructive
obligation to pay further contributions;
■
defined benefit plans, under which the employer guarantees a
future level of benefits.
The provision for pensions and other employee benefits (including
long-term benefits) is equal to the present value of Valeo’s future
benefit obligation less, where appropriate, the fair value of plan
assets in funds allocated to finance such benefits. The calculation
of this provision is based on valuations performed by independent
actuaries using the projected unit credit method and final salaries.
These valuations incorporate both financial assumptions (discount
rate, expected rate of return on plan assets, and increases in salaries
and medical costs) and demographic assumptions, including rate of
employee turnover, retirement age and life expectancy.
The effects of differences between previous actuarial assumptions
and what has actually occurred (experience adjustments) and the
effect of changes in actuarial assumptions (assumption adjustments)
give rise to actuarial gains and losses. Actuarial gains and losses
arising on long-term benefits payable during employment are
recognized in full in the income statement for the financial year in
which they were incurred. However, actuarial gains and losses on
post-employment benefits are taken directly to equity in the year
in which they arise.
4.F.1.16. Share-based payment
Employee stock option plans and plans for granting free shares
and Stock Appreciation Rights (SARS) to employees lead to the
recognition of a personnel expense. This expense corresponds to
the fair value of the instrument issued, and is recognized over the
applicable vesting period. Fair value is estimated on the basis of
valuation models adapted to the characteristics of the instruments
(Black-Scholes-Merton model for options, Monte Carlo method for
SARs, etc.).
PAGE 128
4.F.1.18. Provisions
A provision is recognized when the Group has a legal or constructive
obligation resulting from a past event, where it is probable that
future outflows of resources embodying economic benefits will be
necessary to settle the obligation, and where the obligation can be
estimated reliably. Commitments resulting from restructuring plans
are recognized when an entity has a detailed formal plan and has
raised a valid expectation in those affected that it will carry out the
restructuring by starting to implement that plan or announcing its
main features.
A provision for warranties is set aside to cover the estimated cost
of returns of goods sold. The corresponding expense is recognized
in cost of sales.
When the effect of the time value of money is material, the amount
of the provision is discounted using a rate that reflects the market’s
current assessment of this value and the risks specific to the liability
concerned. The increase in the provision related to the passage of
time (termed “unwinding”) is recognized through income in other
financial income and expenses.
4.F.1.19. Assets held for sale and non-strategic
operations
When the Group expects to recover the value of an asset, or a group
of assets, through their sale rather than through continuing use,
such assets are presented separately under “Assets held for sale”
in the balance sheet. Any liabilities related to such assets are also
presented under a separate caption in balance sheet liabilities. Assets
classified as held for sale are valued at the lower of their carrying
amount and their estimated sale price less costs to sell, and are
therefore no longer subject to depreciation and amortization. Any
impairment losses and proceeds from the disposal of these assets
are recognized through Group operating income.
In accordance with IFRS 5, non-strategic (discontinued or held-forsale) operations represent a separate major line of business of the
Group; an operation that forms part of a single coordinated plan to
dispose of a separate major line of business; or a company acquired
solely with a view to resale. Classification as a non-strategic operation
occurs at the date of sale or at an earlier date if the business meets
the criteria to be recognized as an asset held for sale. Income or
losses generated by these operations, as well as any capital gains
or losses on disposal, are presented net of tax on a separate line
of the income statement. To provide a meaningful year-on-year
comparison, the same treatment is applied to the previous year.
4
4.F.1.20. Segment reporting
According to IAS 14, segment reporting should be provided at both
a primary and secondary level. The choice of segments and levels
of disclosure depends on the differences in terms of risk and return
and on the organizational structure of the Group.
The Group’s risks and returns are based on the nature of its products
or services, the nature of its production processes, the type of
customers to whom the products or services are to be sold, the
methods used to distribute the products or provide the services,
and the nature of the regulatory environment. They also depend on
the countries in which the Group operates and markets its products,
raw material costs used in the production cycle and the Group’s
capacity to innovate in order to offer its clients products that meet
market expectations.
Analysis of these factors demonstrates that they are common to the
Group’s business as a whole and different business segments cannot
therefore be separately identified within the meaning of IAS 14.
Valeo is organized in a multi-dimensional manner:
■
the Group is divided into autonomous Divisions which represent
the levels at which resources are allocated and performance is
measured. However, as there are approximately one hundred
such divisions, none of them can be considered to be material
within the meaning of IAS 14;
■
the Divisions are supported by Valeo’s functional networks and
Branches, which oversee the coherence of the Group’s Product
Families; they also exploit synergies with the Innovation Domains,
and are coordinated by National Directorates.
Analysis of this organizational structure does not allow any specific
dimension of the Group’s business to be separated out from the
others within the meaning of IAS 14.
Accordingly:
■
the Group as a whole is considered as a single business segment
(“Automotive supplier”);
■
information for each geographical area, supplemented
by information based on the most appropriate criteria for
understanding the Group’s business, is provided for the secondary
level of segment reporting.
PAGE 129
4
4.F.2.
Changes in the scope of consolidation
4.F.2.1. Transactions carried out in 2008
4.F.2.2. Transactions carried out in 2007
4.F.2.1.1.
4.F.2.2.1.
Acquisition of a controlling interest
in Valeo Radar Systems, Inc.
On December 15, 2008 Valeo acquired the entire capital stock of
Valeo Radar Systems, Inc. (ex Valeo Raytheon Systems Inc.). This
entity, which was previously 77.8%-owned by the Group and
proportionally consolidated in line with the characteristics of the joint
venture agreement, has now been fully consolidated. The acquisition
of this controlling interest led to the recognition of 6 million euros
in goodwill and resulted in a royalties agreement being set up in
favor of the seller.
4.F.2.1.2.
Creation of Valeo Climate Control
Tomilino LLC in Russia
On June 18, 2008 Valeo signed an agreement to create a Russianbased entity 95%-owned by Valeo and 5%-owned by the Russian
firm Itelma. The new entity was named Valeo Climate Control
Tomilino LLC, and will produce heating, ventilation and air conditioning
systems. The full consolidation of this entity did not have a material
impact on the Group’s consolidated financial statements for the year
ended December 31, 2008. This company will only begin deliveries
to the Russian market in 2009.
4.F.2.1.3.
Sale of the heavy duty truck
Engine Cooling business
On May 30, 2008 Valeo sold its heavy duty truck Engine Cooling
business to Swedish company EQT for 77 million euros . This
transaction generated a post-tax capital gain of 25 million euros ,
recorded under “Other income and expenses”. The heavy duty truck
Engine Cooling business contributed 76 million eurosto consolidated
net sales for the first five months of 2008 (172 million euros for the
year ended December 31, 2007).
4.F.2.1.4.
Sale of Valeo Armco Engine Cooling Co
On December 20, 2008, Valeo sold its interests in the Iranian joint
venture Armco Engine Cooling Co to the Armco group. The sale did
not have a material impact on the 2008 financial statements.
Sale of the Wiring Harness
activity to the Leoni group
In December 2007 Valeo sold its Wiring Harness activity to German
group Leoni for 143 million euros. The impact of this transaction on
income for 2007 was a capital loss of 51 million euros after tax,
which was included in the consolidated statement of income under
“Income/(loss) from non-strategic activities”.
In 2007 this business generated net sales of 551 million euros
and operating income of 3 million euros. In accordance with
IFRS 5 – Non-current Assets Held for Sale and Discontinued
Operations, the after-tax profit from the Wiring Harness activity is
presented in aggregate on a separate line under “Income/(loss)
from non-strategic activities” in the 2007 statement of income.
4.F.2.2.2.
Acquisition of Connaught
Electronics Ltd. (CEL)
In July 2007 the Group acquired the Irish group Connaught Electronics
Ltd (CEL), which manufactures electronic equipment for the
automotive industry. The full consolidation of this entity did not
have a material impact on the Group’s consolidated balance sheet
at December 31, 2007 or statement of income for the year then
ended. No significant adjustments were made following completion
of the project to identify the assets acquired and liabilities assumed
in the acquisition. The contribution of Connaught Electronics Ltd (CEL)
to consolidated net sales was 24 million euros in 2008.
4.F.2.2.3.
Creation of two new
joint ventures in India
In May 2007 Valeo formed a joint venture specializing in automotive
security systems with the Minda group, one of India’s leading
automotive equipment suppliers. The consolidation of this entity
using the proportional method did not have a material impact on
the Group’s 2007 or 2008 financial statements.
On July 24, 2007 Valeo and the Minda group created another joint
venture to produce starters and alternators for private passenger
vehicles, 66.7%-owned by Valeo and 33.3%-owned by Minda. In
view of the agreements between Valeo and Minda, this entity is fully
consolidated. The first-time consolidation of the entity did not have a
material impact on the Group’s 2007 or 2008 financial statements.
These two Indian joint ventures contributed 12 million euros to
consolidated net sales for 2008.
PAGE 130
4.F.2.2.4.
Ichikoh
Valeo raised its interest in Ichikoh, one of Japan’s largest lighting
systems suppliers, from 29.4% at December 31, 2006 to 31.6%
4.F.3.
4
at December 31, 2007. The Group’s percentage interest in the
company remained unchanged at December 31, 2008. Ichikoh is
accounted for by the equity method.
Notes to the statement of income
4.F.3.1. Net sales
Group net sales fell 9.3% to 8,664 million euros in 2008 from
9,555 million euros in 2007. The decrease includes a negative net
currency impact of 1.5% and a negative impact of 0.7% due to
changes in scope of consolidation.
On a comparable Group structure and exchange rate basis,
consolidated net sales for 2008 fell 7.1% year-on-year.
4.F.3.2. Cost of sales
Cost of sales can be analyzed as follows:
2008
2007
Raw materials consumed
(4,819)
(5,297)
Labor
(1,310)
(1,423)
(846)
(945)
(387)
(403)
12
10
(7,350)
(8,058)
Direct production costs and production overheads
Depreciation and amortization
(1)
Others
Cost of sales
(1) This amount does not include amortization charged against capitalized development costs and tooling.
PAGE 131
4
4.F.3.3. Personnel expenses
Total employees (1)
2008
2007
51,200
61,200
(1) Including temporary staff.
The statement of income presents operating expenses by function. Operating expenses include the following personnel-related expenses:
2008
2007
Wages and salaries (1)
1,651
1,686
367
399
8
11
88
96
2008
2007
Social charges
Share-based payment
Pension expenses under defined contribution schemes
(1) Including temporary staff.
Pension expenses under defined benefit schemes are set out in Note 4.9.2.
4.F.3.4. Other income and expenses
Claims and litigation
Restructuring costs
Impairment of fixed assets
Other
Other income and expenses
4.F.3.4.1.
■
1
25
(239)
(37)
(58)
(26)
14
11
(282)
(27)
an expense of 9 million euros corresponding to costs already
incurred during the period.
In the year ended December 31, 2007, the Group wrote back
a provision for 22 million euros following the settlement of a
commercial dispute.
The plan was launched at the end of December 2008 and should
be completed by the end of 2009.
4.F.3.4.2.
The amounts booked concern labor costs and redundancy expenses
covering around 3,400 employees in Europe. Outside Europe, the
cutbacks should affect around 1,600 employees, mostly in North
America and Brazil.
Restructuring costs
Following the announcement in December 2008 of its plan to cut
around 5,000 jobs worldwide, the Group recognized an amount of
225 million euros in its financial statements, breaking down as:
■
additions to provisions for reorganization expenses totaling
232 million euros ;
■
reversals from a provision for pensions in France for 16 million
euros (see Note 4.9.2);
PAGE 132
Restructuring costs for the year ended December 31, 2007 totaled
37 million euros, and comprised costs relating to the streamlining
or closure of plants, mainly in Europe.
4.F.3.4.3.
Impairment of fixed assets
■ Property, plant and equipment and intangible assets
(excluding goodwill)
Impairment losses on property, plant and equipment and intangible
assets mainly result from impairment tests carried out at the level
of Cash-Generating Units (CGUs) in accordance with the following
methodology:
■
the value in use of CGUs is calculated using post-tax cash flow
projections covering a period of five years, prepared on the basis of
the budgets and medium-term plans drawn up by Group divisions.
The projections are based on past experience, macroeconomic
data for the automobile market, order books and products
under development. The steep decline in automobile production
over recent months has prompted the Group to reassess the
assumptions underlying its previous budgets and medium-term
plans. Values in use have therefore been estimated based on:
• a 2009 budget that factors in a sharp drop in forecast sales
volumes following the decline already observed in the last quarter
of 2008;
• medium-term plans which forecast an ending crisis after a period
of three years.
■
■
cash flows beyond the five-year period are extrapolated using a
growth rate of 1%. This rate is the same as that used in 2007,
and is below the average long-term growth rate for the Group’s
business sector.
cash flows are discounted based on a weighted average cost of
capital (WACC) of 8.5% after tax in 2008 (7.5% in 2007). This 1%
rise in the discount rate chiefly reflects the deterioration in the
refinancing market and greater share price volatility. In 2007, an
independent expert was consulted in determining the method
to be used to compute WACC. WACC calculation method is based
on a sample of 20 automotive parts suppliers.
Year ended December 31, 2008
The Group recorded net write-downs of 58 million euros as a result
of these impairment tests, concerning mainly:
■
property, plant and equipment and intangible assets (excluding
goodwill) relating to a CGU within the Compressors Product Family
based in the Czech Republic (20 million euros);
■
impairment losses recognized against assets of 3 CGUs based in
the Americas relating to the Wiper Systems, Climate Control and
Interior Controls Product Families (20 million euros);
■
impairment losses recognized against a Wiper System CGU whose
plants are located in France and Spain (10 million euros).
4
The Group recognized impairment losses of 26 million as a result
of these impairment tests, concerning one CGU within each of the
Interior Controls, Compressors and Engine Cooling Product Families.
The impairment losses were recognized against property, plant and
equipment and intangible assets (24 million euros) and against
goodwill (2 million euros) relating to the Iran-based Engine Cooling
CGU.
■ Sensitivity of CGU impairment tests to the discount rate
An increase of 1% in the discount rate would result in an additional
impairment loss of 10 million euros being recognized against
intangible assets and property, plant and equipment. A 1% decrease
in the discount rate would lead to a reversal of 14 million euros in
impairment recognized against fixed assets. These calculations were
based on an average euro/dollar exchange rate of 1.5.
An increase of 0.5% in the discount rate would result in an additional
impairment loss of 7 million euros being recognized against
intangible assets and property, plant and equipment. A 0.5%
decrease in the discount rate would lead to a reversal of 6 million
euros in impairment recognized against fixed assets.
■ Goodwill
Goodwill is allocated to Cash-Generating Units (CGUs) on the basis
of the Product Family to which it relates. Goodwill is tested for
impairment at least once a year, using the same method and
assumptions as those used for the CGUs described above.
Value in use for groups of CGUs were calculated based on a 2009
budget that factors in a sharp drop in forecast sales volumes and
on medium-term plans which forecast an end to the crisis after a
period of three years. No impairment losses were taken against
goodwill as a result of the tests performed for the year ended
December 31, 2008.
No impairment losses were recognized by the Group in 2007 as a
result of these tests, other than the write-down on goodwill relating
to the CGU in Iran.
■ Sensitivity of goodwill impairment tests
A 1% increase in the discount rate would have no impact on the
results of goodwill impairment tests at December 31, 2008.
No impairment losses would be taken against goodwill were the
crisis forecast to end after a period of four years instead of three.
A 0.5% increase in the discount rate would have no impact on
goodwill impairment tests at December 31, 2007.
PAGE 133
4
4.F.3.4.4.
Other
In 2008 this item mainly includes capital gains totaling 25 million
euros on the disposal of the heavy duty truck Engine Cooling
business.
In 2007, this caption relates mainly to capital gains on disposals
of property assets for 27 million euros. The balance includes costs
relating to strategic transactions.
4.F.3.5. Cost of net debt
2008
2007
Interest expense
(68)
(82)
Interest income
Cost of net debt
Despite the rise in interest rates over the first nine months of 2008,
the cost of the Group’s net debt fell. This was because the negative
impact of the rise in interest rates was offset by the reduction in debt
23
31
(45)
(51)
due to cash received on the disposal of the heavy duty truck Engine
Cooling business and Wiring Harness units, collected in the second
quarter of 2008 and at end-December 2007, respectively.
4.F.3.6. Other financial income and expenses
Interest expense on unwinding of discount on pension obligations (1)
Expected return on pension plan assets (1)
Currency gains (losses) on cash flow hedges
Currency gains (losses) on other transactions
Gains (losses) on commodity transactions (trading and ineffective portion)
Gains (losses) on fair value hedges (interest rate)
Additions to provisions for credit risk
Gains (losses) on disposals of financial assets
Unwinding of discount on provisions (excluding pension obligations)
Miscellaneous
Other financial income and expenses
2008
2007
(49)
(48)
21
21
-
-
(6)
(9)
(17)
-
-
-
(5)
(4)
-
-
(1)
(4)
(2)
(2)
(59)
(46)
(1) See Note 4.9.2.
The sudden, large volume cutbacks by customers in 2008 resulted
in a 17 million euros loss on commodity hedges, since the volumes
initially hedged significantly exceeded actual requirements.
PAGE 134
Currency losses incurred in 2007 mainly relate to operations carried
out by the Group in Eastern Europe and Turkey.
4
4.F.3.7. Income taxes
4.F.3.7.1.
Income tax expense
2008
2007
(73)
(84)
22
1
(51)
(83)
2008
2007
(34,4)
(34,4)
1.9
12.9
▪ unused tax losses (current year) and unrecognized deferred tax assets
72.0
(37.1)
▪ utilization of prior-year tax losses
(0.5)
0.1
▪ permanent differences between book income and taxable income
(1.2)
16.5
▪ tax credits
(4.8)
4.8
33.0
37.2
Current taxes
Deferred taxes
Income tax
4.F.3.7.2.
Effective tax rate
The Group recognized income tax expense of 51 million euros for 2008, while reporting a pre-tax loss.
(% of pre-tax income/loss)
Standard tax rate in France
Impact of:
▪ income taxed at other rates
Effective Group tax rate
No deferred tax assets were recognized as a result of the redundancy plan affecting staff in France and the United States. This explains the
change in the Group’s effective tax rate in 2008 compared to 2007.
4.F.3.8. Earnings per share
4.F.3.8.1.
Basic earnings per share
Net income (loss) attributable to equity holders of the Company (in millions of euros)
Weighted average number of shares outstanding (in thousands of shares)
Basic earnings (loss) per share (in euros)
2008
2007
(207)
81
75,922
76,951
(2.73)
1.06
PAGE 135
4
4.F.3.8.2.
Diluted earnings per share
2008
2007
(207)
81
75,922
76,951
-
445
(in thousands of shares)
75,922
77,396
Diluted earnings (loss) per share (in euros)
(2.73)
1.05
2008
2007
Basic earnings (loss) per share (in euros)
-
(0.76)
Diluted earnings (loss) per share (in euros)
-
(0.76)
2008
2007
1,165
1,415
6
5
(1)
2
(31)
(212)
15
(43)
Net income (loss) attributable to equity holders of the Company (in millions of euros)
Weighted average number of shares outstanding (in thousands of shares)
Stock options (in thousands of options)
Weighted average number of shares used for the calculation of diluted earnings per share
4.F.3.8.3.
4.F.4.
Income (loss) from non-strategic activities
Notes to the balance sheet
4.F.4.1. Goodwill
Net goodwill at January 1
Acquisitions during the year (1)
Price adjustments in respect of acquisitions made in previous years
Disposals, net
Translation adjustments
Impairment losses
Net goodwill at December 31
Including accumulated impairment losses at December 31
-
(2)
1,154
1,165
-
(2)
(1) See Note 2.1.1.
In the years ended December 31, 2008 and 2007, changes in
goodwill excluding the impact of exchange rate fluctuations are
mainly due to the sale of:
■
the heavy duty truck Engine Cooling business (see Note 2.1.3);
■
the Wiring Harness activity in December 2007 (see Note 2.2.1).
PAGE 136
The 2 million euros impairment loss recognized in 2007 reflects
the full write-down taken against goodwill assigned to the Iranian
CGU.
4
The main goodwill balances are broken down by group of CGUs as follows:
2008
2007
Wiper Systems
214
208
Climate Control
238
207
Interior Controls
176
172
181
181
Security Systems
125
129
Electrical Systems
80
100
Other
140
168
TOTAL
1,154
1,165
4.F.4.2. Other intangible assets
Software
Patents and licenses
Gross carrying
amount
2008
Amortization
and impairment
losses
2007
Net carrying
amount
Net carrying
amount
170
(142)
28
35
62
(34)
28
21
Capitalized development expenditure
757
(436)
321
302
Customer relationships intangibles
143
(22)
121
120
48
(21)
27
36
1,180
(655)
525
514
Other
Customer relationship intangibles were valued within the context of acquisitions mostly carried out in 2005. Patents and licenses include assets
relating to technology intangibles acquired.
Changes in other intangible assets over 2008 and 2007 are analyzed below:
2008
Gross at January 1, 2008
Software
Patents and
licenses
Capitalized
development
expenditure
Other
intangible
assets
Total
146
80
636
179
1,041
(111)
(59)
(334)
(23)
(527)
35
21
302
156
514
Acquisitions
5
1
147
7
160
Disposals
-
-
-
(1)
(1)
Changes in scope of consolidation
-
-
(4)
-
(4)
Impairment losses
-
-
(18)
(5)
(23)
(16)
(6)
(95)
(10)
(127)
-
-
(1)
10
9
4
12
(10)
(9)
(3)
28
28
321
148
525
Accumulated amortization and impairment
Net at January 1, 2008
Amortization
Reclassifications
Net at December 31, 2008
PAGE 137
4
2007
Software
Patents and
licenses
Capitalized
development
costs
Other
intangible
assets
Total
Gross at January 1, 2007
132
85
550
187
954
Accumulated amortization and impairment
(97)
(54)
(258)
(17)
(426)
35
31
292
170
528
Net at January 1, 2007
Acquisitions
7
1
122
7
137
Disposals
-
(1)
(4)
(2)
(7)
-
1
(11)
(1)
(11)
Impairment losses
-
-
-
-
-
(19)
(10)
(95)
(6)
(130)
Amortization
-
-
(3)
-
(3)
Reclassifications
12
(1)
1
(12)
-
Net at December 31, 2007
35
21
302
156
514
4.F.4.3. Property, plant and equipment
Land
Buildings
Gross carrying
amount
2008
Amortization
and
impairment
losses
2007
Net carrying
amount
Net carrying
amount
151
(15)
136
136
935
(569)
366
390
Plant and equipment
3,339
(2,599)
740
800
Specific tooling
1,234
(1,077)
157
149
426
(353)
73
100
Other
Fixed assets in progress
TOTAL
267
-
267
215
6,352
(4,613)
1,739
1,790
2008
2007
No material amounts of property, plant and equipment had been pledged as security at December 31, 2008.
Finance leases included within property, plant and equipment can be analyzed as follows:
Land
-
-
Buildings
1
6
Plant and equipment
3
3
Specific tooling
-
1
Other
3
4
Fixed assets in progress
-
-
TOTAL
7
14
PAGE 138
4
Changes in property, plant and equipment in 2008 and 2007 are analyzed below:
2008
Gross at January 1,
2008
Accumulated
depreciation and
impairment
Net at January 1,
2008
Acquisitions
Disposals
Changes in scope of
consolidation
Land
Buildings
Plant and
equipment
Specific
tooling
Other
Fixed assets in
progress
Total
149
939
3,259
1,211
452
215
6,225
(13)
(549)
(2,459)
(1,062)
(352)
-
(4,435)
136
390
800
149
100
215
1,790
-
19
157
67
27
208
478
(3)
(2)
(5)
(5)
(2)
(1)
(18)
(1)
(4)
(15)
(4)
(3)
(2)
(29)
Impairment losses
(3)
(2)
(27)
(1)
(3)
-
(36)
Depreciation
Translation
adjustments
(1)
(46)
(260)
(89)
(39)
-
(435)
8
(9)
(12)
1
(1)
(1)
(14)
-
20
102
39
(6)
(152)
3
136
366
740
157
73
267
1,739
Reclassifications
Net at
December 31,
2008
In accordance with IFRS 5, buildings for which the Group is actively seeking buyers are classified in “Assets held for sale” (5 million euros
at December 31, 2008).
2007
Gross at January 1,
2007
Accumulated
depreciation and
impairment
Net at January 1,
2007
Land
Buildings
Plant and
equipment
Specific
tooling
Other
Fixed assets in
progress
Total
156
971
3,322
1,169
468
239
6,325
(10)
(552)
(2,452)
(1,023)
(370)
-
(4,407)
146
419
870
146
98
239
1,918
Acquisitions
1
16
129
60
28
211
445
Disposals
-
(2)
(5)
(3)
(2)
(2)
(14)
Changes in scope
of consolidation
-
(1)
-
-
-
-
(1)
(3)
(18)
(40)
(2)
12
(3)
(54)
Impairment losses
(1)
(1)
(8)
(9)
(3)
-
(22)
Depreciation
Translation
adjustments
(3)
(51)
(265)
(99)
(43)
-
(461)
(5)
(2)
(8)
(2)
-
(4)
(21)
1
30
127
58
10
(226)
-
136
390
800
149
100
215
1,790
Reclassifications
Net at
December 31,
2007
PAGE 139
4
4.F.4.4. Investments in associates
Changes in the “Investments in associates” caption can be analyzed as follows:
Investments in associates at January 1
Share in net earnings of associates
Dividend payments
(1)
Other
Investments in associates at December 31
2008
2007
103
103
9
8
(3)
(2)
-
1
25
(1)
(1)
(6)
133
103
(1) Due mainly to the impact of the appreciation in the yen on interests in Ichikoh.
Ownership interest
Carrying amount
(%)
(in millions of euros)
2008
2007
2008
2007
Ichikoh
31.6
31.6
100
74
Faw Valeo Climate Control
36.5
36.5
26
23
Other
-
-
7
6
Investments in associates
-
-
133
103
At the beginning of June 2008, Valeo took a larger role in managing
Ichikoh Industries Ltd. pursuant to an agreement concerning Ichikoh’s
corporate governance and operational management structure. The
agreement will allow Valeo to exploit synergies between the two
groups and to strengthen its influence over Ichikoh.
Ichikoh is listed on the Tokyo Stock Exchange.
At December 31, 2008, the collapse in equity markets had driven
down the value of the shares owned by Valeo to 30 million euros
from 49 million euros at December 31, 2007. Ichikoh is accounted
for by the equity method. The carrying amount of the investment
is supported by its value in use.
Summarized financial data in respect of associates are set out below:
2008
2007
Total assets
841
655
Total liabilities
546
433
Total operating revenues
876
841
Net income for the year
27
30
PAGE 140
4.F.4.5. Deferred taxes
Deferred tax assets and liabilities are offset when a legally enforceable
right exists to set off current tax assets against current tax liabilities
and the deferred tax assets and liabilities concern income taxes
levied by the same taxation authority. In France, Valeo elected for
4
tax consolidation. The tax group includes the parent company and its
principal French subsidiaries that are eligible for tax consolidation.
Valeo also elected for tax consolidation for its subsidiaries in other
countries where this is permitted by local legislation (Germany,
Spain, Italy, the United Kingdom and the United States).
Deferred taxes broken down by temporary differences are shown below:
2008
2007
Loss carry forwards (1)
718
645
Capitalized development expenditure
(99)
(80)
Pensions and other employee benefits
148
132
Other provisions
65
83
Inventories
24
21
Provisions for reorganization expenses
88
42
1
8
Non-current assets
(3)
(5)
Other
32
22
Tooling
Deferred taxes, gross
974
868
(887)
(790)
87
78
▪ deferred tax assets
103
99
▪ deferred tax liabilities
(16)
(21)
Unrecognized deferred tax assets (1)
Deferred taxes
Of which:
(1) Deferred tax assets are recognized in respect of tax loss carry forwards to the extent that it is probable that future profits will be available against which they may
be offset. If this is not the case, a provision will be set aside in this respect.
At December 31, 2008, deferred tax assets not recognized by the Group can be analyzed as follows:
Tax basis
Potential
tax saving
Tax losses available for carryforward through 2009 to 2012
175
41
Tax losses available for carryforward in 2013 and thereafter
859
320
Tax losses available for carry forward indefinitely
Current tax loss carry forwards
Unrecognized deferred tax assets on temporary differences
Total unrecognized deferred tax assets
805
277
1,839
638
-
249
887
At December 31, 2007, the total amount of unrecognized deferred tax assets came to 761 million euros.
PAGE 141
4
4.F.4.6. Inventories
At December 31, 2008, inventories break down as follows:
2008
Gross carrying
amount
220
Raw materials
Work-in-progress
Provisions
Net carrying
amount
2007
Net carrying
amount
(39)
181
217
57
(7)
50
66
Finished goods, supplies and specific tooling
367
(55)
312
339
Inventories, net
644
(101)
543
622
Impairment losses taken against inventories amounted to 101 million euros at December 31, 2008 (110 million euros at December 31, 2007),
including an allowance of 29 million euros during the year.
Allowances to provisions for Impairment recognized in 2007 amounted to 35 million euros.
4.F.4.7. Accounts and notes receivable
2008
2007
Accounts and notes receivable, gross
1,200
1,728
Provision for impairment
Accounts and notes receivable, net
(32)
(29)
1,168
1,699
Allowances to provisions against accounts and notes receivable are recognized in “Other financial income and expenses” where such a provision
results from a risk of client default (see Note 3.6), and in administrative expenses in other cases.
4.F.4.8. Stockholders’ equity
4.F.4.8.1.
Share capital
At December 31, 2008, Valeo’s share capital excluding treasury stock
totaled 235 million euros, comprising 78,209,617 shares of fully
paid-up common stock with a par value of 3 euros (see Note 4.8.6).
Shares that have been registered in the name of the same holder
for at least four years carry double voting rights (3,152,418 shares
at December 31, 2008).
Valeo’s share capital would rise to 272 million euros (90,665,384
shares) in the event of:
■
the exercise of stock subscription options granted to Valeo Group
employees;
■
the conversion of bonds issued as part of the OCEANE program
into new shares (see Note 4.10.2).
PAGE 142
The Group seeks to maintain a solid capital base in order to retain
the confidence of investors, creditors and the market, and to secure
its future development. Its objective is to strike a balance between
levels of debt and equity, and in particular to prevent net debt from
exceeding 100% of stockholders’ equity for any prolonged period
of time.
The Group buys back treasury stock on the market to cover its
obligations with regard to stock option plans and free share awards,
as well as company savings plans and the liquidity contract (see
section D.2.2 of the management report).
4
The following employee stock subscription, stock option and free share plans approved by the Annual General Meeting were outstanding at
December 31, 2008:
■ Terms and conditions of stock subscription plans
Number of shares
outstanding at
December 31, 2008 (2)
Expiration date
55.82
80,800
2009
42.48
303,000
2009
442,875
42.69
261,454
2009
2002
420,000
43.84
188,163
2010
2002
600,000
28.30
112,069
2010
2003
700,000
23.51
230,690
2011
2003
780,000
32.91
417,942
2011
2004
1,123,200
28.46
756,210
2012
TOTAL
4,746,075
Number of shares
subject to options
Exercise price of
options (in euros) (1)
2001
80,000
2001
600,000
2001
Year in which plan was set up
2,350,328
(1) Exercise price equal to 100% of the average Valeo share price over the 20 trading days preceding the meeting of the Board of Directors or Management Board
granting the stock subscription options.
(2) The number of shares includes the impact of the public share buyback offer and simplified public tender offer, which increased the share allocation ratio to 1.01
Valeo share from 1 Valeo share.
■ Terms and conditions of stock option plans
Number of shares
subject to options
Exercise price
of options
(in euros) (1)
Number of shares
outstanding at
December 31, 2008 (2)
Expiration date
2003
500,000
32.91
268,038
2011
2004
280,800
32.74
190,087
2012
2005
650,000
32.32
466,660
2013
2006
187,000
33.75
187,000
2014
2006
1,309,250
32.63
1,023,000
2014
2007
250,000
36.97
250,000
2015
2007
1,677,000
36.82
1,374,250
2015
2008
426,750
31.41
396,000
2016
TOTAL
5,280,800
4,155,035
(1) Exercise price equal to 100% of the average Valeo share price over the 20 trading days preceding the meeting of the Board of Directors or Management Board, or
100% of the average purchase price of treasury stock held if higher than the quoted price for Valeo shares.
(2) The number of shares includes the impact of the public share buyback offer and simplified public tender offer, applicable to grants prior to 2005, which increased the
share allocation ratio to 1.01 Valeo share from 1 Valeo share.
PAGE 143
4
■ Terms and conditions of free share awards
Number of free shares
granted
Number of shares
not yet issued at
December 31, 2008
Year of vesting
2006
100,000
74,750
2009
2007
TOTAL
100,000
200,000
82,750
157,500
2010
Movements in stock option plans and free share awards can be analyzed as follows:
2008
Number of options
and free shares
Weighted average
exercise price
7,526,508
33.13
Options not exercised at January 1, 2008
Options granted/free shares to be issued
Options cancelled
Options expired
426,750
31.41
(1,068,719)
38.36
-
-
Options exercised
(250,075)
-
Options not exercised/free shares not issued at December 31 (1)
6,634,464
33.43
Options which can be exercised at December 31, 2008
3,851,714
33.67
Number of options
and free shares
Weighted average
exercise price
Options not exercised at January 1, 2007
7,109,400
30.50
Options granted/free shares to be issued
2,027,000
35.02
Options cancelled
(914,920)
20.21
-
-
(1) The number of shares does not include the impact of the public share buyback offer and simplified public tender offer.
2007
Options expired
Options exercised
(694,972)
27.70
Options not exercised/free shares not issued at December 31
7,526,508
33.13
Options which can be exercised at December 31, 2007
3,582,026
35.43
PAGE 144
4
The principal data and assumptions underlying the valuation of equity instruments at fair value are as follows:
2008
March
2007
Call option
March
Free shares
and stock options
November
Stock options
Share price at grant date (euros)
22.6
37.0
36.9
Expected volatility (%)
39.7
- and 27.8
32.2
Risk-free rate (%)
4.0
4.1
4.4
Dividend rate (%)
3.9
3.2
3.2
8
- and 8
8
4.0
32.2 and 7.6
8.9
Duration of the option (years)
Fair value of equity instruments (euros)
Expected volatility is determined as being the implicit volatility at
the grant date. The maturity of four years used for stock option and
stock subscription plans corresponds to the period during which the
availability of options is restricted by tax legislation, and is considered
to represent the life of the option.
An expense of 8 million euros was booked in 2008 in respect of stock
options plans and free share awards (2007: 11 million euros).
4.F.4.8.2.
Additional paid-in capital
Additional paid-in capital represents the net amount received, either
in cash or in assets, in excess of the par value on issuance of Valeo
shares.
4.F.4.8.3.
At December 31, 2008, this caption primarily includes gains and
losses arising from the translation of the net assets of Valeo’s Asian,
Brazilian, Turkish and Polish subsidiaries.
4.F.4.8.7.
4.F.4.8.4.
Retained earnings
Retained earnings include the 199 million loss for the year prior to
allocation.
4.F.4.8.5.
Dividends per share
The balance of the parent company’s distributable retained earnings
amounts to 1,544 million euros in 2008, before allocation of the 2007
net loss. Distributable retained earnings amounted to 1,592 million
euros in 2007.
Dividends paid in 2008 totaled 92 million euros, representing 1.20
euro per share.
Dividends paid in 2007 totaled 85 million euros, representing 1.10
euro per share.
4.F.4.8.6.
Treasury stock
At December 31, 2008, Valeo owns 3,142,499 of its own shares,
representing 4.02% of share capital (December 31, 2007: 1,432,804
shares, representing 1.83% of share capital).
Minority interests
Changes in minority interests can be analyzed as follows:
Minority interests at January 1
Equity in net earnings
Dividends paid
2008
2007
44
38
8
7
(7)
(4)
Capital increase
3
-
4
3
(1)
-
Minority interests at December 31
51
44
PAGE 145
4
4.F.4.9. Provisions
Changes in provisions can be analyzed as follows:
Provisions for
reorganization
expenses
Provisions for
pensions and other
employee benefits
Other provisions
Total
Provisions at December 31, 2006
176
748
431
1,355
Amounts used during the year
(59)
(80)
(112)
(251)
(16)
(13)
(5)
(34)
(8)
(26)
(5)
(39)
-
-
-
-
39
33
149
221
4
29
-
33
(9)
(4)
(91)
(104)
-
(79)
-
(79)
Reclassification
Additions
Unwinding of discount
Reversals
Actuarial gains and losses recognized through
equity
127
608
367
1,102
(50)
(65)
(62)
(177)
-
(12)
(4)
(16)
4
2
-
6
(1)
(9)
3
(7)
240
30
74
344
Reclassification
Additions
Unwinding of discount
Reversals
Actuarial gains and losses recognized through
equity
1
28
-
29
(7)
(27)
(69)
(103)
-
56
-
56
314
611
309
1,234
Of which current portion (less than 1 year)
246
63
153
462
4.F.4.9.1.
Provisions for reorganization expenses
Provisions for reorganization expenses amount to 314 million euros
at December 31, 2008 and concern:
■
the workforce adjustment plan announced on December 17, 2008
for 232 million euros. The key phases of this plan should be
completed by the end of 2009;
■
provisions for production streamlining measures and staff cuts,
mainly in the United States.
PAGE 146
4.F.4.9.2.
Provisions for pensions and
other employee benefits
■ Description of the plans in force within the Group
The Group’s commitments in relation to pensions and other employee
benefits primarily concern the following defined benefit plans:
■
termination benefits (France, Italy, South Korea);
■
supplementary pension benefits (United States, Germany, France,
United Kingdom, Japan) which top up the statutory pension
schemes in force in those countries;
■
the payment of certain medical and life insurance costs for retired
employees (United States);
■
certain of the above-mentioned benefits granted specifically under
early retirement schemes (United States, Germany, France);
■
other long-term benefits (long-service bonuses in France,
Germany, South Korea and Japan).
4
■ Actuarial assumptions
The actuarial assumptions used by the Group to calculate its
obligations relating to pensions and other employee benefits take
into account the specific demographic and financial conditions of each
Group company and each country in which the Group operates.
Costs relating to all of these benefits are recognized in accordance
with the accounting policy described in Note 1.17.
Discount rates are determined by reference to market yields at
the valuation date on high quality corporate bonds with a term
consistent with that of the employee benefits concerned.
To calculate discount rates for the year ended December 31, 2008, the Group used the same benchmarks as in previous years. The discount
rates used in the countries representing the Group’s most significant obligations were as follows:
2008
Basis after
rounding
2007
Basis after
rounding
Benchmark
(In percentage)
iBoxx Euro-Corporate AA 10-year+
Euro zone
6.0
5.3
iBoxx £-Corporate AA 15-year+
United Kingdom
6.5
5.8
Citigroup Pension Discount Curve
United States
6.1
6.3
10-year government bonds
Japan
2.0
2.3
10-year government bonds
South Korea
4.0
5.5
The sensitivity of the Group’s main obligations to a 0.5% rise or fall in discount rates is set out below.
Expected long-term returns on plan assets were calculated taking into account the structure of the investment portfolio in each country, and
are as follows for the Group’s principal plans:
2008
2007
United States
8.0
8.5
United Kingdom
6.3
6.4
Japan
2.7
2.7
(%)
The weighted average long-term salary inflation rate was 3.5% at
December 31, 2008, unchanged from December 31, 2007.
23 years. This assumption was changed in 2008 further to a recent
study by the Society of Actuaries in the United States. However, the
change does not have a material impact on the measurement of
the Group’s obligations and associated expenses.
The rate of increase for medical costs in the United States used to
value the Group’s obligations at December 31, 2008 was 10% up
to the end of 2009, gradually reducing to 5% over the following
■ Breakdown of obligations
At December 31, 2008
Present value of unfunded obligations
France
Other
European
countries
North
America
Other
countries
Total
110
203
103
44
460
Present value of funded obligations
18
43
274
48
383
Market value of plan assets
(1)
(29)
(157)
(38)
(225)
127
217
220
54
618
(7)
-
-
-
(7)
120
217
220
54
611
Deficit
Unrecognized past service cost
Provisions recognized at December 31, 2008
PAGE 147
4
France
Other
European
countries
North
America
Other
countries
Total
169
231
113
41
554
Present value of unfunded obligations
Present value of funded obligations
21
64
253
41
379
Market value of plan assets
(6)
(44)
(211)
(39)
(300)
Deficit
184
251
155
43
633
Unrecognized past service cost
Provisions recognized at December 31, 2007
(25)
159
251
155
43
(25)
608
France
Other
European
countries
North
America
Other
countries
Total
177
298
225
48
748
■ Movements in provisions
Provisions at January 1, 2007
Actuarial gains and losses recognized through equity
Expenses (income) for the year
Actuarial gains and losses recognized through equity
Reclassification
Expenses (income) for the year
(1)
Of which current portion (less than 1 year)
(7)
(42)
(29)
(1)
(79)
(25)
(17)
(29)
(8)
(79)
(7)
(6)
-
-
(13)
-
(2)
(20)
(4)
(26)
21
20
8
8
57
159
251
155
43
608
(6)
(26)
74
14
56
(27)
(14)
(16)
(8)
(65)
-
(8)
(4)
-
(12)
(9)
-
-
-
(9)
-
(4)
10
(4)
2
3
18
1
9
31
120
217
220
54
611
14
10
28
11
63
(1) Including amortization of unrecognized past service cost.
Expenses booked in respect of pensions and other employee benefit
obligations totaled 31 million euros in 2008 versus 57 million euros
in 2007. The fall in this item mainly reflects:
■
PAGE 148
a reversal of 16 million euros regarding pension obligation in
France following the announcement of the workforce adjustment
plan (employee benefit obligations relating to the redundancies
announced are already included in provisions for reorganization
expenses);
■
changes to the terms and conditions of plans in the United States,
which reduce the expense for the year by 4 million euros.
Following changes in financing arrangements for the Early Retirement
Fund for Asbestos Workers, the Group reclassified outstanding
amounts due in respect of asbestos tax under other social security
liabilities.
4
■ Movements in obligations
Obligations at January 1, 2008
France
Other
European
countries
North
America
Other
countries
Total
190
295
366
82
933
Service cost
(9)
6
(3)
9
3
Interest cost
10
14
22
3
49
(30)
(14)
(19)
(11)
(74)
(8)
(34)
(4)
7
(39)
-
(8)
(4)
-
(12)
Benefits paid
Actuarial gains and losses
Reclassification (1)
Other
Obligations at December 31, 2008
(9)
-
-
-
(9)
(16)
-
-
-
(16)
-
(13)
19
2
8
128
246
377
92
843
(1) This line corresponds to the reduction in the Group’s asbestos-related obligations following changes in financing arrangements for the Early Retirement Fund for
Asbestos Workers. As the reduction relates to an off balance sheet item (unrecognized past service cost), it has no impact on income (loss) for 2008.
Obligations at January 1, 2007
Service cost
Interest cost
France
Other
European
countries
North
America
Other
countries
Total
208
343
429
94
1,074
9
9
2
6
26
9
13
23
3
48
(24)
(15)
(18)
(14)
(71)
(7)
(41)
(28)
(1)
(77)
(7)
(6)
-
-
(13)
Other
2
(2)
1
-
1
-
(6)
(43)
(6)
(55)
190
295
366
82
933
Benefits paid
Obligations at December 31, 2007
PAGE 149
4
■ Movements in plan assets
France
Other
European
countries
North
America
Other
countries
Total
5
45
205
46
301
Expected return on plan assets
-
2
18
1
21
Contributions paid to external funds
2
1
21
1
25
(1)
(2)
(10)
(7)
(20)
Plan assets at January 1, 2007
Benefits paid
-
1
1
-
2
-
(3)
(24)
(2)
(29)
Plan assets at December 31, 2007
6
44
211
39
300
Expected return on plan assets
-
2
18
1
21
Contributions paid to external funds
2
2
10
3
17
Benefits paid
(5)
(2)
(12)
(6)
(25)
(2)
(9)
(78)
(6)
(95)
-
(8)
8
7
7
Plan assets at December 31, 2008
1
29
157
38
225
Following the collapse in equity markets, the fair value of plan
assets in 2008 fell sharply year-on-year. This explains the significant
amount of actuarial losses resulting from experience adjustments
on plan assets, which represent the difference between actual and
expected returns. These actuarial differences were deducted from
equity at December 31, 2008.
The actual return on plan assets was a negative 74 million euros in
2008, compared with a positive 23 million in 2007.
Contributions of 17 million euros were paid to external funds in 2008.
Contributions in 2009 are estimated at 28 million euros.
■ Breakdown of plan assets
France
Other
European
countries
North
America
Other
countries
Total
Cash at bank
-
-
16
8
24
Shares
6
44
156
11
217
Government bonds
-
-
27
20
47
PAGE 150
Corporate bonds
-
-
12
-
12
Breakdown of plan assets at December 31, 2007
6
44
211
39
300
Cash at bank
-
-
11
6
17
Shares
1
29
98
12
140
Government bonds
-
-
35
20
55
Corporate bonds
-
-
13
-
13
Breakdown of plan assets at December 31, 2008
1
29
157
38
225
4
■ Data for previous financial years
Obligations, financial assets and actuarial gains and losses for previous financial years can be analyzed as follows:
2008
Obligations
2007
2006
2005
2004
843
933
1,074
1,188
1,093
(225)
(300)
(301)
(294)
(211)
Funded amount
618
633
773
894
882
Actuarial (losses) gains recognized in equity (1)
(56)
79
27
(50)
(42)
Financial assets
(1) At December 31, 2008, this line includes actuarial losses of 95 million euros resulting from experience adjustments on financial assets, actuarial gains of 8 million
euros resulting from experience adjustments on obligations and 31 million euros resulting from change in actuarial assumptions.
■ Sensitivity of obligations to discount rates and the rate of
increase in medical costs
The discount rates applied in each region have a significant impact
on the amount of the Group’s benefit obligations. Accordingly, a 0.5%
rise in discount rates would reduce the projected benefit obligation
by 46 million euros and service cost by around 1 million euros. A
0.5% fall in discount rates would have the opposite effect.
4.F.4.9.3.
A 1% rise or fall in the rate of increase for medical costs in the US
would not have a material impact on obligations and expenses for
the period.
■ Sensitivity of plan assets to rates of return
A decrease of 1% in the expected return on plan assets would
reduce annual financial income recognized on these assets by
around 2 million euros. An increase of 1% in the expected return
on plan assets would have the opposite effect.
Other provisions
2008
2007
Provisions for product warranties
133
164
Other
176
203
Other provisions
309
367
For the year ended December 31, 2008, the caption “Other” includes provisions for tax risks (56 million euros), and an amount set aside in
respect of site rehabilitation obligations (20 million euros). The balance of this caption is intended to cover other operational risks such as
claims and litigation regarding prices or disputes with suppliers.
4.F.4.10. Debt
4.F.4.10.1. Gross debt
At December 31, 2008, the Group’s gross debt can be analyzed as follows:
2008
2007
Long-term debt (Note 4.10.2)
1,299
1,283
26
29
166
260
1,491
1,572
Current portion of long-term debt (Note 4.10.2)
Short-term debt (Note 4.10.3)
Gross debt
PAGE 151
4
4.F.4.10.2. Long-term debt
■ Analysis of long-term debt
2008
2007
Bonds
596
596
OCEANE bonds (1)
444
435
Syndicated loans
222
219
Lease obligations
6
9
Other borrowings
32
28
Accrued interest
25
25
Long-term debt
1,325
1,312
(1) The carrying amount of the OCEANE bonds was reduced from 463 millions euros to 419 millions euros following the application of IAS 32 at January 1, 2005.
Long-term debt includes:
■
■
■
600 million euros worth of eight-year fixed rate bonds issued
by Valeo on June 24, 2005 and paying a fixed coupon of 3.75%.
These bonds were issued in the context of the Euro Medium
Term Notes program. The effective interest rate on these bonds
is 3.89%;
two seven-year syndicated loans for a total amount of 225 million
euros issued on July 29, 2005, hedged by two interest rate swaps
which are perfectly matched in both amount and duration. These
loans and the related hedges have the following characteristics:
• the first loan is at a variable rate and incorporates a cap which
limits the interest rate to a maximum of 4.735%. It is hedged by
a derivative which offsets the option included in the loan,
463 million euros worth of bonds convertible for new shares
and/or exchangeable for existing shares (“OCEANE”) issued on
August 4, 2003, representing 9,975,754 bonds with a nominal
value of 46.4 euros each. The interest on these bonds is 2.375%
per annum payable in arrears on January 1 of each year. Bearers of
the bonds may request conversion and/or exchange into common
stock at any time, on the basis of 1.013 Valeo share for one bond.
In addition, Valeo has a call option that may be exercised between
January 31, 2007 and December 31, 2010 if the Valeo share is
valued at an average price of 60 euros. The effective interest rate
of the OCEANE bonds is 4.54% (4.46% excluding the call);
• the second loan is at a fixed rate of 3.62% and incorporates a
swaption that enables the Group to opt for a variable rate in 2009.
It is hedged by a derivative which has identical characteristics to
those of the call option included in the loan.
Covenants related to financial debts are detailed in Note 5.3.2.
■ Maturities of long-term debt
2010
2011
2012
2013
2014 and
beyond
Total
Bonds
-
-
-
596
-
596
OCEANE bonds
-
444
-
-
-
444
Syndicated loans
-
-
222
-
-
222
Lease obligations
2
1
-
-
1
4
Other borrowings
4
5
6
5
13
33
TOTAL
6
450
228
601
14
1,299
PAGE 152
4
4.F.4.10.3. Short-term debt
Commercial paper
2008
2007
34
50
Short-term loans and overdrafts
132
210
Short-term debt
166
260
2008
2007
Marketable securities
353
328
Cash
308
443
661
771
4.F.4.10.4. Cash and cash equivalents
Marketable securities consist of money market funds invested in negotiable debt securities or guaranteed by governments in the euro zone
for 349 million euros.
4.F.4.10.5. Net debt
Net debt is defined as all long-term debt (including current maturities thereof) and short-term debt, less loans, other non-current financial
assets and cash and cash equivalents.
■ Breakdown of net debt
2008
2007
Long-term debt (Note 4.10.2)
1,299
1,283
Current portion of long-term debt (Note 4.10.2)
26
29
Loans and other non-current financial assets
(9)
(2)
1,316
1,310
166
260
Total long-term debt
Short-term debt (Note 4.10.3)
Cash and cash equivalents (Note 4.10.4)
(661)
(771)
Net cash and cash equivalents
(495)
(511)
821
799
Net debt
PAGE 153
4
4.F.4.10.6. Analysis of net debt by currency
Net debt can be analyzed as follows by currency:
2008
2007
Euro
881
895
US dollar
(21)
(34)
8
12
Yen
Brazilian real
(16)
(7)
Korean won
(15)
(18)
Chinese yuan
(31)
(24)
15
(25)
821
799
2008
2007
623
615
Net additions to (reversals from) provisions
104
(117)
Losses (gains) on sales of non-current assets
(13)
30
8
11
12
-
Other currencies
TOTAL
4.F.4.11. Breakdown of cash flows
4.F.4.11.1. Other expenses (income) with no cash effect
Expenses (income) with no cash effect
Depreciation, amortization and impairment
Expenses related to share-based payment
Unrealized gains and losses on financial instruments
Other expenses (income) with no cash effect
TOTAL
(2)
(4)
732
535
2008
2007
4.F.4.11.2. Changes in working capital
Changes in working capital
Inventories
59
(22)
505
(40)
(366)
35
Other receivables and payables
(20)
(15)
TOTAL
178
(42)
The sharp decline in the global automotive market and production stoppages at the end of 2008 led to a large fall in inventories and accounts
receivable, partly offset by a decrease in accounts payable.
PAGE 154
4.F.4.11.3. Impact of changes in the
scope of consolidation
■
Changes in the scope of consolidation in 2008 have a positive impact
of 52 million euros on cash and cash equivalents. This amount results
mainly from:
■
cash outflows of 19 million euros on the sale of the Wiring Harness
activity in December 2007 pursuant to the sale agreement. A
provision had been set aside for the full amount of this expense,
which therefore had no impact on 2008 earnings.
In 2007, the impact of changes in the scope of consolidation is
essentially attributable to the sale of the Wiring Harness activity to
German group Leoni.
collection of the proceeds on the sale of the heavy duty truck Engine
Cooling business from Swedish firm EQT (net of cash and cash
equivalents sold and expenses paid in 2008) for 73 million euros;
Net assets acquired (sold)
Minority interests
Total net assets acquired (sold) after minority interests
Goodwill on entities acquired
4.F.5.
4
Disposal of Wiring
Harness unit
2007
Acquisitions and
other disposals
Total
(237)
24
(213)
-
-
-
(237)
24
(213)
-
5
5
(237)
29
(208)
Additional disclosures
4.F.5.1. Segment reporting
included based on an appropriate breakdown to provide a more
accurate analysis of the Group’s business.
The Valeo Group comprises a single business segment (“Automotive
equipment”). The Group’s secondary reporting level – geographical
areas – corresponds to production areas. Additional information is
4.F.5.1.1.
Balance sheet and statement of income items relating to nonstrategic activities have been restated as indicated in Note 2.1.
Reporting by geographic area
2008
Net sales by
market
Net sales by
production area
Total assets at
December 31
Capital
expenditure for
the year
Number of
employees
Europe
5,749
6,133
3,012
415
34,137
North America
1,041
947
374
102
4,670
South America
Asia
Eliminations
TOTAL
598
562
204
73
3,903
1,276
1,284
800
48
8,490
-
(262)
(137)
-
-
8,664
8,664
4,253
638
51,200
PAGE 155
4
2007
Net sales by
market
Net sales by
production area
Total assets at
December 31
Capital
expenditure for
the year (1)
Number of
employees
Europe
6,458
6,873
3,645
365
41,397
North America
1,293
1,224
457
64
6,826
South America
559
522
253
32
4,206
Asia
1,245
1,264
778
92
8,771
Eliminations
TOTAL
9,555
(328)
9,555
(144)
4,989
553
61,200
(1) Capital expenditure in 2007 does not include investments related to the Wiring Harness activity which was sold during that year.
Total segment assets reconcile to total Group assets as follows:
2008
2007
Total segment assets
4,253
4,989
Financial assets
Deferred tax assets
5
7
833
896
103
99
Goodwill
1,154
1,165
TOTAL
6,348
7,156
Goodwill balances cannot be broken down by geographical area as they are allocated to groups of CGUs which belong to several areas.
4.F.5.1.2.
Research and development costs by domain of innovation and sales by Product Family
“Domains of innovation” have been set up to enhance and support innovation by bringing together different technologies and Product Families
in order to propose integrated solutions to the market in terms of comfort, safety and the environment.
2008
2007
Driving Assistance
200
193
Propulsion Efficiency
218
230
Comfort Enhancement
221
242
Other
-
3
Total
639
668
PAGE 156
4
The domains of innovation aim to boost sales of the product portfolio, while the Group’s divisions are responsible for the manufacture and
sale of these products. The product portfolio is divided into the following Product Families:
Transmissions
2008
2007
739
784
Climate Control
1,342
1,436
Engine Cooling
1,112
1,353
Lighting Systems
1,150
1,198
Electrical Systems
1,055
1,154
Wiper Systems
924
1,052
Security Systems
647
726
Interior Controls
890
983
Compressors
389
414
293
339
Other and eliminations
123
116
8,664
9,555
Total
PAGE 157
4
4.F.5.2. Financial instruments
4.F.5.2.1.
Fair value of financial instruments
Recognition and measurement principles regarding financial assets and liabilities are defined in IAS 32 and IAS 39. The classification of financial
instruments into specific categories is described in Note 1.13.
Carrying amount under IAS 39
2008
2007
Carrying
amount
Amortized
cost
Loans and
receivables
Fair value
through
equity
4
-
-
4
-
4
▪ Loans
9
9
-
-
-
2
▪ deposits and guarantees
8
-
8
-
-
6
Fair value
through
income
Carrying
amount
ASSETS
Non-current financial assets:
▪ Investments in non-consolidated
companies
▪ other non-current financial assets
3
-
3
-
-
6
1,168
1,168
-
-
-
1,699
▪ hedging derivatives
1
-
-
1
-
1
▪ trading derivatives
14
-
-
-
14
3
-
-
-
-
-
-
661
-
-
-
661
771
Bonds
OCEANE convertible bonds (debt
component)
596
596
-
-
-
608
444
444
-
-
-
446
Syndicated loans
222
-
-
-
222
221
37
37
-
-
-
37
1,454
1,454
-
-
-
1,836
20
-
-
17
3
19
18
-
-
-
18
2
166
166
-
-
-
260
Other current financial assets:
▪ Other
LIABILITIES
Other long-term debt
Other current financial liabilities:
▪ hedging derivatives
▪ trading derivatives
Short-term debt
The principal terms and conditions of borrowings (bonds, OCEANE convertible bonds and syndicated loans) are detailed in section 4.10.2, while
the basis for recognition is set out in Note 1.13.
PAGE 158
The fair value of bonds is calculated on the basis of listed prices on
active markets, and amounted to 455 million euros at December 31,
2008 and 560 million euros at December 31, 2007.
For the debt component of the OCEANE convertible bonds and for the
syndicated loans, fair value is estimated by discounting future cash
flows at the market interest rate applicable at year-end, based on
an issuer spread for the Group estimated at 7.68% for the OCEANE
4.F.5.2.2.
4
bonds and at 6.32% for the syndicated loans. These issuer spreads
correspond to the spreads on Valeo’s three-and five-year credit
default swaps, respectively. The fair value of OCEANE convertible
bonds and syndicated loans was 397 million euros and 186 million
euros, respectively, at December 31, 2008 (437 million euros and
221 million euros, respectively at end-2007).
The fair value of other debt is equal to its carrying amount.
Fair value of derivatives
2008
2007
1
1
▪ foreign currency derivatives
14
3
Total other current financial assets
15
4
(3)
-
ASSETS
Hedging derivatives:
▪ commodity derivatives
Trading derivatives:
LIABILITIES
Hedging derivatives:
▪ interest rate derivatives
(3)
(6)
(14)
(13)
Trading derivatives:
Total other current financial liabilities
(8)
(2)
(10)
-
(38)
(21)
The impact of financial instruments on income (loss) for the years ended December 31, 2008 and 2007 is set out in Note 3.6.
PAGE 159
4
■ 4.F.5.2.2.1. Fair value of foreign currency derivatives
At December 31
2008
Forward foreign currency purchases
Forward foreign currency sales
2007
Nominal
Fair value
Nominal
Fair value
18
6
2
-
(48)
4
(76)
2
Currency swaps
(20)
4
(132)
1
Total assets
(50)
14
(206)
3
56
(5)
29
-
(30)
(1)
(14)
(1)
Forward foreign currency purchases
Forward foreign currency sales
Currency swaps
(158)
(5)
(3)
(1)
Total liabilities
(132)
(11)
12
(2)
Net impact
3
1
The fair value of foreign currency hedges is computed using the following valuation method: future cash flows are calculated using forward
exchange rates at year-end and are discounted using the interest rate of the functional currency.
■ 4.F.5.2.2.2. Fair value of commodity (metals) derivatives
At December 31
2008
Swaps – Purchases
2007
Nominal
Fair value
Nominal
Fair value
1
-
2
-
Swaps – Sales
(5)
1
(8)
1
Total assets
(4)
1
(6)
1
Swaps – Purchases
69
(24)
146
(13)
Swaps – Sales
(2)
-
-
-
Total liabilities
67
(24)
146
Net impact
(23)
(13)
(12)
The fair value of metals derivatives is computed using the following valuation method: future cash flows are calculated using forward commodity
prices and forward exchange rates at year-end and are then discounted using the interest rate of the functional currency.
■ 4.F.5.2.2.3. Fair value of interest rate derivatives
2008
Nominal
2007
Fair value
Nominal
Fair value
Interest rate swaps
225
(3)
225
(6)
Total liabilities
225
(3)
225
(6)
The fair value of interest rate swaps is computed by discounting future cash flows based on market interest rates at year-end.
PAGE 160
4
4.F.5.3. Risk management policy
A detailed description of the Group’s risk management policy is provided in the management report (see chapter 3.I.3).
4.F.5.3.1.
Market risks
■ 4.F.5.3.1.1. Foreign currency risk
Exposure to foreign currency risk
A detailed description of the Group’s policy for managing foreign currency risk is provided in the management report (see chapter 3.I.3.1).
The principal hedging instruments used by the Group are forward purchases and sales of foreign currencies, as well as swaps and options.
The foreign currency derivatives used by the Group are not recognized as hedging instruments according to the IAS 39 criteria. Exceptionally,
the Group applies hedge accounting to highly probable future cash flows from the date the derivatives are contracted. In 2008, Valeo entered
into cash flow hedges in respect of transactions carried out in Poland. The unrealized loss of 3 million euros on these hedges is included in
equity at December 31, 2008.
The Group’s net exposure to foreign currency risk based on notional amounts arises on the following main currencies (excluding entities’
functional currencies):
2008
2007
USD
JPY
EUR
Total
Total
55
10
226
291
440
Other financial assets
216
29
108
353
314
(38)
(12)
(253)
(303)
(368)
Long-term debt
(22)
211
27
(422)
(341)
(444)
(103)
(528)
(142)
(273)
(38)
(5)
(316)
93
Gross exposure
Forward sales
Forward purchases
Net exposure
38
30
25
93
(293)
(24)
19
(321)
(326)
(342)
In the table above, the EUR column represents the euro exposure of Group entities whose functional currency is not the euro.
At December 31, 2007, the breakdown by currency of the net exposure recognized in the balance sheet for (342) million euros is as
follows:
■
12 million euros relating to the US dollar;
■
18 million euros relating to the Japanese yen;
■
(372) million euros relating to the euro.
Analysis of the sensitivity of net income to foreign currency
risk
The sensitivity analysis was based on an exchange rate of 1.39 US
dollars and 126.14 Japanese yen to 1 euro at December 31, 2008
(1.47 and 164.93, respectively, at December 31, 2007).
The impact on net income (loss) of a 10% rise in the value of the
euro against these currencies at December 31, 2008 is shown in
the table below. A sensitivity analysis is also provided for 2007. For
the purpose of the analyses, it is assumed that all other variables,
including interest rates, remain unchanged.
At December 31
Gains (losses)
USD
2
JPY
(2)
TOTAL FOR 2008
0
USD
(3)
JPY
(2)
TOTAL FOR 2007
(5)
PAGE 161
4
Analysis of the sensitivity of net equity to metal price risk
A 10% increase in metal futures prices at December 31, 2008 would
have a positive impact of around 3 million euros, split between net
equity (effective portion of the hedge) and earnings (ineffective
portion). A 10% increase in metal futures prices at end-2007 would
have had a positive impact of 9 million euros.
Assuming that all other variables remain unchanged, a 10% fall in
the value of the euro against the US dollar and Japanese yen at end2008 would have the opposite effect to the one shown above.
Net investment risk
A detailed description of the Group’s policy for managing net
investment risk is provided in the management report (see
chapter 3.I.3.1).
A fall of 10% in metal futures prices would have the opposite impact
for the same amount.
Where the Group contracts net investment hedges, the resulting
gain or loss is deferred through equity until such time as all or part
of the foreign investment is sold.
For the purposes of the sensitivity analysis, it is assumed that all
other variables remain unchanged over the period.
■ 4.F.5.3.1.3. Interest rate risk
No derivative instrument hedging a net investment in a
foreign operation is recognized in the Group’s balance sheet at
December 31, 2008.
Exposure to interest rate risk
The Group’s policy for managing interest rate risk is provided in the
management report (see chapter 3.I.3.3).
■ 4.F.5.3.1.2. Commodity risk
The Group uses interest rate swaps to convert the interest rates on its
debt into either a variable or a fixed rate, either as from origination
or during the term of the loan. Cash and cash equivalents are mainly
invested in variable-rate instruments. Long-term debt is essentially
at fixed rates.
Exposure to commodity risk
A detailed description of the Group’s policy for managing commodity
risk is provided in the management report (see chapter 3.I.3.2).
The Group favors hedging instruments which do not involve physical
delivery of the underlying commodity, such as swaps and options
based on the average monthly price.
The interest rate derivatives used by the Group to hedge against
changes in the value of its fixed-rate debt are designated as fair value
hedges under IAS 39. These derivatives are recorded at fair value in
the balance sheet, with changes in fair value taken to income. For
the effective portion of the hedge, the impact on income is offset
by a symmetrical revaluation of the hedged item. The interest rate
derivatives used by the Group to hedge its variable-rate debt do not
qualify as hedging instruments within the meaning of IAS 39.
The volume of non-ferrous metals hedged at December 31, 2008
and 2007 was 39,000 tons and 63,000 tons, respectively.
Base metals derivatives used by the Group are designated as cash
flow hedges under IAS 39. An unrealized loss of 13 million euros
related to existing hedges was recognized directly in equity at
December 31, 2008 in accordance with IAS 39. Earnings for the
period include a loss of 17 million euros on commodity transactions
(see Note 3.6).
The Group’s financing rate was 4.9% in 2008 (4.6% in 2007 excluding
non-strategic activities).
An unrealized loss of 12 million euros on commodity hedges was
recognized in equity at December 31, 2007. The loss was reclassified
in full to operating income in the first half of 2008.
At year-end, the Group’s net interest rate position based on nominal values can be analyzed as follows:
Less than 1 year
Fixed Variable
portion
portion
Financial liabilities
More than 5 years
Fixed Variable
portion
portion
Total nominal values
Fixed Variable
portion
portion
Total
166
1,326
-
-
-
1,352
166
1,518
Loans
-
-
-
(9)
-
-
-
(9)
(9)
-
(661)
-
-
-
-
-
(661)
(661)
26
(495)
1,326
(9)
-
-
1,352
(504)
848
-
225
(225)
-
-
-
(225)
225
-
26
(270)
1,101
(9)
-
-
1,127
(279)
848
Net position before hedging
Derivative instruments
Net position after hedging
PAGE 162
26
1 to 5 years
Fixed Variable
portion
portion
4
Financial liabilities
Net position before hedging
Derivative instruments
Net position after hedging
Less than 1 year
Fixed Variable
portion
portion
1 to 5 years
Fixed Variable
portion
portion
Total nominal values
Fixed Variable
portion
portion
Total
27
262
698
3
614
1
1,339
266
1,605
-
(771)
-
(2)
-
-
-
(773)
(773)
27
(509)
698
1
614
1
1,339
(507)
832
-
225
(225)
-
-
-
(225)
225
-
27
(284)
473
1
614
1
1,114
(282)
832
Analysis of sensitivity to interest rate risk
At December 31, 2008, 83% of long-term debt is at fixed rates
(unchanged from December 31, 2007).
Accordingly, fixed-rate debt carried at amortized cost is not included
in the calculation of sensitivity to interest rate risk. The Group’s
exposure to interest rate risk therefore arises solely on its variablerate debt.
Taking derivatives into account, the maximum impact on income
(loss) before tax of a sudden 1% rise in short-term interest
rates applied to financial assets and liabilities at variable rates is
an estimated gain of 2 million euros (gain of 3 million euros at
December 31, 2007).
Similarly, a sudden 1% fall in short-term interest rates would have
the opposite effect for the same amount.
■ 4.F.5.3.1.4. Equity risk
A detailed description of the Group’s policy for managing equity risk
is provided in the management report (see chapter 3.I.3.4).
4.F.5.3.2.
More than 5 years
Fixed Variable
portion
portion
Liquidity risk
The Group borrows long-term funds either through banks or public
debt markets. In 2003, Valeo issued 463 million euros worth of
bonds convertible into shares (OCEANE) maturing in 2011, and in
2005, it issued a 600 million euros Medium Term Note maturing in
2013. It also took out two syndicated loans maturing in 2012 for a
total amount of 225 million euros.
Valeo also has several confirmed bank credit lines totaling 1.2 billion
euros, with an average maturity of 2.3 years. None of these credit
lines had been drawn down at December 31, 2008.
The Group also has a short-term commercial paper financing program
for a maximum amount of 1.2 billion euros, and a medium-and longterm Euro Medium Term Notes financing program for a maximum
amount of 2 billion euros. Valeo’s access to the commercial paper
market has been restricted since Moody’s cut its credit rating on
January 7, 2009. Since that date, its short-term debt has been rated
“not prime”.
Covenants: The credit lines in place, together with the two
syndicated loans, carry an early repayment clause related to the
Group’s debt/equity ratio. This clause stipulates that the Group’s
net debt should not exceed 120% of stockholders’ equity after
appropriation of income (loss) and excluding minority interests.
Non-compliance with this ratio would cause the credit lines to be
suspended – triggering early repayment of any drawdowns already
made – and the syndicated loans to be repaid. At December 31,
2008, the Group’s ratio is 63% (46% at December 31, 2007). Credit
lines with banks and the Group’s long-term debt are also subject
to cross-default clauses, whereby if a specified amount of financial
debts is likely to be called for early repayment, the remaining
financial debt could also become repayable. Some agreements allow
a grace period before the cross default clause becomes enforceable.
At year-end, the Group believes these covenants will be respected
over the following 12 months.
The Euro Medium Term Note includes an option granted to the
bondholders who can request early repayment or redemption of
their bonds in the event of a change of control at Valeo which leads
to a downgrade in the bond’s rating to below investment grade 1.
Such a change of control is deemed to occur if a stockholder (or
several stockholders acting together) acquires more than 50% of
Valeo’s share capital or holds more than 50% of voting rights.
The Euro Medium Term Note includes an option granted to the
bondholders who can request early repayment or redemption of
their bonds in the event of a change of control at Valeo which leads
to a downgrade in the bond’s rating to below investment grade. Such
a change of control is deemed to occur if a stockholder (or several
stockholders acting together) acquires more than 50% of Valeo’s
share capital or holds more than 50% of voting rights.
Note 1: If the previous rating was below ‘investment grade’, bondholders can demand the early redemption of their bond in the event of a change of control
of Valeo which leads to the reduction of one rating category (e.g. from Ba1 to Ba2).
PAGE 163
4
The residual contractual maturity of non-derivative financial instruments can be analyzed as follows:
Carrying
amount
1,040
1,242
222
252
63
63
1,454
1,454
1,454
-
-
-
166
166
166
-
-
-
Syndicated loans
Other long-term debt
Contractual cash flows Payment schedule
Less than
More than 5
1 year
1 to 2 years
2 to 5 years
years
Total
Bonds
Contractual
cash flows
Short-term debt
33
67
1,142
-
7
6
239
-
32
17
14
-
Residual contractual maturities of derivative financial instruments can be analyzed as follows:
Carrying
amount
Contractual
cash flows
Total
Contractual cash flows Payment schedule
Less than 1
year
1 to 2 years
2 to 5 years
Forward foreign currency contracts used as hedges:
▪ Assets
10
10
10
-
-
▪ Liabilities
(6)
(6)
(6)
-
-
4
4
4
-
-
(5)
(5)
(5)
-
-
Foreign currency swaps used as hedges:
▪ Assets
▪ Liabilities
Commodity derivatives:
▪ Assets
▪ Liabilities
1
1
1
-
-
(24)
(24)
(24)
-
-
-
-
-
-
-
(3)
-
-
-
-
Interest rate swaps:
▪ Assets
▪ Liabilities
■ 4.F.5.3.2.1. Credit risk
Counterparty risk
The Group is exposed to financial counterparty risk on financial
market transactions carried out for the purposes of risk and treasury
management. Limits have been set by counterparty, taking into
account the ratings of the counterparties provided by rating agencies.
This also has the effect of avoiding excessive concentration of market
transactions with a limited number of banks.
Commercial credit risk
Valeo is exposed to credit risk arising on its commercial operations,
particularly the risk of default by its customers. Valeo operates
exclusively in the automotive industry, which has been considerably
PAGE 164
weakened by the current crisis. As a result, Valeo has reinforced
its oversight of credit risk and payment delays, which can be
the focus of bilateral negotiations with customers on a case-bycase basis. The average days sales outstanding were 69 days
Valeo works with all automakers in the industry, including the three
largest automakers in the US. At December 31, 2008, the Group
was owed 57 million euros from these three firms (5% of the total
accounts and notes receivable).
At December 31, 2008, Valeo’s largest customer accounts for 18%
of the Group’s accounts and notes receivable.
4
The table below presents an aged analysis of accounts and notes receivable:
Not yet due
Carrying amount
2008
Carrying amount
2007
1,045
1,617
107
67
Less than 1 month past due
More than 1 month but less than 12 months past due
33
34
More than 1 year past due
15
10
1,200
1,728
TOTAL
A depreciation allowance of 32 million euros was taken against past due balances.
4.F.5.4. Commitments given
To the best of Valeo’s knowledge, no other significant commitments exist or exceptional events have occurred other than those disclosed
in the notes to the financial statements, that are likely to have a material impact on the business, financial position, results or assets and
liabilities of the Group.
4.F.5.4.1.
Lease commitments
Future minimum lease commitments existing at December 31, 2008 (excluding capital leases) are as follows:
2008
2007
Less than 1 year
36
32
1 to 5 years
52
29
More than 5 years
12
10
100
71
2008
2007
49
56
TOTAL
Lease rentals recognized in expenses in the year were as follows:
Rent
PAGE 165
4
Lease commitments in respect of capital leases are as follows:
At December 31
2008
2007
Less than 1 year
2
3
1 to 5 years
4
5
More than 5 years
1
1
Future minimum lease payments
Total future minimum lease payments
7
9
(1)
(1)
Less than 1 year
2
3
1 to 5 years
3
5
Of which interest charges
Present value of future lease payments
More than 5 years
1
1
Total present value of future lease payments
6
9
2008
2007
Guarantees given
55
19
Non-cancelable purchase commitments for fixed assets
93
108
140
124
TOTAL
288
251
2008
2007
1
2
Financial assets
13
12
TOTAL
14
14
4.F.5.4.2.
Valeo has also given the following commitments:
Other commitments correspond to warranties granted by Valeo in the context of sale transactions.
The following items recognized in assets in the Group’s balance sheet have been pledged as security:
Property, plant and equipment
4.F.5.4.3.
Known claims and litigation involving Valeo or its subsidiaries have been reviewed as of the date these financial statements were authorized for
issue. Based on the advice of counsel, all necessary provisions have been made to cover the estimated contingencies and potential losses.
4.F.5.5. Commitments received
4.F.5.6. Contingent liabilities
When Valeo purchased the Engine Electronics business of Johnson
Controls Inc. on March 1, 2005, Johnson Controls granted a warranty
concerning the division’s liabilities, including a four-year warranty in
respect of quality and product liability claims related to the activities
of this division.
The Group has contingent liabilities relating to legal proceedings
arising in the normal course of its business.
PAGE 166
The Group does not expect these items to give rise to material
liabilities other than those for which a provision has already been
recognized in its financial statements.
4.F.5.7. French statutory training entitlement
Under the French law of May 4, 2004 on professional training, all
of the Group’s French employees, regardless of their qualifications
4
are entitled to statutory training hours which can be accumulated
and used at the employees’ initiative, subject to the employer’s
agreement. As of 2004, each employee is entitled to at least 20
hours’ training per year.
The cumulative volume of training hours corresponding to Group
employees’ vested rights under the French statutory training
entitlement was 1,240,976 hours at December 31, 2008 (1,008,800
at December 31, 2007), representing a usage rate of around 5%.
4.F.5.8. Related party transactions
4.F.5.8.1.
Management remuneration
Management is comprised of the members of the Group’s Management Committee. Remuneration paid during the year is broken down as
follows:
Salaries and other short-term benefits
Contract termination payments
TOTAL
The Group recognized 3 million euros related to stock subscription and
stock option plans and free share awards in 2008 (unchanged from
2007). It also recorded expenses in relation to pension obligations
for management personnel in an amount of 3 million euros
4.F.5.8.2.
2008
2007
14
13
-
-
14
13
(2 million euros in 2007). At December 31, 2008, provisions included
in the Group’s balance sheet in respect of these obligations amounted
to 18 million euros (15 million euros at December 31, 2007).
Transactions with associates
The consolidated financial statements include transactions carried out in the normal course of business between the Group and its associates.
These transactions are carried out at market prices.
2008
2007
22
22
Purchases of goods and services
(12)
(6)
Interest and dividends received
3
2
2008
2007
Operating receivables
3
3
Operating payables
6
4
Sales of goods and services
PAGE 167
4
4.F.5.8.3.
Transactions with joint ventures
The consolidated financial statements include transactions carried out in the normal course of business between the Group and its joint
ventures. These transactions are carried out at market prices.
2008
2007
25
31
Purchases of goods and services
(14)
(9)
Interest and dividends received
17
6
2008
2007
Sales of goods and services
Operating receivables
10
15
Operating payables
5
6
Net debt
1
-
4.F.5.9. Joint ventures
The following amounts are recorded in the Group’s consolidated financial statements in respect of proportionally consolidated joint
ventures:
2008
Non-current assets
Current assets
2007
91
70
127
113
Non-current liabilities
26
9
Current liabilities
94
107
Operating revenues
351
285
Operating expenses
337
280
4.F.6.
Restatement of prior year financial information
IFRS requires previously published comparative periods to be
retrospectively restated in the event of:
■
changes in accounting policies (subject to the transitional provisions
applicable upon first-time adoption of new standards); and
■
operations meeting the criteria set out in IFRS 5 on non-current
assets held for sale and discontinued operations;
■
corrections of accounting errors.
■
business combinations (recognition of the definitive fair value of
assets acquired and liabilities and contingent liabilities assumed
if fair value was estimated on a provisional basis at the previous
balance sheet date);
PAGE 168
No events occurred in 2008 requiring the 2007 statement of income
published in February 2008 to be restated.
4.F.7.
4
List of consolidated companies
2008
Company
2007
% voting rights
% interest
% voting rights
% interest
DAV
100
100
100
100
Equipement 1
100
100
100
100
Equipement 2
100
100
-
-
EUROPE
France
Valeo S.A. (parent company)
Equipement 11
100
100
100
100
SC2N
100
100
100
100
Société de Participations Valeo
100
100
100
100
Telma
100
100
100
100
Valeo Bayen
100
100
100
100
Valeo Embrayages
100
100
100
100
Valeo Equipements Electriques Moteur
100
100
100
100
Valeo Etudes Electroniques
100
100
100
100
Valeo Finance
100
100
100
100
Valeo Four Seasons (2)
50
50
50
50
Valeo Management Services
100
100
100
100
Valeo Matériaux de Friction
100
100
100
100
50
50
50
50
Valeo Plastic Omnium S.N.C. (2)
Valeo Sécurité Habitacle
100
100
100
100
Valeo Service
100
100
100
100
Valeo Interior Controls (formerly VSDS)
100
100
100
100
Valeo Systèmes de Contrôle Moteur
100
100
100
100
Valeo Systèmes d’Essuyage
100
100
100
100
Valeo Systèmes Thermiques
100
100
100
100
Valeo Thermique Habitacle
100
100
100
100
Valeo Ventures (3)
-
-
100
100
100
100
100
100
Valeo España, S.A.
100
100
100
100
Telma Retarder España, S.A.
100
100
100
100
Valeo Climatización, S.A.
100
100
100
100
Valeo Iluminación, S.A.
99.8
99.8
99.8
99.8
Valeo Materiales de Fricción, S.A.
100
100
100
100
50
50
50
50
Valeo Vision
SPAIN
Valeo Plastic Omnium S.L.
(2)
Valeo Service España, S.A.
100
100
100
100
Valeo Sistemas de Seguridad y de Cierre, S.A.
100
100
100
100
Valeo Sistemas Electricos, S.L.
100
100
100
100
Valeo Termico, S.A.
100
100
100
100
-
-
100
100
Valeo Cableados SL
(1)
(2)
(3)
(4)
(3)
Company accounted for by the equity method.
Company consolidated on a proportional basis.
Company sold or liquidated in 2008.
Cf. Note 2.1.1.
PAGE 169
4
2008
Company
2007
% voting rights
% interest
% voting rights
% interest
100
100
100
100
Valeo Service Italia, S.p.A.
99.9
99.9
99.9
99.9
Valeo, S.p.A.
Valeo Sicurezza Abitacolo, S.p.A. (merged into Valeo
Sistemi di Climatizzazione, S.p.A. in 2008) (3)
99.9
99.9
99.9
99.9
-
-
100
100
Valeo Sistemi di Climatizzazione, S.p.A.
99.9
99.9
99.9
99.9
Valeo Commutazione S.r.l.
99.9
99.9
99.9
99.9
Valeo Auto-Electric GmbH
100
100
100
100
Valeo Auto-Electric Beteiligungs GmbH
100
100
100
100
Valeo Germany Holding GmbH
100
100
100
100
Valeo Holding Deutschland GmbH
100
100
100
100
Valeo Grundvermogen Verwaltung GmbH
100
100
100
100
Valeo Beleuchtung Deutschland GmbH
100
100
100
100
Valeo Klimasysteme GmbH
100
100
100
100
Valeo Klimasysteme Verwaltung SAS & Co. KG
100
100
100
100
Valeo Schalter und Sensoren GmbH
100
100
100
100
Valeo Service Deutschland GmbH
100
100
100
100
Valeo Sicherheitssysteme GmbH
100
100
100
100
Valeo Verwaltungs-Beteiligungs GmbH & Co. KG
100
100
100
100
Valeo Wischersysteme GmbH
100
100
100
100
Valeo Compressor Europe GmbH
100
100
100
100
100
100
100
100
-
-
100
100
Telma Retarder Ltd
100
100
100
100
Valeo Climate Control Limited
Valeo Engine Cooling UK Ltd (formerly Valeo Security
Systems Ltd.)
100
100
100
100
100
100
100
100
Valeo Service UK Limited
100
100
100
100
Connaught Electronics Limited
100
100
100
100
HI-KEY Limited
100
100
100
100
CEL. (Sales) Limited
100
100
100
100
CEL Limited
100
100
100
100
Valeo Vision Belgique
100
100
100
100
Valeo Service Belgique
100
100
100
100
100
100
100
100
Portugal
Cablagens do Ave
Italy
Germany
United Kingdom
Valeo (UK) Limited
Labauto Ltd (3)
Ireland
Belgium
Luxembourg
Coreval
(1)
(2)
(3)
(4)
PAGE 170
Company sold or wound up in 2008.
See Note 2.1.1.
2008
Company
4
2007
% voting rights
% interest
% voting rights
% interest
100
100
100
100
Netherlands
Valeo Holding Netherlands B.V.
Valeo International Holding B.V.
100
100
100
100
Valeo Service Benelux B.V.
100
100
100
100
Valeo Vymeniky Tepla k.s.
100
100
100
100
Sylea Tchequia S.r.o.
100
100
100
100
Valeo Autoklimatizace k.s.
100
100
100
100
Valeo Compressor Europe S.r.o.
100
100
100
100
Connaught Electronics CZ Spol S.r.o.
100
100
100
100
100
100
100
100
-
-
100
100
Valeo Autosystemy Sp. zo.o.
100
100
100
100
Valeo Service Eastern Europe Sp. zo.o.
100
100
100
100
Valeo Electric and Electronic Systems Sp. zo.o.
100
100
100
100
100
100
100
100
-
-
100
100
Czech Republic
Slovakia
Valeo Slovakia S.r.o.
Sweden
Valeo Engine Cooling A.B. (3)
Poland
Hungary
Valeo Auto-Electric Hungary Spare Parts Production LLC
Slovenia
Valeo Kabli, d.o.o. (3)
Romania
Valeo Lighting Assembly SRL
100
100
100
100
Valeo Lighting Injection SA
51
51
51
51
Valeo Sisteme Termice S.r.l.
100
100
100
100
Russia
Valeo Climate Control Tomilino LLC
Valeo Service LLC
95
95
-
-
100
100
-
-
Turkey
Nursan OK (1)
40
40
40
40
Valeo Otomotiv Dagitim A.S.
100
100
100
100
Valeo Otomotiv Sistemleri Endustrisi A.S.
100
100
100
100
Dav Tunisie
100
100
100
100
Valeo Embrayages Tunisie S.A.
100
100
100
100
100
100
100
100
100
100
100
100
51
51
51
51
AFRICA
Tunisia
Morocco
Cablinal Maroc, S.A.
Egypt
Valeo Interbranch Automotive Software Egypt
South Africa
Valeo Systems South Africa (Proprietary) Ltd.
(1)
(2)
(3)
(4)
Company sold or liquidated in 2008.
Cf. Note 2.1.1.
PAGE 171
4
2008
Company
2007
% voting rights
% interest
% voting rights
% interest
Valeo Aftermarket, Inc.
100
100
100
100
Valeo Electrical Systems, Inc.
100
100
100
100
Valeo Investment Holdings, Inc.
100
100
100
100
Valeo Radar Systems, Inc.
100
100
77.8
77.8
NORTH AMERICA
United States
Valeo Compressor North America, Inc.
100
100
100
100
Telma Retarder Inc.
100
100
100
100
Valeo Acustar Thermal Systems, Inc. (3)
-
-
51
51
Valeo Climate Control Corp.
100
100
100
100
Valeo Friction Materials, Inc.
100
100
100
100
Valeo, Inc.
100
100
100
100
Valeo Switches and Detection Systems, Inc.
100
100
100
100
Valeo Sylvania, LLC
(2)
Valeo Thermal Systems NA, Inc.
50
50
50
50
100
100
100
100
Mexico
Delmex de Juarez S de RL de CV
100
100
100
100
Telma Retarder de Mexico, SA de CV
100
100
100
100
Valeo Automotive Electrical Systems de Mexico, SA de CV
100
100
100
100
Valeo Sistemas Electricos, SA de CV
100
100
100
100
Valeo Sistemas Electricos Servicios S de RL de CV
100
100
100
100
Valeo Sistemas Electronicos, S de RL de CV
100
100
100
100
50
50
50
50
Valeo Sylvania Iluminacion, S de RL de CV (2)
(2)
50
50
50
50
Valeo Termico Servicios, S de RL de CV
100
100
100
100
Valeo Transmisiones Servicios de Mexico S de RL de CV
100
100
-
-
Valeo Climate Control de Mexico, SA de CV
100
100
100
100
Valeo Climate Control de Mexico Servicios S de RL de CV
100
100
100
100
Valeo Materiales de Friccion de Mexico, SA de CV
100
100
100
100
100
100
100
100
Cibie Argentina, SA
100
100
100
100
Emelar Sociedad Anonima
100
100
100
100
Valeo Sylvania Services S de RL de CV
SOUTH AMERICA
Brazil
Valeo Sistemas Automotivos Ltda
Argentina
Valeo Embragues Argentina, SA
100
100
100
100
Valeo Termico Argentina, SA
100
100
100
100
98.5
98.5
98.5
98.5
97.3
ASIA
Thailand
Valeo Compressor (Thailand) Co. Ltd
Valeo Compressor Clutch (Thailand) Co. Ltd
97.3
97.3
97.3
Valeo Siam Thermal Systems Co. Ltd
74.9
74.9
74.9
74.9
Valeo Thermal Systems Sales (Thailand) Co. Ltd
74.9
74.9
74.9
74.9
(1)
(2)
(3)
(4)
PAGE 172
See Note 2.1.1.
2008
Company
4
2007
% voting rights
% interest
% voting rights
% interest
100
100
100
100
50
50
50
50
-
-
50
50
South Korea
Valeo Electrical Systems Korea, Ltd
Valeo Pyeong Hwa Co. Ltd (2)
Valeo Pyeong Hwa Distribution Co., Ltd (3)
Valeo Samsung Thermal Systems Co., Ltd
(2)
50
50
50
50
Valeo Compressor Korea Co., Ltd
100
100
100
100
Dae Myong Precision Corporation
100
100
100
100
Valeo Thermal Systems Korea Co. Ltd
100
100
100
100
50
50
-
-
Ichikoh Industries Ltd (1)
31.6
31.6
31.6
31.6
Valeo Engine Cooling Japan Co. Ltd
100
100
100
100
66
66
66
66
100
100
100
100
Valeo Automotive Transmissions Systems (Nanjing) Co. Ltd
100
100
100
100
Hubei Valeo Autolighting Company Ltd
100
100
100
100
55
55
55
55
Faw-Valeo Climate Control Systems Co. Ltd (1)
36.5
36.5
36.5
36.5
Huada Automotive Air Conditioner Co. Ltd (1)
30
30
30
30
Valeo Lighting Hubei Technical Center Co. Ltd
100
100
100
100
55
55
55
55
50
50
50
50
55
55
55
55
Valeo Pyeong Hwa International Ltd (2)
Japan
Valeo Unisia Transmissions K.K.
Valeo Thermal Systems Japan Corporation
China
Valeo Automotive Air Conditioning Hubei Co. Ltd
Nanjing Valeo Clutch Co. Ltd (2)
Shanghai Valeo Automotive Electrical Systems Company
Ltd (2)
Valeo Shanghai Automotive Electric Motors & Wiper
Systems Co., Ltd
Valeo Shanghai Automotive Electric Motors
(3)
Taizhou-Valeo Wenling Automotive Systems Company Ltd
Telma Vehicle Braking System (Shanghai) Company Ltd
-
-
55
55
100
100
100
100
70
70
70
70
Valeo Interior Controls (Shenzhen) Co., Ltd (formerly VSDS)
100
100
75
75
Valeo Automotive Security Systems (Wuxi) Co. Ltd
100
100
100
100
Valeo Fawer Compressor (Changchun) Co. Ltd (2)
Guangzhou Valeo Engine Cooling Co. Ltd
60
60
60
60
100
100
100
100
Valeo Auto Parts Trading (Shanghai) Co. Ltd
100
100
100
100
Valeo Compressor (Beijing) Co. Ltd
100
100
100
100
50
50
50
50
100
100
100
100
49
49
49
49
-
-
51
51
Foshan Ichikoh Valeo Auto Lighting Systems Co. Ltd (2)
Valeo Engine Cooling (Shashi) Co. Ltd
Indonesia
PT Valeo AC Indonesia (1)
Iran
Valeo Armco Engine Cooling Co. (3)
India
Valeo Lighting Systems (India) Private Ltd.
Valeo Minda Electrical Systems India Private Limited
95
95
-
-
66.7
66.7
66.7
66.7
Minda Valeo Security Systems Private Limited (2)
50
50
50
50
Valeo Engineering Center (India) Private Limited
100
100
100
100
Amalgamations Valeo Clutch Private Ltd (2)
50
50
50
50
Valeo Friction Materials India Limited
60
60
60
60
(1)
(2)
(3)
(4)
See Note 2.1.1.
PAGE 173
4
Statutory Auditors’ report on the consolidated financial statements
4.G. Statutory Auditors’ report on the consolidated
financial statements
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English
speaking readers. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether qualified
or not. This information is presented below the opinion on the consolidated financial statements and includes an explanatory paragraph
discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the
purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance
on individual account captions or on information taken outside of the consolidated financial statements. This report should be read in
conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders,
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December 31,
2008, on:
■
the audit of the accompanying consolidated financial statements of Valeo;
■
the justification of our assessments;
■
the specific verification required by law.
The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated
financial statements based on our audit.
1.
Opinion on the consolidated financial statements
We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit
includes verifying, on a test basis or by other selection methods, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the
consolidated group as at December 31, 2008, and of the results of its operations for the year then ended in accordance with IFRSs as adopted
by the European Union.
PAGE 174
Statutory Auditors’ report on the consolidated financial statements
2.
4
Justification of our assessments
The financial crisis, which has gradually taken hold of the real economy, has wide-ranging consequences for businesses in terms of their
operations and funding. The assumptions and estimates used by Valeo for the preparation of the consolidated financial statements for the
year ended December 31, 2008, as described in Note 1.2 to the consolidated financial statements, were determined in light of uncertainties
linked to the difficulty in ascertaining the economic outlook for the automotive sector. It is within this context that, in accordance with the
requirements of article L.823-9 of the French Commercial Code (Code de commerce) relating to our assessments, we bring to your attention
the following matters:
■
at each balance sheet date, the Company performs impairment tests on the amounts recorded as goodwill and also assesses whether
there is any indication of impairment of fixed assets, in accordance with the methods described in Note 3.4.3 to the consolidated financial
statements. We have examined the methods used to implement these tests and ensured that they take account of management’s
assumptions as described in the above-mentioned note;
■
the Company records provisions for pensions and other employee benefit obligations in accordance with the policy described in Note 1.17
to the consolidated financial statements. Such obligations have generally been determined with the assistance of independent actuaries.
We have examined the data used, assessed the assumptions adopted, and tested the calculations made.
These assessments were made in the context of our audit of the consolidated financial statements taken as a whole, and therefore contributed
to the opinion which is expressed in the first part of this report.
3.
Specific verification
As required by law, we have also performed the specific verification of the information given in the Group’s management report. We have
no matters to report as to its fair presentation and consistency with the consolidated financial statements.
Paris La Défense and Neuilly-sur-Seine, February 13, 2009
The Statutory Auditors
Salustro Reydel
Member of KPMG International
Jean-Pierre Crouzet
Emmanuel Paret
PricewaterhouseCoopers Audit
Jean-Christophe Georghiou
PAGE 175
4
PAGE 176
5.A.
Report of the Chairman of the Board of Directors on the
composition of the Board, the conditions in which the Board’s work
is prepared and organized, and the internal control procedures put
in place by the Valeo Group
178
5.B.
Report of the statutory auditors of the report of the Board of
Directors of Valeo, regarding the internal control procedures
for the preparation and processing of financial and accounting
information
5
197
PAGE 177
5
Report of the Chairman of the Board of Directors on the composition of the Board
5.A. Report of the Chairman of the Board of Directors
on the composition of the Board, the conditions
in which the Board’s work is prepared and
organized, and the internal control and risk
management procedures put in place by the
Valeo Group
This report of the Chairman of the Board of Directors was presented
to the Nomination, Remuneration and Corporate Governance
Committee (as regards information relating to the composition of
the Board, and the conditions in which the Board’s work is prepared
and organized) and to the Audit Committee (as regards information
relating to internal control and risk management procedures). It
was approved by the Board of Directors on February 12, 2009, in
accordance with Article L. 225-37 of the French Commercial Code
(Code de commerce).
5.A.1. Composition of the Board of Directors during the year ended
December 31, 2008
The bylaws provide that the Board of Directors must have between
three and 18 members appointed for a period of four years. At the
beginning of 2008, the Board had 11 members.
Pursuant to the May 21, 2008 agreement between Valeo, the Pardus
Capital Management L.P. fund and Behdad Alizadeh (see Chapter 3,
section 3.J.4.1 for more information), at the General Shareholders’
Meeting held on June 20, 2008 the Board recommended the
appointment of Behdad Alizadeh as Director, which the shareholders
then ratified in the eighth resolution. Accordingly, the Board has
PAGE 178
had 12 members since that date: Thierry Morin, Behdad Alizadeh,
Gérard Blanc, Daniel Camus, Pascal Colombani, Jérôme Contamine,
Pierre-Alain De Smedt, Philippe Guédon, Lord Jay of Ewelme, Helle
Kristoffersen, Georges Pauget and Erich Spitz. For details of the
corporate offices and duties performed by members of the Board
of Directors over the last five years, see Chapter 3, section 3.O.
5
Summary of the expiry of Directors’ terms of office
Expiry of term of office
Directors whose term of office is due to expire
Shareholders’ Meeting called to approve the financial statements
for the year ending December 31, 2009
Daniel Camus, Jérôme Contamine
Thierry Morin, Gérard Blanc, Pascal Colombani,
Pierre-Alain De Smedt, Philippe Guédon,
Lord Jay of Ewelme, Helle Kristoffersen,
Georges Pauget, Erich Spitz
Behdad Alizadeh
There are no employee-elected Directors.
In accordance with the independence criteria set out in the
Board’s Internal Procedures, on January 27 the Board of Directors
reviewed whether or not its members could still be classified as
independent. In compliance with the AFEP-MEDEF’s Corporate
Governance Code for Listed Corporations (adopted by Valeo), the
Board’s Internal Procedures classify as independent a Director who
has no relations whatsoever with the Company, the Group or the
Group’s management that may compromise his or her ability to
exercise freedom of judgment.
For Directors holding at least 10% of the Company’s capital or voting
rights, or representing a legal entity that holds such a stake, the
classification as independent takes into account the Company’s share
ownership structure and any potential conflicts of interest that may
exist.
In application of these criteria, the Board of Directors noted that:
■
one Director (Thierry Morin) holds the position of Chairman and
Chief Executive Officer of the Company, and therefore cannot be
considered independent;
■
one Director (Erich Spitz) has been a member of the Board of
Directors (and previously the Supervisory Board) for over 12 years,
and therefore cannot be considered independent;
■
one Director (Behdad Alizadeh) represents a shareholder holding
more than 10% of the Company’s capital or voting rights: given the
Company’s share ownership structure and the conflicts of interest
that may arise, the Board does not consider Behdad Alizadeh
independent. This opinion was also based on a report drafted
by the Nomination, Remuneration and Corporate Governance
Committee;
■
in the absence of events that could prevent them from freely
exercising their judgment, nine Directors (Gérard Blanc, Daniel
Camus, Pascal Colombani, Jérôme Contamine, Pierre-Alain De
Smedt, Philippe Guédon, Lord Jay of Ewelme, Helle Kristoffersen,
Georges Pauget) are considered independent in light of the criteria
set out in the Internal Procedures.
In particular, independence is presumed to exist when a Director:
■
is not an employee or a corporate officer of the Company, or an
employee or Director of one of its consolidated subsidiaries, and
has not been in such a position for the previous five years;
■
is not a corporate officer of a company in which the Company
holds a directorship, either directly or indirectly, or in which an
employee appointed in that role, or a corporate officer of the
Company (currently in office or having held such office in the past
five years), is a Director;
■
is not a customer, supplier, investment banker or commercial
banker that is material for the Company or Group, or for which the
Company or Group represents a significant portion of the business
of the Director concerned;
■
is not related by close family ties to a corporate officer;
■
has not been an auditor of the Company in the past five years;
■
has not been a Director of the Company for more than 12 years
on the date he/she was appointed to his/her current term
of office.
PAGE 179
5
5.A.2. Preparation and organization of the Board of Directors’ work
5.A.2.1. Internal Procedures
On March 31, 2003 the Board of Directors adopted Internal Procedures
defining the operation of the Board, in addition to applicable legal
and regulatory requirements and the provisions of the Company’s
bylaws. These Internal Procedures were amended on November 20,
2008 and again on December 16, 2008 following the creation of
the Strategy Committee and the enlarged remit of the Nomination
and Remuneration Committee and Audit Committee, which were
decided by the Board on October 20, 2008.
The Internal Procedures applicable to the committees were also
amended at that time by the decisions taken by the Board on
November 20, 2008 and December 16, 2008 (see section 5.A.2.5
below).
The Internal Rules applicable to the Audit Committee were amended
pursuant to a decision of the Board of Directors on February 12, 2009,
in order to bring them into line with Executive Order 2008-1278 of
December 8, 2008 regarding statutory auditors.
The Company’s Internal Procedures are available on its corporate
website.
5.A.2.2. Rules specific to the functioning and
organization of the Board and their
application
5.A.2.2.3. Chairman of Board meetings
The Board meetings are chaired by the Chairman of the Board or,
in his absence, by a Vice-Chairman or a Director designated by the
Board of Directors. All 14 Board meetings held during the 2008 fiscal
year were chaired by the Chairman.
5.A.2.2.4. Directors’ participation in Board meetings
The Internal Procedures allow Directors to participate in Board
meetings by any telecommunications technology that enables
them to be identified and ensures that they actually participate
in the meeting. Accordingly, Directors who take part in Board
meetings through such means are deemed to be present for the
purposes of calculating the quorum and majority, except at meetings
dedicated to the preparation of the annual parent company and
consolidated financial statements and the related management
reports (as provided for in Articles L. 232-1 and L. 233-16 of the
French Commercial Code). The Chairman is required to state in the
relevant notice of meeting whether these methods can be used for
certain meetings. Directors wishing to participate in a Board meeting
by these methods must contact the Board Secretary at least two
working days before the meeting date (except in an emergency)
in order to ensure that the relevant technical information can be
exchanged and tests performed before the meeting takes place.
5.A.2.3. Directors’ access to information
5.A.2.2.1. Average period of notice for calling
Board meetings
In accordance with the Internal Procedures, each Director is notified
of the dates of Board meetings at the beginning of each fiscal year at
the latest. The average period of notice for calling Board of Directors’
meetings is approximately ten days.
5.A.2.2.2. Representation of Directors
A Director may be represented at meetings of the Board of Directors
by another Director. The proxy must be given in writing. During the
2008 fiscal year, two Directors were represented by proxy at Board
meetings.
PAGE 180
5.A.2.3.1. Directors’ access to information
Each Director is given all the information required to perform his
or her duties. The agenda for any upcoming Board meeting and
details of issues requiring upfront analysis, are provided within a
sufficient time frame (except in an emergency), and at least 48
hours before the meeting, provided that this is not incompatible
with confidentiality requirements.
Induction seminars on the specificities of the Company, its business
lines and its industry sector were given to new Directors appointed
by the 2007 and 2008 General Shareholders’ Meetings.
5.A.2.3.2. Guests of the Board
During the year, the Financial Controller, the General Counsel (as
secretary to the Board) and the Vice-President, Financial Affairs
and Strategic Operations, attended all Board meetings. The Group
Strategy Director attended two Board meetings in order to present
the Group’s strategy. The lawyers and bankers representing Valeo
also attended certain meetings of the Board.
5.A.2.3.3. Frequency of Board meetings and
average attendance rates of Directors
In accordance with its Internal Procedures, the Board of Directors
meets at least six times a year. The Board of Directors met on 14
occasions in 2008.
The average attendance rate of the members of the Board of
Directors (in person or via proxy) during 2008 was 92.4%. The
average attendance rate of the members of the Board of Directors
in person during 2008 was 91.1%.
5.A.2.4. Role of the Board
The principal role of the Board of Directors is to determine the
Company’s business strategies and ensure that they are implemented
effectively.
In 2008 the Board of Directors reviewed the Company’s shareholding
structure – particularly as regards Pardus. It took note of the share
capital increase at December 31, 2008 resulting from the exercise
of stock options; reviewed the Group’s strategy; examined and
approved provisional management data and the budget for 2008;
analyzed the annual parent company and consolidated financial
statements for 2007; and recommended a dividend payout. In
addition it assessed the Board’s operating procedures and considered
whether the Directors could be considered independent in light of
the criteria in the Internal Procedures. It awarded stock options to
certain Division Directors and those reporting to members of the
Management Committee and Division Directors, and to product/
process experts and high-performing junior employees approved by
the Board. The Board set the variable compensation for the Chairman
and Chief Executive Officer; reviewed the terms and conditions
governing his departure; and set the performance criteria used as
the basis to determine the compensation, indemnities and benefits
5
due or likely to be due to him on termination of his duties or at a
later date. In addition the Board called an Ordinary and Extraordinary
Shareholders’ Meeting; authorized the Chairman to issue sureties,
endorsement and guarantees, as well as bonds (within or outside the
scope of the rollover of the EMTN program); decided to implement
the share buyback program; authorized the signing of a shareholders’
agreement with Pardus; examined the interim consolidated financial
statements; reviewed forecasts; analyzed strategic transactions; and
considered Valeo’s competitive positioning. It reviewed the work of
the Nomination and Remuneration Committee and Audit Committee;
set up a Strategy Committee and appointed its six members;
amended its Internal Procedures; appointed two new Directors to the
Nomination, Remuneration and Corporate Governance Committee;
reviewed reorganization plans; discussed financial reporting, and
reviewed activity reports from each of its various committees.
5.A.2.5. Committees created by the Board
In 2003, the Board created a number of committees to improve
its functioning and provide effective assistance for preparing
its decisions. These included the Strategy Committee, the Audit
Committee, the Remuneration Committee and the Nomination
Committee.
At the Board meeting of December 14, 2006, the Nomination
Committee was merged with the Remuneration Committee and
the Strategy Committee was dissolved.
At the Board meeting of October 20, 2008, the remit of the existing
committees was extended, and the Nomination and Remuneration
Committee became the Nomination, Remuneration and Corporate
Governance Committee. A new Strategy Committee was also set
up.
The Board therefore currently has three standing committees – the
Audit Committee, the Nomination, Remuneration and Corporate
Governance Committee, and the Strategy Committee.
The work of the Audit Committee and the Nomination, Remuneration
and Corporate Governance Committee in 2008 was presented to the
Board of Directors throughout the year in the form of reports and
is summarized below.
PAGE 181
5
5.A.2.5.1. Audit Committee
■
examine the draft interim financial statements, interim reports and
reviews of operations and earnings prior to publication, as well
as any financial statements drawn up in connection with specific
transactions (contributions, mergers, market operations, interim
dividend payments, etc.);
■
analyze the scope of consolidation, and the reasons why certain
companies may not have been consolidated;
■
assess the risks to which the Company is exposed and any material
off balance sheet commitments;
■
review the accounting and financial treatment of acquisitions or
disposals in excess of 50 million euros per transaction, based on
the opinion of the Strategy Committee where appropriate, and
review any key transactions which could have given rise to a
conflict of interests.
The Audit Committee has three members including a Chairman
appointed by the Board of Directors. All members of the Audit
Committee are independent Directors as defined by the criteria set
out in the Internal Procedures.
Since June 13, 2007 the members of the Audit Committee have been
Pierre-Alain De Smedt, Daniel Camus and Gérard Blanc. The Audit
Committee is chaired by Pierre-Alain De Smedt. The Chairman and
Chief Executive Officer is not a member of the Audit Committee but
may attend its meetings as a guest.
The remit of the Audit Committee was extended pursuant to
a decision of the Board of Directors on October 20, 2008 and a
further Board decision on February 12, 2009, which brought the
Internal Procedures applicable to the Audit Committee into line with
Executive Order 2008-1278 of December 8, 2008 relating to statutory
auditors.
a) As regards the financial statements, the role of the Committee
is to:
■
monitor any issues linked to the preparation of financial and
accounting information;
■
ensure that the accounting policies adopted to prepare the
consolidated and parent company financial statements are
relevant, consistent and properly applied, and that material
transactions are accounted for appropriately at Division and Group
levels;
■
PAGE 182
monitor the statutory audit work on the parent company and
consolidated financial statements, and at period-end, review
and give an opinion on the draft interim and annual parent
company and consolidated financial statements prepared by the
Financial Controller before they are presented to the Board. For
this purpose, all draft financial statements and any other useful
documentation and information should be provided to the Audit
Committee before the Board reviews the financial statements.
In examining the financial statements, the Audit Committee
should also be provided with (i) a memorandum from the
statutory auditors outlining the key findings and accounting
options applied; and (ii) a memorandum from the Financial
Controller describing the Company’s risk exposure and material
off balance sheet commitments. The Audit Committee meets
with the statutory auditors, the Financial Controller (without
General Management being present, where appropriate), and
with General Management, to discuss depreciation, amortization,
provisions, goodwill, consolidation principles and accounting
policies, among other subjects;
b) As regards internal control, internal audit, and statutory auditors,
the role of the Audit Committee is to:
■
follow up on any issues that arise in relation to internal control
over accounting and financial information, and monitor the process
used to prepare financial information;
■
check that internal procedures are defined for compiling and
verifying information and for ensuring that data is reliable and
reported in a timely manner, and review the statutory auditors’
work plan;
■
ensure that internal control and risk management systems are
effective;
■
meet with the people in charge of Internal Audit and Internal
Control, give an opinion on how their departments are organized,
and keep informed of their work program;
■
have the Group’s external auditors report on the conditions in
which their work is carried out and on Management’s comments
on a regular basis;
■
assess compliance with rules, principles and recommendations
guaranteeing the independence of statutory auditors and
monitor their independence, particularly by examining the risks
to independence and the measures taken to mitigate such risks,
in conjunction with the statutory auditors;
■
supervise the procedure for selecting or renewing statutory audit
engagements based on the best, and not the lowest, tender;
express an opinion on the statutory audit fees requested; give an
informed opinion on the choice of statutory auditors and inform
the Board of its recommendation;
■
c)
■
obtain details of fees paid by the Company and the Group to the
statutory audit firm and its network, and of any services provided
in direct relation to the statutory audit engagement; ensure that
the amount or percentage that such fees represent in relation to
the audit firm’s total revenues do not risk comprising the auditors’
independence.
As regards financial policies, the role of the Audit Committee
is to:
be informed by General Management of the Group’s financial
position and of the methods and techniques used to define
financial policy; to keep regularly abreast of the main thrusts of
the Group’s financial strategy;
■
review upfront any documents to be published on accounting and
financial matters or events liable to affect the Group’s financial
position or outlook;
■
give an opinion on the resolutions submitted to General
Shareholders’ Meetings relating to parent company or consolidated
financial statements;
■
at General Management’s request, give an opinion on any resource
allocation decisions which, in light of the beneficiaries or because
of potential conflicts of interest, could give rise to difficulties in
interpretation as to their compliance with legislative rules and
the Company’s bylaws;
■
review any financial or accounting matter referred to it by the
Chairman, the Board, General Management or the statutory
auditors, as well as any conflicts of interest which are brought
to its attention.
The Audit Committee liaises mainly with General Management,
the Financial Controller and with the Company’s statutory auditors.
The Committee may interview members of the Financial Control
Department without the Chairman of the Board or members of
General Management being present, if it decides to do so and has
previously notified the Chairman. It can also interview third parties
to the Company if this is considered useful to the performance of
its duties, and may meet with independent experts as and when
necessary.
The Audit Committee met four times in 2008 with an attendance
rate of 83.3%.
5
During these meetings, the Committee:
■
reviewed the financial statements for the year ended December 31,
2007 and the consolidated financial statements for the period
ended June 30, 2008, involving:
• a review of the main transactions affecting the consolidated
Group,
• meetings with the statutory auditors,
• reports from the Financial Controller on Valeo’s exposure to risks
and material off balance sheet commitments;
■
reviewed the financial statements for the first quarter of 2008,
especially changes in provisions or other items with an impact
on earnings;
■
analyzed major risk factors, particularly regarding provisions and
asset write-downs, the sale of the Wiring Harness activity, and
the capitalization of research costs;
■
assessed risk factors and obtained information on asset impairment
tests;
■
considered any significant changes to accounting standards or
policies and the scope of consolidation;
■
reviewed the effectiveness of internal control and risk management
systems;
■
reviewed the work carried out by the statutory auditors regarding
the rollover of the EMTN program;
■
interviewed the Internal Control Director, gave its opinion on
the organization of the Internal Control department from both a
quantitative and qualitative perspective, and on the department’s
draft work program;
■
analyzed the Group’s liquidity agreement, presented to the
Committee by the Vice-President, Financial Affairs and Strategic
Operations;
■
examined and put forward proposals regarding the Group’s
tax strategy, as presented to the Committee by the Taxation
Director.
The Audit Committee’s work was conducted in line with its
objectives. The statutory auditors, Financial Control Director and
Group Accounting Director facilitated the Committee’s work by
attending all of the meetings. The Committee was also assisted
by the Internal Audit department. The presentations made by the
statutory auditors mainly related to the findings of their audit of the
annual parent company and consolidated financial statements and
their limited review of the interim financial statements. The Audit
Committee did not have any reservations concerning the annual
parent company and consolidated financial statements or the interim
financial statements presented to it.
PAGE 183
5
5.A.2.5.2. Nomination, Remuneration and
Corporate Governance Committee
Further to a decision of the Board of Directors on October 20,
2008, the Nomination and Remuneration Committee became the
The enlarged Committee has five members, including a chairman
appointed by the Board of Directors.
The majority of the Committee’s members are independent Directors
as defined by the criteria in the Internal Procedures. The Chairman
and Chief Executive Officer also takes part in the work of the
Committee, except when it convenes to discuss his compensation
package or the renewal of the terms of office of corporate officers.
The members of the Nomination, Remuneration and Corporate
Governance Committee are Jérôme Contamine, Georges Pauget
and Philippe Guédon (since June 13, 2007), Behdad Alizadeh (since
July 28, 2008) and Lord Jay of Ewelme (since October 20, 2008). All
members are considered independent with the exception of Behdad
Alizadeh. The Committee is chaired by Jérôme Contamine.
c) concerning corporate governance:
■
analyzing how the Board and its Committees operate; and
■
assessing and updating corporate governance rules and in
particular, ensuring that the assessment of the Board’s operation
is carried out in line with market practice.
In carrying out its duties, the Committee may meet with Company
and Group executive management teams. Where appropriate, and
provided that it previously informs the Chairman of the Board, it may
be assisted by independent consultants.
The Nomination, Remuneration and Corporate Governance Committee
met seven times in 2008 with an 80% attendance rate.
During these meetings, the Committee:
■
played a part in the Board’s self-assessment of its work for fiscal
years 2007 and 2008, with the assistance of an independent
consultant;
■
recommended, at its meeting of March 19, 2008, granting a tranche
of stock options on a total of 426,750 Company shares to certain
division heads and those reporting to members of the Management
Committee and division heads, product/process experts and highperforming junior employees. This recommendation was adopted
by the Board on March 20, 2008;
■
put forward proposals concerning the calculation of the Chairman
and Chief Executive Officer’s variable compensation and the
performance criteria on which the variable compensation is based;
the terms and conditions governing his departure; indemnities
and benefits due or likely to be due to the Chairman and Chief
Executive Officer upon termination of his duties or at a later date.
These proposals were adopted by the Board at its meeting of
March 20, 2008;
■
proposed modifications to the Internal Procedures, which were
adopted by the Board at its meetings of November 20 and
December 16, 2008; and
■
put forward recommendations concerning the allocation of
attendance fees for 2008 and 2009 (see section 5.A.2.13 below),
which were adopted by the Board at its meetings of February 12
and December 16, 2008.
According to its Internal Procedures, the roles and responsibilities
of the Nomination, Remuneration and Corporate Governance
Committee include the following:
a) concerning compensation:
■
studying and making recommendations concerning the
compensation paid to corporate officers (particularly in relation to
the variable portion of their compensation and any benefits due);
■
recommending to the Board an aggregate amount of attendance
fees payable to Directors and the rules for allocating amounts to
each Director;
■
giving its opinion to the Board of Directors on the Group’s general
stock option policy and specific stock option grants.
b) concerning selections and nominations:
■
preparing the composition of the Company’s governing bodies,
by making recommendations regarding the appointment
of corporate officers and Directors and ensuring that it is in a
position to recommend to the Board possible successors should
any unforeseen vacancies arise;
■
reviewing the status of each Director in light of the independence
criteria set out in the Board’s Internal Procedures.
PAGE 184
5.A.2.5.3. Strategy Committee
The Strategy Committee was created further to a decision of
the Board of Directors on October 20, 2008. Internal Procedures
were drawn up for the Committee in accordance with the Board’s
decision of December 16, 2008, acting on a recommendation of the
The Strategy Committee has six members including a chairman
appointed by the Board of Directors at the time the Committee
was created.
Three independent Directors (Pascal Colombani, Pierre-Alain
De Smedt and Helle Kristoffersen) and three non-independent
Directors (Erich Spitz, Thierry Morin and Behdad Alizadeh) sit on the
Committee. Pascal Colombani acts as chair of the Committee. In light
of his duties within the Group, the Strategy Director was appointed as
permanent guest on the Committee by the first Strategy Committee
meeting on November 17, 2008.
In accordance with its Internal Procedures, the Strategy Committee
is responsible for reporting to the Board its opinions and
recommendations on:
■
the review of the Group’s key strategies, market trend information,
analyses of research activities, competition benchmarking and the
resulting medium and long-term outlook for the business; and
■
the analysis of the Group’s development projects, particularly
external growth transactions involving acquisitions and disposals
of subsidiaries, equity investments and other assets, and any
investments or borrowings in excess of 50 million euros per
transaction.
In conjunction with the Chairman of the Board, the Committee
may invite other Directors to participate in its debates or meet with
any other competent person (senior management, independent
consultants) to discuss matters dealt with by the Committee.
Following its creation in October 2008, the Strategy Committee
met on two occasions during the year, with an attendance rate
of 100%.
At its meeting of November 17, 2008, the Committee decided
that its priorty focus would be on the immediate term (2009) and
that its long-term strategy would be defined at a later date. The
purpose of this decision is to identify all of the ingredients needed
to make Valeo an efficient business. Members of the Committee
discussed market trends for the coming year and looked in detail at
the Company’s strategic operations.
5
At its meeting of December 22, 2008, the Committee discussed (i)
the situation of the automotive supplier industry in 2009, (ii) key
figures, Valeo’s portfolio and strategic vision, (iii) the alignment of
the Group’s short-term business plan with the strategic choices made,
and (iv) the agenda of the Committee’s meetings for 2009.
5.A.2.6. Evaluation of the Board of Directors
In accordance with the Internal Procedures, the Board carried out a
self-assessment to review its operating procedures and ensure that
its meetings are properly organized. As the assessment for 2007
was carried out in conjunction with an independent consultant, the
suggested that the 2008 exercise be carried out internally by the
Company based on a questionnaire sent to Directors. An independent
consultant was, however, asked to review the findings of these
questionnaires.
The questionnaires set out to compile Directors’ assessments of how
the Board functions, along with any suggestions they might have to
improve it. The issues covered include the operation and composition
of the Board, the information provided to the Directors, the variety
of subjects dealt with, the quality of discussions, the functioning
of the Board’s Committees as a whole, the follow-up given to
suggested improvements discussed in the previous assessment,
and the results obtained following amendments to the Group’s
Internal Procedures.
The Directors’ replies were analyzed by the Nomination,
Remuneration and Corporate Governance Committee assisted by an
independent consultant at the Board’s meeting of February 12, 2009.
The Directors noted an improvement in the way the Board operates,
exemplified by the creation of a Strategy Committee and the broader
remit of the Audit Committee and Nomination, Remuneration and
Corporate Governance Committee. A number of recommendations
were made to ensure the Board keeps on the right track, particularly
as concerns the preparation of the Committees and the involvement
of General Management and line managers.
PAGE 185
5
5.A.2.7. Shareholdings and corporate actions
Each Director must hold at least 100 Valeo shares throughout his or
her term of office.
On accepting their position, members of the Board of Directors and
the Group’s executive managers agreed to a Code of Conduct in
relation to trading in the Company’s securities. Under the terms of
the Code, Directors must declare to the Group’s General Counsel any
transactions that they have entered into involving the Company’s
securities, within a maximum of five trading days following the
transaction. In accordance with applicable regulations, this information
must then be disclosed to the French securities regulator, Autorité
des Marchés Financiers (AMF), and subsequently made public in
accordance with the provisions of the AMF’s General Regulation.
5.A.2.8. Agreements governed by Article
L. 225-38 of the French Commercial Code
Management L.P. and Behdad Alizadeh (for more information,
see Chapter 3, section 3.J.4).
A special report by the statutory auditors will be drawn up in respect
of these agreements.
5.A.2.9. Agreements featuring commitments
given on behalf of Thierry Morin in
accordance with Article L. 225-42-1
of the French Commercial Code
The agreement described below was disclosed in a special report
by the statutory auditors for the General Shareholders’ Meeting
of June 20, 2008, and was approved by the shareholders on
that date:
■
The following agreements entered into in previous years remained
in force during 2008:
■
the agreements authorized by the Board of Directors at its meeting
of October 18, 2004 and entered into between the Company and
its Spanish subsidiaries, further to the implementation of the 2004
Valeorizon international employee stock ownership plan;
■
the agreements authorized by the Board of Directors at its
meeting of December 15, 2005 and entered into between the
Company and the Group’s operating subsidiaries in connection
with trademark royalties agreements;
■
the mandate signed by the Company with Calyon, a Crédit Agricole
Group bank, following the analysis of the notices of interest
received from several investment funds during the first half of
2007 and related services, approved by the Board of Directors’
on April 24, 2007. This agreement was terminated in June 2008,
and a payment of 1 million euros made in full and final discharge
of obligations under the agreement.
The Board of Directors authorized a further agreement in 2008
described in the Statutory Auditor’s special report and approved by
the General Shareholders’ Meeting of June 20, 2008:
■
PAGE 186
on May 21, 2008, the Board authorized the related-party
agreement between the Chairman of the Board, Pardus Capital
at its meeting of March 20, 2008, the Board of Directors approved
changes to the operative event determining the payment
of termination benefits to Thierry Morin, and introduced a
performance basis for certain remuneration, indemnities and
other benefits payable to Thierry Morin upon termination of his
duties under certain conditions, in accordance with the provisions
of Act no. 2007-1223 of August 21, 2007 (“TEPA Act”). For more
information on this agreement, see Chapter 3, section 3.H.1.7.
The agreement described below was also authorized by the Board
of Directors in 2008:
■
on October 20, 2008 the Board took note of and accepted Thierry
Morin’s intention not to combine benefits payable on termination
of his corporate office, if any, with those payable on termination
of his employment contract. Thierry Morin also agreed to waive
his contractual non-competition indemnity. The Board confirmed
that upon termination of Thierry Morin’s corporate office and
employment contract, his situation would be treated as follows: (i)
no benefits would be payable on termination of his employment
contract if he were to receive all or part of his indemnities arising
from termination of his corporate office; and (ii) the clause
providing for the payment of benefits on termination of his
employment contract may apply if no indemnities are paid on
termination of his corporate office. In this case, he would receive
the equivalent of two years’ salary (based on his last salary – i.e.,
960,000 euros).
Acting on a recommendation of the Nomination, Remuneration
and Corporate Governance Committee, the Board of Directors of
February 12, 2009 also authorized the following agreements in
accordance with the AFEP-MEDEF recommendations:
5.A.2.11. General management of the Company
and limitations on the powers
of the Chief Executive Officer
(i) closure of the pension fund set up for Thierry Morin at Valeo (UK)
Limited;
The Company’s Board of Directors chose to combine the positions
of Chairman of the Board of Directors and Chief Executive Officer in
March 2003, when the structure of the Board was adopted.
(ii) definition of the lump-sum termination benefits payable to
the Chairman as two years’ fixed and variable compensation,
calculated taking into account the average fixed and variable
compensation received during the three fiscal years preceding
his departure. These benefits may be paid to Thierry Morin if his
departure takes place following (i) a change in control of the
parent company or (ii) a change of strategy decided by the Board
of Directors, regardless (in both cases) of the legal terms of a
forced departure of the Chairman and Chief Executive Officer (i.e.,
whether the Board decides to terminate Thierry Morin’s tenure,
or if Thierry Morin has no other choice but to resign following a
significant change in the conditions in which he can perform his
duties as corporate officer). Payment of these indemnities and
the determination of the final amount depends on whether the
Board of Directors considers the performance criteria set by the
Board meeting of March 20, 2008 to have been met.
A special report by the statutory auditors will be drawn up in respect
of these agreements.
5.A.2.10. Authorization granted regarding
sureties, endorsements and guarantees
governed by Article L. 225-35
of the French Commercial Code
During the year the Board of Directors authorized the Chairman –
and any person so designated by the Chairman – to issue sureties,
endorsements and guarantees in the Company’s name up to a
maximum amount of 40 million euros, and to maintain in effect
the sureties, endorsements and guarantees previously issued.
This authorization was given by the Board of Directors’ meeting of
February 12, 2008 for a 12-month period, and was renewed by the
Board for a further 12 months at its meeting of February 12, 2009.
No further commitments were given by the Chairman during the
year under this authorization.
5
This choice was reaffirmed during the year when Thierry Morin’s term
of office as Chairman and Chief Executive Officer was renewed.
The Chairman and Chief Executive Officer therefore has the widest
possible powers to act in any circumstances in the Company’s
name. He exercises his powers within the scope of the Company’s
corporate purpose and subject to the powers that the law specifically
grants to Shareholders’ Meetings and the Board of Directors. The
Chairman and Chief Executive Officer also represents the Company
in its relations with third parties.
However, in accordance with the Internal Procedures, the Chairman
and Chief Executive Officer must obtain the prior agreement of
the Board for acquisitions or disposals of any subsidiaries, equity
investments or any other assets, or for any other investments
exceeding 50 million euros per transaction.
5.A.2.12. Stock purchase/subscription option
and performance share policy
5.A.2.12.1. Stock purchase/subscription option policy
The Board grants options to purchase new shares or acquire existing
shares to the Group’s employees and corporate officers in March and
November each year. However, in 2008 the Board granted options
on one occasion only, further to a decision of the Board on March 20,
2008. Since 2005 the Company has granted only stock purchase
options with no discount.
In theory, beneficiaries are chosen from among the Group’s corporate
officers, operational directors, members of the Management
Committee and the main managers reporting to them, Division
Directors and the main managers reporting to them, product/
process experts and high-performing junior employees.
In 2008 no stock options were granted to the Chairman and Chief
Executive Officer.
PAGE 187
5
5.A.2.12.2. Performance share policy
No bonus shares have been awarded since March 2007. However,
the Board of Directors has taken into consideration the AFEP-MEDEF
recommendations published on October 6, 2008 regarding the
compensation of executive directors of companies whose shares are
admitted to trading on a regulated market. Any bonus share awards
made pursuant to the Board of Director’s decision of December 16,
2008 will be based on the AFEP-MEDEF Corporate Governance Code,
which incorporates these recommendations (see section 5.A.3).
5.A.2.13. Principles and rules adopted by the
Board in respect of compensation and
other benefits granted to members
of the Board of Directors in 2008
Apart from Thierry Morin, no compensation or benefits were paid to
members of the Board of Directors in 2008 other than attendance
fees (see Chapter 3, section 3.H.2. for more information).
In accordance with the Internal Procedures applicable to the Board
of Directors and the Nomination, Remuneration and Corporate
Governance Committee, the Board has powers to decide how
attendance fees should be allocated. It bases its decision on the rules
recommended by the Nomination, Remuneration and Corporate
Governance Committee for allocating these fees and the suggested
amounts payable to each Director, taking into account Directors’
attendance rate at Board and Committee meetings.
Based on a recommendation of the Nomination and Remuneration
Committee, the Board of Directors’ meeting of February 12, 2008
decided on the following attendance fee allocation:
(i) each Director receives:
• Fixed portion: 20,000 euros/year,
• Variable portion: 2,000 euros per meeting,
the total is capped at 40,000 euros;
(ii) each Director who is member of a Board committee also
receives:
• Fixed portion: 10,000 euros/year,
PAGE 188
Attendance fees are paid every six months based on the following
criteria:
■
the variable portion paid depends on the number of meetings
which the Director actually attended; and
■
the entire fixed portion is paid when the Director’s average
attendance rate for Board meetings in the last six months (and
for Board committee meetings if the Director is also a member of
a Board committee), is at least 50%. Failing this, the full amount
of the fixed portion will not be paid.
Given the increase in the number of Directors, the creation of a new
committee and the sum of 600,000 euros approved by the June 20,
2008 General Shareholders’ Meeting, on December 16, 2008 the
Board decided to allocate attendance fees to Directors for 2009
and subsequent years in accordance with the rules set out below.
These rules are based on a recommendation of the Nomination,
Remuneration and Corporate Governance Committee. It should be
noted that Behdad Alizadeh agreed to waive all attendance fees at
the Board’s meeting on July 28, 2008:
(i) each Director receives:
• Fixed portion: 17,000 euros,
(ii) each Director who is a member (but not Chairman) of a Board
committee also receives:
• Fixed portion: 0,
• Variable portion: 1,900 euros/per meeting attended,
(iii) each Director who is Chairman of a Board committee also
receives:
• Fixed portion: 7,000 euros,
the total is capped at 24,100 euros.
The amount paid in attendance fees to each Director during the year
is disclosed in Chapter 3, section 3.H.2.
Acting on a recommendation of the Nomination, Remuneration and
Corporate Governance Committee, the Board of Directors’ meeting
of February 12, 2009 decided that attendance fees would no longer
be payable to the Chairman and Chief Executive Officer for offices
held within the Group.
5.A.2.14. Compensation paid to the Chairman
and Chief Executive Officer
5.A.2.14.
Compensation paid in 2008
The compensation payable by Valeo to Thierry Morin, Chairman
and Chief Executive Officer of the Company, is decided by the
Board of Directors based on a recommendation of the Nomination,
Remuneration and Corporate Governance Committee.
At its November 15, 2007 meeting, the Board adopted the principles
for calculating compensation payable to the Chairman and Chief
Executive Officer, based on a recommendation of the Nomination,
Remuneration and Corporate Governance Committee.
Fixed compensation
Total gross fixed compensation paid to Mr. Morin in 2008 was set
at the same level as 2007. At its meeting of February 12, 2009,
the Board of Directors set the annual fixed compensation payable
to Thierry Morin at 1,100,000 euros, including attendance fees,
based on a recommendation of the Nomination, Remuneration and
Corporate Governance Committee.
Variable compensation
At its meeting of March 7, 2007, the Board of Directors decided,
on the recommendation of the Nomination and Remuneration
Committee, that the variable remuneration payable to the Chairman
and Chief Executive Officer for 2007 would depend solely on the
gross margin and operating margin achieved by the Group. Based
on this formula, the exceptional bonus came out at 15% of basic
fixed compensation (236,640 euros). This amount was recorded by
the Nomination and Remuneration Committee on March 19, 2008
and ratified by the Board of Directors on March 20, 2008. In 2007
Thierry Morin received no variable compensation.
Acting on a recommendation of the Nomination and Remuneration
Committee, on November 15, 2007 the Board approved a formula
for calculating the variable compensation payable for 2008, based
on economic criteria (total operatring revenues and operating
margin), strategic criteria (total sales, divestments and acquisitions)
and qualitative criteria (especially financial communication). The
Board capped the exceptional bonus at 65% of fixed compensation,
following a recommendation of the Nomination and Remuneration
Committee. No variable compensation was paid to Thierry Morin
for 2008.
Following a recommendation of the Nomination, Remuneration and
Corporate Governance Committee, on February 12, 2009 the Board
of Directors decided that variable compensation payable to Thierry
Morin for 2009 would be based on quantitative criteria evaluated
5
by half year (net operating cash flow excluding restructuring costs
and EBITDA) and full year (change in the share price with regard to a
basket of shares in companies from the same sector), and qualitative
criteria evaluated over the full year (implementation of crisis plans).
The maximum variable compensation payable to Thierry Morin was
capped by the Board at 100% of his annual fixed compensation,
on the recommendation of the Nomination, Remuneration and
Corporate Governance Committee.
Attendance fees
In 2008 Thierry Morin received 49,000 euros in attendance fees
in his capacity as Director of Valeo, calculated as described in
section 5.A.2.13 above. Acting on a recommendation of the
Nomination, Remuneration and Corporate Governance Committee,
the Board of Directors’ meeting of February 12, 2009 decided that
attendance fees would no longer be payable to the Chairman and
Chief Executive Officer for offices held within the Group.
Compensation paid by companies controlled by Valeo
In 2008 Thierry Morin received total gross compensation of 45,750
euros from companies controlled by Valeo (as defined in Article
L. 233-16 of the French Commercial Code). This amount consisted
entirely of attendance fees paid by Valeo (UK) in respect of his
duties as Chairman. Valeo UK has approved the same amount of
attendance fees for Thierry Morin every year since 2002.
Corporate Governance Committee, the Board of Directors’ meeting
of February 12, 2009 decided that attendance fees would no longer
be payable to the Chairman and Chief Executive Officer for offices
held within the Group.
Stock options and bonus share awards
In 2008 no stock purchase/subscription options or bonus shares
were awarded by the Board to Thierry Morin.
Details of the valuation of stock options and performance shares
awarded to Thierry Morin at the grant date, calculated using the
method described in the consolidated financial statements, and
expressed as a percentage of equity, are provided in Chapter 3,
section 3.H.1.5 and 3.H.1.8.
5.A.2.14.2. Pension scheme
In 2008 Thierry Morin continued to benefit from the top-up pension
scheme set up for senior exectuves and the supplementary pension
scheme set up for members of the former Management Board as
approved by the Supervisory Board on October 17, 2002 (these
schemes are described in Chapter 3, section 3.H.3). He also benefited
from the Valeo (UK) Limited pension plan which was set up on
PAGE 189
5
his appointment as Chairman and which was to be paid over at
retirement.
lump-sum termination benefits and thereafter from the pension
benefits payable under the scheme set up by Valeo (UK) Limited:
Corporate Governance Committee, the Board of Directors’ meeting of
February 12, 2009 decided to close the Valeo (UK) Limited pension
scheme of which Thierry Morin was a beneficiary and continue
working to replace it with a new supplementary scheme for the
Group’s senior management, including Thierry Morin.
■
if 4 or 5 of the applicable conditions were met Mr. Morin would
receive 100% of the amounts concerned;
■
■
■
if fewer than 2 of the applicable conditions were met Mr. Morin
would receive 0% of the amounts concerned.
5.A.2.14.3. Termination benefits
Following a recommendation of the Nomination and Remuneration
Committee on March 19, 2008, the Board of Directors’ meeting of
March 20, 2008 took measures to ensure that the compensation,
indemnities and other benefits payable to Thierry Morin upon
termination of his corporate duties and contingent on certain criteria
were brought into compliance with the provisions with Act 20071223 of August 21, 2007 (“TEPA Act”).
At the same date, the Board decided to base any amounts payable
to Thierry Morin for the termination of his duties and covered by the
TEPA Act (termination benefits and amounts paid through the Valeo
UK pension fund) on the achievement of a number of performance
criteria, as follows:
■
Mr. Morin would have to have received all or part of his exceptional
target-based bonus at least once in the last three years;
■
Valeo’s attributable net income for the last fiscal year would have
to be positive;
■
Valeo’s operating margin for the last fiscal year would have to
be above 3%;
■
Valeo’s gross margin for the last fiscal year would have to be
above 15%;
■
Valeo’s orders to OE net sales ratio would have to be above 1 on
average over the two last fiscal years.
The overall amount payable to Thierry Morin at the time of his
departure from the Company or subsequent thereto would be
determined as follows, with any reductions deducted first from his
PAGE 190
The Board decided that lump-sum termination benefit equal to three
times the Chairman’s last annual compensation (excluding bonuses),
could be paid to Thierry Morin if the Board decided to terminate his
contract (except in the event of gross misconduct during the exercise
of his duties), or if Thierry Morin decided to leave the Company at
his own initiative following (i) a change of control, or (ii) changes in
the composition of the Company’s Board of Directors not endorsed
by the Board or resulting from a strategy not endorsed by Thierry
Morin that differed from the one pursued by the Company up to the
date the changes were made.
An agreement setting out these terms and conditions was approved
by the General Shareholders’ Meeting on June 20, 2008.
At its meeting on October 20, 2008, the Board of Directors noted
and accepted Mr. Morin’s intention not to combine benefits relating
to the termination of his corporate duties and of his employment
contract, as well as Mr. Morin’s intention to waive his contractual
non-competition benefit. The Board confirmed that, in the event of
termination of his corporate duties and of his employment contract,
Mr. Morin would be treated as follows: (i) if he received some or
all benefits relating to the termination of his corporate duties, he
would not receive any benefits relating to the termination of his
employment contract; (ii) if he did not receive any benefits relating
to the termination of his corporate duties, the benefits clause in
his employment contract would apply and he would receive
benefits equal to two years of his last salary as an employee,
or 960,000 euros.
At its meeting on February 12, 2009, the Board of Directors, acting
on the recommendation of the Nomination, Remuneration and
Corporate Governance Committee, decided to follow AFEP/MEDEF
recommendations and set the lump-sum termination benefit payable
to the Chairman at two years of fixed and variable compensation,
the compensation to be taken into account being the average of all
fixed and variable compensation received during the last three full
years preceding his departure. These benefits may be paid to Mr.
Morin in the event that his termination comes following (i) a change
in control of the Company or (ii) a change in strategy decided by the
Board of Directors and, in either of these two cases, regardless of
the legal terms of a non-voluntary departure of the Chairman & CEO;
5
that is to say whether the Board decides to terminate the Chairman
& CEO’s tenure or should the Chairman & CEO have no other choice
than to resign after noting a significant modification of the conditions
for exercising his function. The payment of these benefits and the
setting of their final amount are subject to validation by the Board
of Directors that the above-mentioned performance criteria set by
the Board of Directors on March 20, 2008 have been met.
For more information on compensation, indemnities and other
benefits payable to Thierry Morin on termination of his functions
under certain conditions, see Chapter 3, section 3.H.1.7.
5.A.3. Corporate governance code
The Company applies the Corporate Governance of Listed
Corporations, published by AFEP and MEDEF in December 2008.
With regard to the recommendations on executive compensation,
the Company has taken the measures needed to comply with new
AFEP-MEDEF recommendations released in October 2008. As regards
rules on auditor independence, the Company refers to the French
audit industry code of ethics, incorporated into Annex 8-1 of Book
VIII of the regulatory section of the Commercial Code.
■
major internal restructuring operations are not expressly subject
to the Board’s prior agreement; in practice, however, the Board
does debate them;
■
■
directorships are not renewed by rotation; however, when putting
new directors up for appointment, the Board endeavors to strike
an even balance between new and re-elected directors;
options and bonus shares outstanding at December 31, 2008
represented 8.5% of the share capital. Stripping out options
plans with a strike price systematically higher than the average
acquisition cost of Valeo shares held in treasury at the time of the
grant, the total number of options and bonus shares outstanding
at December 31, 2008 represented 3.2% of the capital. This
situation results from grants made before the October 2008
publication of new AFEP and MEDEF recommendations on
executive compensation.
■
the Internal Procedures and the bylaws require directors to hold at
least 100 shares, a threshold deemed sufficient to avoid conflicts
of interest;
A copy of the AFEP-MEDEF Corporate Governance of
Listed Corporations (in French) can be downloaded from
www.medef.com.
The following should also be noted:
PAGE 191
5
5.A.4. Special arrangements for Annual General Meeting attendance
Article 26 of the Company’s bylaws states that shareholders
taking part in the meeting by videoconference or other means of
telecommunication that allow them to be identified, in accordance
with prevailing law and regulations, are deemed to be present for
the purposes of computing a quorum and majority, provided the
Board of Directors publishes a decision to that effect in the notice
of meeting.
5.A.5. Information likely to be impacted by a public tender offer
Details concerning the information likely to be affected in the event of a public tender officer, pursuant to Article L. 225-100-3 of the Commercial
Code, are given in Chapter 3, Section 3.J.
5.A.6. Internal control and risk management procedures
This report has been prepared based on the findings of a working
Group that included representatives of the Group’s Financial Control,
Financial Affairs, and Legal Departments.
5.A.6.1. Definition and aims of internal control
and risk management
Internal control as defined by the Valeo Group is the process
implemented by Management and employees to provide reasonable
assurance regarding the achievement of objectives in the following
categories:
■
reliability of financial and management data;
■
compliance with laws and regulations;
■
safeguarding of assets;
■
effectiveness and efficiency of operations.
Valeo has adopted a definition of internal control in line with that
provided by the COSO (Committee of Sponsoring of the Treadway
Commission), the findings of which were published in 1992 in the
United States.
PAGE 192
As with any control system, Valeo’s internal control procedures can
provide only reasonable assurance – and not an absolute guarantee
– that the Group’s objectives will be achieved and that risks will be
avoided. The purpose of the system put in place by Valeo is to reduce
the probability of risks occurring and their potential impact.
In 2007 the Group benchmarked its internal control system against
the general principles of internal control and the implementation
guide that form part of the reference framework laid down by the
AMF. It subsequently adjusted the Valeo internal control approach
to take account of the findings of this comparison. The Group found
no material discrepancies between Valeo’s system and the AMF
reference framework.
5.A.6.2. Scope of internal control and risk
management
Valeo’s internal control procedures are applied to the entire Valeo
Group, defined as Valeo SA (parent) and all of its fully consolidated
subsidiaries.
5.A.6.3. Components of Valeo’s internal control
and risk management procedures
Valeo’s internal control procedures are based on the following five
interrelated components defined in the COSO framework:
Control environment
The control environment sets the tone of an organization, influencing
the level of awareness of its people to the need for controls.
Organization of the Valeo Group
Valeo’s internal control system is organized around a three-tier
operational structure: Group, Product Families, and operational
Divisions. The Group sets strategic guidelines, allocates resources to
operational Divisions, unlocks synergies through functional networks,
and oversees the performance of its Divisions from an operational
standpoint. The role of Product Families is to coordinate between
the operational Divisions, especially for pooling and allocating
R&D expenditure and optimizing the output of the industrial
plants. The operational Divisions are fully independent as regards
the management of their product lines within their designated
geographical area, and they have all the resources, in terms of
development, production and marketing, needed for that purpose.
Each level is directly involved in implementing the internal control
system. For this, the Group has established operating principles and
rules with appropriate delegation of powers, starting with those of
the Chairman and Chief Executive Officer, which precisely define the
areas and levels of decision-making for each line manager.
Valeo Group principles
Valeo’s policies and behavioral principles are set out in the Code
of Ethics, the aim of which is to allow the Group to develop, while
complying fully with national and international legal and ethical
rules. The Code places major emphasis on upholding fundamental
rights with respect to child labor, employment of the disabled,
discrimination and harassment, and health and safety at work. It
also highlights the Group’s commitment to sustainable development.
Finally, the Code of Ethics deals with societal issues and business
conduct. Available on the intranet and translated into 19 languages,
the Code has been sent out to all of the Group’s managers.
5
Risk management assessment and procedures
Risk assessment is the ongoing identification and analysis of risks
that may impact the objectives set by the Group, forming a basis
for determining how those risks should be managed. By identifying
possible risk factors, the Group can more accurately define what
control activities are appropriate.
The Group’s Management Committee is responsible for identifying
and analyzing risks. Headed by the Chairman and Chief Executive,
the committee is composed of Group line and staff managers and
assisted by the Financial Control and Internal Audit Departments.
The main risks that have been identified by the committee include
the volatility of raw material prices, product development, civil liability
for products and services sold by the Group, supplier default, risks
relating to the automotive supply industry (especially macroeconomic
conditions in the auto market), client creditworthiness, country risk,
environmental and regulatory risk, and financial market risk (liquidity,
counterparty, and currencies).
The main risks and the procedures for managing them are formally
discussed in the Risks and Uncertainties section of Chapter 3 of the
management report.
Each risk is rated according an assessment matrix with multiple
criteria (potential impact, likelihood of occurrence, and level of
control) to determine a level of exposure; it is then examined in
detail with reference to the risk control system and ongoing action
plans.
Risk maps are updated on an annual basis. The conclusions of the
latest update were presented to the Audit Committee meeting on
November 18, 2008, attended by the Chairman and Chief Executive
and the Financial Control Director. A two-year audit plan was drawn
up on the basis of these findings, with a focus on the most acute
risk areas.
Activities
Control activities are the policies and procedures that help ensure
Management directives are carried out. They occur throughout the
organization, at all levels and in all functions.
PAGE 193
5
The Group’s Administrative and Financial Manual serves as the
standard for Valeo’s financial and management operations. Used
on a daily basis by all operational staff, the Manual comprises two
parts:
■
part one concerns the rules governing management and internal
control;
■
part two determines how the main items of the balance sheet and
statement of income should be measured and presented.
Every year, the Director and Financial Controller of each Product
Family and each Division sign a letter of representation in which they
undertake to ensure compliance with the financial, internal control
and management rules contained in the Manual.
In addition to the Administrative and Financial Manuel, the functional
Departments have drawn up special rules and procedures that are
consistent with financial and management standards:
■
the Constant Innovation Charter, which provides a strict definition of
the management principles applicable to development projects;
■
marketing procedures and sales practices;
■
human resources procedures;
■
purchasing procedures, aimed at reducing the number of listed
suppliers in order to facilitate quality control;
■
the Risk Management Manual and implementation guides in
relation to security, safety and the environment, together with the
Insurance Manual. Valeo has undertaken to comply at a minimum
with local regulations concerning safety and the environment and,
in certain cases, with even higher standards;
■
legal procedures that set down the principles with which the Group
must comply. These mainly concern the laws and regulations
applicable in the countries where the Group operates as well
as respecting contractual obligations and protecting the Group’s
intellectual property.
The information on these rules and procedures is accessible on the
Group’s intranet by the staff concerned.
In terms of quality, Valeo has set its own standards – Valeo 1000 and
Valeo 5000. In addition, the QRQC (Quick Response Quality Control)
method ensures the prompt implementation of corrective action,
and the Lessons Learned Card (LLC) process enables the Group to
monitor best practices and explore avenues for improvement.
Since September 2000, the Group has organized Valeo Finance
Academy seminars with the aim of developing internal control and
financial management skills. By combining modules (on accounting,
cash flow, management control and internal control) with case
studies and simulations, these yearly training sessions help the
Group’s younger financial managers to get better acquainted with
the methods and tools used in financial control.
PAGE 194
Information and communication
Pertinent information must be identified, captured and communicated
in a form and time frame that enable all of the Group’s people to
carry out their responsibilities and perform the controls required
of them. The information delivered by the management system
is analyzed and disseminated every month to operational staff,
and a monthly summary is presented to the Group Management
Committee.
Group Financial Control is responsible for preparing the financial
statements of the Company and the Group, and reports to the
Chairman and Chief Executive. The budget and monthly reporting
procedure is a critical tool for Valeo in managing its operations. Any
variances can be identified, analyzed and dealt with during the
year, thereby increasing the reliability of the account closing process
for interim and annual financial statements. The same information
system is used for the consolidation and reporting processes, thus
ensuring that the Group has constant control over the preparation
and processing of financial information. The Group has put in place
an integrated business software application, which is being rolled
out to all of its operating units. As well as providing a structured
framework, this application makes it possible to determine
user profiles and monitor access controls, enabling the Group to
comply with regulations concerning the separation of tasks (see
Section 5.A.6.4).
Organizing and monitoring the internal control system
The internal control system is supervised jointly by the Audit
Committee, General Management, the Technical Department, the
Financial Control Department, and the Risk Insurance Environment
Department, as well as the individual Product Families for the
management of issues within their responsibility.
The internal control system is audited by the Valeo Internal Audit
Department, whose task is to carry out assignments within the Group
to ensure that the procedures set up function properly. Based on
observations made during these assignments, recommendations are
put forward to the audited operating units, which are subsequently
required to implement appropriate action plans. The Internal Audit
team is also called upon at regular intervals to carry out audits
of performance indicators, and to coordinate the updates to the
Group’s financial and management procedures. The Internal Audit
Department’s work and findings are presented each year to the
Audit Committee, in accordance with that committee’s Internal
Procedures.
In 2008 the Internal Audit Department performed assignments
relating among other things to tooling, inventory reliability and
return on investment for customer projects; it also reviewed the
internal control processes of the Valeo Internal Bank.
The application of Valeo’s quality standards is regularly checked
via VAQ (Valeo Audit Qualité) audits, and the environmental and
safety aspects are overseen by the Risk Insurance Environment
Department. Valeo has launched a certification program for its
manufacturing sites in accordance with the ISO 14001 standard
relating to environmental management and the OHSAS 18001
standard concerning occupational health and safety. At December 31,
2008 these two standards had been awarded to 108 and 94 sites
respectively, out of a total of 121 sites.
In addition, teams from the Information Systems Department audit
the proper use of the integrated business software application, with
special emphasis of security, data processing and implementation
of the Group’s control tools.
5.A.6.4. Description of the internal control and
risk management analysis process
The Group has put in place a specific project designed to improve
internal control in relation to the reliability of financial reporting. As a
result, Valeo now has reliable information for monitoring, measuring
and assessing the relevance and correct implementation of existing
internal control procedures in relation to the reliability of financial
reporting by all of its operational Divisions.
The approach is based on the following principles:
1) Each operating unit carries out a self-assessment using a
questionnaire that focuses on seven processes:
■
sales, receivables management and payments received;
■
procurement, payables management and payments made;
■
monitoring of assets;
■
monitoring of inventory;
■
payroll and human resources;
■
cash flow;
■
accounts closing policies.
In addition to the standard self-assessment questionnaire, which
comprises 131 key control points, specific controls have been
established and deployed for Valeo Service in order to take
into account the risks related to the distribution of universal
aftermarket parts. For smaller start-up units, the Group also
produced a simplified self-assessment questionnaire comprising
68 key control points relating to the seven processes above.
5
Rules relating to documentation and testing – particularly regarding
the size of the sample used – have been defined to ensure
uniformity between the sites. A special database of internal control
best practices has been posted on the Group’s intranet. In addition,
Valeo leverages a tool for reporting the findings of its internal
control self-assessment procedures to centralize documentation
relating to the controls and tests. This tool is also used for realtime monitoring of action plans implemented to improve internal
control. The Group’s Internal Audit team supervises the tool,
training and monitoring personnel who use it and controlling
the self-assessment process. The results of the self-assessment
campaign are submitted to the Audit Committee and the financial
control departments of the Product Families.
2) Valeo has set up a procedure aimed at reviewing user profiles
and access controls for the integrated business software package
deployed at all of the Group’s main sites. The underlying aim of this
process is to establish consistent internal control practices across
all operating units. Using matrices that show incompatibilities
for each of the processes, optimized standard user profiles have
been identified. Whenever the software is deployed for the
first time, the Internal Audit team provides manuals and tracks
incompatibility matrices, in liaison with each Division.
The Group also carried out a centralized review of the automatic
and manual controls in the integrated business software package,
as well as of the security of its information systems. To supplement
this effort, a review was conducted within each operating unit that
included an analysis of how the centrally defined key controls are
applied at a local level and a verification of the manual controls
performed by local users.
Internal Audit carries out a half-yearly review of access to the
integrated business application at all operating units. Access to
the system and to sensitive transactions, key users who provide
first-level support to other users, analysis of incompatibilities and
action plans implemented to eliminate them are the main areas
of focus in these reviews.
Central functions have been included in the scope of the Valeo
internal control project. As a result, detailed documentation has
been drawn up for the internal control system of the Valeo Internal
Bank and the consolidation process, with details of procedures,
key controls, and roles and responsibilities in the main subprocesses.
PAGE 195
5
5.A.6.5. Procedures for preparing and
processing financial and accounting
information for the financial
statements of the Company
and the Group
■
the Management Control Department measures the economic
performance of the Group, analyzes the relevance of reported
information, and prepares a summary of management indicators
for General Management. It analyzes include a summary of sales,
orders, gross margin, and operating margin by Division;
■
the Taxation Department coordinates the Group’s tax policy and
advises the operational Divisions, National Directorates and,
where necessary, Product Families on all issues relating to tax
law and also on the implementation of the tax consolidation
system in France.
The Financial Control Department is in charge of the internal control
procedures pertaining to the reparation and processing of financial
information. Production and analysis of this information is handled
as follows:
■
■
the Group Accounting Department prepares and disseminates
the accounting procedures used by the Group, making sure they
are consistent with prevailing accounting standards. Working
with the financial control departments of the operating units, the
Accounting Department regularly monitors the Group’s operations
and the accounting policies used to record them;
the Consolidation Department is responsible for preparing
quarterly disclosures and half-yearly and annual consolidated
financial statements under IFRS. All Group Divisions send out
detailed information that includes an income statement, business
analysis, summary balance sheet, cash flow statement, and
analytical statements. Each half-yearly report is reviewed in-depth
in accordance with detailed period-end closing instructions, which
include the close schedule, changes in the scope of consolidation,
classification of and movements in the main balance sheet items,
the process for reconciling inter-company transactions within the
Group, and the supervision of off-balance sheet commitments
(the Divisions are required to give an exhaustive list of their
commitments and to monitor them);
5.A.6.6. Outlook
The Group will pursue ongoing efforts to improve its internal control
procedures, with the aim of constantly adapting its management and
control tools in line with changes in its structure and objectives.
In 2009 the following initiatives will be taken:
■
finalizing access controls and user profiles for the integrated
business software application at Valeo Service facilities, a program
launched in 2007;
■
launching the campaign for self-assessing internal control
procedures at the Group’s holding companies;
■
setting up a risk committee charged with properly identifying and
controlling risks, and assessing the quality of risk management
procedures.
These efforts are wholly supported by the Group’s General
Management team.
Thierry Morin
Chairman of the Board of Directors
PAGE 196
Report of the statutory auditors of the report of the Board of Directors of Valeo
5
5.B. Statutory Auditors’ report, prepared in accordance
with Article L.225-235 of the French Commercial
Code (Code de commerce), on the report prepared
by the Chairman of the Board of Directors
of the Company Valeo
This is a free translation into English of a report issued in French and is provided solely for the convenience of English-speaking readers.
This report should be read in conjunction and construed in accordance with French law and the relevant professional auditing standards
applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of Valeo, and in accordance with Article L.225-235 of the French Commercial Code (Code de commerce), we
hereby report to you on the report prepared by the Chairman of your company in accordance with Article L.225-37 of the French Commercial
Code for the year ended December 31, 2008.
It is the Chairman’s responsibility to prepare, and submit to the Board of Directors for approval, a report on the internal control and risk
management procedures implemented by the company and containing the other disclosures required by Article L.225-37 particularly in terms
of the corporate governance measures.
It is our responsibility:
I
to report to you on the information contained in the Chairman’s report in respect of the internal control procedures relating to the preparation
and processing of the accounting and financial information, and
I
to attest that this report contains the other disclosures required by Article L.225-37 of the French Commercial Code (Code de commerce),
it being specified that we are not responsible for verifying the fairness of these disclosures.
We conducted our work in accordance with professional standards applicable in France.
Information on the internal control procedures relating to the preparation and processing of accounting and financial
information
These standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’s report
in respect of the internal control procedures relating to the preparation and processing of the accounting and financial information. These
procedures consisted mainly in :
I
obtaining an understanding of the internal control procedures relating to the preparation and processing of the accounting and financial
information on which the information presented in the Chairman’s report is based and existing documentation ;
I
obtaining an understanding of the work involved in the preparation of this information and existing documentation;
I
determining if any significant weaknesses in the internal control procedures relating to the preparation and processing of the accounting
and financial information that we would have noted in the course of our engagement are properly disclosed in the Chairman’s report.
PAGE 197
5
Report of the statutory auditors of the report of the Board of Directors of Valeo
On the basis of our work, we have nothing to report on the information in respect of the company’s internal control procedures relating to
the preparation and processing of accounting and financial information contained in the report prepared by the Chairman of the Board in
accordance with Article L.225-37 of the French Commercial Code (Code de Commerce).
Other disclosures
We hereby attest that the Chairman’s report includes the other disclosures required by Article L.225-37 of the French Commercial Code (Code
de commerce).
Paris La Défense and Neuilly-sur-Seine, February 13, 2009
The Statutory Auditors
Salustro Reydel
Member of KPMG International
Jean-Pierre Crouzet
PAGE 198
Emmanuel Paret
PricewaterhouseCoopers Audit
Jean-Christophe Georghiou
5
PAGE 199
5
PAGE 200
Information on
the Company and its capital
6.A.
General information about the issuer
202
6.B.
Fees paid by the Group to the Auditors and members
of their networks
211
6.C.
General information on the Company’s capital
212
6.D.
Current ownership structure
218
6.E.
Market for the Company’s securities
223
6.F.
Investor relations
224
6.G.
Information on subsidiaries and affiliates
229
6
PAGE 201
6
Information on the Company and its capital
6.A. General information about the issuer
6.A.1. Legal provisions and company bylaws
6.A.1.1. Corporate name and registered office
6.A.1.5. Corporate purpose
The name of the Company is Valeo. Its registered office is at
43, rue Bayen, 75017 Paris, France. (tel.: +33 (0) 1 40 55 20 20).
The Company’s corporate purpose is as follows (Article 3 of the
bylaws):
■
the research and development, manufacture, sale, trading or
supply of any products, equipment or services for industry and
business purposes which may be manufactured, finished or
developed by the Company or other Valeo Group companies or
which may interest their customers;
■
operations of any nature – including industrial, commercial,
financial and investing activities, or acquisitions and divestments
– which are directly or indirectly related to the corporate purpose
or designed to facilitate the development or realization thereof.
6.A.1.2. Legal form and governing law –
Corporate governance
Valeo is a joint-stock company (“société anonyme”) with a Board
of Directors. It is governed by French law, notably the French
Commercial Code.
6.A.1.3. Corporate governance
With a view to increasing the transparency of information disclosed
to the public, the Company has set up a number of procedures to
ensure that it complies with best corporate governance practices.
Further information is provided in Chapter 6 in the report of the
Chairman of the Board of Directors on internal control procedures
and the conditions for preparing and organizing the work conducted
by the Board.
6.A.1.4. Date of incorporation and term
The Company was incorporated on February 10, 1923 and its term
was extended for a further 99 years on February 10, 1972.
6.A.1.6. Registration particulars
The Company is registered at the Paris Companies Registry under
the number 552 030 967 RCS Paris.
6.A.1.7. Fiscal year
The Company’s fiscal year covers a twelve-month period from
January 1 to December 31.
6.A.1.8. Consultation of documents
The Company’s press releases and annual reference documents
filed with the French securities regulator, Autorité des Marchés
Financiers (AMF) (including historical financial information relating
to the Company and the Group), as well as any updates thereto can
be accessed on the Company’s website at www.valeo.com. Copies
are also available on request from the Company’s head office.
PAGE 202
In accordance with Article 221-3 of the AMF General Regulation, the
regulated information defined in Article 221-1 of said Regulations is
posted on the Company’s website and remains on line for at least
five years after the related documents are issued.
■
As recommended by the AMF in its report on corporate governance
and internal control issued on November 27, 2008, the Board of
Directors’ Internal Procedures are also posted on the Company’s
website. The bylaws, minutes of General Shareholders’ Meetings,
Statutory Auditors’ reports and all other corporate documents can
be consulted at Valeo’s head office in accordance with the law and
the Company’s bylaws.
• First and current term of office began on April 5, 2004 and
expires at the close of the General Shareholders’ Meeting to
be held to approve the financial statements for the year ending
December 31, 2009.
6.A.1.9. Auditors
Statutory auditors
■
PricewaterhouseCoopers Audit, represented by Jean-Christophe
Georghiou – 63, rue de Villiers 92200 Neuilly-sur-Seine, France.
• Member of the Compagnie régionale des Commissaires aux
comptes de Versailles,
• First appointed on March 31, 2003,
• Current term of office began on April 5, 2004 and expires at
the close of the General Shareholders’ Meeting to be held
to approve the financial statements for the year ending
December 31, 2009;
Philippe Arnaud – 198, boulevard Malesherbes - 75017 Paris,
France;
comptes de Paris,
6.A.1.10. Dividends
Each share entitles its holder to a proportion of income equal to the
proportion of capital represented by the share.
Distributable income is composed of net income for the year less
any prior year losses and amounts appropriated to the legal reserve,
plus any income carried forward. Subject to the provisions of the
law, shareholders in a General Meeting may decide to distribute
amounts taken from available reserves and/or retained earnings.
In this case, the related resolution approved by the shareholders
must clearly specify the reserve account from which the distributed
amounts are to be taken.
Shareholders may resolve to pay out a dividend only after approving
the financial statements for the year and noting that amounts are
available for distribution. Shareholders or the Board of Directors set
the applicable conditions for any dividend payments.
Salustro Reydel, Member of KPMG International, represented by
Jean-Pierre Crouzet and Emmanuel Paret – Immeuble Le Palatin,
3, cours du Triangle, 92939 Paris La Défense Cedex, France;
The Board of Directors may decide to pay an interim dividend before
the financial statements are approved, subject to the conditions set
down by law.
At the General Meeting called to approve the financial statements,
shareholders may decide to offer a stock dividend alternative
representing all or part of the dividend, or interim dividend, as
provided for by law.
■
• First appointed on May 27, 1998,
• Current term of office began on April 5, 2004 and expires at the
close of the General Shareholders’ Meeting to be held to approve
the financial statements for the year ending December 31,
2009.
Alternate statutory auditors
■
Yves Nicolas – 63, rue de Villiers – 92200 Neuilly-sur-Seine,
France;
6
Dividends unclaimed after a period of five years from the date they
were made payable are paid to the French government.
6.A.1.11. Liquidation surpluses
Liquidation surpluses are allocated between the shareholders in
proportion to their interests in the Company’s capital.
• First and current term of office began on April 5, 2004 and
expires at the close of the General Shareholders’ Meeting to
be held to approve the financial statements for the year ending
December 31, 2009;
PAGE 203
6
6.A.1.12. General Shareholders’ Meetings
6.A.1.13. Double voting rights
Ordinary and Extraordinary Shareholders’ Meetings are called and
conduct business in accordance with the conditions set down
by law.
Each shareholder has a number of votes corresponding to the
number of shares held or represented by proxy.
In accordance with Article R 225-85 of the French Commercial
Code, shareholders may participate in General Meetings subject to
submitting evidence of ownership of their shares. Share ownership
is evidenced by an entry in Valeo’s share register in the name of
the shareholder (or of the intermediary acting on their behalf) or
in the register of bearer shares held by an accredited intermediary.
Such entries must be recorded by 0.00 hours (12:00 am) (CET) on
the third working day preceding the date of the Meeting. In the
case of bearer shares, the accredited intermediary shall provide a
participation certificate for the shareholders concerned, which must
be attached to the corresponding postal voting or proxy form or
to the admission card made out in the name of the shareholder
or in the name of the registered intermediary representing the
shareholder.
Subject to the above-mentioned conditions, all shareholders are
entitled to attend General Meetings provided they have settled all
capital calls related to their shares.
Shareholders who are unable to attend a meeting in person may
give proxy to their spouse or another shareholder or may cast a
postal vote. Alternatively, they may return the signed form of proxy
to the Company without naming a person to represent them, in
accordance with the applicable laws and regulations.
In compliance with the conditions set down by the applicable laws
and regulations, shareholders may send proxy and postal voting
forms for General Meetings either in paper format or, if authorized by
the Board of Directors in the notice of meeting, in electronic form.
Minutes of Shareholders’ Meetings are drawn up, and copies and
extracts thereof are certified and delivered, in accordance with
the law.
PAGE 204
However, since the General Shareholders’ Meeting of June 16, 1992,
Article 23 of the Company’s bylaws provides that double voting rights
are attached to all fully-paid shares that have been registered in
the name of the same holder for at least four years. In the case of
a capital increase paid up by capitalizing reserves, income or share
premiums, the new registered shares allocated to a shareholder in
respect of existing shares with double voting rights will also carry
double voting rights from the date of issue. Double voting rights are
automatically stripped from any registered shares that are converted
into bearer shares or transferred. However, registered shares are
not stripped of voting rights and the above four-year qualifying
period continues to run following the transfer of shares included
in the estate of a deceased shareholder, or in connection with the
settlement of the marital estate, or an inter vivos gift to a spouse
or relative in the direct line of succession. Double voting rights may
be removed at an Extraordinary Shareholders’ Meeting, subject to
the approval of shareholders entitled to double voting rights, at a
special meeting held for that purpose.
6.A.1.14. Changes in share capital and rights
attached to shares
Any changes in the Company’s share capital or voting rights attached
to shares are subject to the applicable law as the bylaws do not
contain any specific provisions in relation to such operations.
6
6.A.2. Corporate governance structure
6.A.2.1. Executive Management
France Curis
Taxation Director
The Group’s Executive Management team includes the Chairman
and Chief Executive Officer, and Valeo’s Functional and Operational
Directors.
Chairman and Chief Executive Officer: Thierry Morin
Thierry Morin’s current term of office began on May 21, 2007 and
expires at the General Shareholders’ Meeting to be called to approve
the financial statements for the year ending December 31, 2010.
Jean-Luc di Paola-Galloni
Chairman’s Delegate
Thierry Dreux
Vice-President, International Development
André Gold
Technical Senior Vice-President
At its meeting of May 21, 2007 Valeo’s Board of Directors elected to
combine the roles of Chairman of the Board of Directors and Chief
Executive Officer, thus maintaining the corporate procedures adopted
by the Board of Directors on March 31, 2003. On March 31, 2003,
the Board of Directors modified the corporate administration and
management structure and appointed Thierry Morin as Chairman
of the Board of Directors.
Martin Haub
In his capacity as Chairman and Chief Executive Officer, Thierry Morin
has the broadest ranging powers to act in any circumstances in the
Company’s name. He exercises these powers within the limits of
the Company’s corporate purpose and subject to the powers that
the law specifically grants to General Shareholders’ Meetings or to
the Board of Directors. The Chairman and Chief Executive Officer
represents the Company in its relations with third parties.
Vincent Marcel
In compliance with internal regulations, the prior approval of the
Board of Directors must be obtained for the acquisition or sale of
any subsidiary, holding, or any other asset or investment, for a sum
of more than 50 million euros.
Vice-President, Research & Development and Product Marketing
Hans-Peter Kunze
Senior Vice-President, Sales and Business Development
Géric Lebedoff
General Counsel
Vice-President, Financial Affairs and Strategic Operations
Kate Philipps
Communications Director
Quentin Testa
Quality Director
Operational Directors
Luc Blériot
Chief Operating Officer
Functional Directors
Michel Boulain
Vice-President, Human Resources
Robert Charvier
Financial Control Director
Bernard Clapaud
Vice-President, Strategy
Antoine Doutriaux
Vice-President, Wiper Systems
Thierry Kalanquin
Vice-President, Lighting Systems
Claude Leïchlé
Vice-President, Engine and Electrical Systems
Alain Marmugi
Vice-President, Climate Control
PAGE 205
6
Maurizio Martinelli
Vice-President, Engine Cooling
Christophe Périllat-Piratoine
Vice-President, Interior Controls
Jacques Schaffnit
Vice-President, Security Systems
Michael Schwenzer
Vice-President, Transmissions
Michel Serre
Vice-President, Compressors
Robert de La Serve
Senior Vice-President, Valeo Service Activity
Eric Schuler
Vice-President, Independent Aftermarket Branch of Valeo Service
Dirk Strothmann
Vice-President, Original Equipment Spares Branch of Valeo Service
6.A.2.2. Board of Directors
6.A.2.2.1. Composition of the Board of Directors
The table in Chapter 3, section 3.0 lists the names of the members
of Valeo’s Board of Directors, together with their age, the date on
which they were first appointed, and the start and end dates of their
current terms of office. Information is also provided on the main
positions that they hold outside the Company and other directorships
and positions that they have held in any company during the past
five years. This information is given in principle for the date of
December 31, 2008, but any changes that took place between
December 31, 2008 and February 27, 2009 are also specified.
The members of the Board of Directors are as follows:
Thierry Morin joined the Valeo Group in 1989 as Finance Director
of the Clutches Branch. He then became Finance Director of the
Engine Cooling Branch and subsequently Group Financial Controller.
In 1997, he was appointed Group Vice-President Financial and
Strategic Operations. On June 5, 2000 he was appointed Senior VicePresident in charge of Finance, Strategic Operations and Information
Systems and became a member of the Management Committee. He
was named Chairman of the Board of Directors on March 21, 2001,
Chairman of the Management Board on May 9, 2001 and on
March 31, 2003 was appointed as Valeo’s Chairman and Chief
Executive Officer. His term of office was renewed for four years on
May 21, 2007.
PAGE 206
Before joining Valeo, Thierry Morin was Deputy Director of the ISD
Division at Thomson Consumer Electronics in Los Angeles. He also held
various financial positions during ten years with Schlumberger.
On March 4, 2008 Thierry Morin was appointed Chairman of the
Board of Directors of the French National Institute for Industrial
Property (INPI).
Thierry Morin has a Masters degree in Management from the
University of Paris-IX Dauphine.
Behdad Alizadeh, President of Pardus Europe S.A.S., was a Partner
at Pardus Capital Management L.P. up to 2008. He is also a member
of the Supervisory Council of Atos Origin and a member of the Board
of Governor’s Committee on Scholastic Achievement.
A US national, he holds an MBA from Columbia Business School
(1988) and a BS in economics from New York University (1984).
Behdad Alizadeh has 20 years of experience in the financial services
industry. Before joining Pardus, he was a managing director in charge
of the Merchant Banking division of the Bank of New York (BNY) from
1998 to early 2007. He was responsible for strategic management of
BNY relations with investment capital companies. Behdad Alizadeh
was partner-manager of BNY Mezzanine Partners L.P., an alternative
investment company set up to invest directly in unlisted companies.
He also managed BNY investments in investment capital companies.
Between 1995 and 1998, Mr Alizadeh was managing director in
charge of private investments with Patricof & Co. Capital Corp.,
a company bought out by BNY in 1998. Before joining Patricof,
he worked for seven years at Bankers Trust Company, where he
specialized in operations involving mergers-acquisitions, investment
capital and advice on restructuring.
Behdad Alizadeh has also been a member of the Board of Directors
of Caliber Collision Centers and Mid West Wholesale Distribution.
Gérard Blanc is a Director of Sogeclair. Earlier in his career he held
the position of Executive Vice President, Programmes at Airbus until
2003 when he was appointed Executive Vice-President, Operations,
a position he held until 2005.
Gérard Blanc graduated from HEC business school in Paris in 1965.
Daniel Camus is Chief Operating Officer in charge of finance and
international development in the EDF group. He joined the EDF
group in 2002 after working in the chemicals and pharmaceuticals
industry for 25 years within the Hoechst-Aventis group in Germany,
the United States, Canada and France.
He is a graduate of the Paris Political Studies Institute (Institut
d’Études Politiques de Paris) and holds a doctorate in Economics.
He is also an Associate Professor in Management Sciences.
Pascal Colombani has been a Senior Advisor at AT Kearney Paris
since 2003 and is in charge of the innovation, high technology and
energy sectors. Between 2000 and 2002 he was Chairman of the
French Atomic Energy Commission (CEA) and since 2004 has been
a member of the Académie des Technologies.
In 1999, he joined Renault as Executive Vice-President, Industry and
Technology and was also a member of the Executive Committee of
the Renault Group and of the Renault/Nissan Alliance Board.
Previously he held a number of different positions including
Chairman and Chief Executive Officer of CEA-Industries, Chairman of
the Supervisory Board of Areva, Chairman of the Board of Directors of
ENS Cachan, Chairman of the Association Française pour l’Avancement
des Sciences, and Senior Advisor with Detroyat & Associés and
Arjil Banque.
Philippe Guédon has been Managing Partner of Espace
Développement since 2003.
Pascal Colombani graduated from École Normale Supérieure at
Saint-Cloud in France and holds a doctorate in science.
Jérôme Contamine joined Veolia in 2000 as Executive Vice-President,
Finance, before becoming Executive Vice-President responsible for
cross-functional activities in 2002 and Senior Executive Vice-President
of Veolia Environnement in 2003 until January 16, 2009. He was
appointed Executive Vice-President and Chief Financial Officer of
Sanofi-Aventis from March 16, 2009.
Between 1988 and 2000, he held several posts within the Elf group
including Financing and Treasury Director (1991 to 1994), Deputy
Director, Europe and the USA for the Exploration and Production
Division, CEO of Elf Norway (1995-1998), and Director of Continental
European and Central Asian Operations for the Exploration and
Production Division (2000).
Jérôme Contamine graduated from École Polytechnique and École
Nationale d’Administration and is a special advisor to the French
Audit Commission (Cour des Comptes).
Pierre-Alain De Smedt is a Sales Engineer and holds a Commercial
and Financial Sciences degree from Université Libre de Bruxelles
in Belgium. He began his career in 1966 in the IT Department of
Solvay before joining Bosch Belgium in 1971 as Financial Director
responsible for Purchasing, Logistics, Organization and IT. He was
appointed to the same position within the Volkswagen group in
1973 and in 1985 was named Chairman of the Board of Directors
of the Volkswagen subsidiary responsible for logistics, purchasing,
organization and IT. In 1988, he became a Director of Tractebel and
Chairman of the Executive Committee of the electricity companies
Ebes, Intercom and Unerg.
In 1991, Pierre-Alain De Smedt was appointed Chairman of
Autolatina – the leading Latin American private company and a
joint venture between Volkswagen and Ford – and in 1997 he was
named Chairman of Seat, a subsidiary of the Volkswagen group.
6
In 2006, he took on the role of Chairman of FEBIAC (the Belgian
Federation of the Car and Two-wheeler Industries).
He joined Simca in 1956 as an After-Sales Service Engineer and
went on to become a Research Engineer until 1965. He then
joined Matra, where he also held the post of Research Engineer,
and subsequently Technical Director until 1983. In that year he was
appointed Chairman and Chief Executive Officer of Matra – a post
he occupied until 2003.
Philippe Guédon was the designer of the Matra 530, the Bagheera,
the Rancho, the Murena, the Espace and the Avantime.
He graduated as an engineer from the Arts et Métiers school in
Angers, France in 1956.
Lord Jay of Ewelme is an independent member of the House of
Lords in the United Kingdom. He is also a non-executive Director
of Associated British Foods (ABF) and Candover Investments Plc,
Chairman of the House of Lords Appointments Commission, Chairman
of the international medical charity Merlin, Vice Chairman of Business
for New Europe and a Director of Crédit Agricole.
Lord Jay was also a member of the European Sub-Committee on
EU law and Institutions and the House of Lords select committee
on international institutions. He is also a member of, GLOBE,
an interparliamentary group on climate change.
Between 2002 and 2006 he held the position of Permanent UnderSecretary at the United Kingdom Foreign Office and in this role was
Head of the Diplomatic Service.
In 2005 and 2006 he served as the UK Prime Minister’s
personal representative at the G8 summits at Gleneagles and
St. Petersburg.
Lord Jay of Ewelme is an Honorary Fellow of Magdalen College,
Oxford.
Helle Kristoffersen has been Senior Vice-President, Vertical Markets,
at Alcatel-Lucent since January 1, 2009. Until December 31, 2008,
she was Vice-President, Corporate Strategy and Secretary of the
Strategy Committee of the Alcatel-Lucent group, previously Alcatel
group, which she joined in 1994 as Head of Financial Operations.
PAGE 207
6
Between 1989 and 1991 she worked as an analyst in the mergers
and acquisitions department at Banque Lazard & Cie before joining
the Bolloré group where she held the following positions: Deputy
Financial Director responsible for mergers and acquisitions, Head of
Operational Strategy for the Maritime Division and Head of Mergers
and Acquisitions reporting to the Chairman and CEO.
Helle Kristoffersen is a graduate of École Normale Supérieure and of
École Nationale de la Statistique et de l’Administration Économique
(ENSAE). She also holds a Masters degree in Econometrics from
Sorbonne University Paris I.
Georges Pauget has spent his entire career with the Crédit Agricole
group where he has held the positions of Chief Executive Officer
and Chairman of the Executive Committee since September 2005.
In September 2008 he became Chairman of the French Banking
Federation (FBF). He is also Chairman of the Board of Directors of
LCL – Le Crédit Lyonnais, Chairman of the Board of Directors and the
Remuneration Committee of Calyon, and permanent representative
of Crédit Lyonnais for the Fondation de France.
Earlier in his career he served as Chairman of the Union des
Assurances Fédérales, TLJ SAS, Uni-Editions (SAS), CEDICAM (GIE),
and SERVICAM (SAS).
He has also held the following other positions: permanent
representative of Crédit Agricole SA on the Supervisory Board of
Fonds de Garantie des Dépôts, Chief Executive Officer of Crédit
Lyonnais, Chairman of the Executive Committee and Chief Operating
Officer of LCL – Le Crédit Lyonnais, and member of the Executive
Committee and Director of the Regional Banks division of Crédit
Agricole SA.
Georges Pauget was awarded a doctorate in Economics from the
University of Bordeaux in 1975 and holds a Masters in Economics
(with an econometrics option) from the University of Lyon.
Erich Spitz joined Compagnie Générale de TSF in 1958 (since
renamed Thomson-CSF). He began his career with the company
as Director of the Central Research Laboratory before becoming
Research and Development Director of the Thomson Group from
1983 to 1994.
Erich Spitz is Advisor to the Thales Group and Director of Thales
Corporate Ventures. He is a member of the Supervisory Board
of Novaled, a member of the Supervisory Board of Riber, a
correspondent member of the Académie des Sciences, and a
member of the Académie des Technologies.
He was Chairman of Thales Avionics Lcd, Chairman of the Supervisory
Board of Riber and member of the Management Board of ERA.
He is Honorary Chairman of the European Industrial Research
Management Association (EIRMA).
Erich Spitz graduated from Prague Polytechnic University and holds
a doctorate in science.
PAGE 208
6.A.2.2.2. Declarations concerning members
of the Board of Directors
To the best of the Company’s knowledge, there are no family ties
between the members of the Board of Directors.
As far as the Company is aware, in the past five years no member of
the Board of Directors has (i) received a conviction for a fraudulent
offence; (ii) been involved in any bankruptcies, receiverships or
liquidations, (iii) been issued any official public incriminations and/or
sanctions by statutory or regulatory authorities (including designated
professional bodies); or (iv) been disqualified by a court of law
from acting as a member of the administrative, management or
supervisory bodies of an issuer or from acting in the management
or conduct of the affairs of any issuer.
As far as the Company is aware, none of the members of the
Board of Directors has agreed to any restrictions concerning
the disposal of their interests in the Company’s share capital
within a certain period of time, other than the restrictions set
down by the applicable laws and regulations or the Company’s
bylaws; the restrictions applicable in the Company’s stock option,
stock grant or employee stock ownership plans, under which
Thierry Morin has acquired shares; and the compulsory holding
period imposed by the Board of Directors in relation to the
shares issued on exercise of options granted to Thierry Morin
since March 7, 2007.
Independently of the agreement (“Agreement”) signed on May 21,
2008 between Valeo, the Pardus Capital Management L.P. fund
(“Pardus”) and Behdad Alizadeh, described in Chapter 3 section 3.J.4
of this reference document, no arrangement or agreement has been
signed with the main shareholders, or with customers or suppliers,
in which one of them is selected to become a director of Valeo or
a member of the management team.
To avoid possible conflicts of interest for Pardus, owing in
particular to its stake in Visteon, Pardus makes a commitment
as part of the agreement not to seek any management positions
or representation in management bodies of any company
with activities similar to or in competition with Valeo, and in
particular in Visteon and Delphi. Further, Pardus has agreed
that its representative on the Board of Directors will not vote
or participate in any deliberations of the company’s Board of
Directors during which relations between Valeo and Visteon are
discussed. Moreover, Pardus will not acquire more than 10%
of the capital or voting rights of any Valeo competitor (without
prejudice to its shareholding in Visteon).
6.A.2.2.3. Conflicts of interest
Some corporate officers hold posts as managers and/or corporate
officers in groups that could sign contracts with Valeo in connection
with commercial and/or financial operations (as financial advisors
and/or underwriters and/or lenders). In so far as these contracts
are negotiated and signed in normal conditions, there is no conflict
of interest, to the best of the Company’s knowledge, between the
duties of these corporate officers to Valeo and their private interests
and/or other duties.
6.A.2.2.4. Service contracts between the
members of the Board of Directors and
the Company or any of its subsidiaries
Independently of the regulated agreements described in Chapter 5,
section 5.A.2.8, no service contracts have been entered into between
the members of the Board of Directors and the Company or any of
its subsidiaries providing for the granting of benefits.
6.A.2.3. Organization and operation
On March 31, 2003 the Company’s Board of Directors adopted a set
of Internal Procedures, which have since been amended. The last
change took place on December 16, 2008.
These Internal Procedures define the Board’s operating methods and
the rules to be followed when appointing Board members. They are
applied alongside the provisions set down by law, the applicable
regulations and the Company’s bylaws.
6.A.2.3.1. Composition of the Board
and appointment of Directors
The Company’s bylaws provide that the Board of Directors must
comprise at least three and no more than eighteen members
(subject to any amendments in line with changes in the applicable
law). The Board of Directors currently has twelve members. There are
no Directors elected by employees or any non-voting Directors.
Directors are appointed by shareholders in a General Meeting on the
recommendation of the Board of Directors, which in turn receives
proposals from the Nomination, Remuneration and Corporate
Governance Committee.
Members of the Board are appointed for renewable four-year terms
which expire at the close of the General Shareholders’ Meeting
called to approve the accounts for the year in which their terms
expire. Where one or more seats on the Board become vacant due
6
to the death or resignation of any member or members, the Board
of Directors may appoint new members on a temporary basis until
the next General Shareholders’ Meeting, in accordance with the
applicable legislation. The term of office of the Chairman may not
exceed his term of office as a Director.
The proportion of Board members over the age of 70 may not
exceed one-third. This age limit applies both to individuals and to
permanent representatives of legal entities holding directorships.
The Chairman’s term of office expires at the latest at the close of
the General Shareholders’ Meeting held to approve the financial
statements for the year in which he reaches his seventieth birthday.
Directors may be removed from office by shareholders in a General
Meeting at any time.
6.A.2.3.2. Roles and responsibilities
The Board of Directors represents all shareholders. It determines
the Company’s overall business strategies and oversees their
implementation. Subject to the powers directly vested in General
Shareholders’ Meetings and within the limits of the corporate
purpose, the Board of Directors deals with any issues relating to
the efficient functioning of the Company and makes any and all
decisions relating thereto. The Board devotes one meeting per year
to reviewing the Group’s overall industrial and financial strategies.
The Chairman convenes meetings of the Board as often as required
in the general interest of the Company and at least six times a
year. The dates for the meetings are issued at the beginning of
each fiscal year at the latest. In 2008, the Board of Directors held
fourteen meetings with a 92% average attendance rate (in person
or by proxy).
Board meetings are chaired by the Chairman of the Board or, in his
absence, by any Director who has been temporarily authorized to
chair Board meetings or a Vice-Chairman.
Board meetings are only validly constituted if at least half of the
members are present or deemed present (in accordance with the
law and the Company’s bylaws), excluding members attending by
proxy. Decisions are taken based on a majority vote of the members
present, deemed present, or represented, in accordance with the
law and the Company’s bylaws. Each member who is present or
represented has one vote and each member present may only
represent one other member. In the case of a split decision, the
Chairman has the casting vote.
Minutes are drawn up after each Board Meeting, which are signed
by the Chairman and one other Director.
PAGE 209
6
In accordance with its Internal Procedures, the Board of Directors
includes an assessment of Board performance on the agenda of
one meeting per year. For 2008, this assessment was performed
with the assistance of an external firm in January 2009. A detailed
questionnaire was sent to all Directors concerning their assessment
of the way in which the Board operates and suggestions for
improvement. The topics covered included the operation and
composition of the Board, Directors’ access to information, the choice
of issues discussed, the quality of the discussions, and the general
running of the Board Committees.
The Directors’ replies were analyzed and the findings presented at
the Board meeting held on February 12, 2009. The results of this
assessment are provided in the report of the Chairman of the Board
of Directors on internal control and risk management procedures and
the conditions for preparing and organizing the work conducted by
the Board, set out in Chapter 5, section 5.A.2.6.
6.A.2.3.3. Directors’ rights and duties – Compensation
The Board’s Internal Procedures impose certain duties on Directors
in order to ensure that they are aware of the rules and regulations
applicable to them, that conflicts of interest are avoided, that they
dedicate the necessary time and attention to their duties and respect
the applicable law relating to multiple directorships.
Members of the Board of Directors are also responsible for ensuring
that they have all the necessary information to carry out their duties.
To this end, the Chairman provides Directors with the data and
documents required in order for them to fully perform their duties.
As compensation for the work carried out by Directors, shareholders
in a General Meeting may grant an annual fixed amount of
attendance fees which may be freely allocated by the Board
among its members. The Board may also grant Directors exceptional
compensation for specific assignments or tasks entrusted to them.
The Board of Directors is responsible for setting the Chairman’s
compensation.
PAGE 210
Article 14 of the Company’s bylaws stipulates that each Director
must hold at least 100 Valeo registered shares throughout his or
her term of office.
On accepting their position, each member of the Board of Directors
and the Group’s Executive Management team agrees to a Code of
Conduct in relation to trading in the Company’s securities. This Code
sets out the legal and regulatory provisions applicable to them in
relation to declaring transactions concerning those securities. It also
specifies the periods during which members of the Board and the
Group’s Executive Management team are prohibited from trading in
the Company’s securities and recalls the fact that they may not carry
out any such transactions based on insider information.
6.A.2.4. Board Committees
The Board of Directors has set up committees in order to enhance its
operation and provide assistance with preparing its decisions.
The Board currently has three standing committees – the Audit
Committee, the Nomination, Remuneration and Corporate
Governance Committee, and the Strategy Committee.
Further details relating to the composition and running of these
standing committees are provided in the report of the Chairman
of the Board of Directors on internal control procedures and the
preparation and organization of the Board’s work in Chapter 5,
section 5.A.2.5.
Fees paid by the Group to the Auditors and members of their networks
6
6.B. Fees paid by the Group to the Auditors
and members of their networks
2008 (In millions of euros)
PricewaterhouseCoopers
%
KPMG
%
Audit
Issuer
0.0
0.0
Consolidated subsidiaries
Statutory audit and contractual audits
4.5
4.5
2.2
2.2
Issuer
0.0
0.3
Audit-related services
0.9
0.9
0.2
0.5
SUB-TOTAL AUDIT
Other services provided by members of the Auditors’
networks to consolidated subsidiaries
5.4
Legal and tax advisory services
0.7
89%
2.7
87%
0.4
Other
0.0
SUB-TOTAL OTHER SERVICES
0.7
11%
0.4
13%
TOTAL
6.1
100%
3.1
100%
PricewaterhouseCoopers
%
KPMG
%
2007 (In millions of euros)
0.0
Audit
Issuer
0.0
0.0
Filiales intégrées
Statutory audit and contractual audits
4.1
4.1
2.3
2.3
Issuer
2.7
0.0
Audit-related services
0.5
3.2
0.4
0.4
SUB-TOTAL AUDIT
Other services provided by members of the Auditors’
networks to consolidated subsidiaries
7.3
Legal and tax advisory services
0.5
0.5
Other
0.0
0.0
SUB-TOTAL OTHER SERVICES
0.5
6%
0.5
15%
TOTAL
7.8
100%
3.2
100%
94%
2.7
85%
PAGE 211
6
6.C. General information on the Company’s capital
6.C.1. Changes in Valeo’s share capital
At December 31, 2008, Valeo’s share capital totaled 234,628,851 euros,
represented by 78,209,617 common shares with a par value of
3 euros each, all in the same class and all fully paid-up. The Valeo
share is quoted on the Euronext Paris.
To the best of the Company’s knowledge, none of these shares
have been pledged.
Changes in the Company’s capital since December 31, 2004 are as follows:
Changes
(millions of euros)
Par value
Premium
Total
Number of
shares
Total number
of shares
Employee share issue
5
28
33
1,575,296
83,709,024
Issuance of shares on exercise of stock
options
Capital reduction further to public
tender offers
options
options
-
-
1
1
51,333
(19)
(233)
(252)
(6,250,000)
77,510,357
-
2
2
70,260
77,580,617
2
15
17
629,000
78,209,617
-
-
-
-
78,209,617
Year
Type of operation
2004
2005
2006
2007
2008
In 2004, Valeo set up an international employee stock ownership
plan entitled “Valeorizon 2004” and carried out an employee share
issue under an authorization given at the General Shareholders’
Meeting of April 5, 2004. The issue was described in an information
memorandum registered with the French securities regulator
(Autorité des marchés financiers – AMF) on August 27, 2004 under
number 04-738. As a result of this operation, on December 16, 2004,
Valeo placed on record a capital increase through the issue of
1,575,296 new shares, including 400,653 subscribed by Société
Générale in order to offer employees of subsidiaries in certain
countries outside France a leveraged formula equivalent to that
offered through a corporate mutual fund. The shares were issued
without pre-emptive subscription rights for existing shareholders,
at a price of 23.65 euros per share, representing a 20% discount
PAGE 212
to the average of the opening prices quoted for Valeo shares over
the twenty trading days preceding the Board of Directors’ decision
setting the opening date of the offer period.
During 2005, Valeo bought back 6,250,000 shares from the
Company’s shareholders, at a price of 40 euros each, representing
approximately 7.5% of the Company’s capital. The shares were
purchased under a public share buyback offer and a simplified
public tender offer, described in an information memorandum
registered with the AMF on April 28, 2005 under number 05-323.
The offer period ended on June 3, 2005 and on June 20, 2005
the Board of Directors canceled the acquired shares and reduced
the Company’s capital by 18,750,000 euros, representing the par
value of the shares.
6
6.C.2. Authorized, unissued capital
Authorizations granted
1. Authorizations to increase capital with pre-emptive rights
Issuance of shares and/or share equivalents (A)
AGM of May 21, 2007 – 18th resolution (authorization given for a
maximum of 26 months, expiring on July 21, 2009)
Capital increase paid-up by capitalizing income, retained earnings
or additional paid-in capital (B)
AGM of May 21, 2007 – 21st resolution (authorization given for a
2. Authorizations to increase capital without pre-emptive rights
Issuance of shares to members of the employee stock ownership
plan (C)
AGM of May 21, 2007 – 23rd resolution (authorization given for a
Maximum amount
of issue
Utilization of authorizations
during the year
69.8 million euros
(A)+(B)+(C) ceiling
= 180 million euros
None
69.8 million euros
(A)+(B)+(C) ceiling
= 180 million euros
None
2.1 million euros
(A)+(B)+(C) ceiling
= 180 million euro
None
6.C.3. Other securities giving access to the capital
6.C.3.1. Bonds convertible into new shares
and/or exchangeable for existing
shares (OCEANE)
Under the terms of the authorization granted by the General
Shareholders’ Meeting of June 10, 2002 (and confirmed on March 31,
2003 when the Company’s management structure was changed),
on July 25, 2003 Valeo issued 9,975,754 bonds convertible into new
shares and/or exchangeable for existing shares (OCEANEs) with
a nominal value of 46.40 euros each, representing an aggregate
nominal value of 462,874,985.60 euros.
These bonds – which mature on January 1, 2011 – are quoted on the
Euronext Paris. They bear interest at 2.375% per annum and since
August 4, 2003 may be exercised at any time. The bond issue is
described in detail in the prospectus registered with the Commission
des Opérations de Bourse on July 25, 2003 under number 03-707.
On June 20, 2005, the Board of Directors adjusted the exercise
conditions of the OCEANE bonds following the public share buyback
offer and simplified public tender offer carried out in May and
June 2005, which resulted in Valeo purchasing its own shares at
an amount higher than the publicly quoted price. This adjustment
was made in order to maintain the rights of the bondholders in
accordance with Article R. 228-90 of the French Commercial Code
and with the OCEANE bond issue contract. Consequently, the
conversion/exchange ratio applicable to the OCEANE bonds was
amended from 1 share for 1 bond to 1.013 share for 1 bond.
At February 13, 2009, all of the OCEANE bonds were outstanding
and were convertible and/or exchangeable for 10,105,439 shares,
taking into account the adjustment due to the public share buyback
offer and simplified public tender offer.
6.C.3.2. Stock option plans and allotment of
bonus shares
The policy governing the allocation of stock options, and the policy
on the allotment of bonus shares, are described in Chapter 5,
section 5.A.2.12.
The table below presents the stock option plans set up since 2000.
In accordance with Article R 225-138 of the French Commercial Code,
following the public share buyback offer and simplified public tender
offer, on June 20, 2005 the Board of Directors adjusted the number
of shares underlying the Company’s stock options. As a result, the
exercise ratio was raised from 1 share to 1.01 shares for 1 stock
option, with the number of shares to be allocated on the exercise
of options rounded up to the nearest whole number.
At December 31, 2008, 4,150,417 stock purchase options were
outstanding, exercisable for 4,155,035 existing shares (including
4,618 related to the public share buyback offer and simplified public
tender offer). In addition, 2,326,547 stock subscription options were
outstanding, exercisable for 2,350,328 new shares (including 23,781
related to the public share buyback offer and simplified public
tender offer).
PAGE 213
6
Options to subscribe for shares plans in force at December 31, 2008
Shareholders’ Meetings
Date of
Shareholders’ No. of
Meeting
options
Term
Plan characteristics
Date (1)
05/27/1998
500,000
6 years
05/25/1999
500,000
6 years 10/17/2000
05/25/2000
800,000
8 years
05/09/2001 1,000,000
06/10/2002
1,500,000
03/31/2003 1,500,000
04/05/2004 1,500,000
Exercice
No. of
price grantees.
€ 48.00
122,875
0
0
0
500,000
0
0
0
677,125
0
0
210,000
154,000
0
03/21/2001
€ 55.82
2
80,000
80,000
50,000
0
0
0
12/07/2001
€ 42.48
5
600,000
600,000
200,000
0
0
300,000
12/10/2001
€ 42.69
213
442,875
0
0
140,000
118,000
0
8 years 07/01/2002
€ 43.84
699
420,000
0
0
2,500
96,700
0
11/25/2002
€ 28.30
229
600,000
0
0
159,500
107,500
0
03/31/2003
€ 23.51
755
700,000
160,000
100,000
52,750
44,000
0
11/06/2003
€ 32.91
1005
780,000
61,000
61,000
117,766
77,395
0
8 years 11/08/2004
€ 28.46
1094 1,123,200
160,000
160,000
169,600
134,400
0
6,046,075
1,061,000
571,000
852,116
731,995
300,000
8 years
8 years
TOTAL STOCK
SUBSCRIPTION OPTIONS
(1) Date of Directors’/Supervisory Board/Management Board meeting.
(2) Including directors who are not corporate officers.
PAGE 214
1084
Options awarded
o/w granted o/w granted
o/w
o/w granted
to exec.
to exec.
granted
No. of to corporate
mgrs and mgrs excl. to top ten Conditional
options
officers corp. officers corp. officers grantees (2)
options
Exercice date and
conditions
Impact of
tender offers
(56,330 at
June 21, 2005)
8,287
Start of
exercise
period
Options
outstanding
Expiry at Dec. 31,
date
2007
Number of options
Exerciced
Cancelled
Options
Number of
at Dec. 31,
at Dec. 31, outstanding shares to be
Exerciced
2008 Cancelled
2008 at Dec. 31,
subscribed Residual
in 2008 (aggregate)
in 2008 (aggregate)
2008 or purchased grantees
10/16/2006
50 %-2 years ;
100 %-3 years 10/16/2006
0
0
0
0
0
0
0
0
10/16/2008
389,500
0
0
80,800
2
303,000
5
261,454
111
188,163
376
112,069
45
230,690
224
417,942
479
756,210
711
0
0
3,913
800
100 %
immediately 03/20/2009
3,000
50 %
immediately ; 12/06/2009
50 % cond.
80,000
0
0
389,500
389,500
0
3,913
3,913
0
0
0
80,000
800
300,000
800
0
0
0
300,000
300,000
3,000
3,000
12,200
184,025
258,850
123
851
2,604
24,500
233,700
186,300
245
861
1,863
3,000
3,455
50 %-2 years ;
100 %-3 years 12/09/2009
2,724
50 %-2 years ;
100 %-3 years 06/30/2010
4,568
50 %-2 years ;
100 %-3 years 11/24/2010
6,022
50 %-2 years ;
100 %-3 years 03/30/2011
271,050
0
0
2,727
210,800
0
0
2,108
7,185
50 %-2 years ;
100 %-3 years 11/05/2011
10,682
50 %-2 years ;
100 %-3 years 11/07/2012
46,723
6
115,710
0
274,790
4,750
214,250
110,960
1,157
0
2,596
48
863
1,109
235,420
0
309,915
7,030
161,695
228,390
2,375
0
2,987
75
735
2,300
436,338
0
91,508
23,011
275,165
413,327
4,877
0
924
262
1,646
4,615
801,760
0
67,200
53,040
307 280
748,720
8,021
0
673
531
2,519
7,490
2,840,578
0
743,413
514,031
2,065,615
2,326,547
28,978
0
7,180
5,197
14,388
23,781
2,350,328
PAGE 215
6
Options to purchase shares plans in force at December 31, 2008
Date of
Shareholders’ No. of
Meeting
options
Term
Date (1)
Exercice
No. of
price grantees.
o/w
granted to
No. of corporate
options
officers
Options awarded
o/w
o/w
granted to granted to
o/w
exec. mgrs exec. mgrs
granted
and corp. excl. corp. to top ten Conditional
officers
officers grantees (2)
options
03/31/2003 1,500,000
8 years 11/06/03
€ 32.91
1005
500,000
39,000
39,000
75,484
49,605
0
04/05/2004 1,500,000
8 years 11/08/04
€ 32.74
1094
280,800
40,000
40,000
42,400
33,600
0
05/04/2005 4,500,000
8 years 11/17/05
€ 32.32
1082
650,000
0
0
94,300
48,900
0
03/03/06
€ 33.75
2
187,000
150,000
150,000
37,000
0
0
11/20/06
€ 32.63
1298 1,309,250
0
0
251,000
175,000
0
03/07/07
€ 36.97
200,000 (i)
200,000 (i)
50,000
0
0
11/15/07
€ 36.82
1330 1,677,000 150,000 (i) (ii) 150,000 (i) (ii)
350,000 (ii)
230,000 (ii)
174,250 (ii)
03/20/08
€ 31.41
2
596
TOTAL STOCK PURCHASE OPTIONS
(1)
(2)
(i)
(ii)
250,000
426,750
0
0
0
78,000
0
5,280,800
579,000
579,000
900,184
615,105
174,250
Date of Directors’/Supervisory Board/Management Board meeting.
Including directors who are not corporate officers.
Stock purchase options subject to the holding period described in Chapter 3, section 3.H.1.5.
Of which conditional (50% for the Chairman and CEO and 25% for other directors) subject to the Group achieving an operating margin equal to at least 3.8% of
operating revenue,with proportional and linear allocation of between 3.8 and 4.1%
Free share grant plans in force at December 31, 2008
Date of
Shareholders’
Meeting
05/03/2005
No. of
options
No. of
actions
o/w granted
to corporate
officers
1082 600,000
0
0
141,450
73,350
300,000
63,000
50,000
50,000
13,000
0
36,500
11/20/2006
116 100,000
0
0
0
18,500
0
03/07/2007
155 100,000
0
0
0
0
0
863,000
50,000
50,000
154 ,50
91,850
336,500
Date (1)
4,500,000 11/17/2005
03/03/2006
TOTAL SHARE GRANTS
No. of
grantees.
2
(1) Date of Directors’/Supervisory Board/Management Board meeting.
(2) Including directors who are not corporate officers.
PAGE 216
Options awarded
o/w granted o/w granted
to exec. mgrs to exec. mgrs o/w granted
and corp.
excl. corp.
to top ten
officers
officers
grantees (2)
Conditional
awards
Exercice date and conditions
Number of options
Impact of
tender offers
Options
Exercided
Cancelled
Options
(56,330 at
outstanding
at Dec. 31,
at Dec. 31, outstanding
June 21,
Start of
Expiry
Dec. 31, Exerciced
2008 Cancelled
2008 at Dec. 31,
2005)
exercise period
date
2007 in 2008 (aggregate) in 2008 (aggregate)
2008
50 %-2 years ;
4,263
11/05/2011
280,460
0
57,694 15,133
176,979
265,327
100 %-3 years
2,787
Number of
shares to be
subscribed or Residual
purchased grantees
268,038
479
190,087
711
2,867
0
590
156
962
2,711
202,140
0
14,075
13,960
78,545
188,180
2,060
0
188
153
692
1,907
11/16/2013
517,695
0
465
51,035
182,875
466,660
466,660
815
03/02/2014
187,000
0
0
0
0
187,000
187,000
2
11/19/2014
1,127,750
0
0 104,750
286,250
1,023,000
1,023,000
972
03/06/2015
250,000
0
0
0
250,000
250,000
2
100 % - 3 years
11/14/2015 1,677,000
0
0 302,750
302,750 1,374,250
1,374,250
1208
100 % - 3 years
03/19/2016
550
50 %-2 years ;
100 %-3 years
50 %-2 years ;
100 %-3 years
50 %-2 years ;
100 %-3 years
50 %-2 years ;
100 %-3 years
50 %-2 years ;
100 %-3 years
11/07/2012
7,050
426,750
0
4,668,795
0
4,927
0
0
0
30,750
30,750
396,000
396,000
72,234 518,378
1,058 ,49
4,150,417
4,155,035
1,654
4,618
778
309
6
Number of shares
Vesting period and
conditions
Vesting period: 2
years 3 months
50% cond (1/2 on
2006 perf; 1/2 on
2007 perf. (*))
Vesting period: 2
years 3 months
50% cond (1/2 on
2006 perf; 1/2 on
2007 perf. (*))
Vesting period:
3 years
Vesting period:
3 years
Remain to be
transferred at
12/31/07
Ownership
transferred
at 2008
Cancelled
in 2008
Cancelled at
Dec. 31, 2008
(aggregate)
o/w ownership
remains to be
transferred at
12/31/08
Number of
shares that
could be
transferred
Residual
grantees
232,135
223,575
8,560
376,425
0
0
0
26,500
26,500
0
36,500
0
0
0
89,000
0
14,250
25,250
74,750
74,750
99
96,250
0
13,500
17,250
82,750
82,750
129
443,885
250,075
36,310
455,425
157,500
157,500
(*) Perf 2006: Group consolidated operating margin before non-recurring expenses as a % of total operating revenues equal to or greater than 4.5%
(*) Perf 2007: Group consolidated operating margin before non-recurring expenses as a % of total operating revenues equal to or greater than 5%
PAGE 217
6
6.C.4. Other securities
The company has had access to a Euro Medium Term Notes (EMTN)
program since October 2002, last renewed in May 2008. Valeo
issued 600 million euros worth of notes under this program on
June 24, 2005. The notes have an eight-year term and bear fixed
interest of 3.75%.
6.D. Current ownership structure and voting rights
6.D.1. Changes in ownership structure since 2006
The following table concerning the Company’s capital and voting
rights was based, concerning the number of shares and voting rights
held, on disclosures made to the Company in accordance with Articles
L. 233-7 and L. 233-12 of the French Commercial Code, as well as
information voluntarily provided by shareholders. The percentage
PAGE 218
of shares and voting rights held by each shareholder is based on
the Company’s capital and on voting rights at December 31 each
year. At December 31, 2008, the Company’s capital was divided
into 78,209,617 shares corresponding to 81,362,035 voting rights,
including 3,142,499 treasury stock shares.
December 31, 2006
Number
Number
of voting
of shares
%
rights*
M&G Investment
1,631,438
Management
Limited
Caisse des dépôts 5,061,559
et consignations**
Morgan Stanley
The Boston
Company Asset
Management, LLC
The Goldman
Sachs Group, Inc.
Brandes
Investment
Partners LP
AQR Capital
Management, LLC
Franklin
Resources, Inc.
Pardus (1)
Employees***
Treasury stock****
4,208,278
4,120,338
%
December 31, 2007
Number
Number
of voting
of shares
%
rights*
%
December 31, 2008
Number
Number
of voting
of shares
%
rights*
%
2.10
1,631,438
2.06
1,631,438
2.09
1,631,438
2.07
1,780,731
2.28
1,780,731 2.19
6.52
7,128,860
9.01
4,681,559
5.99
6,748,860
8.54
4,681,559
5.99
6,748,860 8.29
8,685,926 11.11
8,685,926
11.00
2,949,810
3.77
2,949,810 3.63
5.42
4,208,278
5.32
3,468,372
4.43
3,468,372 4.26
3,572,038
4.57
3,572,038 4.39
1,582,308
2.02
1,582,308 1.94
1,527,313
1.95
1,527,313 1.88
5.31
4,120,338
5.21
3,752,183
4.84
3,752,183
4.74
3,450,000
1,041,149
4.45
1.34
3,450,000
1,041,149
4.36
1.32
686,704
0.89
0
0.00
Autres
53,628,968 69.13
TOTAL
77,580,617
53,777,208 67.98
100 79,109,454
3,572,038
4.57
3,572,038
4.52
4.80
3,752,183
4.75
14,500,000 18.54
962,270 1.23
14,500,000
962,270
18.36
1.22
3,752,183
1.83
0
0.00
38,991,399 49.84
39,130,222
49.54
1,432,804
100 78,209,617
100 78,982,937
6
15,450,000 19.75 15,450,000 18.99
940,328 1.20
940,328 1.16
3,142,499
4.02
3,142,499 3.86
39,114,659 50.02 40,199,776 49.41
100 78,209,617
100
81,362,035
100
(1) As part of a reorganization of its shareholdings, Pardus Special Opportunities Master Fund L.P. has transferred its Valeo shares to its subsidiary Pardus Investments Sàrl
(declaration dated June 30, 2008).
*
Shares registered in the name of the same shareholder for four years carry double voting rights (see section 6.A.1.13 above).
** Caisse des dépôts et consignations interest held in its own account. Caisse des Dépôts et consignations is the only shareholder owning over 5% of the capital to have
double voting rights.
*** For more information on employee share ownership, see Chapter 3, section 3.D.2.3.
**** For more information on treasury stock, see Chapter 3, section 3.D.2.2.
6.D.1.1. Major shareholders
To the best of the Company’s knowledge, the only shareholders
directly or indirectly holding 5% or more of the Company’s capital
or voting rights at December 31, 2008 were Pardus Investments Sàrl
and Caisse des dépôts et consignations.
To the best of the Company’s knowledge, the only shareholders
directly or indirectly holding 2% or more of the Company’s capital
or voting rights at December 31, 2008 were Pardus Investment Sàrl,
Caisse des dépôts et consignations, The Goldman Sachs Group Inc.,
Brandes Investment Partners LP, Morgan Stanley, M&G Investment
Management Limited and AQR Capital Management, LLC.
In a letter dated June 30, 2008 Pardus Special Opportunities Master
Fund L.P. disclosed that its subsidiaries Pardus Sàrl and Pardus
Investments Sàrl had successively raised their ownership interest
to more than 5%, 10% and 15% of the capital and voting rights
on June 25, 2008. As part of this reorganization of Valeo shares by
Pardus, on June 25, 2008, Pardus Special Opportunities Master Fund
L.P. transferred 15,450,000 Company shares to Pardus Sàrl, which
in turn transferred 15,295,500 shares to Pardus Investments Sàrl
on June 25, 2008 and the rest on June 30, 2008. On June 30, 2008,
in a statement of intention drawn up in compliance with Article
L.233-7 VII of the French Commercial Code, Pardus declared that
it was not acting in concert with any third party, that it had no
plans to take control of the Company, and that it did not plan to
raise its stake in the Company by acquiring more shares. Further,
as a representative of Pardus now sits on the Board of Directors,
it declared that it had no plans to request the appointment of another
member of the Board of Directors.
In a letter dated May 21, 2008 Morgan Stanley disclosed that
it had indirectly lowered its interest on May 14, 2008 to below
the thresholds of 10% and 5% of the Company’s capital and
PAGE 219
6
voting rights and that it indirectly held 4.94% of the capital and
4.81% of voting rights. On May 26, 2008 Morgan Stanley disclosed
that it had indirectly raised its interest, on May 19, 2008, to above the
threshold of 5% of the Company’s capital and that it indirectly held
5.09% of the capital and 4.95% of voting rights. On May 30, 2008,
Morgan Stanley disclosed that it had indirectly raised its interest,
on May 19, 2008, to above the threshold of 5% of the Company’s
voting rights and that it indirectly held 5.19% of the capital and
5.04% of voting rights. On June 4, 2008 Morgan Stanley disclosed
that it had indirectly lowered its interest, on June 3, 2008, to below
the threshold of 5% of the Company’s capital and voting rights and
that it indirectly held 4.77% of the capital and 4.64% of the voting
rights. On September 25, 2008 Morgan Stanley disclosed that it had
indirectly raised its interest, on September 18, 2008, to above the
threshold of 5% of the Company’s capital and voting rights and that
it indirectly held 8.40% of the capital and 8.17% of the voting rights.
On October 20, 2008 Morgan Stanley disclosed that it had indirectly
lowered its interest, on October 16, 2008, to below the threshold of
5% of the Company’s capital and voting rights and that it indirectly
held 3.77% of the capital and 3.67% of the voting rights.
the capital and 5.80% of the voting rights. On November 7, 2008,
The Goldman Sachs Group, Inc. Disclosed that on November 6,
2008, on behalf of its subsidiaries, it held 7.07% of the capital and
6.88% of voting rights. The Goldman Sachs Group, Inc. stated that,
at November 6, 2008, it held 10,469 convertible bonds entitling it
upon conversion to 10,605 Company shares. On December 10, 2008,
The Goldman Sachs Group, Inc., acting on behalf of its subsidiaries,
disclosed that it had lowered its interest, on December 5, 2008 to
below the threshold of 5% of the Company’s capital and voting
rights and that it held 4.44% of the capital and 4.31% of the voting
rights.
On March 2, 2009 Morgan Stanley disclosed that it had indirectly
raised its interest, on February 23, 2009, to above 5% of the
Company’s capital and voting rights and that it held 7.69% of the
capital and 7.39% of voting rights. Morgan Stanley also disclosed
that it held 20,000 OCEANE bonds convertible to 20,260 shares.
On February 7, 2008 Franklin Resources, Inc. informed the Company
that, through its affiliates, it had a position equivalent to 3.15%
of the capital and 3.14% of voting rights under management at
March 31, 2008. In a letter dated November 24, 2008, Franklin
Resources, Inc. disclosed that it had lowered its interest to below
the threshold of 2% of the Company’s capital and voting rights and
that it managed 1.95% of the capital and 1.90% of voting rights at
November 19, 2008.
On May 20, 2008, ING Bank NV disclosed that it had raised its
interest, on May 16, 2008 to above the threshold of 5% of the
capital and 6.22% of the voting rights. In a letter dated June 18, 2008
ING Bank NV disclosed that it had lowered its interest, on June 13,
2008, to below the threshold of 5% of the Company’s capital and
voting rights and that it no longer held shares in the Company.
On August 20, 2008, Société Générale disclosed that it had directly
and indirectly raised its interest, on August 15, 2008, to above the
threshold of 5% of the Company’s capital and voting rights and that
it directly and indirectly held 7.82% of the capital and 7.61% of
voting rights. In the same letter, Société Générale disclosed that it
had directly and indirectly lowered its interest, on August 18, 2008,
to below the threshold of 5% of the Company’s capital and voting
rights and that it directly and indirectly held 4.61% of the capital
and 4,48% of voting rights. Société Générale informed the Company
that it held no more than around 1% of the capital and voting rights
In a letter dated November 6, 2008, followed by another letter dated
November 7, The Goldman Sachs Group, Inc., acting on behalf of
its subsidiaries, disclosed for legal compliance purposes that it had
raised its interest, on October 6, 2008, to above the threshold of
5% of the Company’s capital and voting rights that it held 5.93% of
PAGE 220
At the start of 2009, The Goldman Sachs Group, Inc., acting on
behalf of its subsidiaries, disclosed that it had raised its interest, on
February 10, 2009, to above the threshold of 5% of the Company’s
capital and voting rights and that it held 5.53% of the capital and
5.32% of voting rights. On February 19, 2009, The Goldman Sachs
Group, Inc., acting on behalf of its subsidiaries, disclosed that it had
lowered its interest, on February 13, 2009, to below the threshold
of 5% of the Company’s capital and voting rights and that it held
4.93% of the capital and 4.74% of voting rights.
In a letter dated September 5, 2008 AQR Capital Management, LLC,
acting on behalf of its subsidiaries, disclosed that, at September 3,
2008, it held 2.02% of the Company’s capital and 2.02% of voting
rights. On January 22, 2009 AQR Capital Management, LLC disclosed
that it had lowered its interest to below the threshold of 2% of the
capital and 1.98% of voting rights.
On February 25, 2009 Caisse des dépôts et consignations disclosed
that it had raised its interest, on February 20, 2009, through the
Fonds Stratégique d’investissement (FSI) to above the threshold of
10% of voting rights and it held, at this date, 7.88% of the capital
and 10.11% of voting rights. It also declared that, through FSI, it
directly and indirectly held, 8.33% of the capital and 10.55% of
voting rights at February 24, 2009. In the same letter, Caisse des
dépots et consignations stated that it was acting alone, that the
FSI, and consequently the CDC, planned to raise their stake in the
Company in line with opportunities, that they had no intention of
taking control of the Company but that the FSI was considering
requesting the appointment of a representative on the Board of
Directors.
6.D.1.2. Directors’ interests
6.D.1.3. Change in control
As part of the employee share issue carried out in 2004 (see
section 6.C.1. above), Thierry Morin, Chairman and Chief Executive
Officer of Valeo, subscribed to 153,617 units in the Valeorizon mutual
fund, corresponding to 153.62 Company shares, and 921,702 units
in the Valeorizon+ mutual fund, entitling him to 7,373.62 shares
as a result of the applicable leverage effect. Thierry Morin ’s total
investment in these funds came to 25,431.30 euros, representing
23.65 euros per unit.
To the best of the Company’s knowledge, there are no shareholder
pacts or agreements in force that could lead to a change in control
of the Company.
At December 31, 2008, Thierry Morin and other members of
the Board of Directors held less than 1% of Valeo’s capital and
voting rights in a personal capacity. The number of shares held
by each member of the Board of Directors is given in Chapter 3,
section 3.O.
6
6.D.1.4. Capital under option
At the date of this Reference Document, no capital of any member of
the Group was under option or agreed conditionally or unconditionally
to be put under option.
6.D.2. Disclosure thresholds
In accordance with Article L. 233-7 of the French Commercial Code,
any individual or legal entity, acting alone or in concert that holds
a number of shares representing over 5%, 10%, 15%, 20%, 25%,
33.33%, 50%, 66.66%, 90% or 95% of the Company’s capital or
voting rights, is required to disclose to the Company and the AMF by
letter that the related disclosure threshold has been exceeded. Said
disclosure must be made within five trading days from the date when
the threshold is exceeded and must also state the total number of
shares and voting rights held by the shareholder concerned. The AMF
subsequently publishes the disclosures. This disclosure obligation also
applies when an interest in the Company’s capital and/or voting
rights is reduced to below the above-mentioned thresholds.
If any shareholder fails to comply with these disclosure requirements,
the shares in excess of the relevant threshold will be stripped of
voting rights at any and all General Shareholders’ Meetings held
within the two-year period from the date when the omission is
remedied.
Since the General Shareholders’ Meeting of March 31, 2003, Article 9
of the Valeo bylaws states that, in addition to the applicable statutory
disclosure thresholds, any individual or legal entity, acting alone or in
concert, that raises or reduces its interest in the Company’s capital or
voting rights, directly or indirectly, to above or below 2% respectively
(or any multiple thereof), is required to disclose to the Company
by registered letter with return receipt requested that the relevant
disclosure threshold has been crossed. Said disclosure must be made
within 15 days from the date when the threshold is crossed and the
shareholder concerned must state their own identity as well as that
of any parties acting in concert with the shareholder.
In accordance with the seventh paragraph of Article L.228-1 of
the French Commercial Code, this disclosure requirement also
applies to shares held through an intermediary. Non-compliance
with the above obligations is subject to the penalties set out in
Article L. 233-14 of the French Commercial Code, at the request
of one or several shareholders together holding at least 2% of the
Company’s capital or voting rights, as recorded in the minutes of
the General Shareholders’ Meeting.
PAGE 221
6
6.D.3. Shareholder identification
Registered and bearer shares are recorded in shareholders’ accounts
in accordance with applicable laws and regulations.
However, a bank, broker or other intermediary may register on behalf
of shareholders who are domiciled outside France in accordance
with Article 102 of the French Civil Code. This registration may be
made in the form of a joint account or several individual accounts,
each corresponding to one shareholder. Any such intermediary must
inform the Company or the intermediary managing the Company’s
account that it is holding the shares on behalf of another party.
The Company is entitled to identify all holders of shares and other
securities redeemable, exchangeable, convertible or otherwise
exercisable for shares carrying rights to vote at General Shareholders’
Meetings, in accordance with the procedure provided for in Article
L. 228-2 et seq. of the French Commercial Code.
In order to identify holders of bearer shares, in accordance with
the applicable laws and regulations, the Company is entitled to
request, at any time, from the central depository responsible for its
securities issues account, in exchange for a fee, the name – or, in
the case of corporate shareholders, the company name – nationality,
year of birth – or, in the case of corporate shareholders, the year of
incorporation – and address of holders of bearer shares and other
securities redeemable, exchangeable, convertible or otherwise
exercisable for shares carrying rights to vote at General Shareholders’
Meetings, together with details of the number of shares held by each
such shareholder and of any restrictions applicable to the securities
concerned.
Based on the list provided by the above-mentioned organization,
where the Company considers that shares may be held on behalf
of third parties, it may request, in accordance with the same
conditions, either through the organization or directly from the
parties mentioned on the list, the same information concerning the
holders of the shares. If one of the parties mentioned on the list is
PAGE 222
a bank, broker or other intermediary, it must disclose the identity of
the shareholders for whom it is acting. The information is provided
directly to the financial intermediary managing the Company’s share
account, which shall pass on said information either to the Company
or the above-mentioned central depository, as applicable.
For registered shares and other securities redeemable, exchangeable,
convertible or otherwise exercisable for shares, any intermediary
holding the securities on behalf of a third party must disclose the
identity of the person or entity for whom it is acting as well as
the number of shares held by each, upon simple request by the
Company or its representative, which may be made at any time.
The Company may also request from any corporate shareholder
holding over 2.5% of the Company’s capital or voting rights,
information concerning the identity of persons or companies
holding either directly or indirectly over one third of the corporate
shareholder’s capital or voting rights.
If an individual or corporate shareholder is asked to provide
information in accordance with the above conditions and fails to
provide it by the applicable deadline, or provides incomplete or
incorrect information, the shares or other securities redeemable,
exchangeable, convertible or otherwise exercisable for shares
recorded in the shareholder’s account shall be stripped of voting rights
for all General Shareholders’ Meetings held until the identification
request has been fulfilled, and the payment of any corresponding
dividends shall also be deferred until that date.
In addition, if an individual or company registered in the Company’s
shareholders’ account deliberately ignores their obligations, the
Company or one or more shareholders holding at least 5% of the
Company’s capital may apply to the court of the place in which the
Company’s registered office is located to obtain an order to totally
or partially strip the shares concerned of their voting rights and the
corresponding dividend, for a maximum period of five years.
Market for the Company’s securities
6
6.E. Market for the Company’s securities
6.E.1. Share buyback program and cancellation of treasury shares
6.E.1.1. Share buyback program
as well as the program authorized at the General Shareholders’
Meeting of May 21, 2007.
In the fifth resolution of the General Shareholders’ Meeting held
on June 20, 2008, in accordance with Articles L.225-209 et seq. of
the French Commercial Code, the Company’s shareholders granted
the Board of Directors an eighteen-month authorization from the
date of said Meeting to trade in the Company’s shares, including
by delegation. This authorization may be used for the following
purposes: (i) to allocate shares on the exercise of stock options; (ii)
to award shares to employees by way of profit-sharing bonuses and
in connection with company savings plans; (iii) to allocate shares on
redemption, conversion, exercise or exchange of share equivalents;
(iv) to purchase shares with a view to canceling some or all of them;
(v) to allocate shares in exchange for shares in another entity in
connection with acquisitions; (vi) to ensure liquidity in the secondary
market for the Company’s shares in accordance with a liquidity
agreement entered into with an investment services provider;
and (vii) to enable an investment services provider to carry out
share purchases, sales or transfers, including through off-market
transactions.
During the year the Company purchased 1,500,814 shares at an
average price of 21.38 euros and sold 1,469,971 shares at an average
price of 25.62 euros, under the liquidity agreement signed on
April 22, 2004 with an investment services provider which complies
with the Code of Ethics of the French Association of Investment
Companies (AFEI), and acquired 1,928,927 shares at an average price
of 19.74 euros by virtue of partial management of share buyback
agreements signed with an investment services provider in order
to cover stock option programs and other allocations to employees
(for more details, see Chapter 3, section 3.D.2.2).
The number of shares that may be acquired under this authorization
may not represent over 10% of the Company’s capital.
At December 31, 2008 Valeo held 3,142,499 treasury shares,
representing 4.02% of the Company’s capital. At that date each of
the shares had a unit value of 22.95 euros, based on their purchase
price. At December 31, 2007, Valeo held 1,432,804 treasury shares,
representing 1.83% of the Company’s capital.
The number of shares held in treasury at December 31, 2008 broke
down as 2,671,869 to be allocated on the exercise of stock options
and 470,630 to be used in connection with the above-mentioned
liquidity agreement.
The purchase price may not exceed 60 euros per share.
This authorization was given for an eighteen-month period as of the
General Shareholders’ Meeting of June 20, 2007, and superseded
the unused portion of previous authorizations given to the Board of
Directors to carry out share buyback programs.
A description of the 2008 renewal of the Company’s share buyback
program was drawn up in accordance with Articles 241-1 et seq. of
the AMF’s General Regulations and published on Valeo’s website
on May 31, 2008.
6.E.1.2. Cancellation of treasury shares
In the twenty-fourth resolution of the General Shareholders’ Meeting
of May 21, 2007, the Company’s shareholders gave the Board of
Directors a twenty-six month authorization to reduce the Company’s
capital by canceling treasury shares. Under this authorization, the
number of shares cancelled in any given twenty-four month period
may not exceed 10% of the Company’s share capital.
In 2008 Valeo carried out a number of share sale and purchase
transactions under the above mentioned share buyback program,
PAGE 223
6
Investor relations
6.E.2. Dividends
Dividends per share over the past three years were as follows:
Dividend per share
Year
(in euros)
2005
1.10
2006
1.10
2007
1.20
Tax allowance
Total
(in euros)
in article, 158-3-2° of the French General Tax Code
At the General Shareholders’ Meeting to be held to approve the
financial statements for the year, the Board of Directors of Valeo
will not recommend payment of a dividend.
84
85
92
As the dividend payout rate is not fixed, future dividend payments
will depend on the Group’s results as well as the financing required
to drive future growth. The Company cannot guarantee the amount
of dividends to be paid for any particular year.
6.F. Investor relations
Valeo aims to provide a steady flow of exhaustive and detailed
information in real time to its diverse financial community, comprising
6.F.1.
current and prospective private and institutional shareholders, as
well as financial analysts.
Individual shareholder relations
Based on the Company’s estimates, individual shareholders control
approximately 5% of Valeo’s share capital. These shareholders,
who are mostly domiciled in France, have access to the following
communication tools:
■
■
PAGE 224
a toll-free line (0 800 814 045) available to individual shareholders
in France since 1998. In 2008, this service dealt with over
280 calls, mainly relating to Valeo’s share price and the General
Shareholders’ Meeting;
the valeo.com website which is aimed at providing information to
all shareholders. The Investor Relations section of the site provides
real-time stock market and shareholder information, including the
latest share prices, ownership structure, dividends, and documents
relating to General Shareholders’ Meetings. Financial publications
can also be consulted on-line, such as annual and interim reports
and financial presentations, as well as all press releases and
prospectuses. In addition, visitors to the site can submit financial
questions to the Group’s spokesperson;
■
two issues of the shareholders’ newsletter were published in
2008, in April and October;
■
the share registrar service provided by Société Générale since
the end of 2000. This service, used by almost 4,000 shareholders
at December 31, 2008 – mainly individual shareholders –
provides a share information line on 0825 820 000 (available in
France only), for questions concerning dividends, tax issues and
placing orders).
Investor relations
6.F.2.
Institutional shareholder relations
Valeo places great importance on holding frequent meetings with
investors and analysts. These meetings are organized in major
financial centers in Europe, North America and Asia and take various
forms, including one-on-one meetings, group events, conference
calls, themed or general investor conferences, and site visits. In
all, some 250 institutional investors participated in these events,
either individually or in small groups, with one-half meeting Valeo’s
Chairman.
The objective of the Group’s Investor Relations Department is to
serve as an interface between the Group and investors and analysts,
in order to keep them informed of Valeo’s strategy, products, key
events and financial performance.
6.F.3.
6
Contact:
Vincent Marcel
Vice-President, Financial Affairs and Strategic Operations
Valeo
43, rue Bayen
F-75848 Paris Cedex, 17
France
Tel.: +33 (0) 1 40 55 37 71
Fax: +33 (0) 1 40 55 20 40
E-mail: [email protected]
Provisional financial communication calendar:
First-quarter results 2009: April 24, 2009
First-half results 2009: July 30, 2009
Third-quarter results 2009: October 21, 2009
Full-year results 2009: first half of February 2010
Ownership structure
Primarily on the basis of information voluntarily disclosed by some of the Company’s shareholders.
6.F.3.1
Ownership structure
at December 31, 2008
% capital (% voting rights)
6.F.3.2.
Breakdown of the capital
at February 27, 2009
% capital (% voting rights)
PAGE 225
6
Investor relations
6.F.4.
Stock market data
2008
Market capitalization at year-end (in billions of euros)
Number of shares
2007
2006
2005
2004
0.83
2.21
2.45
2.43
2.58
78,209,617
78,209,617
77,580,617
77,510,357
83,709,024
Highest share price (in euros)
28.60
45.89
35.40
38.20
38.35
Lowest share price (in euros)
9.22
27.75
25.00
30.25
27.22
Average share price (in euros)
Share price at year-end (in euros)
6.F.5.
20.93
37.71
30.58
33.79
32.47
10.615
28.20
31.53
31.41
30.80
Per share data
(in euros)
Earnings per share
Dividend
2008
2007
2006
(2.73)
1.06
2.10
0
(2)
1.10(1)
1.20
(1) Eligible for the 40% tax allowance provided for in Article 158-3-2° of the French General Tax Code.
(2) Eligible for the 40% tax allowance provided for in Article, 158-3-2° of the French General Tax Code or, at the choice of the shareholder, subject to the 18% flat-rate
withholding tax provided for in Article 117 quater i.1 of said Code .
PAGE 226
Investor relations
6.F.6.
6
Share performance over 18 months
Price
(in euros)
High
Low
Closing
(average)
Trading volume
(no. of shares)
September 2007
39.21
33.48
36.48
11.361.699
413.16
October 2007
42.19
37.02
39.36
13.127.738
518.77
November 2007
38.30
32.20
34.98
18.407.856
643.61
December 2007
35.34
27.75
30.76
15.868.385
494.75
January 2008
28.60
22.05
25.017
26.052.874
653.20
February 2008
26.59
22.05
24.817
17.375.338
428.37
Date
Trading volume
March 2008
25.64
21.50
23.625
15.142.049
357.96
April 2008
27.35
22.89
24.533
16.999.889
420.03
May 2008
27.75
24.59
26.280
10.304.379
270.73
June 2008
25.94
19.80
22.563
20.541.507
461.60
July 2008
22.64
17.53
20.102
19.758.601
397.65
August 2008
24.97
20.00
23.475
15.411.659
359.98
September 2008
25.44
21.00
23.957
22.081.032
529.85
October 2008
21.19
10.61
14.723
30.551.421
463.76
November 2008
15.02
9.22
11.666
19.437.423
227.67
December 2008
11.71
9.35
10.369
15.807.075
163.43
January 2009
12.25
8.00
9.776
19.039.018
186.53
February 2009
11.08
8.25
9.858
20.205.183
199.91
Source: Euronext Paris.
PAGE 227
6
Investor relations
6.F.7.
Share price from January 1, 2004 through February 13, 2009
6.F.8.
Monthly trading volumes
PAGE 228
6
Information on subsidiaries and affiliates
6.G. Information on subsidiaries and affiliates
The general organization of the Group, from a legal and operational
standpoint, is described in Chapter 2, section 2.B.1.
Following the creation of subsidiaries for industrial activities in
2002, Valeo is now the Group’s holding and treasury management
company. As such, Valeo centralizes the management of market risks
to which its operating subsidiaries are exposed, including changes in
interest rates as well as fluctuations in exchange rates and quoted
commodities prices. Valeo also centralizes the financing requirements
of these subsidiaries and is generally the sole counterparty of
the financial institutions that provide the funding to cover these
requirements. The related assets (cash and marketable securities)
and liabilities (external debt) are included in Valeo’s balance sheet.
Valeo is also responsible for upholding the image of the Valeo brand.
To this end, it has entered into brand licensing agreements with
certain of its operating subsidiaries.
Group-wide control and support functions, encompassing accounting,
legal counsel, information technology, procurement, real-estate
management and supply chain management, are performed
by Valeo Management Services, which bills a fee to the French
subsidiaries. The Group’s operating assets and liabilities are carried
by its subsidiaries, mainly by the industrial and commercial entities
listed in the table on the following pages. The commercial entities
listed in this table are active only on the independent aftermarket, in
the countries where they are present. Sales to vehicle manufacturers
are handled directly by the Divisions concerned. The commercial
activities of the Divisions with a given customer are coordinated
by the networks of the Sales and Business Development Function,
described in Chapter 2, section 2.B.4.5.2. A list of consolidated
companies – including their geographic location – is given in the notes
to the consolidated financial statements, Chapter 4, section 4.F.7.
PAGE 229
6
PAGE 230
6
PAGE 231
6
PAGE 232
Other information
7.A.
Annual information document
234
7.B.
Person responsible for the Reference Document containing
the annual financial report
239
7
PAGE 233
7
Other information
7.A. Annual information document
This annual information document has been prepared in compliance with Article L. 451-1-1 of the French Monetary and Financial Code and
Article 222-7 of the General Regulation of the French securities regulator, Autorité des Marchés Financiers (AMF). This document lists the
information published or made public by Valeo between March 18, 2008 and March 3, 2009.
Annual, interim and quarterly financial information, share buyback programs,
and other information (www.valeo.com)
February 13, 2009
▪ Press release: Alignment of the remuneration of the Chairman & CEO of Valeo with AFEP-MEDEF recommendations
– February 12, 2009 Board of Directors Meeting
▪ 2008 consolidated financial statements
February 13, 2009
▪ Press release: 2008 results
February 5, 2009
▪ Monthly press release containing weekly share buyback statements – January statement
January 7, 2009
▪ Monthly press release containing weekly share buyback statements – December statement
January 2, 2009
▪ Interim statement regarding the liquidity agreement
December 5, 2008
▪ Monthly press release containing weekly share buyback statements – November statement
November 19, 2008
▪ Execution of the agreement for the partial management of the share buyback program
November 7, 2008
▪ Monthly press release containing weekly share buyback statements – October statement
November 6, 2008
▪ Resolution adopted by the Board of Directors following AFEP-MEDEF recommendations on executive remuneration
November 5, 2008
▪ Agreement for partial management of share buyback programs
October 21, 2008
▪ Press release: third quarter 2008 results
October 16, 2008
▪ Execution of the agreement for the partial management of the share buyback program
October 7, 2008
▪ Monthly press release containing weekly share buyback statements – September statement
September 5, 2008
▪ Monthly press release containing weekly share buyback statements – August statement
August 7, 2008
▪ Monthly press release containing weekly share buyback statements – July statement
July 29, 2008
▪ Interim results for the first half 2008
July 7, 2008
▪ Monthly press release containing weekly share buyback statements – June statement
July 1, 2008
▪ Interim statement regarding the liquidity agreement
June 6, 2008
▪ Monthly press release containing weekly share buyback statements – May statement
May 31, 2008
▪ Description of the 2008 share buyback program
May 7, 2008
▪ Monthly press release containing weekly share buyback statements – April statement
April 30, 2008
▪ 2007 reference document
April 30, 2008
▪ 2007 annual financial report
April 30, 2008
▪ 2007 report on internal control and corporate governance
April 30, 2008
▪ Press release on the fees paid to statutory auditors in 2007
April 25, 2008
▪ Press release: first quarter 2008 results
April 5, 2008
▪ Monthly press release containing weekly share buyback statements – March statement
February 13, 2009
PAGE 234
Other information
7
Disclosure thresholds (published on the AMF website at www.amf-france.org)
February 23, 2009
▪ Morgan Stanley reports raising its interest in Valeo’s capital and voting rights to above the 5% disclosure threshold.
February 20, 2009
▪ Caisse des Dépôts et Consignations declared that its interest in Valeo’s capital and voting rights had crossed the
10% disclosure threshold, via the Fonds Stratégique d’Investissement
▪ The Goldman Sachs Group Inc. reports reducing its interest in Valeo’s capital and voting rights to below the 5%
disclosure threshold
▪ The Goldman Sachs Group Inc. reports raising its interest in Valeo’s capital and voting rights to above the 5%
▪ The Goldman Sachs Group Inc. reports reducing its interest in Valeo’s capital and voting rights to below the 5%
▪ The Goldman Sachs Group Inc. reports raising its interest in Valeo’s capital and voting rights to above the 5%
▪ The Goldman Sachs Group Inc. Reports raising its interest in Valeo’s capital and voting rights to below the 5%
▪ Morgan Stanley reports reducing indirectly its interest in Valeo’s capital and voting rights to below the 5%
▪ Morgan Stanley reports raising indirectly its interest in Valeo’s capital and voting rights to above the 5% disclosure
threshold
▪ Société Générale reports raising directly and indirectly its interest in Valeo’s capital and voting rights to above the
5% disclosure threshold
▪ Pardus Investments Sàrl reports raising individually its interest in Valeo’s capital and voting rights to above the 5%,
10% and 15% disclosure thresholds
▪ ING Bank NV reports reducing its interest in Valeo’s capital and voting rights to below the 5% disclosure threshold
February 13, 2009
February 10, 2009
December 11, 2008
November 12, 2008
November 7, 2008
October 20, 2008
September 25, 2008
August 21, 2008
July 1, 2008
June 18, 2008
June 5, 2008
May 30, 2008
May 26, 2008
May 21, 2008
May 20, 2008
threshold
threshold
threshold
▪ Morgan Stanley reports reducing indirectly its interest in Valeo’s capital and voting rights to below the 10% and
5% disclosure thresholds
▪ ING Bank NV reports raising its interest in Valeo’s capital and voting rights to above the 5% disclosure threshold
PAGE 235
7
Other information
Information relating to the company’s total share capital and voting rights
(www.valeo.com)
Information covering the period from March 31, 2008 through February 27, 2009 updated monthly.
Information filed by Valeo with the office of the clerk of the commercial court
in Paris and published in legal gazettes where appropriate
July 28, 2008
▪ Annual company and consolidated financial statements for the year ending December 31, 2007 and related reports.
June 20, 2008
▪ Appointment of a director
▪ - minutes of the Shareholders’ Meeting of June 20, 2008.
▪ Legal notice published in La Loi of July 25, 2008.
February 1, 2008
▪
▪
▪
▪
Increase in capital following the exercise of stock subscription options:
- minutes of the Board of Directors Meeting of January 11, 2008,
- bylaws updated on January 11, 2008.
Legal notice published in La Loi of February 4, 2008.
Information published by Valeo in the Bulletin des annonces légales obligatoires
(BALO) and available on the BALO website (www.journal-officiel.gouv.fr/balo)
September 12, 2008
▪ Sales for the first and second quarters of 2008 and 2007
August 15, 2008
▪ Interim financial statements for the first half 2008
July 21, 2008
▪ Approval of the 2007 accounts by the Shareholders’ Meeting of June 20, 2008
May 30, 2008
▪ Notice of the Shareholders’ Meeting of June 20, 2008
May 14, 2008
▪ Consolidated financial statements for the year ending December 31, 2007
May 2, 2008
▪ Consolidated sales for the first quarter 2008
April 30, 2008
▪ Notice of the Shareholders’ Meeting of June 20, 2008
PAGE 236
Other information
7
Information published by Valeo in financial publications
February 16, 2009
▪ Publication of a press release announcing results for the fourth quarter and the full-year 2008 in Les Echos
October 25, 2008
▪ Publication of a press release announcing results for the first three quarters of 2008 in Investir Hebdo
October 23, 2008
October 22, 2008
▪ Publication of a press release announcing results for the first three quarters of 2008 in Les Echos and Le Figaro
Economie
▪ Online publication of a press release announcing results for the first three quarters of 2008 on www.boursorama.fr
August 2, 2008
▪ Publication of a press release announcing interim results in Investir Hebdo
August 1, 2008
▪ Publication of a press release announcing interim results in La Vie Financière
July 30, 2008
▪ Publication of a press release announcing interim results in Les Echos and Le Figaro Economie
July 29, 2008
▪ Online publication of a press release announcing interim results on www.boursorama.fr
May 3, 2008
▪ Publication of a press release announcing quarterly results in Investir Hebdo
May 2, 2008
▪ Publication of a press release announcing quarterly results in La Vie Financière
April 28, 2008
▪ Publication of a press release announcing quarterly results in Les Échos
▪ Online publication of a press release announcing quarterly results on www.boursorama.fr
Press releases published on the Valeo website (www.valeo.com)
March 2009
March 3, 2009
▪ Valeo equips new BMW 7 Series with its multi-camera system
March 2, 2009
▪ Valeo, the fourth leading patent filer in France
February 2009
February 13, 2009
February 13, 2009
February 13, 2009
▪ Valeo and Michelin announce their collaboration for the development of systems for electric and rechargeable
hybrid vehicles
▪ Valeo’s 2008 results
▪ Alignment of the remuneration of the Chairman & CEO of Valeo with AFEP-MEDEF recommendations –
12 February 2009 Board of Directors Meeting
January 2009
January 12, 2009
▪ Valeo’s Park4U™ automatic parking system makes its debut on the US market
January 12, 2009
▪ Valeo’s new generation LED lighting on the Volvo S60 Concept: optimal lighting for enhanced safety
December 2008
December 17, 2008
▪ Valeo takes into account the AFEP-MEDEF recommendations of 6 October 2008
December 17, 2008
▪ Sharp drop in automobile production leads Valeo to adapt its headcount and revise its 2008 objectives
November 2008
October 2008
October 21, 2008
▪ Third quarter 2008 results
October 2, 2008
▪ Valeo creates a new joint venture in India for the production of lighting systems
October 2, 2008
▪ Additional smart models to be equipped with Valeo’s micro-hybrid system
October 2, 2008
October 2, 2008
▪ Valeo equips the new Mitsubishi Racing Lancer for the 2009 Dakar with a world first: its innovative
UltimateCooling™ system
▪ Valeo’s smart key: keeping in touch with your vehicle
October 2, 2008
▪ “Tame the Dark” using Valeo’s Xenon lighting
PAGE 237
7
Other information
October 2, 2008
▪ A world first: Valeo equips the Volvo XC60 with its MicroOptics™ technology
October 2, 2008
▪ Valeo’s driving assistance systems act as co-pilots for low-speed maneuvers
October 2, 2008
▪ Valeo press release following an article published by Dow Jones on September 30
September 2008
September 19, 2008
▪ Valeo presents Safe4U™, its new front end module with improved pedestrian protection
September 17, 2008
▪ Valeo receives 2008 Automechanika Innovation Award for its StARS micro-hybrid system
September 16, 2008
▪ Valeo at the Paris Motor Show
August 2008
August 29, 2008
▪ Valeo announces a project to transfer production of its Lighting Systems site in Germany to other European sites
July 2008
July 29, 2008
▪ Valeo: First half 2008 results
July 16, 2008
▪ Valeo equips the Mercedes A and B Class with its StARS micro-hybrid system
July 10, 2008
▪ Valeo receives Global Innovation Award from Nissan
July 7, 2008
▪ Valeo to equip more than one million PSA Peugeot Citroën vehicles with its StARS micro-hybrid system
June 2008
June 20, 2008
▪ Valeo: 2008 Combined Annual General Shareholders’ Meeting
June 18, 2008
▪ Valeo’s Low CO2 Motion™ research program receives 61 million euros in funding from OSEO
June 18, 2008
▪ Valeo creates its first joint venture in Russia for the production of climate control systems
June 2, 2008
▪ Valeo strengthens role in Ichikoh at Board and operational levels
May 2008
May 22, 2008
▪ Valeo signs an agreement with Pardus for Board representation
May 5, 2008
▪ Press release: 2007 reference document
April 2008
April 25, 2008
▪ Press release: First quarter 2008 results
April 18, 2008
▪ Valeo Lighting Systems in Spain wins prestigious Prince Felipe Award for Business Competitiveness
April 15, 2008
▪ Valeo Park4U™ System receives 2008 PACE Award: fourth consecutive award for Valeo
April 11, 2008
▪ Valeo Park4U™ system receives Allianz 2008 Genius safety award
April 3, 2008
▪ Valeo announces project to sell heavy duty truck engine cooling business
April 3, 2008
▪ Valeo present at “Planète Durable”, Paris’ first sustainable development trade show
PAGE 238
Other information
Person responsible for the Reference Document containing the annual financial report
7
7.B. Person responsible for the Reference Document
containing the annual financial report
Thierry Morin, Chairman and Chief Executive Officer of Valeo
Declaration by the person responsible for the Reference Document
I hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in the Reference Document
is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import.
I further declare that to the best of my knowledge, the consolidated financial statements have been prepared in accordance with applicable
accounting standards, and that they give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and
the undertakings in the consolidation taken as a whole, and that the Management Report in Chapter 3 of this Reference Document includes
a fair review of the development and performance of the business, profit or loss and financial position of the Company and the undertakings
in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
I obtained a statement from the Statutory Auditors at the end of their engagement affirming that they have read the whole Reference
Document, of which this document is a free translation from the original, and examined the information about the financial position and the
accounts contained therein.
The parent company financial statements for the year ending December 31, 2008, presented in this document, are covered by a report from
the Statutory Auditors (see Chapter 5, section 5.E.)* which contains an observation concerning a change of accounting method. This change
does not have a material impact on the accounts.
Paris, March 17, 2009
Thierry Morin
Chairman and Chief Executive Office
*
This chapter 5, which in the French version of the Reference Document contains the parent company accounts and the Statutory Auditors’ report, has not
been translated into English and therefore does not appear in this version of the Reference Document.
PAGE 239
The printer of this report is environmentally certified by Imprim’vert.
This Reference document is printed on paper which is 100% compliant with PEPC and FSC certification standards,
without use of acid, recyclable, biodegradable, and certified ISO 9001 and 14001.
The English language version of this report is a free translation from the original, which was prepared in French.
All possible care has been taken to ensure that the translation is an accurate presentation of the original. However, in all
matters of interpretation, views or opinions expressed in the original language version of the document in French take
precedence over the translation.
43, rue Bayen - 75848 Paris cedex 17 - France / Tel.: 33 (0)1 40 55 20 20 - Fax: 33 (0)1 40 55 21 71
Valeo French «Société Anonyme» with a capital of 234 628 851 euros - 552 030 967 RCS Paris
valeo.com

2008 Reference Document

Transcription

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