FOLLOWING SEVERAL YEARS OF STEADY growth and expansion of manufacturing operations into new regions of the world, Faurecia SA is scaling back.
In North America, where the French supplier has opened an astounding nine plants since 2006, the change in direction was inevitable as plummeting vehicle sales in the face of recession left the facilities overstaffed.
All nine plants remain open today, but downsizing and temporary shutdowns have resulted in a headcount reduction in North America from 9,000 employees last year to 6,000 this year.
“It's been a terrible crisis, and we took a big hit in the second half of 2008 and the first half of 2009,” Faurecia Chairman and CEO Yann Delabriere tells Ward's.
“We had to rapidly reposition the company. I think we've made a good job of it,” he says. “Our aim is to reduce our breakeven point by 15% worldwide in 2009, and I think we will achieve it. We're reducing our cost base everywhere, not just in the plants.”
Globally, Faurecia has eliminated 13,000 jobs as part of its Challenge 2009 cost-reduction initiative and today employs 58,000 people.
Global sales in the first half for the supplier were €4.4 billion ($6.4 billion), down 30% from like-2008, and the company lost €364 million ($536 million) in the first six months. North American sales were down 50%.
For many years, Faurecia focused on its home market in Europe and kept a relatively small footprint in North America. Over the past decade, it expanded quickly in both emerging markets and mature regions, in response to OEM customer demands for global scale.
The supplier was eager to ramp up production in what was an attractive U.S. market several years ago, and domestic auto makers — particularly then-General Motors Corp. and Chrysler LLC — were glad to source business to a new player.
While entrenched suppliers such as Delphi Corp. and Lear Corp. had too many plants, Faurecia attempted a controlled expansion that allowed just enough capacity in North America to meet the needs of new contracts.
Plants went up in Michigan, Ohio, South Carolina and Mexico just in time for the market to tank.
“Chrysler didn't produce a lot of vehicles this past summer, so we flexed our employee base because of that,” Michael Heneka, president of Faurecia North America, says of the impact on his company of Chrysler's bankruptcy and plant shutdowns this past summer.
Still, Faurecia plants dedicated to Chrysler business remain open, “and we're still working with Chrysler going forward,” he says. “They've extended the life of a couple programs.”
Earlier this year, Faurecia sued Chrysler in a dispute over engineering costs associated with launching new business in the U.S. The case later was resolved.
Faurecia executives say the North American expansion was — and still is — the proper strategy and would do it over again, even if they knew what was coming.
Delabriere says he is satisfied with the outlook for the facilities and recognizes not every market can hold China's promise.
Looking ahead, Faurecia will supply its largest customer, Volkswagen AG, with extensive content for a new midsize sedan to be assembled at the new plant in Chattanooga, TN, beginning in 2011.
Faurecia declines to specify the components but confirms each of its four product segments (seats, interiors, exhaust and exterior systems) will be represented in the Chattanooga program.
Faurecia Grows U.S. Volumes With Eyes Wide Open